Chapter 1 Introduction to Quality MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing1

Modern Importance of Quality “The first job we have is to turn out quality merchandise that consumers will buy and keep on buying. If we produce it efficiently and economically, we will earn a profit, in which you will share.” - William Cooper Procter MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing2

Key Idea MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing3 Building—and maintaining—quality into an organization’s goods and services, and more importantly, into the infrastructure of the organization itself, is not an easy task.

Quality Assurance...is any action directed toward providing customers with goods and services of appropriate quality. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing4

History of Quality Assurance (1 of 3) Skilled craftsmanship during Middle Ages Industrial Revolution: rise of inspection and separate quality departments Early 20 th Century: statistical methods at Bell System Quality control during World War II Post-war Japan: evolution of quality management MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing5

History of Quality Assurance (2 of 3) Quality awareness in U.S. manufacturing industry during 1980s: from “Little Q” to “Big Q” - Total Quality Management Malcolm Baldrige National Quality Award (1987) Disappointments and criticism MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing6

Key Idea MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing7 Although quality initiatives can lead to business success, they cannot guarantee it, and one must not infer that business failures or stock price dives are the result of poor quality.

History of Quality Assurance (3 of 3) Emergence of quality management in service industries, government, health care, and education Evolution of quality to performance excellence Growth and adoption of Six Sigma Current and future challenge: continue to apply the principles of quality and performance excellence. Quality is “a race without a finish line.” MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing8

Contemporary Influences on Quality Globalization Innovation/creativity/change Outsourcing Consumer sophistication Value creation Changes in quality MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing9

Defining Quality MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing10 Perfection Consistency Eliminating waste Fast delivery Compliance with policies and procedures Providing a good, usable product Doing it right the first time Delighting or pleasing customers Total customer service and satisfaction

Formal Definitions of Quality Transcendent definition: excellence Product-based definition: quantities of product attributes User-based definition: fitness for intended use Value-based definition: quality vs. price Manufacturing-based definition: conformance to specifications MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing11

Quality Perspectives MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing12 Customer Distribution products and andservices needs needs transcendent & product-based user-based manufacturing- based based value-based Marketing Design Manufacturing Information flow Product flow

Key Idea MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing13 Because individuals in different business functions speak different “languages,” the need for different views of what constitutes quality at different points inside and outside an organization is necessary to create products of true quality that will satisfy customers’ needs.

Customer-Driven Quality “Meeting or exceeding customer expectations” Customers can be... ◦ Consumers ◦ External customers ◦ Internal customers MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing14

Total Quality People-focused management system Focus on increasing customer satisfaction and reducing costs A systems approach that integrates organizational functions and the entire supply chain Stresses learning and adaptation to change Based on the scientific method MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing15

Principles of Total Quality Customer and stakeholder focus Participation and teamwork Process focus supported by continuous improvement and learning MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing16 … all supported by an integrated organizational infrastructure, a set of management practices, and a set of tools and techniques

Customer and Stakeholder Focus Customer is principal judge of quality Organizations must first understand customers’ needs and expectations in order to meet and exceed them Organizations must build relationships with customers Customers include employees and society at large MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing17

Key Idea MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing18 To meet or exceed customer expectations, organizations must fully understand all product and service attributes that contribute to customer value and lead to satisfaction and loyalty.

Participation and Teamwork Employees know their jobs best and therefore, how to improve them Management must develop the systems and procedures that foster participation and teamwork Empowerment better serves customers, and creates trust and motivation Teamwork and partnerships must exist both horizontally and vertically MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing19

Key Idea MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing20 In any organization, the person who best understands his or her job and how to improve both the product and the process is the one performing it.

Process Focus and Continuous Improvement A process is how work creates value for customers Processes transform inputs (facilities, materials, capital, equipment, people, and energy) into outputs (goods and services) Most processes are cross-functional MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing21

Key Idea MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing22 A process is a sequence of activities that is intended to achieve some result

Continuous Improvement Enhancing value through new products and services Reducing errors, defects, waste, and costs Increasing productivity and effectiveness Improving responsiveness and cycle time performance MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing23

Key Idea MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing24 Major improvements in response time may require significant simplification of work processes and often drive simultaneous improvements in quality and productivity.

Deming’s View of a Production System MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing25 Suppliers of materials and equipment Receipt and test of materials Design and Redesign Consumer research ABCDABCD Production, assembly inspection Tests of processes, machines, methods Distribution Consumers INPUTS PROCESSES OUTPUTS Feedback

Learning The foundation for improvement … Understanding why changes are successful through feedback between practices and results, which leads to new goals and approaches Learning cycle: ◦ Planning ◦ Execution of plans ◦ Assessment of progress ◦ Revision of plans based on assessment findings MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing26

Infrastructure, Practices, and Tools MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing27 Leadership Strategic HRM Process Information and knowledge Planning mgt. management Planning mgt. management Performance Training appraisal appraisal Trend chart Tools Practices Infrastructure

TQ Infrastructure Customer relationship management Leadership and strategic planning Human resources management Process management Information and knowledge management MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing28

Competitive Advantage Is driven by customer wants and needs Makes significant contribution to business success Matches organization’s unique resources with opportunities Is durable and lasting Provides basis for further improvement Provides direction and motivation MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing29 Quality supports each of these characteristics

Quality and Profitability MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing30 Improved quality of design Higher perceived value Increased market share Higher prices Increased revenues Improved quality of conformance Lower manufacturing and service costs Higher profitability

Key Idea MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing31 Considerable evidence exists that quality initiatives positively impact bottom-line results.

Quality and Business Results Studies General Accounting Office study of Baldrige Award applicants Hendricks and Singhal study of quality award winners Performance results of Baldrige Award recipients MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing32

Key Idea MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing33 An organization that is committed to total quality must apply it at three levels: the organizational level, the process level, and the performer/job level.

Three Levels of Quality Organizational level: meeting external customer requirements Process level: linking external and internal customer requirements Performer/job level: meeting internal customer requirements MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing34

Quality and Personal Values Personal initiative has a positive impact on business success Quality-focused individuals often exceed customer expectations Quality begins with personal attitudes Attitudes can be changed through awareness and effort (e.g., personal quality checklists) Unless quality is internalized at the personal level, it will never become rooted in the culture of an organization. Thus, quality must begin at a personal level (and that means you!). MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing35

Key Idea MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing36 In the daily attempt to bring about change in the individual parts of the organizational universe, managers, employees, professors, and students can find that personal quality is the key to unlock the door to a wider understanding of what the concept really is all about.