In today’s global business environment, quality cannot be underestimated or overlooked by any firm, regardless of its size or assets. Business leaders and CEOs cite quality as the most important factor in the long-term profitability and success of their firms.

The key to foreign competition – the concept of value, which is producing quality products at competitive prices.

THE MEANING OF QUALITY

• Quality is a degree or level of excellence.- Oxford American Dictionary

• Quality is the totality of features and characteristics of a product or service that bears on its ability to satisfy given needs.

- American National Standards Institute

Quality from Consumer’s Perspective

From this perspective, product and service quality is determined by what the consumer wants and is willing to pay for.

• Fitness for Use- how well the product or service

does what it is supposed to.

• Quality of Design- the degree to which quality

characteristics are designed into the product or service.

Dimensions of Quality for Manufactured Products

1. Performance. The basic operating characteristic of a product.

2. Features. The “extra” items added to the basic features.

3. Reliability. The probability that a product will operate properly within an expected time frame.

4. Conformance. The degree to which a product meets pre-established standards.

5. Durability. How long the product lasts; its life span before replacement.

6. Serviceability. The ease of getting repairs, the speed of repairs, and the courtesy and competence of the repair person.

7. Aesthetics. How product looks, feels, sounds, smells, or tastes.

8. Safety. Assurance that the customer will not suffer injury or harm from a product.

9. Other Perceptions. Subjective perceptions based on a brand name, advertising, and the like.

Dimensions of Service Quality

1. Time and Timeliness. How long a customer must wait for service, and if it is completed on time.

2. Completeness. Is everything the customer asked for provided?

3. Courtesy. How customers are treated by employees.

4. Consistency. Is the same level of service provided to each customer each time?

5. Accessibility and Convenience. How easy it is to obtain the service.

6. Accuracy. Is the service performed right every time?

7. Responsiveness. How well the company reacts to unusual situations, which can happen frequently in service company.

Quality from Producer’s Perspective

The producer perceives quality to be how effectively the production process is able to conform to the specifications required by the design referred to as quality of conformance.

The Meaning of Quality

The Meaning of Quality

Producer’s PerspectiveConsumer’s Perspective

Quality of Conformance•Conformance to Specifications•Cost

Quality of Design•Quality Characteristics•Price

Production Marketing

Fitness forConsumer Use

The Evolution of Total Quality Management

• Walter Shewhart developed Statistical control Father of Statistical Quality Control together with his colleagues, introduced the term quality assurance

Quality Assurance- refers to a commitment to quality throughout the organization

• W. Edwards Deming • changed the focus of quality assurance from the technical aspects

to more of a managerial philosophy• introduced the use of statistical process control• His approach to QM advocates continuous improvement of the

production process to achieve conformance to specifications and reduce variability

1.PlanIdentify theproblem anddevelop theplan forimprovement.

2.DoImplement theplan on atest basis.

4.ActInstitutionalizeimprovement;continue thecycle.

3.Study/CheckAssess the plan;

is it working?

Deming Wheel/plan-do-check-act (PDCA) cycle

• Joseph M. Juranfocused on strategic quality planning –

determining the desired product quality level and designing the production process to achieve the quality characteristics of a product.

breakthrough solutions

• Philip Crosby• identified that cost of poor quality far outweigh the

cost of preventing poor quality• zero defects

• Armand V. Feigenbaumintroduced total quality control to reflect a total

commitment effort from management and employees throughout an organization to improve on quality.

• Dr. Kaoru Ishikawa• best known for promoting quality circles and his

simple but powerful Ishikawa,or fishbone diagram.

TQM and Continuous Process Improvement

• TQM emphasizes top management’s role in leading a total quality effort on which all employees at all levels must focus. All employees are responsible for continuous quality improvement, and quality is the focal point of all organizational functions. TQM also emphasizes that quality is a strategic issue.

• Continuous Process Improvement reflects a trend of focusing management attention on business processes rather than functions.

Total Quality Management

- represents a set of management principles that focus on quality improvement as the driving force in all functional areas and at all levels in a company.

Principles of Total Quality Management

1. The customer defines quality, and customer satisfaction is the top priority.

2. Top management must provide the leadership for quality.

3. Quality is a strategic issue, and requires a strategic plan.

4. Quality is the responsibility of all employees at all levels of the organization.

5. All functions of the company must focus on continuous quality improvement to achieve strategic goals.

6. Quality problems are solved through cooperation among employees and management.

7. Problem solving and continuous quality improvement use statistical quality control methods.

8. Training and education of all employees are the basis for continuous quality improvement.

TQM Throughout the Organization• Marketing, sales, and research have direct

contact with the customers. Marketing is typically responsible for the consumer research that determines the quality characteristics that customers want and need, and the price they are willing to pay for it.

