Differing Perspectives on Quality

Differing Perspectives on Quality
Chapter 1 Differing Perspectives on Quality S. Thomas Foster, Jr. Boise State University PowerPoint prepared by Dave Magee University of Kentucky Lexington Community College ©2004 Prentice-Hall

Chapter Overview Recognizing Different Perspectives on Quality
What is Quality? Differing Functional Perspectives on Quality The Three Spheres of Quality Other Perspectives on Quality Arriving at a Common Understanding of Quality using a Contingency Perspective of Quality

Recognizing Different Perspectives on Quality
There are many different definitions and dimensions of quality. For the present, you should view quality as a measure of goodness that is inherent to a product or service. Employees working for the same firm often view quality differently as illustrated in the next slide. Perceptions on Quality Can Vary In order to communicate effectively about quality, managers need to recognize that differences in perceptions of quality exist.

What Is Quality? Garvin’s Definitions of Quality
David Garvin of the Harvard Business School found that most definitions of quality were either transcendent, product-based, user-based, manufacturing-based, or value-based. Garvin’s Dimensions of Product Quality Using the five definitions of quality, Garvin developed a list of eight quality dimensions. Service Quality Dimensions Parasuraman, Zeithamel, and Berry of Texas A&M University published a widely recognized set of service quality dimensions.

Garvin’s Definitions of Quality Slide 1 of 2
Transcendent Definition Quality is something that is intuitively understood but nearly impossible to communicate such as beauty or love. Product-Based Definition Quality is found in the components and attributes of a product. User-Based Definition If the customer is satisfied, the product has good quality.

Garvin’s Definitions of Quality Slide 2 of 2
Manufacturing Based Definition If the product conforms to design specifications, it has good quality. Value-Based Definition If the product is perceived as providing good value for the price, it has good quality.

Garvin’s Product Quality Dimensions Slide 1 of 3
Performance Features Durability Reliability Serviceability Conformance Aesthetics Perceived Quality

Performance Refers to the efficiency with which a product achieves its intended purpose. Features Attributes of a product that supplement a product’s basic performance. Reliability The propensity for a product to perform consistently over its useful design life. Conformance Numerical dimensions for a product’s performance, such as capacity, speed, size, durability, color, or the like.

Durability The degree to which a product tolerates stress or trauma without failing. Serviceability Ease of repair. Aesthetics Subjective sensory characteristics such as taste, feel, sound, look, and smell. Perceived Quality Based on customer opinion. Customers imbue products and services with their understanding of their goodness.

Service Quality Dimensions Slide 1 of 3
Parasuraman, Zeithamel, and Berry’s Service Quality Dimensions Tangibles Responsiveness Service Reliability Assurance Empathy

Tangibles Include the physical appearance of the service facility, the equipment, the personnel, and the communication material. Service Reliability Differs from product reliability in that it relates to the ability of the service provider to perform the promised service dependably and accurately. Responsiveness The willingness of the service provider to be helpful and prompt in providing service.

Assurance The knowledge and courtesy of employees and their ability to inspire trust and confidence. Empathy Caring, individual attention paid to customers by the service firm.

Why Does It Matter That Difference Definitions of Quality Exist?
Understanding that definitions and dimensions of quality exist allows measures to be taken to provide a better basis for communication and planning in a firm.

Differing Functional Perspectives on Quality
Engineering Perspective Operations Perspective Strategic Management Perspective Marketing Perspective Financial Perspective Human Resources Perspective

Engineering Perspective on Quality Slide 1 of 4
Nature of Engineering Perspective Engineers are interested in applying mathematical problem solving skills and models to the problems of business and industry. Two of the major emphases in engineering Product design Process design

Product Design Engineering Involves all of those activities associated with developing a product from concept development to final design and implementation. Product design life cycle Key to quality as quality is assured at the design stage. Concurrent engineering The simultaneous performance of product and process design activities. Has resulted in improved quality and faster speed to market for new products.

Product Design Life Cycle Figure 1.1 Idea Generation Prototype Iterations Preliminary Design Prototype Development Final Definition Product Design & Evaluation Implemen- tation

Related Concepts Life Testing Is a facet of reliability engineering that concerns itself with determining whether a product will fail under controlled conditions during a specified life. Redundancy Is applied so that a back up system can take over for the failed primary system. Statistical Process Control Is concerned with monitoring process capability and process stability.

Operations Perspective on Quality Slide 1 of 6
Nature of Operations Perspective The operations management view of quality is rooted in the engineering approach. Like engineers, operations managers are very concerned about product and process design. However, rather than focusing on only the technical aspects of these activities, operations concentrates of the management of these activities. Operations management has developed into an integrative field, combining concepts from engineering, operations research, organizational theory, organizational behavior, and strategic management.

Systems View Operations management utilizes the systems view to address quality problems that underlies modern quality management thinking. The systems view involves the understanding that product quality is the result of the interactions of several variables such as machines, labor, procedures, planning, and management.

The Systems View of Operation Management Figure 1.3 Planning Organizing Inputs Conversion Process Outputs Customers Feedback Controlling

Operations/Marketing Interface In recent years, a major advance in operations management has been the improved understanding of the operations/marketing interface. The interface has resulted in an increased focus on the customer. This externalized view is important as operations managers in firms still tend to be focused heavily on meeting production schedules, sometimes at the expense of good quality.

Strategic View of Operations Management Among the recent advances in operations management has been a migration towards a more strategic view. Ferdows and Demeyer linked this strategic view of operations management to quality management by proposing the Sand Cone Model in which quality was identified as the base on which lasting improvement in other competitive dimensions were established.

An Operations Management Competence Model The Sand Cone Model Figure 1.4 Cost Efficiency Speed Dependability Quality

Strategic Management Perspective on Quality Slide 1 of 3
Nature of the Strategic Management Perspective Strategy refers to the planning processes used by an organization to achieve a set of long term goals. The planned course of action must be cohesive and coherent in terms of goals, policies, plans, and sequencing to achieve quality improvement. Initially, quality-related strategic planning was treated as if it were a separate exercise from firm-level strategic planning. However, quality management, to become pervasive in a firm, needed to be included in all of the firm’s business practices, including strategic planning.

A Generic Strategic Planning Process Figure 1.5 Firm Mission and Goals External Analysis Internal Analysis Strategic Options Business Level Strategy Corporate Level Strategy Operational Subplans Organizational Design Org. Reward Systems Conflict Politics and Change Strategic Alignment Between Structure and Goals

Goal of Strategic Quality Planning The ultimate goal of strategic quality planning is to aid an organization to achieve sustainable competitive advantage. Research shows that quality is still the major concern of CEOs.

Marketing Perspective on Quality Slide 1 of 3
Nature of Marketing Perspective Marketing efforts are often focused on managing perceptions of quality. Relationship Management Directing attention toward satisfying and delivering value to the customer. Tools for Influencing Customer Perceptions of Quality Price and advertising are the primary tools for influencing customer perceptions of quality, but are imperfect mechanisms.

A Marketing System Figure 1.7 Organization Offering Payment Intermediary Offering Payment Offering Payment Customer

Focus on Service Another important contribution of the marketing perspective has been the focus on service. Customer service surveys are important tools for assessing the multiple dimensions of quality.

Financial Perspective on Quality Slide 1 of 4
Nature of the Financial Perspective One of the most commonly asked questions about quality management is “will it pay us financial benefits?” The financial perspective relies more on quantified, measurable, results-oriented thinking. W. Edwards Deming made the first theoretical attempt to link quality improvements to financial results through the “Deming Value Chain.”

The Deming Value Chain Figure 1.8 Improve Quality Cost decrease because of less rework, fewer mistakes, fewer delays, snags; better use of machine-time and materials Productivity Improves Capture the Market Stay in Business Provide Jobs and More Jobs

Law of Diminishing Marginal Returns According to this law, there is a point at which investments in quality improvement will become uneconomical. According to the quadratic economic quality level model, higher levels of quality will result in higher expenditures. This view is at odds with the ethic of continual improvement.

Basic Economic Quality Level Model Figure 1.9 Cost Total Quality Costs = Sum of Losses and Gains Costs of Improving Quality Minimum Cost Losses due to poor quality Optimum Quality Level Quality

Human Resources Perspective on Quality Slide 1 of 3
Nature of Human Resources Perspective Understanding the human resources perspective on quality is essential as it is impossible to implement quality without the commitment and action of employees. Related Concepts Employee Empowerment Organizational Design Job Analysis 360-degree evaluation Total Quality Human Resources Management

Human Resource Perspective on Quality Slide 2 of 3
Employee Empowerment Empowering employees involves moving decision making to the lowest level in the organization. Organizational Design Human resources managers are involved in many aspects of organizational design, such as the design of reward systems, pay systems, organizational structure, compensation, training mechanisms, and employee grievance arbitration. Job Analysis Involves collecting detailed information about a particular job.

