© Wiley 2007 1

Chapter 5 - Total Quality Management

Operations Managementby

R. Dan Reid & Nada R. Sanders3rd Edition © Wiley 2007

PowerPoint Presentation by R.B. Clough – UNHM. E. Henrie - UAA

© Wiley 2007 2

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

© Wiley 2007 3

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.

© Wiley 2007 4

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.

© Wiley 2007 5

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.

© Wiley 2007 6

…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

© Wiley 2007 7

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

© Wiley 2007 8

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

© Wiley 2007 9

Quality Gurus

© Wiley 2007 10

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.

© Wiley 2007 11

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.

© Wiley 2007 12

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.

© Wiley 2007 13

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.

© Wiley 2007 14

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.

© Wiley 2007 15

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/teachings02.html

© Wiley 2007 16

Evolution of TQM – New Focus

© Wiley 2007 17

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

© Wiley 2007 18

Cost of Quality – 4 Categories

Early detection/prevention is less costly May be less by a factor of 10

© Wiley 2007 19

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

© Wiley 2007 20

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

© Wiley 2007 21

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

© Wiley 2007 22

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

© Wiley 2007 23

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

© Wiley 2007 24

PDSA (continued)

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

© Wiley 2007 25

Seven Tools of Quality Control Cause-and-Effect Diagrams Flowcharts Checklists Control Charts Scatter Diagrams Pareto Analysis Histograms

© Wiley 2007 26

Cause-and-Effect Diagrams Called Fishbone Diagram Focused on solving identified quality problem

© Wiley 2007 27

Flowcharts Used to document the detailed steps in a

process Often the first step in Process Re-Engineering

© Wiley 2007 28

Checklist Simple data check-off sheet designed to

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

© Wiley 2007 29

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

© Wiley 2007 30

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

© Wiley 2007 31

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

© Wiley 2007 32

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

© Wiley 2007 33

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

© Wiley 2007 34

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

customer specifications

Voice of theengineer

Voice of the

customer

Customer-basedbenchmarks

© Wiley 2007 35

QFD - House of Quality Adding trade-offs, targets & developing

product specificationsTrade-offs

TargetsTechnical

Benchmarks

© Wiley 2007 36

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

© Wiley 2007 37

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

systemR1 = reliability of the components

© Wiley 2007 38

Reliability – critical to quality Can increase reliability by placing

components in parallel Parallel components allow system

to operate if one or the other failsRSubsystem = R1 +(R2* Probability of needing 2nd

component) = R1 +R2*(1- R1)

© Wiley 2007 39

Reliability: Example, Ch 5 #10

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

Rs =

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

= 0.6541

© Wiley 2007 40

Reliability: Example, Ch 5 #10

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

Rs = = (.90)*(.9775)*(.99)*(.95)

= 0.8274

Rb2 = .85 Rb3 = .90

R2’ = .85+.85*(1-.85) =0.9775

R3’ = .90+.90*(1-.90) =0.99

© Wiley 2007 41

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

© Wiley 2007 42

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

© Wiley 2007 43

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 2007 44

Quality Awards and Standards Malcolm Baldrige National

Quality Award (MBNQA) The Deming Prize ISO 9000 Certification ISO 14000 Standards

© Wiley 2007 45

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

© Wiley 2007 46

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

© Wiley 2007 47

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

© Wiley 2007 48

Why TQM Efforts Fail Lack of a genuine quality culture

Lack of top management support and commitment

Over- and under-reliance on SPC methods

© Wiley 2007 49

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.

© Wiley 2007 50

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

© Wiley 2007 51

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

© Wiley 2007 52

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

© Wiley 2007 53

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.

© Wiley 2007 54

The End Copyright © 2007 John Wiley & Sons, Inc. All rights

reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United State Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.