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Chapter8-MethodofQualityManagement.ppt

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Method of Quality Management

TOPIC 8

Introduction

Quality Management Defined

Involves planning and controlling activities to ensure the product or service is fit for purpose, meeting design specifications and the needs of customers.

Quality-related Costs

Prevention costs
Costs of preventing defects before they occur.
Designing product and services with built in quality.
Training employees in the best ways to do their job.
Appraisal costs
The costs of quality inspection and testing.
Internal failure costs
The costs arising from a failure to meet quality standards. Occurs before the product/service reaches the customer. For example:
Cost of re-working parts.
Re-inspection costs.
Lower selling prices for sub-quality goods.

Quality-related Costs…

External failure costs
The most arising from a failure to meet quality standards. Occurs after the product/service reaches the customer. For example:
Costs of recalling and correcting products.
Cost of lost goodwill.

Traditional Approach to Quality Management

Associated with the inspection of quality management:
Inspection costs
Chocolate was inspected and tested as it come off the production line.
Internal failure costs
Any sub-quality goods were sold at a lower price. Mis-shapes were odd shaped chocolates that could not be used in a box of Roses or Milk Tray chocolates.
External failure costs
Arose when sub-standard product reached the customer. For example, in 2006 more than one million Cadbury chocolate bars were recalled in the UK after salmonella was found in some Cadbury products.
Allows for built in waste. However, waste reduces profitability.

Contemporary Thinking in Quality Management (TQM)

TQM is a philosophy of quality management that originated in Japan in the 1950s.
TQM is the continuous improvement in quality, productivity and effectiveness obtained by establishing management responsibility for processes as well as outputs.
Every process has an identified process owner and every person in an entity operates within a process and contributes to its improvement.

Fundamental Features of TQM

Prevention of error before they occur
The aim of TQM is to get things right first time. This contrasts with the traditional ‘UK’ approach that less than 100% quality is acceptable. TQM will result in an increase in prevention costs, e.g. quality design of systems and products, but internal and external failure costs will fall.
Continual improvement
Quality management is not a one-off process, but is the continuous examination and improvement of processes.

Fundamental Features of TQM

Real participant by all
The ‘total’ means the everyone in the value chain is involved in the process:
Employees- they are expected to seek out, identity and correct quality problem. Teamwork will be vital.
Suppliers- quality and reliability of suppliers will play a vital role (TQM and JIT often go hand in hand).
Customer- the goal is to identity and meet the needs of the customer.
Commitment of senior management
Management must be fully committed and encourage everyone else to become quality conscious.

TQM Tools

Quality Circles

A small group of employees, with range of skills from all levels of the organisation.
Meet voluntarily on a regular basis to discuss quality issues and to develop solutions to real problems.
Advantage include:
Improvements in quality, leading to greater customer satisfaction and improved productivity.
A culture of continuous improvement is encouraged.
Employees at operational level will form part of the quality circle. They often have better understanding of quality problems their superiors/managers.
The group approach helps to foster organisational unity.

Successful Use of Quality Circles

Ensuring that there is high profile executive commitment to support the initiative.
Ensuring that staff members have the training in problem solving and analysis
Ensuring that staff members are free to spend the time necessary away from their day-to-day responsibilities to take part in meetings and activities.
Identifying the information needs of quality circles, and to ensure that any data required to assess performance and identity problems is available to them.

Successful Use of Quality Circles

Demonstrating that the senior management of the organisation takes the process seriously and takes any action to resolve problems which is identified as necessary by quality circles.
Developing a culture in the organisation that allows possible changes to be tested out, allowing for the possibility of mistakes.
Providing training for all staff to increase awareness of the importance and value of quality circles.

Kaizen

Japanese term means continuous improvement in performance
Features include:

Involved all level of employees.

Everyone in encouraged to come up with small improvement suggestions on a regular basis.

Suggestions are not limited to a particular area such as production or marketing, but look at all areas of the business.

Kaizen involve setting standards and then continually improving those standards.

Training and resources should be provided for employees in order for them to meet the standards set.

Kaizen

Continuous improvement can be described as a never-ending cycle. Deming called this Plan-Do-Check-Act (PDCA) cycle:
Plan: Plan activities
Do: Implement the plan
Check: Check the result
Act: Improve the process.