Human Resource Perspective on Quality Slide 3 of 3
360-Degree Evaluation A performance measurement system in which an employee’s peers, supervisors, and subordinates are involved in evaluating the worker’s performance. Total Quality Human Resources Management (TQHRM) TQHRM involves many of the concepts of quality management to provide a more supportive and empowered environment.

The Three Spheres of Quality Slide 1 of 4
Figure 1.10 Quality Management Quality Assurance Quality Control

Quality Control Includes phases of analysis, relation, and generalization. Activities relating to quality control include: Monitoring process capability and stability Measuring process performance Reducing process variability Optimizing processes to nominal measures Performing acceptance sampling Developing and maintaining control charts

Quality Assurance Refers to activities associated with guaranteeing the quality of a product or service. Quality assurance activities include tasks such as: Failure mode and effects analysis Concurrent engineering Experimental design Process improvements Design team formation and management Off-line experimentation Reliability/durability product testing

Quality Management The management processes that overarch and tie together the control and assurance activities. Quality management activities: Planning for quality improvement. Creating a quality organizational culture. Providing leadership and support. Providing training and retraining. Designing an organizational system that reinforces quality ideals. Providing employee recognition. Facilitating organizational communication.

Other Perspectives on Quality Slide 1 of 2
The Value-Added Perspective on Quality A customer-based perspective on quality that is utilized by services, manufacturing, and public sector organizations. Involves a subjective assessment of the efficacy of every step of the process for the customer.

Other Perspectives on Quality Slide 2 of 2
Cultural Perspectives on Quality International marketers have long noted that there are differences in tastes and preferences between cultures and nations. It is not so obvious that approaches to quality improvement may differ according to culture.

Contingency Approach to Quality
Contingency Theory Contingency theory presupposes that there is no theory or method for operating a business that can be applied in all situations. As a result, a coherent quality strategy will need to address key environmental variables. Contingency Approach Definitions and dimensions of quality applied within an organization will, and should vary. Dimensions of quality will depend on the environment in which a company operates. Provides flexibility to managers in pursuing quality.

Chapter Summary Recognizing Different Perspectives on Quality
What is Quality? Differing Functional Perspectives on Quality The Three Spheres of Quality Other Perspectives on Quality Arriving at a Common Understanding of Quality using a Contingency Perspective of Quality

Chapter 2 Quality Theory S. Thomas Foster, Jr. Boise State University
PowerPoint prepared by Dave Magee University of Kentucky Lexington Community College ©2004 Prentice-Hall

Chapter Overview What is Theory?
Leading Contributors to Quality Theory W. Edwards Deming, Joseph M. Juran, Kaoru Ishikawa, Armand Feigenbaum, Philip Crosby, Genichi Taguchi, The Rest of the Pack Viewing Quality Theory From a Contingency Perspective Resolving the Differences in Quality Approaches: An Integrative View Theoretical Framework for Quality Management

What is Theory? Slide 1 of 6 Theory Defined Illustration of a Theory
Theory is a “coherent group of general propositions used as principles of explanation for a class of phenomena.” Illustration of a Theory For example, it might have been observed that many companies that have implemented quality improvements have experienced improved worker morale.

Testable Theoretical Model
What is Theory? Slide 2 of 6 Testable Theoretical Model Figure 2.1 Independent Variable Dependent Variable Quality Improvements Worker Morale Causality

What is Theory? Slide 3 of 6 Four Elements of a Theory What How Why
The what of a theory involves which variables or factors are included in the model. How The how of a theoretical model involves the nature, direction, and extent of the relationship between the variables. Why The why or the theory is the theoretical glue that holds the model together. Who-Where-When The who-where-when aspect place contextual bounds on the theory.

Four Elements of a Complete Theory
What is Theory? Slide 4 of 6 Four Elements of a Complete Theory What Why Where Who-where- when

What is Theory? Slide 5 of 6 Two Ways to Establish a Theory Induction
Deduction The process of induction is useful bus is also subject to observer bias and misperception. Using deduction, researchers propose a model based on prior research and design an experiment to test the theoretical model.

Inductive Versus Deductive Reasoning
What is Theory? Slide 6 of 6 Figure 2.2 Inductive Versus Deductive Reasoning Induction Data Generalization Deduction Supported by Data Generalization

A Theory of Quality Management? Slide 1 of 2
No Unified Theory As yet, there is not a unified theory explaining quality improvement that is widely accepted by the quality community Differing Approaches The differing approaches to quality improvement represent competing philosophies that have sought their places in the marketplace of ideas.

A Theory of Quality Management? Slide 2 of 2
Managers Must Apply What Fits As a result of the availability of competing philosophies of quality management, practicing quality managers must become familiar with these philosophies and apply those that are applicable to their particular situation. The Most Successful Companies The most successful companies have put their own stamp on quality campaigns, mounting their own massive training efforts internally.

Leading Contributors to Quality Theory
W. Edwards Deming Joseph M. Juran Kaoru Ishikawa Armand Feigenbaum Philip Crosby Genichi Taguchi The Rest of the Pack Robert C. Camp Tom Peters Michael Hammer and James Champy

W. Edwards Deming Slide 1 of 12
Preeminent Authority W. Edwards Deming was widely accepted as the world’s preeminent authority on quality management prior to his death on December 24, 1993. Deming gained credibility because of his influence on Japanese and American industry. Contributions Fourteen Points for Management The Seven Deadly Diseases Emphasized “continual neverending improvement.”

Deming’s 14 Points for Management While Deming espoused the belief that theory was important to the understanding of quality improvement, the closest he ever came to expounding a theory was in his 14 points for management. Taken as a whole, the 14 points represent many of the key principles that provide the basis for quality management in many organizations.

Deming’s 14 Points for Management 1. Create constancy of purpose. 2. Adopt a new philosophy. 3. Cease mass inspection. 4. End awarding business on the basis of price tag. 5. Constantly improve the system. 6. Institute training on the job. 7. Improve leadership. 8. Drive out fear. 9. Break down barriers between departments. 10. Eliminate slogans. 11. Eliminate work standards. 12. Remove barriers to pride. 13. Institute education and self-improvement. 14. Put everybody to work.

Point 1 Point 2 Create constancy of purpose toward improvement of product and service with the aim to become competitive and stay in business, and to provide jobs. Adopt a new philosophy. We are in a new economic age. Western management must awaken to the challenge, must learn its responsibilities, and take on leadership of change.

Point 3 Point 4 Cease dependence on mass inspection to improve quality. Eliminate the need for inspection on a mass basis by building quality into the product in the first place. End the practice of awarding business on the basis of price tag alone. Instead, minimize total cost. Move toward a single supplier for any one item, based on a long-term relationship of loyalty and trust.

Point 5 Point 6 Institute training on the job. People must have the necessary training and knowledge to do their job. Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease cost.

Point 7 Drive out fear, so everyone may work effectively for the company. Point 8 Improve leadership. The aim of supervision should be to help people, machines, and gadgets to do a better job. Supervision of management is in need of overhaul as well as supervision of production workers.

Point 9 Point 10 Break down barriers between departments. People in research, design, sales, and production must work as a team to foresee problems of production and use that may be encountered with the product or service. Eliminate slogans, exhortations, and targets for the workforce asking for zero defects and new levels of productivity. Such exportations only create adversarial relationships, as the bulk of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the workforce.

Point 11 Point 12 Eliminate work standards on the factory floor. Eliminate management by objectives. Eliminate management by numbers and numeric goals. Substitute leadership. Remove barriers to rob workers of their right to pride in the quality of their work. The responsibility of supervisors must be changed from sheer numbers to quality.

Point 13 Point 14 Put everybody in the company to work to accomplish the transformation. The transformation is everybody’s job. Institute a vigorous program of education and self-improvement. This is a more generalized education than training on the job. Organizational learning requires a structure that reinforces and rewards learning.

Deming’s 7 Deadly Diseases 1. Lack of constancy of purpose. 2. Emphasis on short-term profits. 3. Evaluation of performance, merit rating, or annual review. 4. Mobility of management. 5. Running a company on visible figures alone. 6. Excessive medical costs for employee health care. 7. Excessive costs of warrantees.

Joseph M. Juran Slide 1 of 5 Juran’s Approach Key Contributions
Juran tends to take a more strategic and planning-based approach to improvement than does Deming. Juran promotes the view that organizational quality problems are largely the result of insufficient and ineffective planning for quality. Key Contributions Juran Trilogy Control versus Breakthrough Project-by-Project Improvement Pareto Analysis

Joseph M. Juran Slide 2 of 5 The Juran Trilogy:
Three basic processes that are essential for managing to improve quality. Planning Improvement Control

Joseph M. Juran Slide 3 of 5 Control versus Breakthrough
According to Juran, control is a process-related activity that ensures processes are stable and provides a relatively consistent outcome. Control involves gathering data about a process to ensure that the process is consistent. Breakthrough improvement implies that the process has been studied and some major improvement has resulted in large, nonrandom improvement to the process. It is important to understand that control and breakthrough-related activities should occur simultaneously.

