quality management, 6 th ed. goetsch and davis © 2010 pearson higher education, upper saddle river,...

Quality Management, 6th ed.Goetsch and Davis

© 2010 Pearson Higher Education,Upper Saddle River, NJ 07458. • All Rights Reserved.1

Quality Managementfor Organizational Excellence

By:Dr. David L. Goetsch and Stanley Davis

Based on the book Quality Management for Organizational Excellence (Sixth Edition)

2Quality Management, 6th ed.Goetsch and Davis

© 2010 Pearson Higher Education,Upper Saddle River, NJ 07458. • All Rights Reserved.

Instructor Info.Dr. Mohammed A. Nasseef

Email:

[email protected] Website:

www.nasseef.infoContact Number:

0540627773 ( SMS and whatsApp)

note: mobile number is for urgent calls, please if you call consider a appropriate time.



Grading Policy

case study Project 20

Quiz 1 10

Quiz 2 10

Class Participation 10

Final Exam 50________________

TOTAL 100



MAJOR TOPICS

Quality Evolution What is Quality? The Total Quality Approach Defined Two Views of Quality Key Elements of Total Quality Total Quality Pioneers

One:The Total Quality Approach to

Quality Management



Quality Evolution



Evolution of Quality I

Finding mistakes/errors

External assessment/control

Culture of mistrust

Inspecting the past



Evolution of Quality II

Looking into

the past and

plan for the future

avoid mistakes

personal responsibility / ownership

culture of trust



Evolution of Quality III

Systematic fulfillment of customer requirements



Evolution of Quality IV

Participation of all members of an organization



Quality is Everywhere Quality is Everywhere

people deal with the issue of quality continually in their daily lives

We all apply a number of criteria when making a purchase

To understand quality as a consumer-driven concept

How will you judge the quality of the restaurant?

ServiceResponse time

Food preparation Atmosphere

PriceSelection



What is QualityWhat is Quality* Quality must be defined

comprehensively. It is not enough to say

the product is of high quality; we must

focus attention on the quality of every

facet of the organization.

* Consumers' needs and requirements

change. Therefore, the definition

of quality is ever changing.

shikawa's



What is QualityWhat is Quality Fred Smith. CEO of FedEx

defines quality as “ performance to the standard expected by customer “

Boeing “ providing our customer with products and services that consistently meet their needs and expectations”



So Quality Is …So Quality Is … Although there is no universally accepted

definition of quality. There are some similarity among among quality definition:

Quality involves meeting or exceeding customer expectations.

Quality applies to products, services, people, processes, and environments.

Quality is ever changing state (i.e., what consider quality today may not good enough to be considered quality tomorrow).



WhyWhy TQM?TQM?

Ford Motor Company had operating losses of $3.3 billion between 1980 and 1982.

Xerox market share dropped from 93% in 1971 to 40% in 1981.

Attention to quality was seen as a way to combat the competition.



TQMTQM TotalTotal - made up of the whole

QualityQuality - degree of excellence a product or service provides

ManagementManagement - act, art or manner of planning, controlling, directing,….

Therefore, TQM is the art of managing Therefore, TQM is the art of managing the whole to achieve excellence.the whole to achieve excellence.



What does TQM mean?What does TQM mean?

Total Quality Management means that the organization's culture is defined by and supports the constant attainment of customer satisfaction through an integrated system of tools, techniques, and training. This involves the continuous improvement of organizational processes, resulting in high quality products and services.



What’s the goal of TQM?What’s the goal of TQM?What’s the goal of TQM?What’s the goal of TQM?

“Do the right things right the first time, every time.”



AnotherAnother way to put itway to put itAnotherAnother way to put itway to put it

At it’s simplest, TQM is all managers leading and facilitating all contributors in everyone’s two main objectives:

(1) total client satisfaction through quality products and services; and

(2) continuous improvements to processes, systems, people, suppliers, processes, systems, people, suppliers, partners, products, and services.partners, products, and services.



Basic belief of TQMBasic belief of TQM 1. The customer makes the ultimate

determination of quality. 2. Top management must provide

leadership and support for all quality initiatives.

3. Preventing variability is the key to producing high quality.

4. Quality goals are a moving target, thereby requiring a commitment toward continuous improvement.

5. Improving quality requires the establishment of effective metrics. We must speak with data and facts not just opinions.



The three aspects of TQMThe three aspects of TQM

CountingCounting

CustomersCustomers

CultureCulture

CountingCounting

CustomersCustomers

CultureCulture

Tools, techniques, and training in their use for analyzing, understanding, and solving quality problems

Quality for the customer as a driving force and central concern.