5-S practice

An approach to achieving an organised, clean and standardised workplace.
The 5-S practice is often part of a Kaizen approach.
The 5S are Japanese words but can be translated as follows:

Word	Meaning	Example
Seiri	Sort	Eliminate unnecessary items, e.g. old, unwanted files.
Seiton	Organise	A structured filing system- ‘a place for everything and everything in its place’.
Seiso	Clean	Clean work station regularly.
Seiketsu	Standardise	Alphabetic filing system.
Shitsuke	Discipline	Do not slip back into old habits.

Six Sigma

The sigma stands for standard deviation. For reasons that need not be explained here, it can be demonstrated that, if the error rate lies beyond the sixth sigma of probability, there will be fewer than 3.4 defects in every one million.
This is almost perfection. Customers will have a reason to complain fewer than four times in a million.

Frequency

Mean

3 Standard deviations

Outcome

e.g. product weight

Product deemed

‘error’ due to low

weight should be in

this area

Product deemed

‘error’ due to high

weight should be in

this area

Six Sigma

Statistical process control is the method used to continually monitor and chart a process whilst it is operating, to warm when the process is moving away from the predetermined limits.
As per six sigma, the upper and lower limits will be three standard deviations away from the expected value (mean).
All points outside the control limits should be investigated and corrective action taken.
For example, the following statistical control chart shows the size of a product (this may be an important aspect or product conformance) against time.

3 Standard deviations

2 Standard deviations

Expected value

Time

Size

In order to do things right first with no (or very few defects), a key emphasis of the Six Sigma approach is to identify root problems and address them.

Successful Six Sigma implementation

Six Sigma should be focused on the customer and based on the level of performance acceptable to the customer.
Six Sigma targets for a process should be related to the main drivers of performance.
To maximise savings Six Sigma needs to be part of a wider performance management programme which is linked to the strategy of the organisation. It should not be just about doing things better but about doing things differently.
Senior managers within the organisation have a key role in driving the process.
Training and education about the process throughout the organisation are essential for success.
Six Sigma sets a tight target, but accepts some failure- the target is not zero defects.

Criticisms & Limitations of Six Sigma

Six Sigma has been criticised for its focus on current processes and reliance on data. It is suggested that this could become too rigid and limit process innovation.
Six Sigma is based on the use of models which are by their nature simplifications of real life. Judgement needs to be used in applying the models in the context of business objectives.
The approach can be very time consuming and expensive. Organisation need to be prepared to put time and effort into its implementation.
The culture of the organisation must be supportive- not all organisation are ready for such a scientific process.
The process is heavily data-driven. This can be a strength, but can become over-bureaucratic.

Criticisms & Limitations of Six Sigma

Six sigma can give all parts of the organisation a common language for process improvement, but it is important to ensure that this does not become jargon but is expressed in term specifics to organisation and its business.
There is an underlying assumption in Six Sigma that the existing business processes meet customers’ expectation. It does not ask whether it is the right process.

Key Writers On TQM

Writer	Main Contribution
Deming	Credited with the development of TQM in Japan. Developed ‘14 points’ to guide companies in quality improvement.
Juran	Defined quality as ‘fit for purpose’, i.e. does product/service fulfill the customer’s needs? Stated that 85% of quality problems are due to the systems that employees work within rather than the employees themselves.
Feigenbaum	Believed that ‘prevention is better than cure’. Design of systems and procedures should enhance quality.
Crosby	Introduced the concept of ‘zero defects’. Believed that prevention is free and that the importance of quality is measured by the cost of not having quality.

Key Writers On TQM

Ouchi

Showed how America companies could be as successful as Japanese companies. Key tool is a highly effective management style. Recommended certain Japanese management practices such as: Group interaction and consensus decision making. Less hierarchy and more devolved authority/responsibility. More participative management style with free flow of importation.

TQM & External Quality Standards

TQM is considered to be a management philosophy rather than a set of management practices.
However, advocates of TQM support the concept of setting standards and monitoring actual performance against these standards.
In addition to internal quality standards, voluntary external quality standards may be set for an industry.
The most widely used external quality standards are those published by the International Organisation for Standardisation (ISO).

ISO Quality Standards

The ISO 9000 series of quality standards –the most recent standards (published in 2000).

Main ISO Standards

ISO 9001: contains the quality management standards. Organisation should follow these standards if they want to become registered.