• Engineering translates the product quality characteristics determined by the marketing and top management into a product design.

• Purchasing must make sure that the parts and materials required by the product design are of high quality.

• Human resources is responsible for hiring employees that have required abilities and skills, and training them for specific job tasks.

• Management at all levels must implement the product design according to quality specifications, controlling labor, materials, equipment, and processes.

• Packing, storing, and shipping make sure that high-quality products are not damaged en route to the customer.

• After-sale support (customer service) has the responsibility of providing the customer with good instructions for the product’s installation and use, with personal assistance if required.

TQM and External Suppliers

• Single-sourcing is based on a notion that if a company has a major portion of a supplier’s business then the supplier is more willing to meet the customer’s quality standards.

• Partnering is the business relationship in which the company and supplier enter into, in which the supplier agrees to meet the company’s quality standards, and in return the company enters into a long-term purchasing agreement with the supplier that includes a stable order and delivery schedule.

TQM and Customer SatisfactionAn important component of any TQM

program is the company’s ability to measure customer satisfaction.

TQM programs require some form of measurement system be place to answer these questions and provide data about the customer’s level of satisfaction.

The most widely used means for measuring customer satisfaction is the customer survey.

TQM and Information Technology

A healthy and successful business organization must have an active and functional central nervous system to monitor and control its functions, to receive information and translate that information into appropriate action and effective decisions. In a business this central nervous system is called an information technology (IT) system. An IT system provides the infrastructure of hardware, networks, and software necessary to support a TQM program.

Strategic Implications of TQM• A strategy is a set of decisions a company

makes that establishes a plan to achieve its long-term goals. A company’s success in implementing its strategy, or strategic plan, through its operations is a key to its long-term competitiveness. For some companies, their strategic plan is embodied in their quality management program or, at the very least, quality is a key part of the company’s strategic plan.

• High goals for quality are characteristic of the strategic plans for these companies.

• Strategic planning also includes a set of programs, or operational plans and policies, to achieve the company’s goals. Establishing goals without telling employees how to achieve them will be fruitless.

• Strategic quality planning includes a mechanism for feedback to adjust, update, and make corrections in the strategic plan

• Strong leadership is a key to successfully integrating quality into a company’s strategic plan. However, strong leadership is not only about making the decision that quality will be an important component of a company’s strategy but it is also about creating a company environment that is conducive to quality management.

TQM in Service Companies

• Services are labor-intensive thus, human contact and its ramifications are an important part of the process of producing services.

• Quality management in services must focus on employee performance related to intangible, difficult-to-measure quality dimensions.

Quality on the Web

2 types of business transactions on the web:

1. Business-to-business (B2B) conducted between companies and

their suppliers, distributors.

2. Direct sales to the general public

most visible and familiar to most of us.

Dimensions of Web Site Quality

1. Ease of use: Is the site easy to maneuver?

2. Clarity of information and instructions: How clearly written are the instructions for conducting transactions?

3. Server reliability: Infrequent service downtime is a serious quality defect.

4. Speed of page loading: load time is the time it takes for the Web pages to download.

5. Transaction time: once the website is accessed, the customer must be able to complete transactions in a timely manner.

6. Aesthetics: How the Web site looks.7. Privacy and Security: does the user

feel secure that the information provided to complete s business transaction is secure, and that any personal information provided will remain private?

8. Domain name: The Web site’s unique URL address on the Internet.

9. Human backup: Access via phone or e-mail should be easy to identify, and should exhibit the same quality characteristics as any service.

10.Transaction reliability: The product or service that the customer acquires needs to be delivered in a timely manner and be of good quality when delivered, the payment or billing process must be prompt, secure and error-free.

The Cost of QualityThe Cost of Achieving Good Quality

Prevention costs are the costs of trying to prevent poor quality products from reaching the customer.Examples: Quality planning costs: the costs of developing

and implementing the QM program. Product design costs: the cost designing

products with quality characteristics. Process costs: the cost expended to make sure

the productive process conforms to the quality specifications.

Training costs: the costs of developing and putting on quality training programs for employees and management.

Information costs: the costs of acquiring and maintaining data related to quality, and development and analysis of reports on quality performance.

Appraisal Costs are the costs of measuring, testing, and analyzing materials, parts, products, and the productive process to ensure that product quality specifications are being met.

Examples: Inspection and testing: The costs of testing

and inspecting materials, parts, and the product at various stages and at the end of the process.

Test equipment costs: The costs of maintaining equipment used in testing the quality characteristics of products.