Shared values and beliefs, expressed by leaders, that define and support quality.



Total Quality ManagementTotal Quality Managementand Continuous and Continuous ImprovementImprovement

TQM is the management process used to make continuous improvements to all functions.

TQM represents an ongoing, continuous commitment to improvement.

The foundation of total quality is a management philosophy that supports meeting customer requirements through continuous improvement.



Continuous Improvement versus Continuous Improvement versus Traditional ApproachTraditional Approach

Market-share focus Individuals Focus on ‘who” and

“why” Short-term focus Status quo focus Product focus Innovation Fire fighting

Customer focus Cross-functional teams Focus on “what” and

“how” Long-term focus Continuous improvement Process improvement

focus Incremental

improvements Problem solving

Traditional Approach Continuous ImprovementContinuous ImprovementContinuous ImprovementContinuous Improvement



Quality ThroughoutQuality Throughout “A Customer’s impression of quality begins

with the initial contact with the company and continues through the life of the product.” Customers look to the total package - sales,

service during the sale, packaging, deliver, and service after the sale.

Quality extends to how the receptionist answers the phone, how managers treat subordinates, how courteous sales and repair people are, and how the product is serviced after the sale.

“All departments of the company must strive to improve the quality of their operations.”



Value-based ApproachValue-based Approach Manufacturing

Dimensions Performance Features Reliability Conformance Durability Serviceability Aesthetics Perceived quality

Service Dimensions Reliability Responsiveness Assurance Empathy Tangibles



The TQM SystemThe TQM System

CustomerFocus

ProcessImprovement

TotalInvolvement

LeadershipEducation and Training Supportive structureCommunications Reward and recognitionMeasurement

ContinuousImprovement

Objective

Principles

Elements



Trends affecting the future of quality management include demanding global customers, shifting customer expectations, and opposing economic pressures

The Total Quality Approach toThe Total Quality Approach toQuality ManagementQuality Management



W. Edwards Deming Born on October 14,

1900 Was an American

statistician, professor, author, lecturer, and consultant

Widely credited with improving production in the United States during the Cold War

Best known for work in Japan

Taught top management (1950 onwards)

Total Quality Pioneers:



W. Edwards Deming

Quality keys:

Understanding customer needs

Process improvement

Statistical analysis Expertise of workers PDCA cycle



DEMING 14 POINTS

1. Create constancy of purpose2. Adopt a new philosophy3. Stop dependence on inspection4. Don’t focus on price tag5. Improve constantly & forever



DEMING 14 POINTS

6. Institute training7. Institute leadership8. Drive out fear9. Break down barriers10. Eliminate slogans, exhortations



DEMING 14 POINTS

11. Eliminate quotas; use leadership

12. Remove barriers to workmanship

13. strong education program14. Involve everybody



The Deming cycle, or PDSA cycle, is a continuous quality improvement model consisting of a logical sequence of four repetitive steps for continuous improvement and learning:

Plan, Do, Study (Check) and Act.

It is also known as the Deming circle/cycle/wheel, Shewhartcycle, control circle/cycle, or plan–do–study–act (PDSA)



W. Edwards Deming in the 1950's proposed that business processes should be analyzed and measured to identify sources of variations that cause products to deviate from customer requirements.

He recommended that business processes be placed in a continuous feedback loop so that managers can identify and change the parts of the process that need improvements.



Example : At Toyota this is also known as "Building

people before building cars.“ Toyota and other Lean companies propose

that an engaged, problem solving workforce, using PDCA, is better able to innovate and stay ahead of the competition through rigorous problem solving and the subsequent innovations. This also creates a culture of problem solvers using PDCA and creating a culture of critical thinkers.



35

Foundations of the PDCA CycleThe foundations of the PDCA cycle and Deming’s teachings consist of the following three principles:

1.Customer Satisfaction: Satisfying customers’ needs should be paramount for all workers in the organization.

2.Management by Fact. Decision making must be made on data collected from operations and analyzed using statistical tools. Decision makers must practice and encourage a scientific approach to problem solving.

3.Respect for People. A sustainable problem solving and continuous improvement approach should be based on the belief that employees are self-motivated and are capable of coming up with effective and creative ideas.



36

Steps of PDCA: The Plan step Recognize the problem and establish priorities.

Form the problem solving team.Interdisciplinary teams of individuals close to the problem are best.

Define the problem and its scope clearly.Who,What,Where and When.Pareto Analysis can be useful in defining the problem.

Analyze the problem/process. Process flowcharts can be useful a useful tool.

