tqm case no. 2 final

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TOOLS OF QUALITY CONTROL The seven basic tools of quality was first emphasized by Kaoru Ishikawa, a professor of engineering at Tokyo University and the father of “quality circles.” 1. Cause-and-effect diagram (also called Ishikawa or fishbone chart): Identifies many possible causes for an effect or problem and sorts ideas into useful categories. 2. Check sheet: A structured, prepared form for collecting and analyzing data; a generic tool that can be adapted for a wide variety of purposes. 3. Control charts: Graphs used to study how a process changes over time. 4. Histogram: The most commonly used graph for showing frequency distributions, or how often each different value in a set of data occurs. 5. Pareto chart: Shows on a bar graph which factors are more significant. 6. Scatter diagram: Graphs pairs of numerical data, one variable on each axis, to look for a relationship. 7. Flowchart: A picture of the separate steps of a process in sequential order. Cause–and–Effect Diagram (Ishikawa Diagram) Variations: cause enumeration diagram, process fishbone, time–delay fishbone, CEDAC (cause–and–effect diagram with the addition of cards), desired–result fishbone, reverse fishbone diagram The fishbone diagram identifies many possible causes for an effect or problem. It can be used to structure a brainstorming session. It immediately sorts ideas into useful categories. When to Use a Fishbone Diagram

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Page 1: TQM CASE NO. 2 final

TOOLS OF QUALITY CONTROL

The seven basic tools of quality was first emphasized by Kaoru Ishikawa, a professor of engineering at Tokyo University and the father of “quality circles.”

1. Cause-and-effect diagram (also called Ishikawa or fishbone chart): Identifies many possible causes for an effect or problem and sorts ideas into useful categories.

2. Check sheet: A structured, prepared form for collecting and analyzing data; a generic tool that can be adapted for a wide variety of purposes.

3. Control charts: Graphs used to study how a process changes over time.4. Histogram: The most commonly used graph for showing frequency distributions, or how

often each different value in a set of data occurs.5. Pareto chart: Shows on a bar graph which factors are more significant.6. Scatter diagram: Graphs pairs of numerical data, one variable on each axis, to look for a

relationship.7. Flowchart: A picture of the separate steps of a process in sequential order.

Cause–and–Effect Diagram (Ishikawa Diagram)

Variations: cause enumeration diagram, process fishbone, time–delay fishbone, CEDAC (cause–and–effect diagram with the addition of cards), desired–result fishbone, reverse fishbone diagram

The fishbone diagram identifies many possible causes for an effect or problem. It can be used to structure a brainstorming session. It immediately sorts ideas into useful categories.

When to Use a Fishbone Diagram

1. When identifying possible causes for a problem.2. Especially when a team’s thinking tends to fall into ruts.

Fishbone Diagram Procedure

Materials needed: flipchart or whiteboard, marking pens.

1. Agree on a problem statement (effect). Write it at the center right of the flipchart or whiteboard. Draw a box around it and draw a horizontal arrow running to it.

2. Brainstorm the major categories of causes of the problem. If this is difficult use generic headings:a. Methodsb. Machines (equipment)c. People (manpower)

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d. Materialse. Measurementf. Environment

3. Write the categories of causes as branches from the main arrow.4. Brainstorm all the possible causes of the problem. Ask: “Why does this happen?” As each

idea is given, the facilitator writes it as a branch from the appropriate category. Causes can be written in several places if they relate to several categories.

5. Again ask “why does this happen?” about each cause. Write sub–causes branching off the causes. Continue to ask “Why?” and generate deeper levels of causes. Layers of branches indicate causal relationships.

6. When the group runs out of ideas, focus attention to places on the chart where ideas are few.

Check Sheet

Also called: defect concentration diagram

A check sheet is a structured, prepared form for collecting and analyzing data. This is a generic tool that can be adapted for a wide variety of purposes.

When to Use a Check Sheet

1. When data can be observed and collected repeatedly by the same person or at the same location.

2. When collecting data on the frequency or patterns of events, problems, defects, defect location, defect causes, etc.

3. When collecting data from a production process.

Check Sheet Procedure

1. Decide what event or problem will be observed. Develop operational definitions.2. Decide when data will be collected and for how long.3. Design the form. Set it up so that data can be recorded simply by making check marks or

Xs or similar symbols and so that data do not have to be recopied for analysis.4. Label all spaces on the form.5. Test the check sheet for a short trial period to be sure it collects the appropriate data and

is easy to use.6. Each time the targeted event or problem occurs, record data on the check sheet.

Control Chart

Also called: statistical process control

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The control chart is a graph used to study how a process changes over time. Data are plotted in time order. A control chart always has a central line for the average, an upper line for the upper control limit and a lower line for the lower control limit. These lines are determined from historical data. By comparing current data to these lines, you can draw conclusions about whether the process variation is consistent (in control) or is unpredictable (out of control, affected by special causes of variation).

Control charts for variable data are used in pairs. The top chart monitors the average, or the centering of the distribution of data from the process. The bottom chart monitors the range, or the width of the distribution. If your data were shots in target practice, the average is where the shots are clustering, and the range is how tightly they are clustered. Control charts for attribute data are used singly.

When to Use a Control Chart

1. When controlling ongoing processes by finding and correcting problems as they occur.2. When predicting the expected range of outcomes from a process.3. When determining whether a process is stable (in statistical control).4. When analyzing patterns of process variation from special causes (non-routine events) or

common causes (built into the process).5. When determining whether your quality improvement project should aim to prevent

specific problems or to make fundamental changes to the process.