Operator costs: The costs of the time spent by operators to gather data for testing product quality, to make equipment adjustments to maintain quality, and to stop work to assess quality.

The Cost of Poor Quality

Internal failure costs are incurred when poor-quality products are discovered before they are delivered to the customer.

Examples: Scrap costs: The costs of poor-quality products

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

Rework costs: The costs of fixing defective products to conform to quality specifications.

Process failure costs: The costs of determining why the production process is producing poor-quality products.

Process downtime costs: The costs of shutting down the productive process to fix the problem.

Price-downgrading costs: The costs of discounting poor-quality products – that is, selling products as “seconds.”

External failure costs are incurred after the customer has received a poor-quality product and are primarily related to customer service.

Examples: Customer complaint costs: The costs of

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

Product return costs: The costs of handling and replacing poor-quality products returned by the customer.

Warranty claims costs: The costs of complying with product warranties.

Product liability costs: The litigation costs resulting from product liability and customer injury.

Lost sales costs: The costs incurred because customers are dissatisfied with poor-quality products and do not make additional purchases.

Measuring and Reporting Quality CostsIndex numbers are ratios that measure quality

costs relative to some base value. These index numbers are used to compare quality management efforts between time periods or between department or functions.

Some common index measures are: Labor index: The ratio of quality to direct labor

hours. Cost index: The ratio of quality cost to

manufacturing cost. Sales index: The ratio of quality costs to sales. Production index: The ratio of quality costs to

units of final products.

Example:

Quality index=

Quality costper sale=

=

total quality costs

base(100)

$810,400(100)

4,360,000

18.58

THE EFFECT OF QUALITY MANAGEMENT ON PRODUCTIVITY

Productivity is a measure of a company’s effectiveness in converting inputs into outputs. It is broadly defined as,

Productivity = output/inputwhere,o output is the final product from a

service or production processo inputs are the parts, material, labor,

capital, and so on that go into the production process.

Measuring Product Yield & Productivity

• Product Yield is a measure of output used as an indicator of productivity.

Yield = (Total Input) (%good units) + (Total Input) ( 1-%good units) (% reworked)

Or,Y= (I) (%G) + (I) (1-%G) (%R)

Where,I=planned number units of product started in the process.%G=percentage of good units produced.%R=percentage of defective units that are successfully reworked.

The H & S Motor Company starts production for a particular type of motor with a steel motor housing. The production process begins with 100 motors each day. The percentage of good motors produced each day averages 80% and the percentage of poor-quality motors that can be reworked is 50%. The company wants to know the daily product yield and the effect on productivity if the daily percentage of good-quality motors is increased in to 90%.

Solution:Yield = (I) (%G) + (I) (1-%G) (%R)Y = 100 (0.80) + 100 (1-0.80) (0.50)Y = 90 motors

If a product quality is increased to 90% of good motors, the yield will be

Y = 100 (.90) + 100 (1-.90) (.50)Y = 95 motors

A 10 percentage-point increase in quality products results in a 5.5 percent increase in productivity output.

(direct manufacturing cost per unit) (input)Product Cost = + (rework cost per unit) (reworked units)

yieldor,

Product Cost = (Kd) (I) + (Kr) (R) Y

where,Kd = direct manufacturing cost per unitI = inputKr = rework cost per unitR = reworked unitsY = Yield

The H & S Motor Company has a direct manufacturing cost per unit $30, and motors that are of inferior quality can be reworked for $12 per unit. 100 motors are produced daily, 80% (on average) are of good quality and 20% are defective. Of the defective motors, half can be reworked to yield good-quality products. Through its quality-management program, the company has discovered a problem in its production process that, when corrected (at a minimum cost), will increase the good-quality products to 90%. The company wants to assess the impact on the direct cost per unit of improvement in product quality.

Solution:The original manufacturing cost per motor is

Product Cost = (Kd) (I) + (Kr) (R) Y

Product Cost = ($30) (100) + ($12) (10) 90 motors

Product Cost = $34.67 per motorThe manufacturing cost per motor with the quality improvement is

Product Cost = ($30) (100) + ($12)(5) 95 motors

Product Cost = $32.21 per motor

QUALITY IMPROVEMENT AND THE ROLE OF EMPLOYEES

• Employee issues are universally perceived by companies to be one of the most important, if not the most important, consideration when initiating a quality-improvement program. Failure to address employee issues will usually lead to failure of the total quality effort.

• Job training and employee development are major features of a successful TQM program. Increased training in job skills results in improved processes that improve product quality. Training in quality tools and skills such as statistical process control enable employees to diagnose and correct day-to-day problems related to their job.

