Chapter 5 - Total Quality

Management

Operations Management
by
R. Dan Reid & Nada R. Sanders
4th Edition © Wiley 2010
PowerPoint Presentation by R.B. Clough – UNH
M. E. Henrie - UAA

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Defining Quality
 Definition of quality is dependent on the
people defining it
 There is a lack of a single, universal definition
of quality
 5 common definitions include
 Conformance to specifications
 Fitness for use
 Value for price paid
 Support services
 Psychological criteria

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 Order Qualifiers…
Delivering Two Kinds of Quality by Keith McFarland, Business Week, Feb. 15, 2006

As I write this, the petroleum executive sitting next to me on the plane

has carefully unpacked his Bose QuietComfort 2 headphones and iPod
nano, which has me thinking about the meaning of quality. The
Japanese actually have two words for quality -- and an understanding
of each is necessary to compete today.
More than 20 years after the quality craze kicked off in the U.S.
(primarily because America was getting its clock cleaned by the
Japanese), quality remains an elusive target for many American
companies. Not that we haven't made progress. In 1980 the average
car produced by Ford (F) had twice as many product flaws (as
measured by J.D. Power's survey of initial quality) as the average
Japanese car.

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 Order Qualifiers…
By 1986 the Japanese auto industry lead over Ford had shrunk from
100% to about 20%, as Ford made quality "Job One." But since that
impressive initial spurt of progress, many U.S. companies have struggled
to keep up on quality, even as the Japanese began building more of their
products in the U.S. with American workers.
INNOVATION CURVE. The truth is, the Japanese have an unfair
advantage. Japanese culture intrinsically values quality and appreciates
the small details. In fact, the Japanese expression for quality is atarimae
hinshitsu, which can be roughly translated as "taken-for-granted quality."
What do the Japanese take for granted when it comes to quality? They
take for granted that things should work as they are supposed to, and
they even see an elegance to things working properly -- whether it's cars,
subway schedules, traditional flower arranging, or the famous tea
ceremony.
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 Order Qualifiers…
Japanese manufacturers were so obsessed with taken-for-granted
quality that they created a constant stream of innovations that built on
renowned quality-management consultant Ed Deming's original
concepts: lean manufacturing, just-in-time industry, and design for
quality. In today's competitive markets, manufacturers need to be very
far along this quality innovation curve -- or moving along it very
quickly. If they are not, you can take for granted that they will go out
of business.
This is true even for small, entrepreneurial companies. The ability to
create products and services that work is no longer a source of long-
term competitive advantage. It has become just the price of admission
to most markets. If the stuff your competitors make works better, your
customers aren't going to be customers for long.

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 …and Order Winners!
MODERN MARVELS. That brings us to the second of the two Japanese
expressions for quality: miryoku teki hinshitsu, which means "bewitching" or
"enchanting quality." This kind of quality appeals not to customer expectations
and reliability (that things should do what they're supposed to), but rather to a
person's aesthetic sense of beauty and elegance.
That's what I think Apple Computer (AAPL) got right with the iPod and its
many offspring. The nano belonging to the man sitting next to me is a marvel,
not just of miniaturization, but of rounded edges in a world of sharp corners.
And as I put on my own Bose headphones, I realize how much I appreciate
being able to retreat to my Zen space amid the rumble of the aircraft engines,
rattling serving carts, and chattering cabin mates. If these products didn't
work properly when you turned them on, nobody would buy them. They
would lack atarimae hinshitsu. But with the hungry competitors in most
markets today, taken-for-granted quality by itself may not get the job done.
http://www.businessweek.com/smallbiz/content/feb2006/sb20060214_876719.htm?chan=search
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Defining Quality – 5 Ways
 Conformance to specifications
 Does product/service meet targets and tolerances defined by
designers?
 Fitness for use
 Evaluates performance for intended use
 Value for price paid
 Evaluation of usefulness vs. price paid
 Support services
 Quality of support after sale
 Psychological
 e.g. Ambiance, prestige, friendly staff

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 TQM is a Philosophy for Business

Philosophy is the discipline concerned with

questions of how one should live (ethics);
what sorts of things exist and what are their
essential natures (metaphysics); what counts
as genuine knowledge (epistemology); and
what are the correct principles of reasoning
(logic). The word is of Greek origin: φιλοσοφία
(philosophía), meaning love of wisdom.
http://en.wikipedia.org/wiki/Philosophy

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Quality Gurus

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Deming’s 14 Points
 Create constancy of purpose toward improvement of
product and service, with the aim to become
competitive and to stay in business, and to provide
jobs.
 Adopt the new philosophy. We are in a new
economic age. Western management must awaken
to the challenge, must learn their responsibilities, and
take on leadership for change.
 Cease dependence on inspection to achieve quality.
Eliminate the need for inspection on a mass basis by
building quality into the product in the first place.

