© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 22 Managing Quality

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objectives Describe the nature of quality and productivity. Discuss the importance of quality and its relation to competition, costs, and effectiveness. Describe strategic initiatives firms use to improve quality. Describe operational techniques firms use to improve quality.

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Nature of Quality and Productivity The Meaning of Quality – Product quality: quality of a real item. – Service quality: quality of intangible service provided by organization. – Quality: total set of features and characteristics of product or service that bear on its ability to satisfy stated or implied needs. See Table 22.1: Eight Dimensions of Quality.

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Eight Dimensions of Quality – Performance – Features – Reliability – Conformance – Durability – Serviceability – Aesthetics – Perceived quality The Nature of Quality and Productivity

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Meaning of Quality – Absolute quality: understood level of quality that a product or system needs to be capable of fulfilling its intended purpose, rather than its quality relative to other alternatives. The Nature of Quality and Productivity

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Quality and Productivity – Productivity: economic index of the value or amount of what is created relative to the value or amount of resources necessary to create it. – Increased productivity often means higher quality. – Higher quality results in higher productivity. The Nature of Quality and Productivity

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Nature of Quality and Productivity

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Levels and Forms of Productivity – Individual productivity: amount produced or created by single individual relative to his or her costs to organization. – Unit productivity: examples are productivity of manufacturing plant within firm, single restaurant within chain of restaurants, group of workers within single facility of organization. The Nature of Quality and Productivity

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Levels and Forms of Productivity – Company productivity: total level of productivity achieved by all employees and/or units of entire organization. – Industry productivity: productivity achieved by all companies in a single industry. – Country productivity: productivity levels achieved by entire nations. The Nature of Quality and Productivity

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Levels and Forms of Productivity – Overall (total factor) productivity: all inputs that organization uses. – Dividing outputs by sum of labor, capital, materials, information, energy costs determines overall productivity. – Citizens of highly productive country have better standard of living than people of less productive country. The Nature of Quality and Productivity

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Productivity Trends – U.S. third highest level of productivity in world. – U.S. productivity growth rates slow in recent years. – U.S. major industrial competitors increasing their productivity at much higher rates. – U.S. businesses working harder than ever to maintain their position in the world economy. The Nature of Quality and Productivity

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Improving Productivity – Organizations improve productivity: various operations and basic management techniques. – Building new distribution systems, information systems, office buildings. – Increasing spending on research and development – Investing in automation and/or robotics. The Nature of Quality and Productivity

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Improving Productivity – Improving motivation and involvement of employees. – Increasing training and employee participation. – Modifying employee reward systems. See Table 22.2: Methods for Improving Productivity. The Nature of Quality and Productivity

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Importance of Quality Quality and Competition – Quality important point of competition in virtually every industry, particularly agribusiness. Quality and Costs – Direct improvements in productivity often result in both lower costs as well as higher quality.

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Importance of Quality Quality and Long-Term Effectiveness – Organizations that make continual and sustained commitments to quality improvement find their images in the marketplace become increasingly positive.

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Improving Quality: Strategic Initiatives The TQM Philosophy – Comprehensive, organization-wide strategy for improving product and/or service quality on systematic and continuous basis.

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The TQM Philosophy – Strategic commitment to quality that relies on: Employee involvement Materials Methods Technology Improving Quality: Strategic Initiatives

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Using TQM – Phase 1: organization primarily concerned with learning about quality. – Phase 2: firm moves to make quality enhancement fundamental part of its culture. – Phase 3: adopts self-managed work teams; continuous improvement becomes routine, ongoing part of how firm does business. Improving Quality: Strategic Initiatives

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Improving Quality: Strategic Initiatives

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Improving Quality: Operational Techniques Statistical Quality Control – Mathematical and/or statistical methods and procedures for measuring and adjusting quality levels. – Acceptance sampling: finished goods sampled to determine what proportion is acceptable quality. – In-process sampling: testing products as they are being made rather than after they are finished.

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Improving Quality: Operational Techniques Benchmarking – Process of finding out in legal and ethical manner how other firms do something and either imitating it or improving upon it. Flexibility – Organization’s ability to adapt to different conditions and circumstances.

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter Summary Quality: total set of features and characteristics of product or service that bears on its ability to satisfy stated or implied needs. Quality assessed in absolute and relative terms and is closely linked with productivity. Productivity: assessed at several levels. Several techniques managers can use to boost productivity.

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter Summary Important reasons for quality are its role in: – Competition – Reducing costs – Improving long-term effectiveness Total quality management (TQM): strategic initiatives to enhance quality. TQM relies on strategic commitment, employee involvement, methods, materials, technology.

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter Summary Operational techniques available to organizations for boosting quality: – Statistical quality control – Benchmarking – Speed and time – Flexibility