Joseph M. Juran Slide 4 of 5 Project-by-Project Improvement
Juran teaches that improvement in organizations is accomplished on a project-by-project basis “and in no other way.” The project-to-project approach advocated by Juran is a planning-based approach to quality improvement. Managers must prioritize which project will be undertaken first based on financial return. This means that analysts must use the language of management, that is, money, in order to help determine which projects should be undertaken.

Joseph M. Juran Slide 5 of 5 Pareto Analysis
Joseph Juran identified an economic concept that he applied to quality problems. The economic concept is called Pareto’s law or the 80/20 rule. Using Pareto’s law, we see that the majority of quality problems are caused by relatively few causes.

Kaoru Ishikawa Slide 1 of 2
Ishikawa’s Primary Contributions Perhaps Ishikawa’s greatest achievement was the development and dissemination of the basic seven tools of quality (B7). As the developer of these tools, Ishikawa is credited with democratizing statistics. Ishikawa felt that to be successful, firms must make everyone responsible for statistical analysis and interpretation.

Kaoru Ishikawa Slide 2 of 2
Ishikawa’s Quality Philosophy Ishikawa spent his life working to improve quality in Japan. His ideas were synthesized into 11 points that made up his quality philosophy. Ishikawa is often overlooked in the U.S.; however, every firm that pursues quality improvement will use his tools.

Armand Feigenbaum Slide 1 of 3
Feigenbaum’s primary contribution to quality thinking in America was his assertion that the entire organization should be involved in improving quality. He was the first in the U.S. to move quality from the offices of the specialists back to operating workers. This occurred in the 1950s. Contributions Three-step process to improving quality. Four deadly sins that impede quality improvement. Nineteen steps for improving quality.

Feigenbaum proposes a three-step process to improving quality. Quality Improvement Quality Technology Organizational Commitment Motivated by leadership Includes statistics and machinery that can improve quality Includes everyone in the quality struggle

Four Deadly Sins (Major Impediments to Improving Quality) Hothouse quality refers to those quality programs that receive a lot of hoopla and no follow-through. Wishful thinking occurs with those who would pursue protectionism to keep American firms from having to compete on quality. Producing overseas is a panacea sometimes undertaken by managers who wish that out of sight, out of mind could solve quality related problems. Confining quality to the factory means that quality has historically just been viewed as a shop floor concern.

Philip Crosby Crosby became very well known for his authorship of the book Quality is Free. The primary thesis of this book was that quality, as a managed process, can be a source of profit for an organization. Crosby specifies a quality improvement program consisting of fourteen steps. These steps underlie the Crosby zero defects approach to quality improvement. His approach emphasizes the behavioral and motivational aspects of quality improvement rather than statistical approaches.

Genichi Taguchi Slide 1 of 3
The Taguchi method was first introduced by Dr. Genichi Taguchi to AT&T Bell Labs in 1980. Due to its increased acceptance and utilization, the Taguchi method for improving quality is now commonly viewed to be comparable in importance to the Deming approach, and the Ishikawa concept of total quality management. Unique Aspects of the Taguchi Method Definition of quality Quality loss function Robust design

The Taguchi Method Provides 1. A basis for determining the functional relationship between controllable product or service design factors and the outcomes of a process. 2. A method for adjusting the mean of a process by optimizing controllable variables. 3. A procedure for examining the relationship between random noise in the process and product or service variability.

Definition of Quality In Taguchi’s terms, “ideal quality” refers to a reference point for determining the quality level of a product or service. Quality Loss Function Normally, when specifications are set, a target is specified with some allowance for variation. Taguchi states that any deviation from target specs results in loss to society produced. Robust Design Products and services should be designed so that they are inherently defect free and of high quality.

The Rest of the Pack Slide 1 of 3
Robert C. Camp The principle pioneer of benchmarking. Benchmarking is the sharing of information between companies so that both can improve.

The Rest of the Pack Slide 2 of 3
Tom Peters Tom Peters is a noted author, consultant, and speaker who is widely recognized. Peters co-authored the book In Search Of Excellence. The research for the book involved a case study of several firms and resulted in eight basic practices found in excellent firms. The eight practices identified with excellent firms include a bias for action, getting close to the customer, promoting entrepreneurship, productivity through people, value-driven management, sticking to the core competencies, lean staff, and implementing appropriate amounts of supervision and empowerment.

Resolving the Differences in Quality Approaches, An Integrative View
There are many differences between the approaches to quality management espoused by the experts mentioned in this chapter. However, rather than focusing on differences, it is instructional to review the literature to identify common themes and messages.

A Categorization of Quality Management Content Variables
Outer Ring Environmental characteristics Quality breakthrough Figure 2.7 Inner Ring Data gathering Strategic planning Core Leadership Employee improvement Quality assurance Customer role Philosophy Quality department focus Team Approach

Quality Management Content Variables Slide 1 of 5
Core Variables Leadership Employee Improvement Quality Assurance Customer Focus Quality Philosophy Breakthrough Inner and Outer Ring Variables Information Analysis Strategic Planning Environment or Infrastructure Team Approach Focus of the Quality Department

Leadership The role of the leader in being the champion and major force behind quality improvement is critical. Employee Improvement Once the leader is enlightened and motivated to go forward in the quality effort, employees must be trained and developed. Quality Assurance Quality experts agree that quality can be assured only during the design phase. Therefore, effort must be invested in designing products, services, and processes so that they are consistently of high quality.

Customer Focus An understanding of the customer is key to quality management efforts. Quality Philosophy Adoption of a philosophy toward quality improvement is also important. Establishing a clear message provides a company with a map to follow during their quest for improvement.

Information Analysis Fact-based improvement refers to an approach that favors information gathering and analysis Strategic Planning This provides a framework for a rational quality strategy that will provide alignment with key business factors. Environment or Infrastructure Quality environment or infrastructure must be created that supports quality management efforts. Team Approach One of the contemporary approaches to quality management learned from the Japanese is teamwork.

Role of the Quality Department As a result of the dispersion of responsibility for quality, the role of the quality department has changed significantly. Rather than performing the policing function, these departments are filling more of a coaching role. Breakthrough The need to make large improvements is not precluded by continuous improvement. Firms must find ways to achieve radical improvements.

Theoretical Framework for Quality Management
Quality management begins with leadership. The quality philosophy influences decision making concerning quality strategy, quality assurance, and employee improvement. The customer is the focus of all activities of the firm. Major activities forming the quality system Breakthrough improvement Team building Data gathering Strategic planning Quality department coaching

Theoretical Framework for Quality Management
Figure 2.8 Customer Focus Information Analysis Team Building Employee Improvement Quality Assurance Leadership Breakthrough Philosophy Development Strategic Planning Quality Dept. Role

Chapter Summary What is Theory? Leading Contributors to Quality Theory
W. Edwards Deming, Joseph M. Juran, Kaoru Ishikawa, Armand Feigenbaum, Philip Crosby, Genichi Taguchi, The Rest of the Pack Viewing Quality Theory From a Contingency Perspective Resolving the Differences in Quality Approaches: An Integrative View Theoretical Framework for Quality Management

Chapter 3 Global Quality and International Quality Standards
S. Thomas Foster, Jr. Boise State University PowerPoint prepared by Dave Magee University of Kentucky Lexington Community College ©2004 Prentice-Hall

Chapter Overview Managing Quality for the Multinational Firm
Quality Improvement: The American Way The Malcolm Baldrige National Quality Award Quality Improvement: The Japanese Way Quality Improvement: The European Way ISO 9000:2000 Are Quality Approaches Influenced by Culture?

Managing Quality for the MNF Slide 1 of 4
Mechanisms That Firms Use In Globalizing Licensing By licensing, a U.S. corporation can allow foreign firms to sell in restricted markets while using the design of the original designer. Partnering Firms also seek international markets through joint ventures or partnering. Globalization Globalization means that a firm fundamentally changes the nature of its business by establishing production and marketing facilities in foreign countries. We refer to these firms as multinational corporations.

Global Factors That Affect Quality-Related Decisions Physical Environment Task Environment Quality Management Social Environment Figure 3.3

Exporting Another means of entering international markets is to not globalize but become an exporter. Exporters produce their products and ship them internationally. Firms that are entrepreneurial in nature and plan their exports effectively tend to have higher quality For exporting firms, quality leads to lower price and greater export success

Export Quality Model Figure 3.4 Firm Characteristics Product Strategy Performance Low Price Entrepreneurship High Quality Export Planning Standardization Export Success Promotion

Malcolm Baldrige National Quality Award Slide 1 of 11
The award is open to small (less than 500 employees) and large firms (more than 500 employees) in the manufacturing and service sectors. It is not open to public-sector and not-for-profit organizations. There can be only two winners per category each year, which limits the number of yearly awards to six. Additional information on the Baldrige award

Key Characteristics of the MBNQA The criteria focus on business results. Companies must show outstanding results in a variety of areas to win. The Baldrige criteria are nonprescriptive and adaptive. Although the focus on the Baldrige is on results, the means for obtaining these results are not prescribed. The criteria support company-wide alignment of goals and processes. The criteria permit goal-based diagnosis. The criteria and scoring guidelines provide assessment dimensions.