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Deming’s 14 Points
 End the practice of awarding business on the basis of
price tag. Instead, minimize total cost. Move toward
a single supplier for any one item, on a long-term
relationship of loyalty and trust. Improve constantly
and forever the system of production and service, to
improve quality and productivity, and thus constantly
decrease costs.
 Institute training on the job.
 Institute leadership (see Point 12 and Ch. 8). The
aim of supervision should be to help people and
machines and gadgets to do a better job. Supervision
of management is in need of overhaul, as well as
supervision of production workers.

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Deming’s 14 Points
 Drive out fear, so that everyone may work
effectively for the company.
 Break down barriers between departments.
People in research, design, sales, and
production must work as a team, to foresee
problems of production and in use that may
be encountered with the product or service.

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Deming’s 14 Points
 Eliminate slogans, exhortations, and targets
for the work force asking for zero defects and
new levels of productivity. Such exhortations
only create adversarial relationships, as the
bulk of the causes of low quality and low
productivity belong to the system and thus lie
beyond the power of the work force.
 Eliminate work standards (quotas) on the factory
floor. Substitute leadership.
 Eliminate management by objective. Eliminate
management by numbers, numerical goals.
Substitute leadership.

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Deming’s 14 Points
 Remove barriers that rob the hourly
worker of his right to pride of
workmanship. The responsibility of
supervisors must be changed from
sheer numbers to quality.

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Deming’s 14 Points
 Institute a vigorous program of
education and self-improvement.
 Put everybody in the company to work
to accomplish the transformation. The
transformation is everybody's job.
 From
http://www.deming.org/theman/teachin
gs02.html
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Evolution of TQM – New Focus

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Cost of Quality
 Quality affects all aspects of the organization
 Quality has dramatic cost implications of;
 Quality control costs
 Prevention costs
 Appraisal costs
 Quality failure costs
 Internal failure costs
 External failure costs

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Cost of Quality – 4 Categories

 Early detection/prevention is less costly

 May be less by a factor of 10

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 TQM Methodology
 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
 Customer focus

 Continuous improvement

 Employee empowerment

 Use of quality tools

 Product design

 Process management

 Managing supplier quality

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TQM Methodology - 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, benchmarking

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TQM Methodology– Concepts
(continued)
 Employee Empowerment
 Empower all employees; external and internal
customers
 Teams formed around processes – 8 to 10 people
 Meet weekly to analyze and solve problems
 Quality Tools
 Ongoing training on analysis, assessment, and
correction, & implementation tools
 Studying practices at “best in class” companies
 Plan-Do-Study-Act

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Ways of Improving Quality
 Plan-Do-Study-Act Cycle (PDSA)
 Also called the Deming Wheel after originator
 Circular, never ending problem solving process
 Seven Tools of Quality Control
 Tools typically taught to problem solving teams
 Quality Function Deployment
 Used to translate customer preferences to design

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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
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PDSA (continued)

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

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Seven Tools of Quality Control
 Cause-and-Effect Diagrams
 Flowcharts
 Checklists
 Control Charts
 Scatter Diagrams
 Pareto Analysis
 Histograms
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Cause-and-Effect Diagrams
 Called Fishbone Diagram
 Focused on solving identified quality problem

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Flowcharts
 Used to document the detailed steps in a
process
 Often the first step in Process Re-Engineering

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 Checklist
 Simple data check-off sheet designed to
identify type of quality problems at each work
station; per shift, per machine, per operator

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Control Charts
 Important tool used in Statistical Process
Control – Chapter 6
 The UCL and LCL are calculated limits used to
show when process is in or out of control

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Scatter Diagrams
 A graph that shows how two variables are
related to one another
 Data can be used in a regression analysis to
establish equation for the relationship

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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 e.g. 80% of the problems caused by 20% of causes

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Histograms
 A chart that shows the frequency distribution of
observed values of a variable like service time
at a bank drive-up window

 Displays whether the distribution is symmetrical

(normal) or skewed

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Product Design - Quality
Function Deployment
 Critical to ensure product design meets customer
expectations
 Useful tool for translating customer specifications into
technical requirements is Quality Function
Deployment (QFD)
 QFD encompasses
 Customer requirements
 Competitive evaluation
 Product characteristics
 Relationship matrix
 Trade-off matrix
 Setting Targets