Control Chart Basic Procedure

1. Choose the appropriate control chart for your data.2. Determine the appropriate time period for collecting and plotting data.3. Collect data, construct your chart and analyze the data.4. Look for “out-of-control signals” on the control chart. When one is identified, mark it on

the chart and investigate the cause. Document how you investigated, what you learned, the cause and how it was corrected.

5. Continue to plot data as they are generated. As each new data point is plotted, check for new out-of-control signals.

6. When you start a new control chart, the process may be out of control. If so, the control limits calculated from the first 20 points are conditional limits. When you have at least 20 sequential points from a period when the process is operating in control, recalculate control limits.

Histogram

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A frequency distribution shows how often each different value in a set of data occurs. A histogram is the most commonly used graph to show frequency distributions. It looks very much like a bar chart, but there are important differences between them.

When to Use a Histogram

1. When the data are numerical.2. When you want to see the shape of the data’s distribution, especially when determining

whether the output of a process is distributed approximately normally.3. When analyzing whether a process can meet the customer’s requirements.4. When analyzing what the output from a supplier’s process looks like.5. When seeing whether a process change has occurred from one time period to another.6. When determining whether the outputs of two or more processes are different.7. When you wish to communicate the distribution of data quickly and easily to others.

Histogram Construction

1. Collect at least 50 consecutive data points from a process.2. Use the histogram worksheet to set up the histogram. It will help you determine the

number of bars, the range of numbers that go into each bar and the labels for the bar edges. After calculating W in step 2 of the worksheet, use your judgment to adjust it to a convenient number. For example, you might decide to round 0.9 to an even 1.0. The value for W must not have more decimal places than the numbers you will be graphing.

3. Draw x- and y-axes on graph paper. Mark and label the y-axis for counting data values. Mark and label the x-axis with the L values from the worksheet. The spaces between these numbers will be the bars of the histogram. Do not allow for spaces between bars.

4. For each data point, mark off one count above the appropriate bar with an X or by shading that portion of the bar.

Histogram Analysis

Before drawing any conclusions from your histogram, satisfy yourself that the process was operating normally during the time period being studied. If any unusual events affected the process during the time period of the histogram, your analysis of the histogram shape probably cannot be generalized to all time periods.

Scatter Diagram

Also called: scatter plot, X–Y graph

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The scatter diagram graphs pairs of numerical data, with one variable on each axis, to look for a relationship between them. If the variables are correlated, the points will fall along a line or curve. The better the correlation, the tighter the points will hug the line.

When to Use a Scatter Diagram

1. When you have paired numerical data.2. When your dependent variable may have multiple values for each value of your

independent variable.3. When trying to determine whether the two variables are related, such as…

a. When trying to identify potential root causes of problems.b. After brainstorming causes and effects using a fishbone diagram, to determine

objectively whether a particular cause and effect are related.c. When determining whether two effects that appear to be related both occur

with the same cause.d. When testing for autocorrelation before constructing a control chart.

Scatter Diagram Procedure

1. Collect pairs of data where a relationship is suspected.2. Draw a graph with the independent variable on the horizontal axis and the dependent

variable on the vertical axis. For each pair of data, put a dot or a symbol where the x-axis value intersects the y-axis value. (If two dots fall together, put them side by side, touching, so that you can see both.)

3. Look at the pattern of points to see if a relationship is obvious. If the data clearly form a line or a curve, you may stop. The variables are correlated. You may wish to use regression or correlation analysis now. Otherwise, complete steps 4 through 7.

4. Divide points on the graph into four quadrants. If there are X points on the graph,5. Count X/2 points from top to bottom and draw a horizontal line.6. Count X/2 points from left to right and draw a vertical line.7. If number of points is odd, draw the line through the middle point.8. Count the points in each quadrant. Do not count points on a line.

9. Add the diagonally opposite quadrants. Find the smaller sum and the total of points in all quadrants.A = points in upper left + points in lower rightB = points in upper right + points in lower left

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Q = the smaller of A and BN = A + B

10. Look up the limit for N on the trend test table.

If Q is less than the limit, the two variables are related.

If Q is greater than or equal to the limit, the pattern could have occurred from random chance.

Pareto Chart

Also called: Pareto diagram, Pareto analysis

Variations: weighted Pareto chart, comparative Pareto charts

A Pareto chart is a bar graph. The lengths of the bars represent frequency or cost (time or money), and are arranged with longest bars on the left and the shortest to the right. In this way the chart visually depicts which situations are more significant.

When to Use a Pareto Chart

1. When analyzing data about the frequency of problems or causes in a process.2. When there are many problems or causes and you want to focus on the most significant.3. When analyzing broad causes by looking at their specific components.4. When communicating with others about your data.

Pareto Chart Procedure

1. Decide what categories you will use to group items.2. Decide what measurement is appropriate. Common measurements are frequency,

quantity, cost and time.3. Decide what period of time the Pareto chart will cover: One work cycle? One full day? A

week?4. Collect the data, recording the category each time. (Or assemble data that already exist.)5. Subtotal the measurements for each category.6. Determine the appropriate scale for the measurements you have collected. The maximum

value will be the largest subtotal from step 5. (If you will do optional steps 8 and 9 below, the maximum value will be the sum of all subtotals from step 5.) Mark the scale on the left side of the chart.

