Total Quality Management Chapter 5 © 2005 Wiley

Management 326 Operations and 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 © 2005 Wiley

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 © 2005 Wiley

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 © 2005 Wiley

How Companies Define Quality Product 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. © 2005 Wiley

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 © 2005 Wiley

Cost of Quality – 4 Categories Early detection/prevention is less costly Costs may be less by a factor of 10 © 2005 Wiley

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 © 2005 Wiley

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

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 © 2005 Wiley

Evolution of TQM – New Focus © 2005 Wiley

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 © 2005 Wiley

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 © 2005 Wiley

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) © 2005 Wiley

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) © 2005 Wiley

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

Quality Award and Certifications Malcolm Baldrige National Quality Award ISO 9000 Certification ISO 14000 Certifications © 2005 Wiley

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 © 2005 Wiley

Baldrige Award Criteria Framework A 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) © 2005 Wiley

Baldrige Award - Business Results Customer-focused results Product and service performance Financial and market results Human resource results © 2005 Wiley

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 © 2005 Wiley

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. © 2005 Wiley

ISO 14000 A certification program in environmental management Standard-setting and certification procedures are similar to ISO 9000 © 2005 Wiley

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