1 Quality Management Z SUZSANNA E SZTER T ÓTH 22 March 2016 D EPT. OF M ANAGEMENT AND C ORPORATE E CONOMICS F ACULTY OF E CONOMIC AND S OCIAL S CIENCES B UDAPEST U NIVERSITY OF T ECHNOLOGY AND E CONOMICS

2 Agenda for today Principles and supporting elements of Total Quality Management –Customer focus –Continuous improvement 2

3 3 Inspection Quality control (QC) Quality Assurance (QA) The 4 stages in the evolution of QMS Total Quality Management (TQM) Inspection Quality control (QC) Quality Assurance (QA) Total Quality Management (TQM) Salvage, Sorting, grading, reblending Corrective actions Identify sources of non- conformance Develop quality manual, process performance data, self-inspection, product testing, basic quality planning, use of basic statistics, paperwork controls Quality systems development, advanced quality planning, use of quality costs, FMEA, SPC Policy deployment, involve suppliers and customers, involve all operations, process management, performance measurement, teamwork, employee involvement

4 FeatureJapanUSAEurope spread multitudinous, bottom-up strategy top-down strategy, snowball principle production and technology management bearing group quality circles top management middle management special features totality, simple tools and techniques management environment standardizatio n, regulation key elementquality circlesmanagement climate documented shadowing Schools of quality

5 TQM TQM is a combination of –Quality culture (focus on improving the quality) –Quality strategy (sustainable quality improvement) –Process improvement tools (tools to support the program) –Continuous quality improvement (empowered to improve his/her individual processes)

6 Origins of TQM After World War II –USA: Increasing demands for consumer goods  focusing on quantity War production capability was converted to the mass production of consumer goods –Other countries (Japan, Korea, Taiwan and Germany): Little infrastructure left, smaller markets to serve New flexibility, capability, understanding what customers desired  economic revolution Captured large segments of the US market –By the 1980s US lost its domination as world supplier –Foreign competitors were more innovative, more cost effective, and more capable of meeting the consumer’s requirements

7 Origins of TQM How to get quality back to US? American managers must change the way if they are to survive MIT: Made in America report New consumer-oriented economy  brings quality closer to the value based approach TQM’s quality definition: A basic business strategy that provides goods and services that completely satisfy both internal and external customers by meeting their explicit and implicit expectations.

8 Goa l Principle s Supporting elements TQMTQM Leadership Communication Supportive structure Reward and recognitions Measurement Education and training Process improvement Total involvement Customer focus

9 TQM system - principles Customer focus: –concept of internal and external customer –Collection, understanding, analysis and fulfillment of customer requirements Process improvement: –Work is the result of a series of interrelated steps and activities that result in an output. –Reduce the variability of the output and improve the reliability of the process Total involvement: –Active leadership of senior management –Utilizing the talents of all employees –Bulinding long-term partnerships with suppliers

10 Leadership: role of senior managers as advocates, teachers, and leaders Education and training: quality is based on the skills of every employee and his or her understanding of what is required –Core trainings and additional trainings Supportive structure: senior managers may require support to bring about the change necessary to implement a quality strategy –Consultants, small support staff TQM system – supporting elements I.

11 Communications: may need to be addressed differently in order to communicate to all employees a sincere commitment to change Reward and recognition: teams and individuals who successfully apply the quality process must be recognized and possibly rewarded Measurement: the use of data becomes paramount in installing a quality management process. TQM system – supporting elements II.

Focusing on products vs focusing on the processes Traditional method Product management Work process Suppliers Customers INPUT OUTPUT INSPECTINSPECT INSPECTINSPECT WAST E

13 Work process

14 Manufacturing vs Nonmanufacturing processes Comparing typical process attributes ManufacturingNonmanufacturing Output propertiestangibleintangible or tangible Production and delivery separateintegrated Customer interface focused: sales and marketing spread across line employees Feedbackthrough processthrough customer Organizational focusprocess efficiencycustomer relations Process ownershipclearly definedmultiple Process boundariesdefinedunclear Process definitiondocumentedunclear Control pointsdefinednone Quality measuresestablished and objectivesubjective Corrective actionpreventivereactive

15 Focusing on processes Manufacturing processes –customers are isolated from production –outputs are tangible –operations are highly repetitive Nonmanufacturing processes –customers are involved directly in the delivery of services –the value added is often intangible –some processes are repeated infrequently, and their outputs can be unique every time.

16 Improving nonmanufacturing processes –Coproduction: customer participation brings the customer directly into the service process the process itself represents value to the customer employees in face-to-face contact with customers –Tangibility and repetition Defining specifications and measuring conformance of tangible outputs relying on physical characteristics Repetitive processes generate large quantities of data over relatively short periods of time Facilitates the measurement, comparison, analysis, and systematic improvement of operations –Overcoming these obstacles Identification of appropriate measures Clarification of the underlying work processes that are repeated

17 Measurement of performance at three levels Process measures: define activities, variables, and operations of the work process itself –help to predict the characteristics of the outputs before they delivered to customers. Output measures: define specific features, values, characteristics, and attributes of each product or service. –Voice of the customer and voice of the process Outcome measures: define the ultimate impact of the process in the cusomer and dependent on what the customer does with the product or service.

18 What customers expect from the organization? How well do organizations provide the services customers have requested? Concept of internal customer: every employee has its own customer inside the organization 90 % x 90 % x 90 % = 73 % Output: a specific product or service that an employee produces, as part if his/her work process, and that is passed to others, who in turn, use them in their work process. Customer focus

19 Customer focus What do customers want? –Determine from the customer what he or she expects, requires, and needs from the supplier. –the customers are often unsure of their precise needs and need assitance Customer satisfaction –Customer needs and expectations are constantly escalating as customers have their requirements met and learn of new possibilities from competitors

20 Understanding customer expectations 1.What product/service characteristics do customers want? 2.What performance level is needed to satisfy their expectations? 3.What is the relative importance of each characteristic? 4.How satisfied are customers with performance at the current level?

21 What is a quality product? Garvin’s 8 quality dimensions for products: –Performance –Features –Reliability –Conformance –Durability –Serviceability –Aesthetics –Perceived quality

22 What is a quality service? Berry’s 10 determinants for service quality: –Reliability –Responsiveness –Competence –Access –Courtesy –Communication –Credibility –Security –Understanding the customer –Tangibles

23 Implicit, explicit and latent requirements

24 Advantages Focus discussions with customers around characteristics that represent the conspicuous specifications and requirements (level 2). Customers take the basic expectations (level 1) for granted and assume that knowledgeable suppliers know this. Customers cannot be expected to appreciate level 3 features until they are experienced. Meeting level 1 expectations is a defensive requirement that at best will help avoid creating dissatisfied customers. High levels of customer satisfaction can be expected by consistently delivering the implicit base expectations (level 1) and every explicit specification (level 2), as well as including the value- added features (level 3) that delight customers. Customers’ expectations will escalate, and performance levels will migrate down through the hierarchy over time.

25 Understanding customers

T HANK YOU FOR YOUR KIND ATTENTION ! Zsuzsanna Eszter Tóth D EPT. OF M ANAGEMENT AND C ORPORATE E CONOMICS F ACULTY OF E CONOMIC AND S OCIAL S CIENCES B UDAPEST U NIVERSITY OF T ECHNOLOGY AND E CONOMICS