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7. Construct and label bars for each category. Place the tallest at the far left, then the next tallest to its right and so on. If there are many categories with small measurements, they can be grouped as “other.”

Steps 8 and 9 are optional but are useful for analysis and communication.

8. Calculate the percentage for each category: the subtotal for that category divided by the total for all categories. Draw a right vertical axis and label it with percentages. Be sure the two scales match: For example, the left measurement that corresponds to one-half should be exactly opposite 50% on the right scale.

9. Calculate and draw cumulative sums: Add the subtotals for the first and second categories, and place a dot above the second bar indicating that sum. To that sum add the subtotal for the third category, and place a dot above the third bar for that new sum. Continue the process for all the bars. Connect the dots, starting at the top of the first bar. The last dot should reach 100 percent on the right scale.

Flowchart

Also called: process flowchart, process flow diagram.

Variations: macro flowchart, top-down flowchart, detailed flowchart (also called process map, micro map, service map, or symbolic flowchart), deployment flowchart (also called down-across or cross-functional flowchart), several-leveled flowchart.

A flowchart is a picture of the separate steps of a process in sequential order.

Elements that may be included are: sequence of actions, materials or services entering or leaving the process (inputs and outputs), decisions that must be made, people who become involved, time involved at each step and/or process measurements.

The process described can be anything: a manufacturing process, an administrative or service process, a project plan. This is a generic tool that can be adapted for a wide variety of purposes.

When to Use a Flowchart

1. To develop understanding of how a process is done.2. To study a process for improvement.3. To communicate to others how a process is done.4. When better communication is needed between people involved with the same process.5. To document a process.6. When planning a project.

Flowchart Basic Procedure

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Materials needed: sticky notes or cards, a large piece of flipchart paper or newsprint, marking pens.

1. Define the process to be diagrammed. Write its title at the top of the work surface.2. Discuss and decide on the boundaries of your process: Where or when does the process

start? Where or when does it end? Discuss and decide on the level of detail to be included in the diagram.

3. Brainstorm the activities that take place. Write each on a card or sticky note. Sequence is not important at this point, although thinking in sequence may help people remember all the steps.

4. Arrange the activities in proper sequence.5. When all activities are included and everyone agrees that the sequence is correct, draw

arrows to show the flow of the process.6. Review the flowchart with others involved in the process (workers, supervisors, suppliers,

customers) to see if they agree that the process is drawn accurately.

Flowchart Considerations

1. Don’t worry too much about drawing the flowchart the “right way.” The right way is the way that helps those involved understand the process.

2. Identify and involve in the flowcharting process all key people involved with the process. This includes those who do the work in the process: suppliers, customers and supervisors. Involve them in the actual flowcharting sessions by interviewing them before the sessions and/or by showing them the developing flowchart between work sessions and obtaining their feedback.

3. Do not assign a “technical expert” to draw the flowchart. People who actually perform the process should do it.

4. Computer software is available for drawing flowcharts. Software is useful for drawing a neat final diagram, but the method given here works better for the messy initial stages of creating the flowchart.

Commonly Used Symbols in Detailed Flowcharts

One step in the process; the step is written inside the box. Usually, only one arrow goes out of the box.

Direction of flow from one step or decision to another.

Decision based on a question. The question is written in the diamond. More than one arrow goes out of the diamond, each one showing the direction the process takes for a given answer to the question. (Often the answers are “ yes” and “ no.”)

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Delay or wait

Link to another page or another flowchart. The same symbol on the other page indicates that the flow continues there.

Alternate symbols for start and end points

SIX SIGMA

Six Sigma is a methodology used to improve business processes by utilizing statistical analysis rather than guesswork. This proven approach has been implemented within a myriad of industries

Input or output

Document

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to achieve hard and soft money savings, while increasing customer satisfaction. Six Sigma at many organizations simply means a measure of quality that strives for near perfection. Six Sigma is a disciplined, data-driven approach and methodology for eliminating defects (driving toward six standard deviations between the mean and the nearest specification limit) in any process from manufacturing to transactional and from product to service.

Six Sigma is more than “training”; it is an approach based on data, geared toward projects with quantifiable business outcomes. For instance, in 1999 GE Capital was able to save $2 Billion with Six Sigma. Processes are improved by controlling variation and understanding the intricacies within them. This results in more predictable and profitable business processes.

The statistical representation of Six Sigma describes quantitatively how a process is performing. To achieve Six Sigma, a process must not produce more than 3.4 defects per million opportunities. A Six Sigma defect is defined as anything outside of customer specifications. A Six Sigma opportunity is then the total quantity of chances for a defect.

The fundamental objective of the Six Sigma methodology is the implementation of a measurement-based strategy that focuses on process improvement and variation reduction through the application of Six Sigma improvement projects. This is accomplished through the use of two Six Sigma sub-methodologies: DMAIC and DMADV. The Six Sigma DMAIC process (define, measure, analyze, improve, control) is an improvement system for existing processes falling below specification and looking for incremental improvement. The Six Sigma DMADV process (define, measure, analyze, design, verify) is an improvement system used to develop new processes or products at Six Sigma quality levels. It can also be employed if a current process requires more than just incremental improvement. Both Six Sigma processes are executed by Six Sigma Green Belts and Six Sigma Black Belts, and are overseen by Six Sigma Master Black Belts.

