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QUALITY MANAGEMENT

• INTRODUCTION TO QUALITY MANAGEMENT


• Definitions of Quality:
• 1. Fitness for intended use. (Joseph Juran)
• 2. Conformance to specifications. (Philip Crosby)
• 3. Meeting or exceeding customer expectations.
• 4. Superiority or excellence.
• 5. Lack of manufacturing or service
defects.
• 6. The totality of features of a product or
service that bears on its ability to satisfy a
stated or implied need. (American Society
of Quality)
• 7. ISO 9000 definition: The degree to
which a set of inherent characteristics
fulfills requirements.
• (‘Degree’ implies quality can be used with
adjectives such as poor, good, excellent;
‘Inherent’ implies a permanent
characteristic; ‘Characteristics’ can be
qualitative or quantitative; ‘Requirement’ is
a need or expectation that is implied,
stated or obligatory.)
• * Quality can be quantified as follows:
• Q=P/E where Q=quality, P=performance,
and E=expectations. If P is greater than E,
customer feels good, and if P is less than E, he
feels cheated. P and E are based on
perceptions, with the organization determining
performance and the customer determining
expectations.
• * Stages of customer experience in terms of
quality:
• Customer satisfaction  Customer delight 
Customer enchantment.
Definitions of Total Quality
Management (TQM):

• 1. The art of managing the total organization to


achieve excellence in all spheres of
activity.(Besterfield)
• 2. The integration of all functions and processes
within an organization in order to achieve the
continuous improvement of the quality of goods
and services. (Omachonu)
• 3. A total organization working as a team to
meet or exceed customer needs and
expectations by using a systematic approach to
continuous improvement.
• *It was Feigenbaum who coined the
phrase ‘Total Quality Control’. The
concept is known in Japan as ‘Company
Wide Quality Control’. In 1985, the
Americans came up with the term TQM to
represent essentially the Japanese way of
quality management.
• Other terms connected with quality:
• Quality Control (QC): The operational
techniques and activities that are used to fulfill
the requirements of quality.
• Quality Assurance (QA): All the planned and
systematic activities implemented within the
quality system to provide adequate confidence
that an entity (product/service) will fulfill the
requirements for quality. It encompasses quality
of design, quality of conformance, and quality of
service.
ISO9000 definition of Quality
Management(QM):
• All activities of the overall management
function that determine the quality policy,
objectives and responsibilities and
implement them by means such as quality
planning, quality control, quality assurance
and quality improvement within the quality
system.
• TOTAL – Made up of the Hole

• QUALITY – Degree of Excellence a


product or service provides

• MANAGEMENT – ACT, OR Manner of


handling , controlling , directing etc.
CHARACTERISTICS
• CUSTOMER ORIENTED
• TEAM WORK
• LONG TERM COMMITMENT FOR
CONTINOUS IMPROVEMENT
• LEADERSHIP OF TOP MANAGEMENT
AND CONTINOUS INVOLVEMENT
• CONTINOUS IMPROVING
PERFORMANCE
BASIC CONCEPTS
• 1. Management commitment,
• 2. Focus on customer (both external and
internal),
• 3. Employee involvement, empowerment,
4. Continuous improvement,
• 5. Treating suppliers as partners, and
• 6. Establish performance measures for
processes.
• Cause-and-effect cycle of TQM:
• TQM  High quality product/service 
High productivity, lower cost  Lower
price  More competitive position  High
profit, growth  Job security  Satisfying
place to work.
• Stages in the evolution of quality:
• Inspection  Quality Control (QC) 
Quality Assurance (QA)  Quality Mgmt.
(QM)  TQM
• Benefits of quality systems:
• Increase in – system efficiency, worker
morale, customer satisfaction.
• Decrease in – complaints, costs,
production time.
TQM Awareness

