Total Quality Management

Total Quality Management Chapter 5

Management 326 Operations and Operations Strategy Designing an Operations System Managing an Operations System Improving an Operations System

Designing an Operations System Product Design Project Management: A Design Tool Process Design Total Quality Management Statistical Process Control

Total Quality Management (TQM) Chapter 5 What is quality? Measurement and costs of quality Total Quality Management (TQM) Quality Awards and Certifications

Why Quality is Important • Increases value of products to customers • Reduces expensive mistakes • Increases profits  Shareholder value

How Customers Define Quality • Customer-defined quality: Meeting quality expectations as defined by the customer • High performance design vs. product or service consistency • Psychological (perceived quality): the quality that the customer thinks he/she got • Value: the good or service is superior to others with similar prices (getting more for your money) • Product and service characteristics

How Customers Define Quality (2) • How customers define quality (2) • Value: the good or service is superior to others in the same price range (getting more for your money) • Product and service characteristics • Quality includes all characteristics that are important to customers – not just the core product

How Companies Define QualityProduct or Service Specification • Characteristics of the product or service which will be measured to determine quality • Target values (ideal values) for each characteristic • Should be based on customer expectations • Should meet any legal requirements • Conformance quality: If a product or service consistently meets specifications, it has conformance quality.

Quality Measurement in Services • Qualitative measures of quality are based on customer perceptions • Customer satisfaction surveys • Teacher evaluations • Quantitative measures of quality are based on numerical data • Waiting time • Percentage of transaction errors • Product availability • Web site availability

Cost of Quality – 4 Categories • Early detection/prevention is less costly • Costs may be less by a factor of 10

Quality–Cost Relationship • Cost of quality • Difference between price of nonconformance and conformance • Cost of doing things wrong • 20 to 35% of revenues • Cost of doing things right • 3 to 4% of revenues • Profitability • In the long run, quality is free

TQM Philosophy Quality in Product Design Why TQM Programs Fail Total Quality Management (TQM) Chapter 5 What is quality? Measurement and costs of quality Total Quality Management (TQM) Quality Awards And Certifications

Total Quality Management (TQM) • Customer-defined quality: Meeting quality expectations as defined by the customer • Integrated organizational effort designed to improve quality on all quality characteristics that are important to customers (core product and anything else that affects customers) • Requires a coordinated effort • All levels of the organization • All functions (departments) in the organization • Work with suppliers and listen to customers

Evolution of TQM – New Focus

TQM Philosophy • Focus on Customer • Identify and meet customer needs • Stay tuned to changing needs, e.g. fashion styles • Continuous Improvement: Continuous learning and problem solving • Quality at the Source: Find the problem when it occurs and fix it. • Employee Empowerment and problem solving (pages 149-150): Empower all employees. Serve external and internal customers

TQM Philosophy (2) • Quality improvement teams (QIT's or quality circles) • Teams formed around processes – 8 to 10 people • Meet regularly to analyze and solve problems • Self-managed work teams: a work group is responsible for managing its responsibilities. Managers are coaches, not bosses. (less common than QIT's) • Benchmarking: Studying practices at “best in class” companies • Managing Supplier Quality: Certify suppliers and eliminate receiving inspection

Quality in Product Design • Quality function deployment (QFD) • Used by product design teams • Used to translate customer preferences into specific technical requirements • The technical requirements are used to develop the product specification • Operations is responsible for making the product to specifications • Products that meet specifications have conformance quality • Objective is to satisfy customers • Principal tool is House of Quality (pages 154-156)

QFD Details • Process used to ensure that the product meets customer specifications Voice of the engineer Customer-based benchmarks Voice of the customer

QFD - House of Quality • Adding trade-offs, targets & developing product specifications Trade-offs Technical Benchmarks Targets

Why TQM Efforts Fail • Lack of top management support and commitment • Lack of a genuine quality culture • Continuous improvement • Teamwork • Training • Employee empowerment • Recognition and rewards (team or individual) • Under-reliance or over-reliance on statistical process control (SPC) • SPC is an essential tool for identifying problems and monitoring quality • It is important to solve the problems (PDSA, 7 quality tools)

Quality Award and Certifications • Malcolm Baldrige National Quality Award • ISO 9000 Certification • ISO 14000 Certifications

Baldrige Award • Competitive quality award presented by U. S. government • 5 award categories: Manufacturing, services, small business, health care, education • All written applications are reviewed by trained examiners • Site visits to leading candidates • Maximum of 2 awards per category

Baldrige Award Criteria FrameworkA Systems Perspective Total = 1,000 pts Organizational Profile Strategic Planning (85 pts) Human Resource Development & Mgmt. (85 pts) Business Results (450 pts) Leadership (120 pts) Customer & Market Focus (85 pts) Process Mgmt. (85 pts) Measurement, analysis, & knowledge management (90 pts)

Baldrige Award - Business Results • Customer-focused results • Product and service performance • Financial and market results • Human resource results

ISO 9000 Standards • International quality certification program guided by the International Standards Organization (ISO) • Any firm that passes an ISO standards audit will be certified. • U. S. participates in the development of these standards: • American National Standards Institute (ANSI) • American Society for Quality (ASQ) • Professional organizations

ISO 9000 • ISO 9000 standards audits must be performed by a registrar, a firm that is certified to do ISO 9000 audits • Some companies require their suppliers to be certified • Be sure that your registrar is acceptable to your customers • Firms must be re-certified periodically.

ISO 14000 • A certification program in environmental management • Standard-setting and certification procedures are similar to ISO 9000

Total Quality Management