1. Total Quality Management Prof. Costas Panou Lecture #8-9 in M.Sc New Technologies in Shipping and Transportation

2. Learning outcomes At the end of this lecture, students should be able to Define quality and Total Quality management Understand why manufacturers care about quality Understand the Six Basic Concepts TQM

3. Why care about quality Increase productivity Expand market share Raise customer loyalty Enhance competitiveness of the firm at a minimum, Serve as a price of entry

4. Total Quality Management The way of managing organization to achieve excellence Total – everything Quality – degree of excellence Management – art, act or way of planning, organizing, directing and controlling to achieve certain goals

5. The Three Quality Gurus Deming: the best known of the “early” pioneers, is credited with popularizing quality control in Japan in early 1950s.Today, he is regarded as a national hero in that country and is the father of the world famous Deming prize for quality.

6. Juran Juran, like Deming was invited to Japan in 1954 by the union of Japanese Scientists and engineers. Juran defines quality as fitness for use in terms of design, conformance, availability, safety and field use. He focuses on top-down management and technical methods rather than worker pride and satisfaction.

7. Philip Crosby: author of popular book Quality is Free Quality is defined as conformance to requirements, not “goodness” The system for achieving quality is prevention, not appraisal. The performance standard is zero defects, not “that’s close enough” The measurement of quality is the price of non-conformance, not indexes.

8. Definition of Quality The concept and vocabulary of quality are elusive. Different people interpret quality differently. Few can define quality in measurable terms that can be proved operationalized. When asked what differentiates their product or service; The banker will answer” service” The healthcare worker will answer “quality health care” The hotel employee will answer “customer satisfaction” The manufacturer will simply answer “quality product”

9. Five Approaches of Defining Quality Harvard professor David Garvin, in his book Managing Quality summarized five principal approaches to define quality. Transcendent Product based User based Manufacturing based Value based

10. Transcendental view Those who hold the transcendental view would say “I can’t define it, but I know it when I see it” Advertisers are fond of promoting products in these terms. “Where shopping is a pleasure” (supermarket). “We love to fly and it shows" (airline). Television and print media are awash with such indefinable claims and therein lies the problem: Quality is difficult to define or to operationalize. It thus becomes elusive when using the approach as basis for competitive advantage. Moreover, the functions of design, production and service may find it difficult to use the definition as a basis for quality management.

11. Product Based Quality is viewed as a quantifiable or measurable characteristic or attribute. For example durability or reliability can be measured and the engineer can design to that benchmark. Quality is determined objectively. Although this approach has many benefits, it has limitation as well. Where quality is based on individual taste or preference, the benchmark for measurement may be misleading.

12. User Based It is based on the idea that quality is an individual matter and products that best satisfy consumer preferences are those with the highest quality. This is rational approach but leads to two problems;  Consumer preference vary widely and it is difficult to aggregate these preferences into products with wide appeal. This leads to the choice between a niche strategy or a market aggregation approach which tries to identify those product attributes that meet the needs of the largest number of consumers.  Another problem concerns the answer to the question “Are quality and customer satisfaction the same?” the answer is probably not. One may admit that a Bentley has many quality attribute, but satisfaction may be better achieved with a Mazda RX-8.

13. Manufacturing Based Manufacturing-based definitions are concerned primarily with engineering and manufacturing practices and use the universal definition of “conformance to requirements”. Requirements or specifications are established by design and any deviation implies a reduction in quality. The concept applies to services as well as product. Excellence in quality is not necessarily in the eye of the beholder but rather in the standards set by the organization. This approach has the serious weakness. The consumer’s perception of quality is equated with conformance and hence is internally focused.

14. Value Based It is defined in term of costs and prices as well as number of other attributes. Thus, the consumer’s purchased decision is based on quality at an acceptable price. This approach is reflected in the popular Consumer Reports magazine which ranks products and services based on two criteria: Quality and Value. The highest quality is not usually the best value. That designation is assigned to the “best- buy” product or service.

15. Definition of TQM (BS4778:1991) A management philosophy embracing all activities through which the needs and expectations of the CUSTOMER and COMMUNITY, and the objectives of the organization are satisfied in the most efficient and cost effective manner by maximising the potential of ALL employees in a continuing drive for improvement.”

16. Definition cont The essence of Total Quality Management is a common sense dedication to understanding what the customer wants and then using people and science to set up systems to deliver products and services that delight the customer. Greg Hughes President AT&T Transmission Systems

17. Definition cont What is TQM? continuous improvement TQM is the integration of all functions and processes within an organization in order to achieve continuous improvement of the quality of goods and services. The goal is customer satisfaction.