• An organization will not begin the transformation to TQM


until it is aware that the quality of the product or service
must be improved.
• Awareness comes about when (a) the organization loses
market share or (b) TQM is mandated by the customer,
or (c) management realizes that TQM is a better way to
run a business and compete in domestic and world
markets.
• Automation and other productivity improvements will not
help a company if quality is poor. The Japanese learned
this from experience before World War II. Now a new
attitude has emerged – quality first among the equals of
cost and service. The customer wants value.
• Quality and productivity are not mutually exclusive.
Improvements in quality can lead directly to increased
productivity and other benefits.
• Quality improvement is not limited to conformance of the
product/service to specifications; it also involves the
inherent quality in the design of the system.
• TQM does not occur overnight; there are no quick
remedies. It takes a long time to build the appropriate
emphasis and techniques into the culture. Over-
emphasis on short-term results and profits must be set
aside so that long-term planning and constancy of
purpose will prevail.
Benefits of TQM

• Improved quality, higher productivity, employee


participation, teamwork, working relationships,
customer satisfaction, employee satisfaction,
communication, profitability, market share, and
stock price performance.
• There is a strong link between TQM and
financial performance.
• Studies show that small organizations
outperform larger organizations in successful
implementation of TQM.
TQM – Obstacles
• 1. Lack of management commitment:
Management does not allocate sufficient time
and resources for TQM implementation.
• 2. Inability to change organizational culture:
Even individuals resist change; changing an
organization’s culture is much more difficult and
may require as much as 5 years or more.
Exhortations, speeches, slogans are effective
only in the short run.

• 3. Improper planning: Absence of two-way


communication of ideas during the development
of the plan and its implementation.
• 5. Incompatible organizational structure and differences
between individuals/departments.
• 6. Ineffective measurement techniques for key
characteristics of the organization. Lack of access to
data and results.
• 7. Paying inadequate attention to internal and external
customers. Inability to understand the changing needs
and expectations of customers. Absence of effective
feedback mechanisms.
• 8. Inadequate use of empowerment and teamwork.
• 9. Lack of employee involvement.
• 10. Non-cooperation of first-line managers and middle
management.
• 11. Lack of clarity in vision.
• 12. Emphasis on short-term results.
• 13. Setting of unmanageable, unrealistic goals.
• 14. Bureaucratic system.
• 15. TQM is considered as a quick-fix solution to current problems.
• 16. Treating suppliers as adversaries to be manipulated, taken
advantage of.
• 17. Adversarial relationship between workers/unions and
management.
• 18. Motivating employees through fear of punishment.
• 19. Failure to continually improve. Tendency to sit back and rest on
one’s laurels. Rigidly sticking to one ‘success formula’.
Quality – Vision, Mission and Policy
Statements

• Besterfield# The quality statements


include the vision statement, mission
statement, and quality policy statement.
• # Once developed, they are only
occasionally reviewed and updated. They
are part of the strategic planning process.
• # There may be considerable overlap
among the three statements.
Vision statement:
• # A short declaration of what an organization aspires to be in the
future. It is an ideal state that an organization continually strives to
achieve. It is timeless, inspirational, and becomes deeply shared
within the organization.
• # Successful vision – a concise statement of the desired end –
provides a succinct guideline for sound decision making.
• # Although mission and vision are often used as synonymous,
sometimes a distinction is made in which case mission evolves from
the vision.

• Example: “We will be the provider of safe, reliable, cost-effective products


and services that satisfy the electric-related needs of all customer
segments.” [Florida Power & Light Company].
Mission statement:

• # The mission statement answers the following


questions: who we are, who are our customers, what we
do, and how we do it.
• # This statement is usually one paragraph or less in
length, is easy to understand, and describes the function
of the organization. It provides a clear statement of
purpose for employees, customers, and suppliers.
• Example: “Our mission is to improve continually our
products and services to meet our customers’ needs,
allowing us to prosper as a business and provide a
reasonable return to our shareholders.” [Ford Motor
Company].
• # If the vision deals with ‘what’, the mission
deals with ‘why’ and ‘how’. It identifies the roles
or activities to which an organization is
committed and provides overall direction for
achieving the mission.
• # The mission provides the guide map,
milestones for achieving the vision.
• # Example: “To be the leading manufacturer and
supplier of measurement and computing
solutions whilst achieving the highest levels of
customer satisfaction, quality, and business
ethics and contributing to India’s technological,
economic and social needs.” [Hewlett-Packard
• Quality policy statement:
• Besterfield# The quality policy is a guide for
everyone in the organization as to how they
should provide products/service to the
customers. It is written after obtaining feedback
from the workforce and is approved by the
quality council.
• # A quality policy is a requirement of ISO9000.
• # Some common characteristics are: ‘Quality is
first priority’;
• ‘Continually improve the quality’; ‘Equal or
exceed the competition’; ‘Meet the needs of
internal and external customers’, etc.
• # Example: “Xerox is a quality company. Quality
is the basic business principle of Xerox. Quality
means providing our external and internal
customers with innovative products and services
that fully satisfy their requirements. Quality is the
job of every employee.” [Xerox Corporation].
CUSTOMER FOCUS