According to the Six Sigma Academy, Black Belts save companies approximately $230,000 per project and can complete four to 6 projects per year. General Electric, one of the most successful companies implementing Six Sigma, has estimated benefits on the order of $10 billion during the first five years of implementation. GE first began Six Sigma in 1995 after Motorola and Allied Signal blazed the Six Sigma trail. Since then, thousands of companies around the world have discovered the far reaching benefits of Six Sigma.

Many frameworks exist for implementing the Six Sigma methodology. Six Sigma Consultants all over the world have developed proprietary methodologies for implementing Six Sigma quality, based on the similar change management philosophies and applications of tools.

Champions

- Company executives who lead Six Sigma by backing projects.

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- Individuals who receive instruction regarding the basic principles of Six Sigma and its methodology.

- Responsible for choosing employees to be “Belts” and mentoring project leaders.- Those who implement and back the introduction of Six Sigma within the firm.

Master Black Belts

- Aligned with the Champion to offer support and provide Project Descriptions.- Those who will advise and instruct Green Belts and Black Belts.- Professionals with widespread project management knowledge.- Masters of Six Sigma Methodologies with proven track records.- Individuals with an advanced understanding of the Statistical Tools used within Six Sigma.- Prospective leaders of a corporation.

Six Sigma Belts

- Individuals who obtain instruction concerning the road map of Six Sigma.- Individuals who receive one-week to four-week training sessions that provide them with

an opportunity to progress through his or her project as the skills are learned.- Individuals who successfully complete all required training, exams, and a live project.

DEMING PRIZE

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The Deming Prize is one of the highest awards on TQM (Total Quality Management) in the world. It was established in 1951 in commemoration of the late Dr. William Edwards Deming who contributed greatly to Japan’s proliferation of statistical quality control after the World War II. His teachings helped Japan build its foundation by which the level of Japan’s product quality has been recognized as the highest in the world.

History

The late Dr. W. E. Deming (1900 - 1993), one of the foremost experts of quality control in the United States, was invited to Japan by the Union of Japanese Scientists and Engineers (JUSE) in July 1950.

Upon his visit, Dr. Deming lectured day after day his “Eight-Day Course on Quality Control” at the Auditorium of the Japan Medical Association in Kanda-Surugadai, Tokyo. This was followed by Dr. Deming’s “One-Day Course on Quality Control for Top Management,” held in Hakone. Through these seminars, Dr. Deming taught the basics of statistical quality control plainly and thoroughly to executives, managers, engineers and researchers of Japanese industry. His teachings made a deep impression on the participants’ mind and provided great impetus to quality control in Japan, which was in its infancy.

The transcript of the eight-day course, “Dr. Deming’s Lectures on Statistical Control of Quality,” was compiled from stenographic records and distributed for a charge. Dr. Deming donated his royalties to JUSE. In appreciation of Dr. Deming’s generosity, the late Mr. Kenichi Koyanagi, managing director of JUSE, proposed using it to fund a prize to commemorate Dr. Deming’s contribution and friendship in a lasting way and to promote the continued development of quality control in Japan. Upon receiving the proposal, the JUSE's board of directors unanimously made a resolution to establish the Deming Prize.

Later, the Japanese translation of Dr. Deming’s book Some Theory of Sampling was published. Dr. Deming further contributed to the fund using the royalties from his book. Since then, the Deming Prize has grown considerably, and today JUSE carries the overall administrative costs for the prize.

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Categories of the Deming Prize

As shown in the table below, the categories of the Deming Prize are the Deming Prize for Individuals, the Deming Application Prize and the Quality Control Award for Operations Business Units.

The Deming Prize for Individuals For individuals or groups

Given to those who have made outstanding contributions to the study of TQM or statistical methods used for TQM, or those who have made outstanding contributions in the dissemination of TQM

The Deming Application Prize For organizations or divisions of organizations that manage their business autonomously

Given to organizations or divisions of organizations that have achieved distinctive performance improvement through the application of TQM in a designated year

The Quality Control Award for Operations Business Units

For operations business units of an organization

Given to operations business units of an organization that have achieved distinctive performance improvement through the application of quality control/management in the pursuit of TQM in a designated year

Definition of TQM (Total Quality Management) (revised in June 1998)

The Deming Prize Committee defines TQM as follows:

TQM is a set of systematic activities carried out by the entire organization to effectively and efficiently achieve company objectives so as to provide products and services with a level of quality that satisfies customers, at the appropriate time and price.

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The Deming Prize and Development of Quality Control / Management in Japan

The Deming Prize, especially the Deming Application Prize that is given to companies, has exerted an immeasurable influence directly or indirectly on the development of quality control / management in Japan.

Applicant companies and divisions of companies sought after new approaches to quality management that met the needs of their business environment and challenged for the Deming Prize. Those organizations developed effective quality management methods, established the structures for implementation and put the methods into practice.

Commonly, those who have challenged for the Prize share the feeling that they have had a valuable experience and that the management principle of achieving a business success through quality improvement has really worked. Through witnessing the success of these organizations, many other companies have been inspired to begin their own quest for quality management. Learning from those who went before them, the new practitioners are convinced that quality management is an important key to their business success and that the challenge to attain the Prize can provide an excellent opportunity to learn useful quality methodologies. Thus, quality management has spread to many organizations, its methods have evolved over the years and the methods contributed to the advancement of these organizations’ improvement activities.