18. Total Quality Management Quality elementPrevious stateTQM DefinitionProduct-orientedCustomer-oriented PrioritiesSecond to service and cost First among equals of service and cost DecisionsShort-termLong-term EmphasisDetectionPrevention ErrorsOperationsSystem ResponsibilityQuality ControlEveryone Problem solvingManagersTeams ProcurementPriceLife-cycle costs Manager’s rolePlan, assign, control, and enforce Delegate, coach, facilitate, and mentor

19. Total Quality Management Requires cultural change – prevention not detection, pro-active versus fire-fighting, life- cycle costs not price, etc Many companies will not start this transformation unless faced with disaster/problems or forced by customers

20. Improve Quality (Product/Service) Increase Productivity (less rejects, faster job) Lower Costs and Higher Profit Business Growth, Competitive, Jobs, Investment Effect of Quality Improvement

21. Scope of the TQM activity TQM Principles & Practices Leadership Customer satisfaction Employee improvement Continuous improvement Supplier partnership Performance measures Tools & Techniques QuantitativeNon-quantitative SPCISO 9000 ISO 14000 Acceptance Sampling ReliabilityBenchmarking Experimental design FMEA QFD Total productive maintenance Management tools Concurrent engineering

22. TQM Six Basic Concepts 1. Leadership 2. Customer Satisfaction 3. Employee Involvement 4. Continuous Process Improvement 5. Supplier Partnership 6. Performance Measures (All these present an excellent way to run a business)

23. Criteria 1 Leadership  Top management must realize importance of quality  Quality is responsibility of everybody, but ultimate responsibility is CEO  Involvement and commitment to CQI  Quality excellence becomes part of business strategy  Lead in the implementation process

24. Characteristics of Successful Leaders 1. Give attention to customers 2. Empower--not control--subordinates. Provide resources, training, and work environment to help them do their jobs 3. Emphasize improvement rather than maintenance 4. Emphasize prevention 5. Encourage collaboration rather than competition 6. Train and coach, not direct and supervise 7. Learn from problems--opportunity for improvement 8. Continually try to improve communications 9. Continually demonstrate commitment to quality 10. Choose suppliers on the basis of quality, not price (!!!) 11. Establish organisational systems that supports quality efforts

25. Implementation Process  Must begin from top management, most important CEO commitment  Cannot be delegated (indifference, lack of involvement cited as principle reason for failure)  Top/senior management must be educated on TQM philosophy and concepts, also visit successful companies, read books, articles, attend seminars  Timing of implementation--is the org ready, re-organization, change in senior personnel, current crisis--then need to postpone to favourable time  Need a roadmap/framework for implementation  Formation of Quality Board--policies, strategies, programmes

26. Implementation Process Quality Board job 1.Develop core values, vision statement, mission statement, and quality policy statement 2.Develop strategic long-term plan with goals and annual quality improvement program with objectives 3.Create total education and training plan 4.Determine and continually monitor cost of poor quality 5.Determine performance measures for the organization, approve them for functional areas, and monitor them. 6.Continually determine projects that improve processes, particularly those affect external and internal customer satisfaction 7.Establish multifunctional project and departmental or work group teams and monitor progress 8.Establish or revise the recognition and reward system to account new way of doing business. Must begin from top management, most important CEO commitment

27. Implementation Process Core values - foster TQM behaviour and define the culture - need to develop own values Examples from Malcolm Baldrige National Quality Award 1.Customer-driven excellence 2.Visionary leadership 3.Organizational and personal learning 4.Valuing employees and partners 5.Agility 6.Management for innovation 7.Management by fact 8.Systems perspective 9.Social responsibility 10.Focus results and creating value

28. Criteria 2 Customer Satisfaction  Customer is always right – in Japan customer is “King”  Customer expectations constantly changing – 10 years ago acceptable, now not any more!  Satisfaction is a function of total experience with organization  Must give customers a quality product or service, reasonable price, on-time delivery, and outstanding service  Need to continually examine the quality systems and practices to be responsive to ever – changing needs, requirements and expectations – Retain and Win new customers

29. Issues for customer satisfaction Checklist for both internal and external customers 1. Who are my customers? 2. What do they need? 3. What are their measures and expectations? 4. Does my product/service exceed their expectations? 5. How do I satisfy their needs? 6. What corrective action is necessary?

30. Customer Feedback To focus on customer, an effective feedback program is necessary, objectives of program are to: 1.Discover customer dissatisfaction 2.Discover priorities of quality, price, delivery 3.Compare performance with competitors 4.Identify customer’s needs 5.Determine opportunities for improvement

31. Customer Feedback Tools/Method  Warranty cards/Questionnaire  Telephone/Mail Surveys  Focus Groups  Customer Complaints  Customer Satisfaction Index Good experience are told to 6 people while bad experience are repeated to 15 people

32. Criteria 3 Employee Involvement  People – most important resource/asset  Quality comes from people  Deming – 15% operator errors, 85% management system  Project teams – Quality Control Circles (QCC)  Education and training – life long, continuous both knowledge and skills  Motivational programmes, incentive schemes  Conducive work culture, right attitude, commitment