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 Quality Function Deployment
(QFD) Details
 Process used to ensure that the product meets customer
specifications

Voice of the
engineer

Voice Customer-based
of the benchmarks
customer

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 QFD - House of Quality
 Adding trade-offs, targets & developing product
specifications
Trade-offs

Technical
Targets Benchmarks
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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

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Reliability – critical to quality
 Simple Serial 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

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Reliability – critical to quality
 Can increase reliability by placing
components in parallel
 Parallel components allow system to
operate if one or the other fails
RSubsystem
= R1 +(R2* Probability of needing 2nd
component) = R1 +R2*(1- R1)

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 Reliability: Example, Ch 5 #10

R1 = .90 R2 = .85 R3 = .90 R4 = .95

Rs =

= (.90)*(.85)*(.90)*(.95)

= 0.6541

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Process Management
 Quality products come from quality
sources
 Quality must be built into the process
 Quality at the source is belief that it is
better to uncover source of quality
problems and correct it
 TQM extends to quality of product from
company’s suppliers

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Managing Supplier Quality
 TQM efforts must extend to a firm’s
suppliers
 Suppliers should meet pre-specified
quality criteria, such as certification
 Inspection of incoming material is a
waste of time and effort
 Firm may have in-plant representative
at supplier

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Quality Awards and Standards
 Malcolm Baldrige National Quality
Award (MBNQA)
 The Deming Prize
 ISO 9000 Certification
 ISO 14000 Standards

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ISO Standards
 ISO 9000 Standards:
 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:
 Focuses on a company’s environmental
responsibility © Wiley 2010 43
Manufacturing Quality vs.
Service Quality
 Manufacturing quality focuses on
tangible product features
 Conformance, performance, reliability, features
 Service organizations produce intangible
products that must be experienced
 Quality often defined by perceptional factors like
courtesy, friendliness, promptness, waiting time,
consistency

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Why TQM Efforts Fail
 Lack of a genuine quality culture

 Lack of top management support and

commitment

 Over- and under-reliance on SPC

methods

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MBNQA- What Is It?
 Award named after the former Secretary of
Commerce – Reagan 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

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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
 Florida P & L was first US company winner

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 Many Viewpoints!
Why Six Sigma Is on the Downslope by Tom Davenport, Harvard Business
Online January 10, 2008
I was never a big fan of Six Sigma. As approaches to business process
improvement and management go, it always had some glaring shortcomings.
First, there was all the statistical mumbo-jumbo it implied—but seldom
delivered on in most companies' implementations. Second, it didn't incorporate
information technology—arguably the most powerful force available for
improving (or screwing up) processes—in any way. Third, it was overly elitist.
Instead of relying on Six Sigma expert "black belts" do the process analysis
and design, every employee should be a process improver, as I argued last
week. Fourth, it really only enabled incremental improvement, not radical
breakthroughs. Fifth and last, it wasn't a good fit for innovation-oriented work.
Even Jack Welch now admits that it shouldn't be used everywhere in a
company, but I might argue that it should only be used in product
manufacturing, where the idea of reducing defects to one in six standard
deviations really makes sense.
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 Many Viewpoints!
So what's the best alternative to Six Sigma for process improvement?
Well, there really is no one alternative that's best for all processes and
circumstances. Companies really need a combination of tools and
approaches. The best companies in process management already have
such a combination. You hear about Lean Six Sigma, which is a
combination of some of the lean approaches found in the Toyota
Production System and Six Sigma, but actually the mix should be even
broader. Johnson & Johnson, for example, in its "Process Excellence"
program, also adds a component involving breakthrough change. Even
Motorola, where Six Sigma was born, also incorporates a method for
creating breakthrough process improvements.
http://www.businessweek.com/managing/content/jan2008/ca2008018_555075.htm?chan=search

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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 skills necessary
 Information systems – increased need for accessible
information

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 Chapter 5 Highlights
 TQM is different from the old concept of quality
as it focus is on serving customers, identifying
the causes of quality problems, and building
quality into the production process
 Four categories of quality cost of prevention,
appraisal, internal and external costs
 Seven TQM notable individuals include Walter A.
Shewhart, W. Edwards Demings, Joseph M.
Juran, Armand V. Feigenbaum, Philip B. Crosby,
Kaoru Ishikawa, and Genichi Taguchi
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 Chapter 5 Highlights -
Continued
 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 is a tool used to translate customer needs
into specific engineering requirements
 Reliability is the probability that the product will
functions as expected
 The Malcom Baldridge Award is given to
companies to recognize excellence in quality
management.
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 The End
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