Organizational Profile: Environment, Relationships and Challenges Baldrige Award Framework Figure 3.5 2 Strategic planning 5 HR develop. & management 7 Business results 1 Leadership 3 Customer and market focus 6 Process management 4 Information and analysis

MBNQA Categories Category 1 Award criteria for leadership. The extent to which top management is involved in creating and reinforcing goals, values, directions, customer involvement and other issues. Category 2 Focuses on how the company establishes strategic directions and how it sets it tactical actions plans to implement the strategic plans. Concerned with methods, measures, deployment, and evaluation.

MBNQA Categories Category 3 Addresses the customer and market focus. The processes for listening to and learning from customers and markets must be evaluated, improved, and kept current. Category 4 Information and analysis relates to the firm’s selection, management, and use of information to support company processes and to improve firm performance.

MBNQA Categories Category 5 Deals with human resources focus. The workforce is to be enabled to develop and use its full potential, aligned with company objectives. Category 6 Examines the key aspects of process management. This includes customer-focus in design, delivery process design for services and products, support processes, and processes relating to partners.

MBNQA Categories Category 7 Documents the results of the other six categories and requires a series of tables and graphs that demonstrate the operational and business results of the firm.

The Baldrige Process The first step is eligibility determination. The completed application is sent to the National Institute of Standards and Technology (NIST). The application is reviewed by examiners and then by judges, who will determine whether the application will be given a consensus score by the examiners. Firms that are granted Baldrige site visits sometimes refer to themselves as “Baldrige Qualified.” The site visit consists of a team of 4 to 6 examiners visiting a company over a period not to exceed one week. One of the most important outcomes is examiner feedback.

Baldrige Evaluation Process Figure 3.6 Receive applications Stage 2 Consensus review Stage 3 Site visit review Stage 1 Independent review Select for site visit? Judges Review and recommend winners Judges Yes No No Yes Select for consensus review? Judges Feedback report to applicant Feedback report to applicant Feedback report Yes No Feedback report to applicant

Feedback Report Scoring summary is a synthesis of the most important strengths and areas for improvement. Individual scoring range provides insight concerning the relative areas of strength and areas for improvement. Scoring distribution provides the percentage of applicants for a particular year scoring in each of the eight scoring bands. Examiner comments give feedback concerning the organization.

Being a Baldrige Examiner Appointment to the board of Trustees for the MBNQA Board of Examiners is a very prestigious designations. Examiners are unpaid volunteers, and must be willing to give up approximately 10% of their year to serve as an examiner. State Awards Full-Baldrige approach Baldrige-lite approach Multilevel approach

Quality Improvement: The Japanese Way
Deming Prize Awarded to individuals and groups who have contributed to the field of quality control. Other Japanese Contributions to Quality Thought Juran stated that the genius of the Japanese was in their ability to maintain a focus on the minutia and detail associated with process improvement. There are several uniquely Japanese contributions that are a part of the Japanese approach to production and service.

Deming Prize for Quality Slide 1 of 7
The Deming Prize for quality was established in 1951 by the Japanese Union of Scientists and Engineers (JUSE). Three categories of awards Deming Application Prize for Division Deming Application Prize for Small Business Quality Control Award for Factory There is no limit on the number of companies that can receive the award in a given year. The Deming Prize is much more focused on processes than is the Baldrige.

Deming Categories Policy Organization and Operations Collecting and Using Information Analysis Planning for the Future Education and Training Quality Assurance Quality Effects Standardization Control

Deming Categories Policy Org. and Operations The first category of the Deming Prize addresses the areas of management of quality policy, quality formation, policy correctness and consistency, and related topics. The organization and operations portion of the Deming application requires the applicant to document processes for clarifying authority and responsibility, and related topics.

Deming Categories Information Analysis The information that is collected for this item includes information that is gathered on the outside and inside. The analysis category of the Deming Prize covers the areas of selection of priority problems and themes, correct use of analytical methods, and use of statistical methods.

Deming Categories Planning for the Future Education & Training To plan well for the future, firms must understand their present condition well, which is the documentation required for this category. Applicants document plans and accomplishments relating to education and training.

Deming Categories Quality Assurance Quality Effects As discussed in Chapter 1, quality assurance has to do with the design of products and the new product development process. Quality effects relate to the documentation of benefits, outcomes, and results of quality improvement.

Deming Categories Standardization Control The systems of setting standards, monitoring performance against the standards, and revision of standards are documented. The applicants describe how they are using SQC, control points, control items, statistical thinking, and the current state of control in the company.

Other Japanese Contributions to Quality Slide 1 of 7
Lean Production Japanese Total Quality Control (TQC) Visibility In-Process Inspection N = 2 Technique Total Involvement of the Workforce The Five Ss

Lean Production Two views emerge in the literature that pertain to Lean (a.k.a. just-in-time (JIT) manufacturing). The first view of Lean is a philosophical view of waste reduction. This view asserts that anything in the process that does not add value for the customer should be eliminated. The second view of Lean is a systems view stating the JIT is a group of techniques or systems focused on optimizing quality processes.

Japanese Total Quality Control Just as the Japanese Lean approach requires attention to detail in every aspect of the process, so does the TQC approach. This attention to detail runs deep in the Japanese culture.

Visibility Problems must be made visible before they can be addressed. Andon or warning lights Line-stop authority In-Process Inspection All work is inspected at each stage of the process. Workers inspect their own work.

N = 2 Technique The N = 2 technique is an alternative to acceptance sampling. Usually, an acceptance sampling plan involves rules such as: If 2 or fewer defects, accept the lot. If more than 2 defects, reject the lot. Total Involvement of Workforce Horizontal deployment means that all departments are involved in quality. Vertical deployment means that all levels of management and workers are actively involved in quality.

The Five S’s. The five Ss are a sequential process that companies follow to literally “clean up their acts.” The Ss are: Seri: organizing by getting rid of the unnecessary. Seiton: neatness that is achieved by straightening offices and work areas. Seiso: cleaning plant and equipment to eliminate dirtiness that can hide or obscure problems. Seiketsu: standardizing locations for tools, files, equipment, and all other materials. Shetsuke: discipline in maintain the prior four Ss.

Quality Circles Are natural work teams made up of workers that are empowered to improve processes they use. Preventive Maintenance (PM) The idea behind this concept is that the worst condition a machine should ever by is on the day you purchase it.

Quality Improvement: The European Way
ISO 9000:2000 Is the European standard for quality that has been expanded worldwide. European Quality Award (EQA) The highest level is the EQA for the most accomplished applicant in a given year. The second level given is the European Quality Prize for other firms that meet the award criteria.

European Quality Award
European Quality Award Model Figure 3.7 Leadership People management Processes People satisfaction Business results Policy and strategy Customer satisfaction Resources Impact on society Enablers Results

ISO 9000:2000 Slide 1 of 11 Worldwide Impact Focus of ISO 9000:2000
On a worldwide basis, ISO 9000:2000 has had a much more significant impact than any of the quality awards in terms of the number of companies that have implemented the approach.. Focus of ISO 9000:2000 The focus of ISO 9000:2000 is for companies to document their quality systems in a series of manuals to facilitate trade through supplier conformance. ISO Organization for International Standards

ISO 9000:2000 Slide 2 of 11 Three Standards
1. ISO 9000: Quality management systems - Fundamentals and vocabulary. 2. ISO 9001: Quality management systems - Requirements. - These are used for internal implementation, contractual purposes, or for third-party registrations. 3. ISO 9004: Quality management - Guidelines for Performance Improvement - These include continual improvement and enhancing overall performance.

ISO 9000:2000 Slide 3 of 11 ISO 9001:2000 consists of 5 clauses.
Clause 4: Quality Management System Clause 5: Management System Clause 6: Resource Management Clause 7: Product Realization Clause 8: Measurement, Analysis and Improvement

ISO 9000:2000 Slide 4 of 11 ISO 9001:2000 Clause 4
Quality Management System Includes development, design, implementation, and maintenance of quality management documents. ISO 9001:2000 Clause 5 Management System Outlines management’s responsibility in developing and maintaining a quality management system.

Resource Management This includes providing needed resources, personnel, facilities, and the environment necessary to get the work done. ISO 9001:2000 Clause 7 Product Realization These are all of the requirements, including processes, documents, customer requirements, specifications, designs, and quality processes needed to produce a product. This includes selecting and developing suppliers in a way that ensures that purchased components satisfy requirements.

Measurement, Analysis and Improvement This has to do with analyzing process data and using the data to improve operations and service to the customer. This includes performing internal audits and monitoring and measuring processes and products. Also included are corrective action preventive action for improvement.