• In previous discussion of TQM, the importance of customer satisfaction as an over-riding company objective was stressed. However, another important aspect of a successful TQM program is internal customer satisfaction. It is unlikely that a company will be able to make its customers happy if its employees are not happy.

• To achieve high quality, it is absolutely necessary that management and employees cooperate and that each have an equally strong commitment to quality. Cooperation and commitment are not possible when management “dictates” quality to employees. Cooperation in a quality-management program is achieved when employees are allowed to participate in the quality-management process- that is, when they are given a voice.

• In participative problem solving employees are directly involved in the quality management process.

Quality Circles and Process Improvement Teams

• A quality circle is a small, voluntary group of employees and their supervisor, comprising a team of about 8 to 10 members from the same work area or department.

• A group technique for identifying and solving problems is brainstorming to generate ideas. Free expression is encouraged, and criticism is not allowed. Only after brainstorming is completed are ideas evaluated.

• Quality circle members are trained to conduct meetings and address problems as a group, as well as to collect data and analyze problems. When needed, outside technical and managerial assistance is available to the circle. The circle sometimes includes an advisor, who provides guidance but is not a team member.

Organization

8-10 members

Same area

Supervisor/moderator

Training

Group processes

Data collection

Problem analysis

Presentation

Implementation

Monitoring

Problem

Identification

List alternatives

Consensus

Brainstorming

Solution

Problem results

Problem

Analysis

Cause and Effect

Data collection

And analysis

The Quality Circle Process

Employee Suggestion

• The simple “suggestion box” is an example of a way to include employees in a quality improvement as individuals, not as part of a group. A key to any type of employee suggestion program is a strong commitment and reinforcement from management at all levels. Equally important, employees must be sufficiently trained to identify quality problems so that can make good suggestions.

Identifying Quality Problems and Causes

• Some of the most popular techniques for identifying the causes of quality problems are Pareto Charts, flowcharts, check sheets, histograms, scatter diagrams, process control charts and cause-and-effect diagrams. These well-known tools are sometimes known as the “magnificent seven,” the “seven QC tools” and the seven process improvement tools.

Pareto Analysis

• A diagram for tallying the percentage of defects resulting from different causes to identify major quality problems.

A B C D E

Flow Chart

• A diagram of the steps in a process; helps focus on where in a process a quality problem might exist.

Step Process

1

2

3

4

5

Check Sheet

• A fact-finding tool for tallying the number of defects for a list of previously identified problem causes.

Items 1 2 3 4

Dirt √√ √√

Old √ √

Temp.

√ √√ √√

Fault √√√

√√

Histogram

• A diagram showing the frequency or data related to a quality problem.

A B C D E

Scatter Diagram

• A graph showing the relationship between two variables in a process; identifies a pattern that may cause a quality problem.

Statistical Process Control Chart

• A chart with statistical upper and lower limit; if the process stays between these limits over time it is in control and a problem does not exist.

Cause-and-Effect Diagram

• Also called a “fishbone” diagram; a graph of the causes of a quality problem divided into categories.

Measurement Human Machine

ProcessMaterialsEnvironment

Quality

Problem

ISO 9000

• ISO is not an acronym for the International Organization for Standardization; it is a word, “ISO,” derive from the Greek “Isos” meaning “equal.” The purpose of ISO is to facilitate global consensus agreements on international quality standards. It has resulted in a system for certifying suppliers to make sure they meet internationally accepted standards for quality management.

• ISO 900:2000, Quality Management Systems – Fundamentals and Vocabulary, is the starting point for understanding the standards. It defines the fundamental terms and definitions used in the ISO 9000 family of standards, guidelines, and technical reports.

• ISO 9001:2000, Quality Management Systems – Requirements, is the requirement standard a company uses to assess its ability to meet customer and applicable regulatory requirements in order to achieve customer satisfaction. ISO 9001:2000 is the only standard in the ISO 9000 family that carries third-party certification. A third-party company called a registrar is the only authorized entity that can award ISO 9000 certification.

• ISO 9004:2000, Quality Management Systems – Guidelines for Performance Improvements, provides detailed guidance to a company for the continual improvement of its quality-management system in order to achieve and sustain customer satisfaction.

ISO 9000 Accreditation• In ISO 9000, an accredited registrar, for a fee,

assesses a company’s quality-management system and determines if it is in compliance with the ISO 9001:2000 standard. If the company’s quality-management system is in compliance with the standards, the registrar issues it a certificate and registers that certificate in a book that is widely distributed.

• ISO certification is accomplished by a registrar through a series of document reviews and facility visits and audits. The registrar’s auditors review a company’s procedures, processes, and operations to see if the company conforms to the ISO quality-management system standards. The registration process can take from several weeks up to a year, depending on how ready the company is or registration.