Total Quality Management Total Quality Management

Presented by

C. Christopher LeeC. Christopher LeeAssociate Professor of Management

Lee (2012): Critical Issues on TQM

1. Customer & Quality

2. Quality Measurements

3. Process Improvement

4. 3 σ (sigma), 4 σ, 5 σ, 6 σ

5. Continuous Improvement

6. Quality & Profitability

7. Total Commitment

Customer & QualityCustomer & Quality• The first step of TQM is to define the quality.• Customers set an expectation for a

product/service.• When the expectation is met, customers are

satisfied.• When customers are satisfied, they validate

the quality of the product/service.• Therefore, Quality = Customer

Satisfaction

• Review Question (RQ): Who defines the quality? Why? 3

Quality MeasurementsQuality Measurements• After defining the quality for a product/service, the next

step is to quantify the quality.• A manager should form a team including workers, quality

specialist.• The manager should lead the team to determine a proper

measurement for each process of a product/service; A quality goal can become a measurable number.

• The quality goal is now set scientifically.• Workers will collect the data for the measurement,

process & analyze the data, and improve the process.• RQ: Why does TQM quantify the quality?

• RQ: Why do Workers have to be involved in quantifying the quality (planning)?

4

Product Control vs. Process Control Product Control vs. Process Control

• Product Control = Quality Control (old): • Before TQM, we implemented quality control by

checking the defect rate of finished goods. This is product control.

• This approach does NOT improve the quality. • When you check the quality of finished goods,

damages were already done. • Summary: Product control is not TQM.• Reality Check: Still many business organizations

conduct “quality control” approach, and think they are implementing TQM.

• RQ: Why doesn’t Quality Control improve the quality actually?

Product Control vs. Process Control (continued)Product Control vs. Process Control (continued)

• Process Control = Process Improvement, Quality Improvement, TQM (new): TQM asks you to check the quality in each process of a whole business operation.• If a process shows low quality, you must stop the

whole operation, and everyone must solve the particular process immediately.

• By improving each process, the whole operation (total quality) is improved, and the quality of the fished good is improved.

• Summary:

• RQ: Why is “quality improvement” better than “quality control”?

OLD NEW

Product Control Process Control

Quality Control Quality Improvement - TQM

Striving for 6 Striving for 6 σσ• SPC: SPC: Statistical Process Control

• 3 3 σσ : Less than 3 defects per 1000

• Industry standard, Supply chain management

• 4 4 σσ : Less than 3 defects per 10,000

• Leader in the industry • Contender for Malcom Baldridge Award

• 5 5 σσ : Less than 3 defects per 100,000

• Contender for Deming Prize

• 6 6 σσ : Less than 3 defects per 1,000,000

• World Leader • Motorola (early 90s); Toyota (1965-early 2000s)

• RQ: Why did Toyota lose the 6-sigma reputation in 2000s?

Continuous Continuous ImprovementImprovement

• OLD: If it is not broken, don’t fix it.• NEW: Even if you achieved a quality goal,

never stop improving the process.• TQM = Continuous improvement

= Never-ending process• If you stop improving, a competitor will take

over your territory soon.• To simply survive, you need to continuously

improve the quality. • 3 3 σσ 4 4 σσ 5 5 σσ 6 6 σσ

• RQ: Why is TQM a never-ending process? 8

Relationship b/w Quality & ProfitabilityRelationship b/w Quality & Profitability REVENUE:REVENUE:

1.1. Words of MouthWords of Mouth::» Higher QualityHigher Quality

» Higher SatisfactionHigher Satisfaction

» Worlds of MouthWorlds of Mouth

» Higher SalesHigher Sales

2.2. Higher PriceHigher Price::» Higher QualityHigher Quality

» Higher PerceptionHigher Perception

» Higher PriceHigher Price

» Higher RevenueHigher Revenue

COST:COST:1.1. Lower WIPLower WIP::

» Higher QualityHigher Quality

» Less DefectsLess Defects

» Less WIPLess WIP

» Less Production CostLess Production Cost

2.2. Lower ReturnsLower Returns::» Higher QualityHigher Quality

» Less DefectsLess Defects

» Less ReturnsLess Returns

» Less Operations CostLess Operations Cost

Quality Revenue & Cost Profit !!!

Interlinking QualityQuality and ProfitabilityProfitability Performance

RQ: What is the relationship b/w quality & profitability?

Total CommitmentTotal Commitment• Time & Cost: Improving a process takes a lot of

resources (time & cost). Imagine a business operation that involves more than 100 processes.

• Long-Term Project: Therefore, TQM must be a long-term project.

• Total Quality: Every process in the organization must get involved in quality improvement.

• Top Management Support: Top management must commit fully to this TQM project, otherwise the TQM will fail miserably. Without support of CEO/President of a firm, TQM will never be implemented successfully.

• RQ: Why does TQM fail without total commitment & full support by top management?