33. Criteria 4 Continuous Process Improvement  View all work as process – production and business  Process – purchasing, design, invoicing, etc.  Inputs – PROCESS – outputs  Process improvement – increased customer satisfaction  Improvement – 5 ways; Reduce resources, Reduce errors, Meet expectations of downstream customers, Make process safer, make process more satisfying to the person doing

34. Continuous Improvement Inputs – processing – outputs Input Materials Info, Data People Money Process Work methods Procedures Tools Production – Cutting, Welding, etc. Bank – deposit/withdrawal process, Outputs Products Delivered service In-process jobs – forms signed, drawing completed Others Also by-products, wastes Conditions feedback

35. Problem – Solving Method  Identify the opportunity (for improvement)  Analyze the current process  Develop the optimal solution(s)  Implement changes  Study the results  Standardize the solution  Plan for the future

36. Identify the opportunity (for improvement)  Phase 1 – Identify problems  Use Pareto Analysis – external & internal failures, returns  Phase 2 – Form a team (same function of multifunctional)  Phase 3 – Define scope of problem (Paint process – data collected for a week showed high 30% ‘runs’ defect)

37. Pareto Charts: Organize data on a histogram based on frequency from most prevalent to least. Help identify major causes or occurrences (80:20 rule)

38. Pareto Diagrams Purpose: ◦ helps organize data to show major factors ◦ displays data in the order of importance ◦ organize based on fact rather than perception To construct: ◦ use data from a check sheet or similar instrument ◦ analyze data to determine frequency ◦ identify the vital few ◦ calculate percentages ◦ add percentages to find vital few (80%) ◦ draw cumulative curve Typical Application: ◦ display relative importance of different factors  choose starting point for problem solving  monitor success  identify basic cause of a problem ◦ use a selling tool to gain support

39. Pareto Diagram Example

40. Process Flow Chart – Ink filling process

41. Analyze the current process  Understand the current process, how it is performed  Develop process flow diagram  Define target performance  Collect data, information  Determine causes not solution (use cause and effect diagram)  Root cause if possible

42. Affinity diagram Example

43. Develop the optimal solution(s)  To establish solutions  Recommended optimal solution to improve process  Create new process, combine different process, modify existing process  Creativity (rubber pad adhesive, door trim)  Brainstorming, Delphi, Nominal Group Technique  Evaluate and testing of ideas/possible solutions Implement changes  To prepare implementation plan, obtain approval, conduct process improvements, study results  Why is it done? How, When, Who, When it will be done?

44. Criteria 5 Supplier Partnership  40% product cost comes from purchased materials, therefore Supplier Quality Management is important  Substantial portion quality problems stem from suppliers  Need partnership to achieve quality improvement – long term purchase contract  Supplier Management activities

45. Criteria 5 Supplier Partnership  Define product/service requirements; 1.Evaluate potential and select the best suppliers 2.Conduct joint quality planning and execution 3.Require statistical evidence of quality 4.Certify suppliers, e.g. ISO 900, Ford Q1 5.Develop and apply Supplier Quality Ratings  Defects/Percent non-conforming  Price and Quality costs  Delivery and Service

46. Criteria 6 Performance Measures  Managing by fact rather than gut feelings  Effective management requires measuring  Use a baseline, to identify potential projects, to asses results from improvement  E.g. Production measures – defects per million, inventory turns, on-time delivery  Service – billing errors, sales, activity times  Customer Satisfaction  Methods for measuring  Cost of poor quality Internal failure External failure Prevention costs Appraisal costs

47. Performance Measures  Award Models  Benchmarking – grade to competitors, or best practice  Statistical measures – control charts  Certifications  ISO 9000:2000 Quality Mgt System  ISO 14000 Environmental Mgt System,  Underwriters Lab (UL)  QS 9000, ISO/TS 16949

48. Deming’s 14 Points for Management 1. Create constancy of purpose towards improvement of product and service with aim to be competitive, stay in business and provide jobs. 2. Adopt a new philosophy – new economic age, learn responsibilities and take on leadership for future change. 3. Cease dependence on inspection to achieve quality. Eliminate the need for inspection on a mass basis by building quality into product in the first place.

49. Deming’s 14 Points for Management 4. End the practice of awarding business on the basis of price, instead, minimize total costs. 5. Improve constantly and forever the system of production and service, to improve quality and productivity, thus decreasing costs. 6. Institute training on the job 7. Institute leadership, supervision to help do a better job. 8. Drive out fear, everyone can work effectively for company.

50. Deming’s 14 Points for Management 9.Breakdown barriers between departments. Work as teams to foresee production problems. 10.Eliminate slogans, exhortations, and targets for workforce. 11.Eliminate numerical quotas on the workforce. 12.Remove barriers that rob people’s pride of workmanship. 13.Institute a vigorous program of education and self-improvement. 14.Put everybody to work to accomplish the transformation.