TQM 1 Linkages Marketing - customers generally pay more for “better” products. Finance and accounting - doing things correctly the first time saves money –need to understand these investments Information systems - need to understand type of data needed - can also be improved with same tools Human Resources - hire right people Organization wide commitment !Organization wide commitment !

TQM 2 From tools to here Managing quality (removing variance from our processes) requires a process and a managerial philosophy to make it work. Last class we talked about tools to help us remove variance: these create a problem solving process –Step one- learn existing process – flow charts –Step two – brain storm all possible causes – fishbone –Step three- collect data and analyze data – pareto –Step 4 – act – fix problems in order of importance –Step 5- monitor – inspection and SPC

TQM 3 PDAC – and TQM Plan / do / act/ check -repeat –A broad process that still requires tools TQM - a managerial philosophy to actual get people to care about improving quality Note – most companies have a been there done that attitude about TQM- so they don’t use the term-but elements of the philosophy are in place in most well run companies.

TQM 4 Quality - a key element of satisfaction Why do we care about quality ? –Market share: Many customers expect a certain level of quality. –Cost : Improvements in quality often lead to decreases in costs and lead-time. –Cost 2: The costs of fixing problems generally exceed the cost of preventing problems. –Reputation / perceptions. May be especially important to retain customers. –Liability: Poor quality can lead to law-suits

TQM 5 Take 30 seconds to answer the following If you could live anywhere in the world where would you live? Why?

TQM 6 Definitions of Quality According to your book quality is “the totality of features and characteristics of a product or service that bears on its ability to satisfy stated or implied needs” Which implies that: –Customers define quality –There is no one correct definition of quality –The definition is going to change over time

TQM 7 Dimensions of Quality 1 ) performance 2) features 3) reliability 4) serviceability 5) durability 6) aesthetics 7) conformance 8) perceived quality Although OM can impact any or all of theses dimensions it is conformance that is OM’s day to day responsibility

TQM 8 Quality definitions for OM Quality (from an OM perspective) is the production of goods and services that meet specifications and perform as intended. The assumption of this definition is that the products / services have been designed to satisfy the customer. In other words it is OM’s daily job to execute the design properly. Our focus is then on variance reduction.

TQM 9 What is Total Quality Management (TQM) ? An organization wide commitment to quality. Note that a better definition would be a supply chain commitment to quality. Why ? Who should define quality for an organization or supply chain ? TQM is strong on philosophy and changing managerial beliefs and behaviors.

TQM 10 Elements of a TQM philosophy Focus on customer satisfaction –Southwest airlines is basically a flying bus- yet people are very satisfied with them. Delta provides a (slightly) higher level of service and people are generally not satisfied- why? –Link between process and quality

TQM 11 Other elements Continuous improvement - our products and or processes can always be better. –If we stop improving what tends to happen? Empowerment / employee involvement –85% of defects are caused by system The ergonomic work station that moves up and down not only prevents injury it does what else? Around 40% of cows in America have no ID beyond a brand – which means what from a quality control standpoint?

TQM 12 Key behaviors- from Deming, Crosby and Juran Consistency of purpose / Lead to promote change –Ford- is quality still job one? –Dow – changing from a continuous improvement focus to a shareholder value focus –Quality must be a long term goal- and the journey never ends

TQM 13 More key behaviors Build quality into product as opposed to inspecting quality into a product –Preventing quality defects is less expensive than trying to inspect in quality or fixing defects. Libby glass and inspection – hence SPC Harley Davidson’s KC assembly plant Understanding this is fundamental to TQM – the focus is on continuously working toward making our processes variance free so that the outputs always match what was promised to the customer.

TQM 14 Even more Drive out fear – employees must think it is in their best interest to be involved –Back to Dow –85% of defects are from the system- if we are honest about this should we (generally) be blaming employees for poor quality? Break down barriers – quality problems tend to cross functions –Harlan manufacturing

TQM 15 …More Make decisions based on total cost not price –Why do people us Fed Ex instead of the post office- even for 2 day delivery? –Saving 10 cents a pound on beef –Lopez at GM –Space shuttle maintenance

TQM 16 Yes more behaviors Involve everyone –Tightly linked to breaking down barriers –Who knows the most about a job / process? –Who then is most likely to be able to improve upon it? Eliminate Slogans –Howie Makum –Office Space – “is it good for the company”

TQM 17 Costs of quality – how we think about quality Traditionally managers viewed quality as consisting of two costs that needed to be traded off: –prevention and appraisal costs –failure costs internal and external Why does Crosby say “quality is free” ? –This was a radical idea in why ? Is it today?

TQM 18 Trying to figure out what this means` TQM is a change in philosophy –Long term – note on business publications and fads –Customer focused What assumption is made if we take a long term customer focus? –Continuous improvement- we are never good enough What happened about a week after Ford stopped telling you “quality is job one” ? –Prevention not inspection or correction –Leverage / value our employees Are Dilbert and Office Space realistic?

TQM 19 Key point of TQM Most companies would claim that they wish to have a system that produces products that meet customer expectations. However, TQM companies are not only meeting needs today, but also for tomorrow. They do this by vigorously eliminating all variance from their processes - which allows them to make better products (because they understand their processes).

TQM 20 3 “most” important things Price verses cost 85% of our defects come from our processes Measurement and rewards –We hinted at this last class –Dominoes –Dogs and Skunks If you can keep these ideas in mind when making decisions you will be far ahead of most of your counterparts

TQM 21 The Baldrige award Similar to Japan’s Deming prize Recognizes companies who have successfully implemented quality Expensive to win - but there is a payoff –ROI for Baldrige winners Many companies use the criteria as a guide –leadership- strategic planning –HR development- process management –business results- customer focus and satisfaction

TQM 22 ISO 9000 International quality standard –often required to supply many companies QS 9000 Not as rigorous as Baldrige –operations focused –ignores customers and continuos improvement –can have poor quality and get certified

TQM 23 Why get ISO 9000 Cost of doing business (worst reason) Can lead to continuos improvement and increased customer satisfaction. –Measurement focus we can not improve until we know the present situation –Training- all employees must be trained in quality processes –Audits force managers to justify changes in a quality context Can become the foundation of a TQM program

TQM 24 TQM Conclusions TQM is a supply chain wide philosophy to continuously improve processes to make products that will satisfy our customers. In the process of getting better most companies also reduce costs and lead time through elimination of waste. –So TQM is a way to get faster, better and cheaper simultaneously.