• CUSTOMER PERCEPTION OF
QUALITY,

TRANSLATING NEEDS INTO


REQUIREMENTS,

• CUSTOMER RETENTION
Customer perception of Quality
• There are three key elements of quality:
customer, process and employee.
• Delighting Customers
• Customers are the center. they define quality.
They expect performance, reliability, competitive
prices, on-time delivery, service, clear and
correct transaction processing and more. In
every attribute that influences customer
perception, we know that just being good is not
enough. Delighting our customers is a necessity.
Because if we don't do it, someone else will!
• ...the Process
• Outside-In Thinking
• Quality requires us to look at our business from
the customer's perspective, not ours. In other
words, we must look at our processes from the
outside-in. By understanding the transaction
lifecycle from the customer's needs and
processes, we can discover what they are
seeing and feeling. With this knowledge, we can
identify areas where we can add significant
value or improvement from their perspective.
• ...the Employee
• Leadership Commitment
• People create results. Involving all
employees is essential to GE's quality
approach. GE is committed to providing
opportunities and incentives for
employees to focus their talents and
energies on satisfying customers.
• + Total satisfaction is achieved when the
offer matches the need, or the circle is
superimposed on the square.
• + That part of the square that lies within
the circle is perceived by the customer as
satisfying, and the part outside the circle is
perceived as unnecessary.
• # Customer satisfaction should not be viewed in
a vacuum. A customer may be satisfied with a
product/service and thus rate it highly in a
survey, and yet may buy another
product/service. Customer loyalty can be
sustained only by maintaining a favorable
impression when compared with competitors.
• # It is important that the organization listen to the
‘voice of the customer’ and ensure that its
marketing, design, production, distribution
processes truly meet the expectations of the
customer.
• * Internal and external customers:
• # There are two types of customers – external and
internal.
• # An external customer exists outside the organization
and can be defined in many ways – user, buyer,
influencer. He generally falls into one of three categories:
current, prospective, or lost customer.
• Every function within the organization – engineering,
production, order processing, etc. – has an internal
customer. Every person in a process is considered a
customer of the preceding operation. For example,
Manufacturing is a customer for Purchasing, and
Dispatching is a customer for Packaging.
• # One basic concept of TQM is an
unwavering focus on the customers, both
internal and external. In reality, most
employees are shielded from external
customers by organizational layers. Yet
employees who lack direct contact with
the external customer must still contribute
to his satisfaction.
Customer perception of quality

• # An American Society for Quality (ASQ)


survey on end user perceptions of
important factors that influenced
purchases showed the following ranking:
1. Performance, 2. Features, 3. Service, 4.
Warranty, 5. Price, and 6. Reputation. The
first four factors are part of product/service
quality. Hence it is evident that
product/service quality is considered more
important than price.
• # Other factors felt important by customers
are: Availability, Reliability, Maintainability,
Care in handling (of products as well as
customers), Response time.
• # The way to assess customers’
perception of quality is by measuring
customer satisfaction (by carrying out
customer satisfaction surveys).
Translating needs into
requirements
The Kano model:
• # In the late 1970’s, Dr. Noriaki Kano of Tokyo Rika University came
out with a model for understanding customer satisfaction.
• # He identified three levels of product quality: (i) Basic quality, (ii)
Performance quality, and
• (iii) Excitement quality. The products corresponding to these three
quality levels were termed as ‘Dissatisfiers’, ‘Satisfiers’ and
‘Delighters/Exciters’ respectively.
• # Dr. Kano’s model is based on Hertzberg’s Hygiene-Motivation (2-
factor) theory.
• # Traditionally, we use a one-dimensional quality model to rate
performance (good, bad) and customer satisfaction (good, bad).