Determine possible causes.Cause-and-effect diagrams are helpful in identifying root causes of a problem. Data from the diagrams can be organized using check sheets, scatter diagrams, histograms, and run charts.

Identify possible solutions.Brainstorm to find solutions. Avoid the temptation to propose quick, immediate fixes. Goals should be specific, measurable, achievable, and realistic.

Evaluate potential solutions. Focus on solutions that address root causes and prevention of problem occurrence. Solutions should be cost-effective; achieving group consensus is important.



37

Steps of PDCA (continued)

The Do step Implement the solution or process change Monitor results and collect data

The Check step Review and evaluate the result of the change Measure progress against milestones Check for any unforeseen consequences

The Act step If successful,

Standardize process changes Communicate to all involved Provide training in new methods



38

Problem Solving Tools

1. Check Sheet. A simple tool for collecting data about problems or complaints.

Example 1.Appliance Department Complaints

Late Wrong Faulty Total Units %Month delivery appliance installation installed Complaints

January 2 3 3 8 800 1.00%February 4 3 4 11 900 1.22%March 1 4 3 8 750 1.07%April 4 5 2 11 1050 1.05%May 3 5 5 13 1400 0.93%June 2 6 3 11 980 1.12%July 3 4 4 11 1030 1.07%August 5 6 6 17 1500 1.13%September 3 5 5 13 1330 0.98%October 4 6 6 16 1500 1.07%November 3 7 5 15 1320 1.14%December 3 8 6 17 1550 1.10%



39

Problem Solving Tools (continued)

2. Histogram. A graph which presents the collected data as a frequency distribution in bar-chart form. Example 1

Complaint Type

0

1

2

3

4

5

6

7

8

9

Month

Freq

uen

cy

Late

Wrong

Faulty



40


3. Pareto Chart. Orders problems by their relative frequency in decreasing order. Focus and priority should be given to problems that offer the largest potential improvement.

0

10

20

30

40

50

60

70

Wrong appliance Faulty installation Late delivery

Nu

mb

er o

f co

mp

lain

ts

Complaint category

Pareto Chart for complaints



41


4. Scatter Diagram. A graphical tool to check if two relationships exist between two variables.

0

20

40

60

80

100

120

140

160

180

0 1 2 3 4 5 6 7

Num

ber

of in

sta

llation

s per

cre

w

Number of faulty installations

Scatter Diagram for faulty installations



42


5. Flowchart. A visual representation of a process which can help in identifying points where failures may occur and intervention is useful. Example 2



43


6. Cause-and-effect diagram (fishbone diagram). Offers a structured approach for identifying all possible causes of a problem. The classic diagram is as shown:

In retail, a better representation is the 5S (Pal & Byron 2003):



Any serious attempt to improve quality must take into account the costs associated with achieving quality since the objective of continuous improvement programs is not only to meet customer requirements, but also to do it at the lowest cost.

This can only happen by reducing the costs needed to achieve quality, and the reduction of these costs is only possible if they are identified and measured.

Therefore, measuring and reporting the cost of quality

(CoQ) should be considered an important issue for managers.

COST OF QUALITY (COQ)



DEFINITION

There is no general agreement on a single broad definition of quality costs (Machowski and Dale, 1998). However, CoQ is usually understood as the sum of conformance plus non-conformance costs, where cost of conformance is the price paid for prevention of poor quality (for example, inspection and quality appraisal) and cost of non-conformance is the cost of poor quality caused by product and service failure(for example, rework and returns).



(COQ) CONTINUE

It was Armand Feigenbaum, who in 1943 first devised a quality costing analysis when he and his team developed a dollar-based reporting system.

later proposed the now widely accepted quality cost categorization of prevention, appraisal and failure (internal and external) costs



(COQ) CONTINUE

Many business executive adopt the attitude that ensuring quality is good thing to do until hard times set in and cost cutting is necessary.



GENERIC COQ MODELS

Feigenbaum ModelP-A-F models Prevention + appraisal + failure

Crosby’s modelConformance + non-conformanceOpportunity or intangible cost models Prevention + appraisal + + failure opportunityConformance + - +non conformance opportunity

ABC models Value-added + non-value-added



Cost of Quality

Cost of Achieving Good Quality Prevention costs

costs incurred during product design Appraisal costs

costs of measuring, testing, and analyzing Cost of Poor Quality

Internal failure costs include scrap, rework, process failure,

downtime, and price reductions External failure costs

include complaints, returns, warranty claims, liability, and lost sales



Prevention Costs

Quality planning costs

costs of developing and implementing quality management program

Product-design costs costs of designing

products with quality characteristics

Process costs costs expended to

make sure productive process conforms to quality specifications

Training costs costs of developing

and putting on quality training programs for employees and management

Information costs costs of acquiring and

maintaining data related to quality, and development of reports on quality performance