ISO 9000:2000 Slide 6 of 11 Underlying Quality Management Principles
Customer Focus Leadership Involvement of People The Process Approach A Systems Approach to Management Continual Improvement Factual Approach to Decision Making Mutually Beneficial Supplier Relationship

ISO 9000:2000 Slide 7 of 11 ISO 9000:2000 Registration Process
Step 1: Inquiry Step 2: Contract with registrar Step 3: Phase 1 audit Step 4: Certification audit Step 5: Process audits (optional) Step 6: Final certification audit Step 7: Rolling certification (surveillance) audits

Step 2: Contract with registrar
ISO 9000:2000 Slide 8 of 11 ISO 9000:2000 Registration Process Step 1: Inquiry Client contacts registrars to investigate the terms for registration and makes a selection. Step 2: Contract with registrar Registration steps are determined and a price is negotiated. A pre-assessment or gap analysis may be done.

Step 3: Phase 1 audit Registrar performs an onsite audit of the documented quality system against the applicable standard. Step 4: Certification audit Every element of the ISO 9000 standard is audited several times during the registration process. During each 3-year period, 100% of the organization is audited.

Step 5: Process audits (optional) The client may choose business processes for auditing to the applicable standard, allowing the client to learn and experience the registrar’s auditing methods. Step 6: Final certification audit Once the client’s documented quality system has met the applicable standard, the registrar will conduct an audit to determine the system’s effective implementation.

Step 7: Rolling certification audits The registrar returns on either 6 month or annual cycle. Sometimes referred to as surveillance audits.

ISO 14000 ISO 14000 A series of standards that provide guidelines and a compliance standard for environmental compliance. ISO 14001 The compliance standard for ISO 14000, Environmental Management Systems. Uses the same basic approach as ISO 9000:2000 with documentation control, management system auditing, operational control, control of records, management policies, audits, training, statistical techniques, and corrective and preventive action.

Are Quality Approaches Influenced By Culture?
Quality Approaches are Influence by Culture The US approach has historically been command-and-control oriented. The Japanese approach is based on an ethic of consistency and emphasis on reduction of waste. The Europeans have adopted broad standards that can be adapted to the diverse nation states of the EC.

Summary Managing Quality for the Multinational Firm
Quality Improvement: The American Way The Malcolm Baldrige National Quality Award Quality Improvement: The Japanese Way Quality Improvement: The European Way ISO 9000:2000 Are Quality Approaches Influenced by Culture?

Strategic Quality Planning
Chapter 4 Strategic Quality Planning S. Thomas Foster, Jr. Boise State University PowerPoint prepared by Dave Magee University of Kentucky Lexington Community College ©2004 Prentice-Hall

Chapter Overview Strategy Content
The Importance of Time in Quality Improvement Leadership for Quality Quality and Ethics Quality as a Strategy Quality Strategy Process Deploying Quality (Hoshin Kanri) Does Quality Lead to Better Business Results?

Strategy Content Importance of Quality Planning
Quality improvement is a planned managerial activity. Quality improvement involves identifying potential improvements, prioritizing potential areas for improvement, and planning the implementation of projects and improvements. Strategy Content Variables Among the strategy content variables we discuss are time, leadership, quality costs, generic strategies, order winners, and quality as a core competency. These outline key considerations when developing a strategic plan.

Strategy Content Variables
Time Leadership Ethics Quality costs Generic strategies Order winners Quality as a core competency

The Importance of Time in Quality Improvement
Two Aspects of Time The time it takes to achieve business goals as a result of quality. The speed at which companies improve. Studies indicate a significant time lag between the implementation of quality improvement programs and recognizable results. Management that is looking for a quick fix to long-term problems probably will not be too satisfied with this fact.

Leadership For Quality Slide 1 of 7
The process by which a leader influences a group to move toward the attainment of superordinate goals. A key strategic variable for quality management. Superordinate goals Those goals that pertain to achieving a higher end that benefits not just the individual, but the group.

Types of Power Power of expertise Reward power Coercive power Referent power Legitimate power Leadership Dimensions Trait dimension Leader skills Leader behavior

Types of Power Power of Expertise Reward Power If a leader has rewards that he or she can bestow on subordinates in return for some desirable position, the leader has reward power. Sometimes a leader has special knowledge (or is perceived to have special knowledge).

Types of Power Coercive Power Referent Power If a leader is charismatic or charming and is followed because he or she is liked, then the leader has referent power. If the leader has power to punish the follower for not following rules or guidelines, the leader has coercive power.

Types of Power Legitimate Power Legitimate power comes with the position.

Leadership Dimensions Trait dimension Leadership characteristics tied to the personal “traits” of leaders (such as height and intelligence). Leader skills Attributes such as knowledge, communication, planning, and vision. Leader behavior This approach discusses how leaders behave to identify specific leadership styles and the effects of leadership style on subordinate performance.

Commitment to Quality An important attribute of quality managers is commitment over the long term. Quality management is hard, painstaking, slow work. Often, victories in quality are rare and should be celebrated - especially at first. Leaders need to provide funding, slack time, and resources for quality improvement efforts to be successful. This commitment is measured in decades, not quarters or budget cycles.

Quality and Ethics Quality appears to be good business.
Quality is also good ethics. It is unethical to ship defective products knowingly to a customer. Reliable products reflect an ethical approach to management. There is a need for integrity, which gets down to honesty, in doing business.

Quality as Strategy Slide 1 of 8
Quality as a Strategy We now discuss quality as a strategy from the perspective of generic strategies. These generic strategies are cost, differentiation, and focus Costs of Quality There are two broad categories of costs Costs due to poor quality. Costs associated with improving quality.

PAF Paradigm Prevention costs are those costs associated with preventing defects and imperfections from occurring. Appraisal costs are associated with the direct costs of measuring quality. Failure costs are roughly categorized into two areas of costs. Internal failure costs are those associated with on-line failure. External failure costs are associated with product failure after the production process.

Examples of Appraisal Costs Laboratory acceptance testing Inspection and tests by inspectors Inspection and tests by noninspectors Set-up for inspection and testing Product quality audits Review of test and inspection data On-site performance tests ISO 9000 qualification activates Quality award assessments

Examples of Failure Costs Cost of troubleshooting Reinspection of stocks after defect detection Disruption of production schedules Complaint-handling and replacements Cost of corrective maintenance to plant Cost of corrective action to product Lost production Process waste Cost of product scrapped at product audit Cost associated with disposition of scrap

Lundvall-Juran Model Cost C + C 1 2 c C Prevention & appraisal costs 1 = C 2 = Failure Costs 1 q Conformance

Differentiation Through Quality Differentiation is achieved by a competitor if the customer perceives the product or service to be unique in an important way. It is increasingly difficult to differentiate products based on quality alone. Quality Through Focus Think of a product that is particularly regional or is marked to a particular group. That limited region or group is the object of the focus strategy.

Order Winners Terry Hill of the London Business School defined a process for setting strategy that is centered on the identification of the order winning criteria (OWC). The organization determines its competitive priorities and defines how it wins orders in the marketplace. The key is reaching a consensus on the OWC by developing an understanding of the markets the company is serving.

Quality as Core Competency Quality, in and of itself, is probably not a core competency. The ability to change can be more important than the actual changing technology of the moment for organizations operating in rapidly evolving markets or industries. However, core competency is built on the foundation of a long-term commitment to quality and continual process improvement.

Quality Strategy Process Slide 1 of 4
Forced-Choice Model One of several strategic-planning models that could be adapted to demonstrate integrated quality planning. Particularly useful for companies that are relatively inexperienced in strategic planning. Mature Strategic Planning Process A comprehensive strategy development process used in companies with mature quality processes. The process contains quality concerns at every step. Many metrics and indicators are used to monitor performance as it relates to the strategic business plan.

Forced-Choice Model The process begins by sequestering members of upper management at a retreat. An organizational assessment is performed to identify strengths and weaknesses within the firm. An environmental assessment is performed to evaluate the company’s relative position in the marketplace. In the wrap-up session, alternative strategies are developed.

Forced-Choice Model Figure 4.2 Organization’s Position Environmental Assessment 1 Statement of mission 6 Broad economic assumptions 2 Interrelated set of financial and nonfinancial objectives 7 Key government and regulatory issues 8 Major technological forces 3 Statement of strengths and weaknesses 9 Significant market opportunities and threats 4 Forecast of operational needs 5 Major future programs 10 Explicit strategies of competitors 11 Strategic options Requirements for implementing options Contingency plans

Mature Strategic Planning Process Figure 4.3 Step 1. Mission, vision, values, and current strategy. Step 2. Market assessment. Prepare for next planning cycle Step 3. Set goals by assessing future markets. Step 4. Develop broad goals and plans by product line. Step 5. Review and monitor implementation of strategic plan.

Deploying Quality (Hoshin Kanri) Slide 1 of 2
Hoshin is Japanese for a compass, a course, a policy, or a plan. Kanri refers to management control. In English, this is generally referred to as policy deployment. Hoshin Process The company develops a 3 to 5 year plan, and senior executives develop the current year’s Hoshin objectives. Then the process of catchball occurs. This involves reporting from teams and feedback from management. Development of the Hoshin plan results in the cascading of action plans designed to achieve corporate goals.