This mechanism that encourages each organization’s self-development comes from the examination process of the Deming Prize, though the very process has invited some criticism that the marking criteria for the Deming Application Prize is unclear. To make the examination process more transparent and to communicate the intentions of the Deming Prize more clearly, the evaluation criteria and the judgment criteria for passing are now presented.

However, the Committee’s basic stance on the examination criteria remains unchanged. Namely, the criteria should reflect each applicant organization’s circumstance.

The Deming Prize examination does not require applicants to conform to a model provided by the Deming Prize Committee. Rather, the applicants are expected to understand their current situation, establish their own themes and objectives and improve and transform themselves company-wide. Not only the results achieved and the processes used, but also the effectiveness expected in the future are subjects for the examination. To the best of their abilities, the examiners evaluate whether or not the themes established by the applicants were commensurate to their situation; whether or not their activities were suitable to their circumstance and whether or not their activities are likely to achieve their higher objectives in the future.

The Deming Prize Committee views the examination process as an opportunity for “mutual-development,” rather than “examination.” While in realty the applicants still receive the

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examination by a third party, the examiners’ approach to evaluation and judgment is comprehensive. Every factor such as the applicants’ attitude toward executing Total Quality Management (TQM), their implementation status and the resulting effects are taken into overall consideration. In other words, the Deming Prize Committee does not specify what issues the applicants must address, rather the applicants themselves are responsible for identifying and addressing such issues, thus, this process allows quality methodologies to be further developed.

Total Quality Control (TQC) that had been developed in Japan as discussed above was re-imported to the United States in the 1980s and contributed to the revitalization of its industries. While the term TQC had been used in Japan, it was translated as TQM in western nations. To follow an internationally-accepted practice, Japan changed the name from TQC to TQM.

There is no easy success at this time of constant change. No organization can expect to build excellent quality and management systems just by solving problems given by others. They need to think on their own, set lofty goals and drive themselves to challenge for achieving those goals. For these companies that introduce and implement TQM in this manner, the Deming Application Prize aims to be used as a tool for improving and transforming their business management.

Deming Prize for Individuals

The Deming Prize for Individuals is an annual award given to:

- individuals who have made outstanding contributions to the study of TQM or statistical methods used for TQM, or

- individuals who have made outstanding contributions in the dissemination of TQM.

To apply for the Deming Prize for Individuals, recommendation from the members of the Deming Prize Committee will be necessary. Any individual who fulfils the above (1) or (2) may apply for the Prize regardless of nationality. However, those whose activities are limited to outside Japan are not eligible for application.

The Deming Prize Committee welcomes candidates to apply or make recommendations for others for the Deming Prize for Individuals. There is no difference in the examination process regardless if the candidates have been recommended by others or self-applied.

Deming Application Prize

The Deming Application Prize is an annual award presented to a company that has achieved distinctive performance improvements through the application of TQM. Regardless of the types of industries, any organization can apply for the Prize, be it public or private, large or small, or

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domestic or overseas. Provided that a division of a company manages its business autonomously, the division may apply for the Prize separately from the company.

There is no limit to the number of potential recipients of the Prize each year. All organizations that score the passing points or higher upon examination will be awarded the Deming Application Prize.

Companies Qualified for Receiving the Prize

The Deming Application Prize is given to applicant companies or divisions of companies (applicant companies hereafter) that effectively practice TQM suitable to their management principles, industry, business and scope. More specifically, the following evaluation criteria are used for the examination to determine whether or not the applicant companies should be awarded the Prize:

1. 1. Reflecting their management principles, industry, business, scope and business environment, the applicants have established challenging and customer-oriented business objectives and strategies under their clear management leadership.

2. 2. TQM has been implemented properly to achieve business objectives and strategies as mentioned Item 1) above.

3. As an outcome of Item 2), outstanding results have been obtained for business objectives and strategies as stated in Item 1).

Quality Control Award for Operations Business Units

The Quality Control Award for Operations Business Units is given to operations business units of a company that have achieved distinctive performance improvement through the application of quality control/management in the pursuit of TQM in a designated year.

While the Deming Application Prize is directed toward an entire company or a division of a company, the Quality Control Award for Operations Business Units accommodates an individual business unit, which is not eligible for the Deming Application Prize challenge. To be eligible for the Quality Control Award for Operations Business Units, the head of the business unit must possess management responsibilities for the budget. In addition, the unit must have clearly established responsibilities and authorities for quality management within the business unit, with a clearly defined relationship with the head office or other related departments. The unit does not have to possess all functions related to quality management and quality assurance.

Effects of the Deming Application Prize

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More than 160 companies have been awarded the Deming Application Prize. As a result, a quantum leap in the quality of their products and services has been achieved. The Deming Application Prize, which was born in Japan, has earned an internationally renowned reputation as a coveted quality award. This section introduces the effects that can be expected from challenging the Prize and also words from the top management of the Prize winning companies.

1. Quality Stabilization and Improvement

By disseminating the concept of quality and the concept of controlling/managing business activities throughout the organization, companies have improved their day-to-day operations. At the same time, statistical quality control methods have been utilized and a quality assurance system has been established. These activities, together with an enhanced quality consciousness, have allowed companies to provide customers with quality products and services that are matched with customer requirements and company policies and that have been properly planned, developed, designed, produced and installed. As a result, there have been reductions in development and design troubles, parts defects, production defects, installation defects, service defects and market claims and complaints. Expected product and service quality has been achieved, and it has become possible to provide products and services with attractive quality that positively satisfy customers. Results also include improved reliability, safety and quality that meet society's needs. Due in part to these improvements, many companies have acquired a world-class reputation.