PERFORMANCE CUSTOMER SATISFACTION


GOOD ---------- BAD GOOD ----------------- BAD
• # Dr. Kano proposed a two-dimensional model for quality, in which
the X-axis represents performance and the Y-axis represents
customer satisfaction.
• High
• Customer satisfaction
• |
• |
• Poor performance--------------------------------------Good
• performance
• |
• |
• Low
• Customer satisfaction
• CUSTOMER RETENTION
• # It is essential to achieve a balance between
acquiring new customers and retaining existing
customers. Often, existing customers do not
receive sufficient attention.
• # It costs a company six times more to sell a
product to a new customer than it does to sell to
an existing one. Hence the importance of
customer retention, especially in this era of
hyper-competition in most sectors.
• * Customer loyalty ladder: The
relationship with a customer can be
viewed as steps on a ladder as follows:
• Partner
AdvocateSupporterClientCustomerPro
spect
• Prospect: a potential customer
• Customer: one who has had at least one
direct dealing with the organization.
• Client: one who has had repeated dealings, but
is neutral or negative towards the organization.
• Supporter: one who has positive commitment to
the relationship with the organization.
• Advocate: one who actively promotes the
company through positive word-of-mouth.
• Partner: a customer who is linked to the supplier
through mutually beneficial exchanges.
• # “Churn rate” is the rate at which new customers try a
new product/service and then stop using it. A high churn
rate indicates poor quality, and hence low loyalty.
• # Customer loyalty facilitates cross-selling/up-selling of a
company’s other products/services, and also acts as an
effective barrier to the entry of competition. It also
reduces expenditure on advertising and other
promotional programs.
• The concept of ‘customer lifetime value’ attempts to
quantify the benefits accruing to a company in the long
run due to customer retention.
Dimensions of quality
• Quality has different dimensions. These dimensions are somewhat
independent and therefore, a product can be excellent in one
dimension and average or poor in another.
• Dimensions of product quality:
• 1. Performance: primary product characteristics, e.g. picture
brightness in TV.
• 2. Features: secondary characteristics, added features, e.g. remote
control, picture-in-picture.
• 3. Usability: ease of use with minimum training.
• 4. Conformance: meeting specifications, industry standards, etc.
• 5. Reliability: consistency of perfor
• 6. Durability: extent of useful life.
• 7. Maintainability/Serviceability: ease of attending to maintenance,
repairs.
• 8. Service: efficiency, effectiveness in resolving problems,
complaints.
• 9. Efficiency: ratio of output to input. E.g. mileage, braking distance.
• 10. Portability: in software, etc., ease of use in different
environments.
• 11. Responsiveness: human aspects like courtesy, prompt
response, etc.
• 12. Aesthetics: sensory characteristics, e.g. exterior finish, texture,
colour, etc.
• 13. Reputation: subjective assessment based of past performance,
brand image, industry ranking.
Dimensions of service quality:

• 1. Time: how much time a customer must wait / undergo


service.
• 2. Timeliness: whether service will be performed when
promised.
• 3. Completeness: whether all items in the order are
included.
• 4. Consistency: consistent service every time, and for
every customer.
• 5. Accessibility/Convenience: ease of obtaining the
service.
• 6. Accuracy: absence of mistakes.
• 7.Responsiveness: quick response, resolution of
unexpected problems.
• 8. Courtesy: cheerful, friendly service.
• Product quality has two dimensions
• Physical dimension - A product's
physical dimension measures the tangible
product itself and includes such things as
length, weight, and temperature.
• Performance dimension - A product's
performance dimension measures how
well a product works and includes such
things as speed and capacity.
COST OF QUALITY