Deploying Quality (Hoshin Kanri) Slide 2 of 2
Hoshin Planning Development of 3-5 years Hoshin Figure 4.4 Senior management develops 1-year Hoshin goals Catchball: Top management 1-year Hoshin goals, targets, measurements to ensure alignment Catchball: Product management Product management develops 1-year Hoshin goals Review Hoshin Process Senior management action plans Product management action plans Review by CEO Review by senior management Quarterly Problems Yes Yes No

Does Quality Lead to Better Business Results? Slide 1 of 4
The effects of quality on business results is mixed for two primary reasons: First, there are many variables that affect profitability besides quality. Second, many companies implement quality incorrectly. As a result of the mixed results, it is important to understand the relationships between quality and other variables.

Variables that interrelate with quality Quality and price Quality and cost Quality and productivity Quality and profitability Quality and the environment

Quality and Price This relationship has long been studied. The price-quality relationship becomes increasingly unclear when culture differences in an international setting are considered. Quality and Cost A fundamental difference exists between a low-price strategy based on competitive pricing, and a low-cost orientation that is based on continual learning and production competence. Quality will tend to provide a competitive advantage.

Quality and Productivity The relationship between quality and productivity is clear and has been demonstrated over time. The elimination of waste results in higher productivity. Quality and Profitability High quality is no guarantee of success. Firms must still successfully market, manage cash, and do the many other things that ensure profitability. Quality and the Environment Companies have to address environmental issues in ways that involve a focus on prevention.

Summary Strategy Content The Importance of Time in Quality Improvement
Leadership for Quality Quality and Ethics Quality as a Strategy Quality Strategy Process Deploying Quality (Hoshin Kanri) Does Quality Lead to Better Business Results?

The Voice of the Customer
Chapter 5 The Voice of the Customer S. Thomas Foster, Jr. Boise State University PowerPoint prepared by Dave Magee University of Kentucky Lexington Community College ©2004 Prentice-Hall

Chapter Overview Slide 1 of 2
Customer-Driven Quality What Is the Voice of the Customer? Customer-Relationship Management The “Gap” Approach to Service Design Segmenting Customers and Markets Strategic Alliances between Customers and Suppliers Communicating with Customers

Actively Solicited Customer Feedback Approaches Passively Solicited Customer Feedback Approaches Managing Customer Retention and Loyalty Customer Relationship Management (CRM) Systems A Word on Excellent Design

Customer Facts Customers will tell twice as many people about bad experiences as good experiences. A dissatisfied customer will tell 8 to 10 people about bad experiences. Seventy percent of upset customers will remain your customer if you resolve the complaint satisfactorily. It’s easier to get customers to repeat than it is to find new business. Service firms rely on repeat customers for 85% to 95% of their business. Eighty percent of new product and service ideas come from customer ideas. The cost of keeping an existing customer is one-sixth of the cost of attracting a new customer.

Customer Defined A customer is the receiver of goods or services.
Typically, this involves an economic transaction in which something of value has changed hands. Internal customers Employees receiving goods or services from within the same firm. External customers Bill-paying receivers of work. The ultimate people we are trying to satisfy. End user Another term that describes customers.

Customer-Driven Quality Slide 1 of 3
Customer-Driven Approach Customer driven quality represents a proactive approach to satisfying customer needs that is based on gathering data about our customers to learn their needs and preferences and then providing products and services that satisfy the customer.

The Pitfalls of Reactive Customer-Driven Quality One of the difficulties in satisfying customer requirements is that in a dynamic environment customer needs are constantly changing. Problems occur when customer requirements increase at a faster rate than quality and service improvement. This places the firm in reactive mode and may signal the need for major process and service redesign.

Reactive Customer-Driven Quality Model Figure 5.1 Quality Region of satisfaction Customer expectations Region of complacency Supplier performance Time t T

What is the Voice of the Customer?
The voice of the customer represents the wants, opinions, perceptions, and desires of the customer. Quality Function Deployment (QFD) “House of quality,” Translates customer wants into a finished product design.

Customer-Relationship Management Slide 1 of 8
This view of the customer asserts that he or she is a valued asset to be managed. The tangibles meet the intangibles to provide a satisfying experience for the customer. Four important design aspects Complaint resolution Feedback Guarantees Corrective action or recovery

Components of a Customer-Relationship Management Process Complaint resolution Feedback Customer Relationship Management Guarantees Corrective action Figure 5.2

Complaint Resolution Complaint resolution is an important part of the quality management system. Three common types of complaints regulatory complaints employee complaints customer complaints. The complaint-resolution process involves the transformation of a negative situation in one in which the complainant is restored to the state existing prior to the occurrence of the problem. Complaint-recovery process

Complaint Resolution (or recovery) Process Compensate people for losses Apologize to the customer (contrition) Make it easy for the complainant to resolve his or her problem

Feedback There are two main types of feedback feedback to the customer feedback to the firm as a basis for process improvements Feedback to the firm should occur on a consistent basis with a process to monitor changes resulting from the process improvement. Some customer data is solicited and other data is provided without solicitation.

Guarantees A guarantee outlines the customer’s rights. The guarantee is both a design and an economic issue that must be addressed by all companies before the first sale occurs. To be effective, a guarantee should be: Unconditional Meaningful Understandable Communicable Painless to invoke

To be effective, guarantees should be: Unconditional Understandable Meaningful Communicable Painless to invoke

Corrective Action When a service or product failure occurs, the failure is documented and the problem is resolved in a way that it never happens again. Corporate teams or committees should be in place to regularly review complaints and to improve processes so the problems don’t recur.

The Gap Approach to Service Design
Typically, the gap refers to the differences between desired levels of performance and actual levels of performance. The formal means for identifying and correcting these gaps is called gap analysis.

Word of mouth communications Personal needs Past experience Expected service Gap 5 Perceived service Marketer Gap 4 Service delivery External communications to consumers Gap 3 Gap 1 Translation of perceptions into service quality specs Gap 2 Management perceptions of consumer expectations Figure 5.3

Gaps Model Customer Perceptions Good Wasted time Relative strength IV I Relative Importance Low High Areas for improvement II Minor annoyances III Poor

Segmenting Customers and Markets
Segmenting Data To segment markets means to distinguish customers or markets according to common characteristics. Segmentation implies that data is gathered separately for each segment and analyzed separately.

Strategic Alliances Between Customers and Suppliers
Strategic Partnerships Increasingly, sole sourcing arrangements are developing into strategic partnerships where the suppliers become de facto subsidiaries to their major customers. In these arrangements, not only are suppliers sole source providers, but also they integrate information systems and quality systems that allow close interaction at all levels.

Communicating With Customers
Customer Rationalization Results from agreement between marketing and operations as to which customers add the greatest advantage and profits over time. Annuity Relationship An annuity relationship is one in which the customer provides a long-term, steady income stream to the provider. Gathering Data From Customers Active data gathering Passive data gathering

Actively Solicited Customer Feedback Approaches Slide 1 of 6
Includes all supplier initiated contact with customers. The three most common arenas telephone customers conducting focus groups sending out surveys Types of Data Soft data Hard data Ordinal data

Soft Data Phone contacts, focus groups, and survey results. Hard Data Hard data are measurements data such as height, weight, volume, or speed that can be measured on a continuous scale. Ordinal Data Are ranked so that one measure is higher than the next.

Different Methods of Soliciting Customer Feedback Telephone Contact Focus Groups Customer Service Surveys

Focus Group Steps Figure 5.5 Identify Purpose Narrow Scope of Questions Select Target Population Develop Questions Run Multiple Groups Summarize and Develop Common Themes

Steps in Developing a Useful Survey Identifying customer requirements Developing and validating the instrument Implementing the survey Analyzing the results

Reliability and Validity Figure 5.8

Passively Solicited Customer Feedback Approaches
Customer initiated contact, such as filling out a restaurant complaint card, calling a toll-free complaint line, or submitting an inquiry via a company’s Web site. Examples customer research cards customer response lines web site inquires.

Managing Customer Retention and Loyalty
Customer retention is measured as the percentage of customers that return for more service. Customer retention will increase by application of the service tools and concepts contained in this chapter such as tools for data gathering and analysis. Customer Loyalty Customer loyalty can be instilled by offering specialized service not available from competitors. This can take many forms including high customer contact or technology advancements.

Customer Relationship Management Systems
Systems created to mine data including personal, internet, process and customer preference information to improve customer service and retention. Manage 3 phases of CRM Acquisition Retention Enhancement

Customer Relationship Management Systems
CRM Functions by Category Customer-centric activities Enterprise capabilities Customer acquisition Sales management Customer retention and enhancement

A Word on Excellent Design
Not all good ideas come from customers. Ready-Fire-Aim A method that focuses on getting new technology to the market and then determining how to sell the product. Good customer intelligence coupled with innovative research and development programs appears to be the best marriage of resources.

