Total Quality Management
Chapter 5
© 2005 Wiley
1
Management 326
Operations
and
Operations
Strategy
Designing
an
Operations
System
Managing
an
Operations
System
Improving
an
Operations
System
Designing an Operations System
Project
Management:
A Design Tool
Total Quality
Management
Statistical
Process Control
Product Design
Process Design
Total Quality Management (TQM)
Chapter 5
What is
quality?
Measurement
and costs of
quality
Total Quality
Management (TQM)
Quality Awards
and
Certifications
Why Quality is Important

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
Increases value of products to customers
Reduces expensive mistakes
Increases profits  Shareholder value
© 2005 Wiley
5
How Customers Define Quality

Customer-defined quality: Meeting quality
expectations as defined by the customer
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High performance design vs. product or service
consistency
Psychological (perceived quality): the quality
that the customer thinks he/she got
Value: the good or service is superior to others
with similar prices (getting more for your
money)
Product and service characteristics
© 2005 Wiley
6
How Customers Define Quality (2)

How customers define quality (2)

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
Value: the good or service is superior to others
in the same price range (getting more for your
money)
Product and service characteristics
Quality includes all characteristics that are
important to customers – not just the core
product
© 2005 Wiley
7
How Companies Define Quality
Product or Service Specification

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Characteristics of the product or service which will be
measured to determine quality
Target values (ideal values) for each characteristic
Should be based on customer expectations
Should meet any legal requirements
Conformance quality: If a product or service
consistently meets specifications, it has conformance
quality.
© 2005 Wiley
8
Quality Measurement in Services

Qualitative measures of quality are based on
customer perceptions
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Customer satisfaction surveys
Teacher evaluations
Quantitative measures of quality are based on
numerical data
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Waiting time
Percentage of transaction errors
Product availability
Web site availability
© 2005 Wiley
9
Cost of Quality – 4 Categories

Early detection/prevention is less costly

Costs may be less by a factor of 10
© 2005 Wiley
10
Quality–Cost Relationship
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Cost of quality
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Difference between price of
nonconformance and conformance
Cost of doing things wrong
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Cost of doing things right

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20 to 35% of revenues
3 to 4% of revenues
Profitability

© 2005 Wiley
In the long run, quality is free
11
Total Quality Management (TQM)
Chapter 5
What is
quality?
Measurement
and costs of
quality
TQM
Philosophy
Total Quality
Management (TQM)
Quality Awards
And Certifications
Quality in
Product Design
Why TQM
Programs
Fail
Total Quality Management (TQM)



Customer-defined quality: Meeting quality
expectations as defined by the customer
Integrated organizational effort designed to improve
quality on all quality characteristics that are
important to customers (core product and anything
else that affects customers)
Requires a coordinated effort
 All levels of the organization
 All functions (departments) in the organization
 Work with suppliers and listen to customers
© 2005 Wiley
13
Evolution of TQM – New Focus
© 2005 Wiley
14
TQM Philosophy
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Focus on Customer
 Identify and meet customer needs
 Stay tuned to changing needs, e.g. fashion styles
Continuous Improvement: Continuous learning and
problem solving
Quality at the Source: Find the problem when it
occurs and fix it.
Employee Empowerment and problem solving (pages
149-150): Empower all employees. Serve external and
internal customers
© 2005 Wiley
15
TQM Philosophy (2)
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Quality improvement teams (QIT's or quality circles)
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Teams formed around processes – 8 to 10 people
Meet regularly to analyze and solve problems
Self-managed work teams: a work group is
responsible for managing its responsibilities.
Managers are coaches, not bosses. (less common
than QIT's)
Benchmarking: Studying practices at “best in class”
companies
Managing Supplier Quality: Certify suppliers and
eliminate receiving inspection
© 2005 Wiley
16
Quality in Product Design

Quality function deployment (QFD)
 Used by product design teams
 Used to translate customer preferences into specific
technical requirements
 The technical requirements are used to develop the
product specification
 Operations is responsible for making the product to
specifications
 Products that meet specifications have conformance
quality
 Objective is to satisfy customers
 Principal tool is House of Quality (pages 154-156)
© 2005 Wiley
17
QFD Details

Process used to ensure that the product meets customer
specifications
Voice of the
engineer
Voice
of the
customer
Customer-based
benchmarks
QFD - House of Quality

Adding trade-offs, targets & developing product
specifications
Trade-offs
Targets
Technical
Benchmarks
Why TQM Efforts Fail
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Lack of top management support and commitment
Lack of a genuine quality culture
 Continuous improvement
 Teamwork
 Training
 Employee empowerment
 Recognition and rewards (team or individual)
Under-reliance or over-reliance on statistical process control
(SPC)
 SPC is an essential tool for identifying problems and
monitoring quality
 It is important to solve the problems (PDSA, 7 quality tools)
© 2005 Wiley
20
Total Quality Management (TQM)
Chapter 5
What is
quality?
Measurement
and costs of
quality
TQM
Philosophy
Total Quality
Management (TQM)
Quality Awards
And Certifications
Quality in
Product Design
Why TQM
Programs
Fail
Quality Award and Certifications

Malcolm Baldrige National Quality Award

ISO 9000 Certification

ISO 14000 Certifications
© 2005 Wiley
22
Baldrige Award
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Competitive quality award presented by
U. S. government
5 award categories: Manufacturing, services,
small business, health care, education
All written applications are reviewed by
trained examiners
Site visits to leading candidates
Maximum of 2 awards per category
© 2005 Wiley
23
Baldrige Award Criteria Framework
A Systems Perspective
Total =
1,000 pts
Leadership
(120 pts)
Organizational Profile
Strategic
Planning
(85 pts)
Human Resource
Development
& Mgmt. (85 pts)
Customer &
Market Focus
(85 pts)
Process
Mgmt. (85 pts)
Business
Results
(450 pts)
Measurement, analysis, & knowledge management (90 pts)
© 2005 Wiley
24
Baldrige Award - Business Results
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Customer-focused results
Product and service performance
Financial and market results
Human resource results
© 2005 Wiley
25
ISO 9000 Standards

International quality certification program
guided by the International Standards
Organization (ISO)
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Any firm that passes an ISO standards audit will
be certified.
U. S. participates in the development of these
standards:

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American National Standards Institute (ANSI)
American Society for Quality (ASQ)
Professional organizations
© 2005 Wiley
26
ISO 9000
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ISO 9000 standards audits must be
performed by a registrar, a firm that is
certified to do ISO 9000 audits
Some companies require their suppliers to be
certified
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Be sure that your registrar is acceptable to your
customers
Firms must be re-certified periodically.
© 2005 Wiley
27
ISO 14000


A certification program in environmental
management
Standard-setting and certification
procedures are similar to ISO 9000
© 2005 Wiley
28
Total Quality Management (TQM)
Chapter 5
What is
quality?
Measurement
and costs of
quality
TQM
Philosophy
Total Quality
Management (TQM)
Quality Awards
And Certifications
Quality in
Product Design
Why TQM
Programs
Fail