These quality improvements not only please customers but also bring about positive economic results, as listed in Items (2), (3) and (4) and improve the company's organizational constitution, as described in Items (4) through (10).

2. Productivity Improvement/Cost Reduction

Significant effects have been achieved as a result of the following improvements: reduced development and design troubles during the new product development stage; decreased parts defects or reduced process troubles due to the spread of TQM promotion with vendors; lower manufacturing defects and reduction of rework and adjustment work at the manufacturing stage; reduced installation defects at construction companies; and increased customer satisfaction in service industry companies. Furthermore, through a systematic approach to cost reduction during new product development, competitive cost targets have been achieved. Activities to improve production control systems and reduce man-hour have also enhanced productivity.

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3. Expanded Sales

Through a systematic approach to satisfying customers' requirements, or to developing competitive new products in anticipation of customers' potential requirements, Deming Prize-winning companies have achieved improved customer satisfaction and, as a result, have been able to expand their sales. Furthermore, they have strengthened their management system for the initial distribution of new products and have deployed TQM into their sales activities. These efforts have contributed to capturing new customers or markets and to preventing out-of-stock problem situations, both of which have resulted in increased sales.

4. Increased Profits

Item (3), expanded sales, and Item (2), improved productivity/reduced cost, work together to increase profits. To promote TQM, of course, some expenses are inevitable, such as education and training, payroll for TQM promotion staff and other activities and events. However, based on the improved business performance companies have achieved by implementing TQM, it is clear that TQM is highly cost-effective.

5. Thorough Implementation of Management Plans/Business Plans

To secure profits, it is important to implement management plans/business plans that center on profit plans. Naturally, quality control/management must be carried out in concordance with these plans. To logically establish policies and objectives, it is necessary first to understand and analyze historical business performance. Then, to efficiently achieve these policies and objectives, it is necessary to deploy them, implement them and evaluate the results achieved. As a concrete means to do this, Policy Management, one of the TQM management methods, has been widely introduced and promoted. Through systematic approaches like Policy Management, many companies have been efficiently achieving their management plans/business plans.

6. Realization of Top Management's Dreams

To a greater or a lesser extent, a company has its traditions, organizational cultures, customary business practices, the way of thinking, complex human relations, etc. These factors, quite often, make it difficult for top management to communicate and carry out what it intends to implement in the organization. However, by establishing the high goal

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of winning the Deming Prize and by promoting TQM with an examination date in mind, many companies are able to improve their organizational constitution. Top management at these companies often pleasantly states, "We were able to achieve at once many things we had wanted to accomplish for years."

As quality control/management is disseminated throughout the entire company, and as top management's policies are promptly communicated to all levels of the company and achieved, plant managers, department heads, section chiefs as well as supervisors improve their understanding of business management. Moreover, their solidarity is strengthened and, thus, it becomes possible to develop the next generation of executives and managers. Some top managers have commented, "I have been president for a long time and achieving my policies has never gone this well."

7. TQM by Total Participation and Improvement of the Organizational Constitution

Many executives and managers of Deming Prize-winning companies emphasize the following:

"During the process leading up to the Deming Prize examination, the company as a whole focused on improving product and service quality, and the organizational constitution was strengthened. These efforts have contributed to breaking down sectionalism, improving interdepartmental communications, removing barriers between departments and instilling a sense of unity. Every employee has learned to see things from the viewpoint of the entire company and has become more confident in his/her job."

Some presidents say, "Through challenging for the Deming Prize, we became convinced that it is possible for our company to accomplish anything when all our employees cooperate. We have become much better at interdepartmental communications and cross-functional management."

8. Heightened Motivation to Manage and Improve as Well as to Promote Standardization

Some companies commented, "Each employee has improved his/her understanding of scientific management and ability to objectively understand the work situation. Employees have enhanced their ability to think on their own and, thus, they have become more capable of coming up with improvement ideas. For example, the number of suggestions per employee has dramatically increased." Others are happy to say, "We can promote standardization that produces good results, not just standardization for its own sake, an effort that has greatly contributed to the establishment of standards that are alive and in use throughout the company."

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9. Uniting Total Organizational Power and Enhancing Morale

In recent years, QC Circle activities have captured worldwide attention. QC Circles are not just for a morale-boosting movement. In companies that have active QC Circles, first-line supervisors and employees have acquired simple managerial and analytical skills, have become more interested in their own work and have acquired the ability to autonomously manage and improve their day-to-day tasks in a logical manner. Obviously, when the efforts of each and every employee are combined, a company can expect to generate enormous powers. Employees enjoy coming to work and, therefore, attendance rates improve. The company's further development is accelerated, a foundation for better labor-management relationships is laid, morale is improved and a contribution is made to optimizing the competence of every employee. When this occurs, staff group roles become much clearer and, thus, staff is able to concentrate its energy on bigger and more meaningful improvement projects.

10. Establishment of Various Management Systems and the Total Management System

As discussed in the preceding sections, when scientific management activities through TQM penetrate the entire company, the company's organizational constitution is genuinely improved. Quality assurance and other management systems for new product development, profit, cost and vendor relations are established along with many other cross-functional management systems. All these different systems then become connected through the total management system. Moreover, standards for every individual's action in the company become clarified as are the lines of authority and responsibility. Thus, the organization improves its overall efficiency and effectiveness.