ISO 9000 and 9004: contains guidelines which help organisations to implement quality standards.

Certificate of ISO

To registering for ISO 9000 - required to submit its quality standards and procedures for external inspection.
Requirements include:
A set of procedures that cover all key business processes.
Keeping adequate records.
Checking output for defects.
Facilitating continuous improvement.
If company receives a certificate it can claim to be ISO registered/certified and will be subject to continuing audit.
ISO 14001 is of growing importance -specifies the process for controlling and improving an organisation’s environmental performance, e.g. regarding waste, energy emissions.

Implementation of TQM approach

EFQM Excellence Model

EFQM stands for The European for Quality Management
Model is the most widely-used business excellence framework in Europe, with over 30,000 businesses using the model to improve performance and increase profit. Advocates claim it is a non-prescriptive assessment framework that can be used to gain a holistic overview of any organisation regardless of size, sector or maturity.
A key feature of the model is its use as a diagnostic tool for self assessment, where organisations grade themselves against a set of detailed criteria under nine categories grouped into two main headings:

5 Method of Quality Measurement

Servqual- measuring service quality
A service company, e.g. a hotel or restaurant, may wish to know more about customers’ perceptions of its service, to compare these to what they had expected and to identify trends in perceived quality.
Servqual uses 22 questions to understand a respondent’s attitude about service quality. Customers may be asked for their responses both before and after the service is consumed.
These questions are claimed to be reliable indicators of five distinct dimensions:

Dimensions	Example for a restaurant
Tangibles	Appearance and taste of food
Reliability	Order processed accurately
Responsiveness	Staff response to queries, e.g. information on specials, request for bill
Assurance	Waiting staff inspire confidence
Empathy	Restaurant guests are treated as individuals

Benchmarking

Process of systematic comparison of a service, practice or process.
Used to provide a target for action in order to improve competitive position.

Types of benchmarking

Benchmarking process

Business Process Re-engineering (BPR)

BPR involve focusing attention inwards to consider how the business processes could be redesigned or re-engineered to improve efficiency.
Its use contrasts with benchmarking which is an external exercise although the ideas generated through benchmarking may be used here to offer radical solutions.

Hammer and Champy : BPR Description

Radical and fundamental
BPR assumes nothing; it starts by asking basic questions about why tasks are carried out and challenges traditional methods.
Dramatic
BPR changes should lead to quantum leaps in performance not just incremental benefits.
Process
The changing process can be defined in terms of:
Combining jobs;
Devolved decision making;
Reduced checks and control with quality built in.

IT is an enable or facilitator in the change process and a major contributor to BPR programs. Some of the key technologies that allow fundamental shifts in business operations to occur are:

Shared database access from any location

Expert systems to devolve expertise

Powerful telecommunication networks for remote offices

Wireless communication for on-the-spot decision making

Tracking technology for warehouse and delivery systems

Internet services to re-engineer channels of distribution

Lean Management

Lean management is a philosophy that aims to systematically eliminate waste.

Wasted to be eliminated

Characteristics of Lean Production

Improve production scheduling
Small batch production or continuous production
Continuous improvement
Zero inventory
Zero waiting time

The six core method of lean manufacturing

JIT
Kaizen
5-S practice
Total productive maintenance (TPM)
Cellular manufacturing
Six Sigma

Criticisms and limitations of lean manufacturing

High initial outlay
Requires a change in culture
Part adoption
Cost may exceed benefit

Application of lean techniques to services

Toyota pioneered the concept of a ‘lean’ operating system and it has now been implemented in countless manufacturing companies. Lean techniques can also be applied to service companies. The six core methods will still apply, although the use of the method will be different.
With service operations a lean approach often focusses on and improving the customer experience.

Factors affecting application of lean techniques to services

Service organisations tend to be more labour intensive, so a lean approach to services could involve a mixture of cutting staffing levels, reducing wasted time and reducing mistakes.
Services are intangible and it is more difficult to measure their quality than it is for a physical product.
Services are consumed immediately and cannot be stored.
Customers participate directly in the delivery process, so firm must evaluate their services from the customer’s perspective.
The customer when evaluating the quality of the service will take into account the face-to-face contact and the social skills of those providing the service. Again there is a danger that efficiency gains may compromise customer service.