• Quality costs are defined as costs associated


with non-achievement of product/service quality.
In simple terms, quality cost is the cost of poor
products/services.
• # The cost of poor quality can add to other costs
such as design, production, maintenance,
inspection, sales, etc. Quality costs cross
department boundaries by involving all activities
of the organization – marketing, purchasing,
design, manufacturing, service, etc.
• The price of nonconformance (Philip
Crosby) or the cost of poor quality
(Joseph Juran), the term 'Cost of
Quality', refers to the costs associated
with providing poor quality product or
service.
• Why is it important?
• Quality processes cannot be justified simply because "everyone
else is doing them" - but return on quality (ROQ) has dramatic
impacts as companies mature. Research shows that the costs of
poor quality can range from 15%-40% of business costs (e.g.,
rework, returns or complaints, reduced service levels, lost revenue).
Most businesses do not know what their quality costs are because
they do not keep reliable statistics. Finding and correcting mistakes
consumes an inordinately large portion resources. Typically, the
cost to eliminate a failure in the customer phase is five times greater
than it is at the development or manufacturing phase. Effective
quality management decreases production costs because the
sooner an error is found and corrected, the less costly it will be.
• When to use it?
• Cost of quality comprises of four parts:
• External Failure Cost: cost associated with defects found
after the customer receives the product or service
• ex: processing customer complaints, customer returns,
warranty claims, product recalls.
• Internal Failure Cost : cost associated with defects found
before the customer receives the product or service
• ex: scrap, rework, re-inspection, re-testing, material
review, material downgrades.
• Inspection (appraisal) Cost: cost incurred to
determine the degree of conformance to quality
requirements (measuring, evaluating or auditing)
• ex: inspection, testing, process or service audits,
calibration of measuring and test equipment.
• Prevention Cost: Cost incurred to prevent (keep
failure and appraisal cost to a minimum) poor
quality
• ex: new product review, quality planning,
supplier surveys, process reviews, quality
improvement teams, education and training.
• How to use it?

The Cost of Quality has other version too.
• 1. Like all things there is a price to pay for quality. This total cost
can be split into two fundamental areas:
• a. Non Conformance. This area covers the price paid by not having
quality systems or a quality product. Examples of this are:
• (1) Rework. Doing the job over again because it wasn't right the
first time.
• (2) Scrap. Throwing away the results of your work because it is not
up to the required standard.
• (3) Waiting. Time wasted whilst waiting for other people.
• (4) Down Time. Not being able to do your job because a machine
is broken.
• b. Conformance. Conformance is an aim of quality
assurance. This aim is achieved at a price. Examples of
this are:
• (1) Documentation. Writing work instructions, technical
instructions and producing paperwork.
• (2) Training. On the job training, quality training, etc.
• (3) Auditing. Internal, external and extrinsic.
• (4) Planning. Prevention, do the right thing first time and
poka yoke.
• (5) Inspection. Vehicles, equipment, buildings and
people.
2. These two main areas can be split further as shown below:
FIGURE 1.3
• This shows the four segments of quality costs:

• a. Prevention. This area covers avoiding defects (poka yoke),


planning, preparation, training, preventative maintenance and
evaluation.
• b. Appraisal. This area covers finding defects by inspection (poka
yoke), audit, calibration, test and measurement.
• c. Internal Failure. This area covers the costs that are borne by
the organisation itself such as scrap, rework, redesign,
modifications, corrective action, down time, concessions and
overtime.
• d. External Failure. This area covers the costs that are borne by
the customer such as equipment failure, down time, warranty,
administrative cost in dealing with failure and the loss of goodwill.
• 3. Whilst aiming to reduce failure through
appraisal and prevention it must be clear
that these also cost as shown below:
Figure 1.4
• 4. The graph shows that there is a minimum Total
Quality cost, which is a combination of prevention,
appraisal and failure. Reducing any of these reduces the
total. The key to minimum cost, is striking the correct
balance between the three.
• 5. Clearly prevention reduces both appraisal and failure
costs, however eventually the cost of prevention itself
starts to increase the total cost and so this must be
controlled and set at an effective level.
• 6. The next graph shows that when Total Quality is
initially introduced into an organisation, there are huge
savings that can be made:
• # Management must use Cost of Quality (COQ)
data to identify and prioritize improvement
opportunities. The first priority is to eliminate
external failures and then internal failures.

• The 1:10:100 rule: Re.1 spent on prevention will


save Rs.10 spent on appraisal and Rs.100 on
failure costs. This rule helps one to prioritize
expenditure on prevention, which is sure to bring
in greater returns.
• Unit –I finished -VIDHYARAJA