These great results, achieved by the Deming Prize-winning companies, would have been difficult to achieve without challenging for the prize. Therefore, we would like to extend our invitation to your company to apply for the Deming Application Prize with courage, enthusiasm and a conviction plan as part of your pursuit for organizational constitution improvement.

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Malcolm Baldrige National Quality Award

In 1987, jumpstarting a small, slowly growing U.S. quality movement, Congress established the Malcolm Baldrige National Quality Award to promote quality awareness, to recognize quality and business achievements of U.S. organizations, and to publicize and share these organizations’ successful performance strategies. Now America’s highest honor for innovation and performance excellence, the Baldrige Award is presented annually to U.S. organizations by the President of the United States. Awards may be given each year in the manufacturing, service, small business, education, health care, and nonprofit sectors. In conjunction with the private sector, the National Institute of Standards and Technology (NIST) manages the Baldrige Award and the Baldrige Performance Excellence Program.

Application process

To apply for the award, organizations must use the Baldrige Criteria for Performance Excellence to submit details showing their achievements and improvements in seven key areas: leadership; strategic planning; customer focus; measurement, analysis, and knowledge management; workforce focus; operations focus; and results. Applicants receive approximately 1,000 hours of review and a detailed report on the organization’s strengths and opportunities for improvement by an independent board of examiners, who complete individual reviews and consensus reviews; the highest-scoring applicants also receive site visit reviews. “The application and review process for the award is the best, most cost-effective, and comprehensive business health audit you can get,” said Arnold Weimerskirch, former Baldrige Award judge and vice president of quality, Honeywell, Inc.

Program impact

Since the first awards were presented in 1988, the Baldrige Performance Excellence Program has grown in stature and impact. Today, the Baldrige Program, the Criteria for Performance Excellence, and the Baldrige Award recipients are imitated and admired worldwide.

In particular, the Baldrige Criteria for Performance Excellence have played a valuable role in helping U.S. organizations improve. The Criteria are designed to help organizations improve their performance by focusing on two goals: delivering ever-improving value to customers and improving the organization’s overall performance. Several million copies of the Criteria have been distributed since 1988, and wide-scale reproduction by organizations and electronic access add to that number significantly. Gordon Black, chairman and chief executive officer of Harris/Black

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International Ltd., said the publication containing the Baldrige Criteria for Performance Excellence is “probably the single most influential document in the modern history of American business.”

Following are some of the program’s highlights:

An October 2001 study of the economic impact of the Baldrige Program, prepared for NIST by Albert N. Link and John T. Scott, conservatively estimated the net private benefits associated with the program to the economy as a whole at $24.65 billion. When compared to the social costs of the program of $119 million, the Baldrige Program’s social benefit-to-cost ratio was 207-to-1. A December 2011 study by Link and Scott of the Baldrige Program's value to U.S. organizations found an even greater benefit-to-cost ratio of 820 to 1.

A 2011 report by Thomson Reuters found that health care organizations that have won Baldrige Awards or been considered for a Baldrige Award site visit outperform other hospitals in nearly every metric used to determine the 100 Top Hospitals in the nation.

The Alliance for Performance Excellence, a network of 33-plus state, local, and sector-based quality programs modeled after the Baldrige Program, offer services to nearly every state of the union and offer tiered approaches to the national award.

Internationally, nearly 100 quality programs are modeled after the Baldrige Program, including one established in Japan in 1996. These programs, including the Global Excellence Model (GEM) Council, look to the Baldrige Program as an international quality leader.

Between 2005 and 2011, 551 U.S. organizations applied for the Baldrige Award. The 90 Baldrige Award winners (including 5 two-time winners) serve as national role models. In 2010 alone, the 83 applicants for the Baldrige Award represented 277,700 jobs; 1,500 work locations; over $38.5 billion in revenues/budgets; and an estimated 80 million customers served. The value of the services volunteered by the 578 Baldrige examiners in 2010 is estimated at $8.8 million. In addition, 2,270 state Baldrige-based examiners volunteered about $29.5 million in services to evaluate 1,350 organizations at the state level in 2010.

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ISO14000 SERIES ENVIRONMENTAL MANAGEMENT SYSTEMS

ISO 14000 is a series of international standards on environmental management. It provides a framework for the development of an environmental management system and the supporting audit programme.

The main thrust for its development came as a result of the Rio Summit on the Environment held in 1992.

The History of ISO 14000

As a number of national standards emerged (BS 7750 being the first), the International Organization for Standardisation (ISO) created a group to investigate how such standards might benefit business and industry. As a result this group recommended that an ISO committee be created to create an international standard.

ISO 14001 is the corner stone standard of the ISO 14000 series. It specifies a framework of control for an Environmental Management System against which an organization can be certified by a third party.

Other ISO14000 Series Standards

Other standards in the series are actually guidelines, many to help you achieve registration to ISO 14001. These include the following:

ISO 14004 provides guidance on the development and implementation of environmental management systems

ISO 14010 provides general principles of environmental auditing (now superseded by ISO 19011)

ISO 14011 provides specific guidance on audit an environmental management system (now superseded by ISO 19011)

ISO 14012 provides guidance on qualification criteria for environmental auditors and lead auditors (now superseded by ISO 19011)

ISO 14013/5 provides audit program review and assessment material.