Appraisal Costs

Inspection and testing costs of testing and inspecting materials,

parts, and product at various stages and at the end of a process

Test equipment costs costs of maintaining equipment used in

testing quality characteristics of products Operator costs

costs of time spent by operators to gar data for testing product quality, to make equipment adjustments to maintain quality, and to stop work to assess quality



Internal Failure Costs

Scrap costs costs of poor-quality

products that must be discarded, including labor, material, and indirect costs

Rework costs costs of fixing defective

products to conform to quality specifications

Process failure costs costs of determining why

production process is producing poor-quality products

Process downtime costs

costs of shutting down productive process to fix problem

Price-downgrading costs

costs of discounting poor-quality products—that is, selling products as “seconds”



External Failure Costs

Customer complaint costs costs of investigating and

satisfactorily responding to a customer complaint resulting from a poor-quality product

Product return costs costs of handling and

replacing poor-quality products returned by customer

Warranty claims costs costs of complying with

product warranties

Product liability costs

litigation costs resulting from product liability and customer injury

Lost sales costs costs incurred

because customers are dissatisfied with poor quality products and do not make additional purchases



Costs of Quality

Prevention costs Appraisal costs

Internal failure costs External failure costs



Costs of Quality Example

Vegas Photo Corporation made 10,000photocopying machines last year.

Vegas Photo determines the costs of qualityof its photocopying machines using a 7-step

activity-based costing approach.



Costs of Quality (Steps 1 and 2)

Identify cost objects.

10,000 photocopying machines

Identify the direct costsof quality of the products.

No direct costs of quality

Step 1 Step 2



Costs of Quality (Step 3)

Select the cost-allocation bases to use forallocating indirect costs of quality to the products.

• Prevention• Appraisal• Internal failure• External failure

Step 3

Information on the totalquantities of each of thesecost-allocation bases usedin all of Vegas operations

is not provided.




Identify the indirect costs of qualityassociated with each cost-allocation base.

Step 4

Information about total (fixed and variable)costs is not provided.




calculate therate per unit.

Step 5

Inspection hours is onecost-allocation base.




Prevention costs:Design engineering (R&D) $80 per hourProcess engineering (R&D) $60 per hour

Appraisal costs:Inspection (Manufacturing) $40 per hour




Internal failure costs:Rework (Manufacturing) $100 per hour

External failure costs:Customer support (Marketing) $ 50 per hour

Transportation (Distribution) $240 per loadWarranty repair (Customer Service)$110 per hour




Step 6

calculate the indirect costs of qualityallocated to the product.




Prevention costs:Design engineering (R&D) 20,000 hours

Process engineering (R&D) 22,500 hours

Appraisal costs:Inspection (Manufacturing) 120,000 hours




Internal failure costs:Rework (Manufacturing) 50,000 hours

External failure costs:Customer support (Marketing) 6,000 hours

Transportation (Distribution) 1,500 loadsWarranty repair (Customer Service) 60,000 hours




What is the total cost for design engineering?

20,000 hours × $80 = $1,600,000

What is the total cost for inspection?

120,000 hours × $40 = $4,800,000




Cost of Quality andValue Chain Category Total Costs

Prevention costs:Design engineering (R&D) $1,600,000Process engineering (R&D) 1,350,000Total $2,950,000

Appraisal costs:Inspection $4,800,000





Internal failure costs:Rework (Manufacturing) $5,000,000





External failure costs:Customer support (Marketing) $ 300,000Transportation (Distribution) 360,000Warranty repair (Customer Service) 6,600,000Total $7,260,000




Step 7

Compute the total costs of quality of the product.

Prevention costs $ 2,950,000Appraisal costs 4,800,000

Internal failure costs 5,000,000External failure costs 7,260,000Total $20,010,000



Traditional Cost of Poor Quality

(4-5% of Sales)

When quality costs are initially determined, the categories included are the visible ones as

depicted in the iceberg below.

Waste

Testing Costs

Rework

Customer Returns

Inspection CostsRejects

Recalls



Cost of Poor QualityAs an organization gains a broader definition of poor quality,the hidden portion of the iceberg becomes apparent.