Summary Slide 1 of 2 Customer-Driven Quality
What Is the Voice of the Customer? Customer-Relationship Management The “Gap” Approach to Service Design Segmenting Customers and Markets Strategic Alliances between Customers and Suppliers Communicating with Customers

Summary Slide 2 of 2 Actively Solicited Customer Feedback Approaches
Passively Solicited Customer Feedback Approaches Managing Customer Retention and Loyalty Customer Relationship Management (CRM) Systems A Word on Excellent Design

The Voice of the Market Chapter 6 S. Thomas Foster, Jr.
Boise State University PowerPoint prepared by Dave Magee University of Kentucky Lexington Community College ©2004 Prentice-Hall

What Do We Mean by the Voice of the Market? Gaining Insight through Benchmarking Purposes of Benchmarking Difficulties in Monitoring and Measuring Performance Commonly Benchmarked Performance Measures

Best-in-Class Benchmarking Best-of-the-Best Benchmarking Business Process Benchmarking Leading and Managing the Benchmarking Effort Baselining and Reengineering Problems with Benchmarking

What Do We Mean By The Voice of the Market?
Customers are not the only source of information about the market. One of the best sources of information can be other companies. By understanding our competitors, we begin to understand the marketplace better and what it takes to compete successfully in the marketplace.

What Do We Mean By The Voice of the Market?
Strategic Quality Planning Model Figure 6.1 Company Mission Strategic Plan Strategic Quality Plan Competitive Forces Customer Needs

Gaining Insight Through Benchmarking Slide 1 of 5
A benchmark is an organization recognized for its exemplary operational performance. There are many benchmarks in the world including Toyota for processes, Intel for design, Motorola for training, Scandinavian Airlines for service, and Honda for rapid product development. Benchmarking The sharing of information between companies, so that both can improve.

Parties to Benchmarking Relationships The initiator firm is the firm that initiates contact and studies other firms. The target firm is the firm that is being studied (also called the benchmarking partner). Types of Benchmarking Process benchmarking Financial benchmarking Performance benchmarking Product benchmarking Strategic benchmarking Functional benchmarking

Types of Benchmarking Process Benchmarking Financial Benchmarking The goal of financial benchmarking is to perform financial analysis and compare the results in an effort to assess your overall competitiveness. In process benchmarking, the initiator firm focuses their observations and investigation on business processes. The goal is to identify and observe best practices.

Types of Benchmarking Performance Benchmarking Product Benchmarking Allows initiator firms to assess their competitive position by comparing products and services with target firms. Many firms perform product benchmarking when designing new products or upgrades to current products. Often includes reverse engineering.

Types of Benchmarking Strategic Benchmarking Functional Benchmarking Involves observing how others compete. The focus is to identify the mix of strategies that make firms successful competitors. Involves a company focusing its benchmarking efforts on a single function to improve the operation of that function.

Purposes of Benchmarking Slide 1 of 2
I Learning from successes II Borrowing ideas III Best-in-firm IV Beating industry standards V Best-in-class VI National leadership VII Best-in-World

Purposes of Benchmarking Slide 2 of 2
Benchmark Purpose and Quality Maturity Quality Maturity Figure 6.2 World-class Leadership Life Cycle I Learning from success II Borrowing ideas III Best-in-firm IV Beating industry standards V Best-in-class VI National leadership VII Best-in-world Benchmarking Purpose

Difficulties in Monitoring and Measuring Performance
Financial Measures Many times firms desire to compare financial measures between companies when benchmarking. This can be a useful activity; however, companies often have variations in the way they compute their measures that affect the result. Productivity Total factor productivity is the least sensitive to differences in costing conventions and accounting practices.

Difficulties in Monitoring and Measuring Performance
Comparative measures Concentrating too much on comparative measures can focus managers on results and not causes. Could result in the development of numerical goals that ignore the necessity of improving the system of production. Comparisons with foreign companies Problems become even more pronounced, because cost accounting conventions and accepted accounting principles can vary greatly between countries.

Commonly Benchmarked Performance Measures Slide 1 of 4
Benchmarking Data Financial ratios Productivity ratios Customer-related results Operating results Human resource measures Quality measures Market share data Structural measures

Financial Ratios Such as ROA or ROI are probably the easiest to obtain and compare. Productivity Ratios Are useful in measuring the extent to which a firm effectively uses the scarce resources that are available to it. Customer-Related Results Include customer satisfaction and comparisons of customer satisfaction relative to competitors.

Operating Results Might include cycle times, waste reduction measures, value-added measures, and lead time. Human Resource Measures May include employee satisfaction measures, training expenditures, turnover, and absenteeism. Quality Measures These can include conformance-based quality information such as reject rates, capability information, performance information, or other measures.

Market Share Data Includes shares in the different markets served by the firm. Structural Measures Include objectives, policies, and procedures followed by a firm.

Best-In-Class Benchmarking
Best-in-breed Refers to those firms or organizations that have been recognized as the best in an industry based on some criterion. Generally, initiator firms will choose to benchmark the best-in-class. Objective The objective of best-in-class is to provide a basis for continual improvement.

Best-Of-The-Best Benchmarking
Best-in-the-world The next level of improvement after becoming a best-in-class firm, because it may be difficult to gain new insight and information from direct competitors. Can lead to breakthrough improvement by causing individuals within firms to look at other industries and to visualized the business in new and different ways.

Business Process Benchmarking Slide 1 of 4
Based on the concept of 5w2h developed by Alan Robinson. 5w2h concept A business process benchmarking project should result in answers to seven questions What? Why? Where? When? Who? How? How much?

Type W2H Description Countermeasure Subject matter What? What is being done? Can this task be eliminated? Purpose Why? Why is this task necessary? Clarify the purpose. Location Where? Where is it being done? Does it have to be done there? Sequence When? When is the best time to do it? Does it have to be done then? People Who? Who is doing it? Should someone else do it? Eliminate unnecessary tasks Change the sequence or combination

Type W2H Description Countermeasure Method How? How is it being done? Is this the best method? Is there some other way? Cost How much? How much does it cost now? What will the cost be after improvement? Simplify the task Select an improvement method

Process Model Figure 6.3 Conversion Process After- sales Processes Inputs Output Control Process Loop Customer Feedback Loop Benchmarking Feedback Other Firms

Robert Camp’s Business Process Benchmarking Process Slide 1 of 2
Step 1: Decide what to benchmark. Step 2: Identify whom to benchmark. Step 3: Plan and conduct the investigation. Step 4: Determine the current performance gap. Step 5: Project future performance levels.

Robert Camp’s Business Process Benchmarking Process Slide 2 of 2
Step 6: Communicate benchmark findings and gain acceptance. Step 7: Revise performance goals. Step 8: Develop action plans. Step 9: Implement specific actions and monitor progress. Step 10: Recalibrate the benchmarks.

Camp’s Five Phases Slide 1 of 6
Phase 1: Planning: Identify what to benchmark; identify who to benchmark; and gather data. Phase 2: Analysis: Examine the performance gap and project future performance. Phase 3: Integration: Communicate the findings and develop new goals. Phase 4: Action: Take actions, monitor progress, and recalibrate measures as needed. Phase 5: Maturity: Achieve the desired state.

Planning: Identify what to benchmark; identify who to benchmark; and gather data. A plan for benchmarking is prepared Decide what to benchmark Identify who to benchmark Plan the investigation and conduct it - Gather necessary information and data - Observe the best practices

Analysis: Examine the performance gap and project future performance. The gap is examined and the performance is assessed against best practices. Determine the current performance gap Project future performance levels

Integration: Communicate the findings and develop new goals. The goals are redefined and incorporated into the planning process. Communicate benchmarking findings and gain acceptance Revise performance goals

Action: Take actions, monitor progress, and recalibrate measures as needed. Best practices are implemented and periodically recalibrated as needed. Develop action plans Implement actions and monitor progress Recalibrate the benchmarks

Maturity: Achieve the desired state. Leadership may be achieved. Determine when leadership position is attained Assess benchmarking as an ongoing process

Leading and Managing the Benchmarking Effort Slide 1 of 3
Managing the Benchmarking Process Involves establishing, supporting, and sustaining the benchmarking program. Develop a strategy statement outlining the goals and strategies to be used. Set expectations for performance relating to the benchmarking project. Other management activities Providing management awareness training Establishing a benchmarking center Developing guidelines for information sharing Overseeing development of a visit protocol

Process Benchmarking Management Process 1. Strategy statement Document process 2. Set expectations Qualify partners 3. Management and training Follow 10-step process 4. Benchmarking competency center External assistance 5. Guidelines and protocol Benchmarking handbook 6. Network Share successes 7. Champions identification Inspect for benchmarking use 8. Establish benchmarking teams Rewards 9. Team skills training

Training Training is the key to success in all quality management approaches. This is especially true for benchmarking. Participants must have project management skills and be familiar with benchmarking approaches and protocols.