ISO 14020+ labeling issues

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ISO 14030+ provides guidance on performance targets and monitoring within an Environmental Management System

ISO 14040+ covers life cycle issues

Of all these, ISO14001 is not only the most well known, but is the only ISO 14000 standard against which it is currently possible to be certified by an external certification authority.

The Main ISO 14000 Standards

ISO 14001 and ISO 14004: the initial standards. These present a structured approach to setting environmental targets and objectives. An organization may apply these broad conceptual tools to their own processes.

ISO 14040 discusses pre-production planning and environment goal setting.

ISO 14020 covers labels and declarations.

ISO 14062 discusses making improvements to environmental impact goals.

ISO 14063 is an addendum to 14020, discussing further communications on environmental impact.

ISO 14000 is a series of environmental management standards developed and published by the International Organization for Standardization ( ISO ) for organizations. The ISO 14000 standards provide a guideline or framework for organizations that need to systematize and improve their environmental management efforts. The ISO 14000 standards are not designed to aid the enforcement of environmental laws and do not regulate the environmental activities of organizations. Adherence to these standards is voluntary.

The ISO 14001 standard is the most important standard within the ISO 14000 series. ISO 14001 specifies the requirements of an environmental management system (EMS) for small to large organizations. An EMS is a systemic approach to handling environmental issues within an organization. The ISO 14001 standard is based on the Plan-Check-Do-Review-Improve cycle.

The Plan cycle deals with the beginning stages of an organization becoming ISO 14001-compliant. The Check cycle deals with checking and correcting errors. The Do cycle is the implementation and operation of the ISO 14001 standard within an organization. The Review cycle is a review of the entire process by the organization's top management. And the Improve cycle is a cycle that never ends as an organization continually finds ways to improve their EMS.

The entire process can take several months to several years depending on the size of the organization. If an organization is already ISO 9000-certified, the implementation of ISO 14001

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does not take as long. When an organization is compliant, they can either register with a third-party registrar or self-declare their compliance. The ISO 14001 standard is the only ISO 14000 standard that allows an organization to be registered or "certified.

Case Questions for TQM:

From the questions below, answer the following and apply quality management systems or applicable standard that will help to justify the answer.

How would you work with a subordinate who is underperforming?

Underperformance is an issue that results from the subordinate’s insufficient training, lack of motivation and misalignment of their goals with the company. It would be beneficial for the subordinate to be informed of the company’s mission, vision & values and align them with the former’s goals. Establishing key performance indicators is also vital. The employee that still underperforms based on the set standards would be re-trained. Involvement of people and encouragement of continual development are both part of the quality management principles of ISO 9001.

You're consulting with a large pharmacy with stores in multiple states. This company has improved sales but experienced a decrease in revenue. As a result, it is contemplating store closings. Explain how you'd advise this client?

Good sales but decrease in revenue would suggest large operating cost. These may have resulted from poor quality system that is being used. Re-works and inefficient use of materials that resulted in large quantity of scrap materials would only lead to more expenses. Adoption of Six Sigma which aims to produce fewer errors in any process would be highly suggested.

You are working directly with a company's management team. It is organizing a project designed to significantly increase revenue. If you were provided with data and asked to supervise the project, what steps would you take to ensure it's successful?

First thing to do is to identify the customers’ needs, wants and expectations, setting these as initial standards, and implement a quality system that would ensure that these standards would be met. At the end of the process, we need to get the feedback from the target customers, competitors and employees to identify the things that still need to be developed. These steps aim to increase

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the sales. By strictly implementing complementary programs that would intend to reduce cost, such as establishing good relationship with its suppliers and preventing re-works and inefficiency in material usage, the success of the program would be ensured if done correctly.

You have been assigned to work with a small company that manufactures a popular product. However, a competitor begins selling a very similar product which incorporates state of the art technology. What would you advise your client to do?

It would be wise to cope up with the fast growing technology and research on the latest innovations on the process of producing the popular product. The company’s initial investments on their technological upgrade, if done properly, would be recovered after a certain amount of time once the faster operation at a better quality is realized. This is in line with the company’s target to continually improve not only its operations but also the product’s quality.

You have been assigned to advise a company with a large Western European market. Company management wants to open the Chinese market. What advice do you have for this company?

It is advisable to conduct market analysis first since there may be certain differences in terms of culture and tradition. These differences affect customers’ preferences & satisfaction and these should be primarily considered. Good working relationships with the company’s suppliers must also be established since the company would be dealing with a larger market.

The firm has assigned you to consult a company intending to drop a product or expand into new markets in order to increase revenue. What steps would you take to help this company achieve its objective?

Good and long-term planning laying out the involved processes should be considered in implementing drastic actions such as dropping one of company’s products or expanding into new markets, to improve the company’s revenue. This may affect the already established customer loyalty base and expectations. Relationships with the new suppliers should also be considered since the company is already producing a different product for their prospective new market.

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You have been assigned to consult a shoe retailer with stores throughout the nation. Since its revenue is dropping, the company has proposed to sell food at its stores. How would you advise this client?

It would be better for the company to conduct further market studies and research in presenting a different product in their stores. Since the retailer is already involved in the shoe business, improving the quality of their service and their advertisement would be strongly suggested.

Why TQM Efforts fail?

Total Quality Management is a long term process that would require changes in terms of organizational culture & values, that demands long term planning, time, & management commitment, that would take a number of years to show results, that needs financial investments in terms of training, team development and infrastructural improvement and discourages creativity and innovation. Impatience and lack of management initiative may cause the TQM to fail.