Late Paperwork High CostsPricing orBilling Errors

ExcessiveServices Expenses

Incorrectly CompletedSales OrderLack of Follow-up

on Current ProgramsExcessiveEmployee Turnover

Planning Delays

late delivery

ComplaintHandling

Unused Capacity

Time withDissatisfied Customer

Excessive Overtime

Waste

Testing Costs

Rework

Customer Returns

Inspection CostsRejects

Recalls

Development Cost of Failed ProductHidden COPQ: The costs incurred to deal with these chronic problems

Premium cargo Costs

Customer Allowances

COPQ rangesfrom 15-25% of Sales



Malcolm Baldrige National Malcolm Baldrige National Quality AwardQuality Award



MBNQA In the 1980s, many industry and government

leaders saw that a renewed emphasis on quality was no longer an option for American organisations, rather, it was a necessity for doing business in an ever expanding, and more demanding competitive global market. The Baldrige Award was therefore envisaged as a standard of excellence that would help US organisations achieve world-class quality



Malcolm Baldrige

1981-87 secretary of Commerce. supporter of quality management as

key to US economic survival Helped draft early version of quality

act Resolved technology transfer

differences with China and India First Cabinet-level meetings with

Soviet Union in 7 years Paved way for increased access for US

firms



Champion Roper

National Cowboy Hall of Fame July 25, 1987 N. California

rodeo Horse threw him, fell on him,

and crushed him



WHY Baldrige ?

Purpose of MBNQA to enhance US competitivenes

Promotes quality awareness, recognizes achievements of US companies

Vehicle for sharing success strategies ISO covers less than 10 percent of the

Baldrige award criteria Many apply, few are selected MBNQA not required for business



Each category has several items (18 total), and each item has several “areas to address”



Point Values



ADLI = Approach, Deployment, Learning, Integration



Categories

Manufacturing Service Small Business Education (added 1999) Health Care (added 1999) Nonprofit (2005)



Leadership

Examines how senior executives guide the company and how the company addresses its responsibilities to the public and practices good citizenship.1.1 Organizational Leadership

1.2 Social Responsibility



Strategic planning

Examines how the company sets strategic directions and how it determines key action plans.

2.1Strategy Development 2.2 Strategy Deployment



Customer and market focus

Examines how the company determines requirements and expectations of customers and markets.

3.1Customer and Market Knowledge 3.2 Customer Relationships and Satisfaction



Information and analysis

Examines the management, effective use, and analysis of data and information to support key company processes and the company’s performance management system.

4.1Measurement and Analysis of Organizational Performance

4.2 Information and Knowledge Management



Human resource focus

Examines how the company enables its workforce to develop its full potential and how the workforce is aligned with the company’s objectives.

5.1 Work Systems 5.2 Employee Learning and Motivation 5.3 Employee Well-Being and Satisfaction



Process management

Examines aspects of how key production/delivery and support processes are designed, managed, and improved.

6.1V alue Creation Processes 6.2 Support Processes



Business results

Examines the company’s performance and improvement in its key business areas: customer satisfaction, financial and marketplace performance, human resources, supplier and partner performance, and operational performance.

The category also examines how the company performs relative to competitors. better market performance, gains in market share,

and customer retention and satisfaction



Baldrige Award Recipients

http://www.baldrige.nist.gov/Contacts_Profiles.htm

Group project



• MidwayUSA, a 2009 Baldrige Award winner in the small business category, utilizes a customer-first culture and many customer-focused approaches to building trust, confidence, and loyalty at all stages of the customer relationship.

• MidwayUSA’s commitment to the customer is hard-wired into the company’s vision, purpose, mission, and values; Company Goals; and Code of Conduct . The vision itself says it all: “To be the best-run business in America for the benefit of our Customers.”

—

MIDWAYUSA - customer focus



• This customer-focused philosophy is carried out in many different approaches, including the following:

- All salaried employees (including senior leaders) spend at least one hour each week on the phone taking orders and answering customer requests.

- Employees are selected for leadership development based on their support of the company’s core value of “Customer-Driven Excellence” in addition to other performance-based criteria. Employees also are encouraged to participate in industry-related events.

MIDWAYUSA - customer focus cont.



- Employees’ performance reviews are aligned with key customer requirements. For example, customer service representatives are evaluated on their performance in relation to the requirement for “Friendly, Courteous, Respectful, and Ethical Service.”

- Direct access is provided to the company’s founder and CEO, Larry Potterfield, via the Larry Line. Potterfield also role-models the customer-first philosophy by being very visible and accessible

(“The Face of MidwayUSA”) to customers at industry and other public events.




Customer input on improving operations is solicited via the company’s Web site by regularly featuring online surveys, posting customer reviews of the company’s products, and providing an “I’m Having Trouble Finding” option so customers can suggest additions to product lines.


quality management, 6 th ed. goetsch and davis © 2010 pearson higher education, upper saddle river,...

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