Analyze Data to Identify Trends
Baselining Process Figure 6.6 Identify Measures Establish Time Frames Gather Data Analyze Data to Identify Trends

Problems With Benchmarking Slide 1 of 2
There is enormous difficulty obtaining cooperation from other firms in your own industry. The thing to remember is reciprocity. The predominance of functional benchmarking with firms in noncompeting industries makes it difficult to benchmark these firms. Business and industry literature can be very helpful in trying to identify benchmarking firms in noncompetitive industries.

Problems With Benchmarking Slide 2 of 2
Your efforts will be wasted unless you fully understand your own processes before you benchmark against someone else. Using tools such as business process maps, it is possible to identify the exact performance measures and metrics needed from the target firm. Benchmarking is time consuming and costly. Costs include things like time for planning, travel, documentation, and implementation. Largest costs are associated with implementation. The investment is lost if benchmarking data are not used to drive improvement.

Summary Slide 1 of 2 What Do We Mean by the Voice of the Market?
Gaining Insight through Benchmarking Purposes of Benchmarking Difficulties in Monitoring and Measuring Performance Commonly Benchmarked Performance Measures

Summary Slide 2 of 2 Best-in-Class Benchmarking
Best-of-the-Best Benchmarking Business Process Benchmarking Leading and Managing the Benchmarking Effort Baselining and Reengineering Problems with Benchmarking

Quality in Product and Process Design
Chapter 7 Quality in Product and Process Design S. Thomas Foster, Jr. Boise State University PowerPoint prepared by Dave Magee University of Kentucky Lexington Community College ©2004 Prentice-Hall

Chapter Overview Designing Products for Quality The Design Process
Quality Function Deployment (QFD) Technology in Design Prototyping Methodologies Designing for Reliability Environmental Considerations in Design

Designing Products for Quality
Each dimension of quality poses different design problems. Design is not strictly a technical decision to be made by engineers. Engineers need input from marketing and operations to understand customer needs, marketing requirements, and the realities of production.

The Design Process Slide 1 of 4
Project Development Process Figure 7.1

Stage 1: Product Idea Generation External and internal sources brainstorm new concepts. Internal sources include marketing, management, R&D, and employee suggestions. The primary source for external product ideas is the customer. Stage 2: Customer Future Needs Projection This stage uses data to predict future customer needs. Stage 3: Technology Selection for Product Development Designers choose the materials and technologies that will provide the best performance for the customer at an acceptable cost.

Stage 4: Technology Development For Process Design Designers choose the processes that will be used to transform the materials picked in the prior stage into final products. Stage 5: Final Product Definition Results in final drawings and specifications for the product with product families by identifying base product and derivative products. Stage 6: Product Marketing and Distribution Preparation Includes activities such as the marketing plan.

Stage 7: Product Design and Evaluation Requires definition of the product architecture, the design, production, testing of subassemblies, and testing of the system for production. Stage 8: Manufacturing System Design Includes the selection of the process technologies that will result in a low-cost, high-quality product. Stage 9: Product Manufacture, Delivery and Use Finishes the process. The customer then enjoys the result of the design process.

Quality Function Deployment (QFD) Slide 1 of 2
Describes a method for translating customer requirements into functional design. Sometimes this process translation is referred to as the voice of the customer. Designers need a means for implementing customer requirements into designs. The house of quality (QFD) is used to accomplish this.

Quality Function Deployment (QFD) Slide 2 of 2
QFD Layout: The House of Quality Figure 7.2

Steps in QFD Slide 1 of 5 Step 1: Develop a list of customer requirements. Step 2: Develop a listing of technical design elements along the roof of the house. Step 3: Demonstrate the relationship between the customer requirements and technical design elements. Step 4: Identify the correlations between design elements in the roof of the house. Step 5: Perform a competitive assessment of the customer requirements. Step 6: Prioritize customer requirements. Step 7: Prioritize technical requirements. Step 8: Final Evaluation.

Steps in QFD Slide 2 of 5 Step 2: Develop a listing of technical design elements along the roof of the house. Step 1: Develop a list of customer requirements The list of customer requirements includes the major customer needs as they relate to a particular aspect of a process. These are the design elements that relate to customer needs.

Steps in QFD Slide 3 of 5 Step 3: Demonstrate the relationship between the customer requirements and technical design elements Step 4: Identify the correlations between design elements in the roof of the house The correlations can be identified through the use of symbols. A diagram can be used to demonstrate these relationships.

Steps in QFD Slide 4 of 5 Step 5: Perform a competitive assessment of the customer requirements Step 6: Prioritize customer requirements Articulate customer requirement priorities. Compare your product with those of your key competitors.

Steps in QFD Slide 5 of 5 Step 7: Prioritize technical requirements
Step 8: Final Evaluation The relative and absolute weights for technical requirements are evaluated to determine what engineering decisions need to be made to improve the design based on customer input. Prioritize the technical requirements that fit your product design.

Technology in Design Slide 1 of 3
Computer-Aided Design (CAD) System These systems are used in designing anything from an ultralight airplane, to a hamburger, to a home, or to a new intersection that can handle higher volumes of traffic. Greatly improve the ability of designers to generate new and varied designs. Simplify the design process. Help to develop more reliable and robust systems.

Multiuser CAD Systems An important advance in CAD systems has been the advent of multiuser CAD systems. Using a common database in a network, multiple designers in locations worldwide can work on a design simultaneously, around the clock. Geometric Modeling Is used to develop a computer compatible mathematical description of a part. The image is typically a wire frame drawing of a component.

Engineering Analysis May involve many different engineering tests such as heat-transfer calculations, stress calculations, or differential equations to determine the dynamic behavior of the system being designed. Interference Checking Examining a design to see if different components in a product occupy the same space. Closed-Loop Systems CAD/CAM systems are often tied together in a closed-loop system with computer-aided inspection (CAI) and computer-aided testing (CAT) quality control systems.

Prototyping Methodologies Slide 1 of 3
Is an iterative approach to design in which a series of mock products are developed until the customer and the designer agree on the final design.

Types of Prototypes Basic prototype. The basic prototype is a nonworking mock-up of the product that can be reviewed by customers prior to acceptance. Paper prototypes. Consist of a series of drawings developed by the designer on CAD systems and reviewed by decision makers prior to acceptance. Working prototypes. These are fully working models of the final product.

Organizing the Design Team Perform design steps sequentially. Perform design steps simultaneously. Concurrent Engineering The simultaneous performance of product design and process design. Typically, concurrent engineering involves the formation of cross-functional teams. This allows engineers and mangers of different disciplines to work together simultaneously in developing product and process designs.

Product Life Cycle and Related Topics Slide 1 of 4
The Product Life Cycle (PLC) The product life cycle concept demonstrates the need for developing new products by showing product design, redesign, and complementary product development on a continuum. Product Life Cycle Imperatives First, product life cycles are becoming shorter. Second, as product life cycles shorten, product variety and change become much more important to the successful competitor as complementary products are needed to consume productive capacity

Complementary Products Are new products using similar technologies that can coexist in a family of products. Extend the life of a product line by offering new features or improvements to prior versions of a product. Design for Manufacture (DFM) Means to design products so they are cost effective and simple to build. Design for Manufacture Methods Intended to eliminate over-the-wall syndrome and radically reduce design cycle times.

Enterprise Resource Planning (ERP) System A system that integrates financial, planning, and control systems into a single architecture. Examples include the SAP R/3 system and Oracle. Product Data Management (PDM) Helps manage both product data and the product development process by tracking the masses of data needed to design, manufacture, support, and maintain products.

Design for Maintainability A concept that states that products should be designed in a way that makes them easy for consumers to maintain. Design for Maintainability Concepts Components that are easily replaced. Components that are easily removed with standard tools. Adequate space to perform the maintenance function. Nondestructive disassembly. Safe maintenance. Available adequate owners manuals and documentation.

Design for Reliability Slide 1 of 11
Dimension of reliability Failure rate Time Component Reliability Is defined as the propensity for a part to fail over a given time. System Reliability Refers to the probability that a system of components will perform their intended function over a specified period of time.

Reliability Analysis Tools Failure Modes and Effects Analysis (FMEA) Fault Tree Analysis Failure Modes, Effects, and Criticality Analysis (FMECA)

Failure Modes and Effects Analysis (FMEA) Method for systematically considering each component of a system, identifying, analyzing, and documenting the possible failure modes within a system and the effect of each failure on the system. Benefits of FMEA Improvement of product safety, quality, and reliability. Improvement of a company’s image and competitiveness. Increased satisfaction from a user standpoint. Reduction in product development cost. Record of action taken to reduce a product risk.

Basic areas where FMEA can be applied Concept: FMEA is used to analyze a system or its subsystems in the conception of the design. Process: FMEA is applied to analyze the assembly and manufacturing processes. Design: FMEA is used for analysis of products before mass production of the product begins. Service: FMEA is used to test industry processes for failure prior to their release to customers. Equipment: FMEA can be used to analyze equipment before the final purchase.

FMEA Steps Figure 7.18

Fault Tree Analysis An analytical tool that graphically renders the combinations of faults that lead to the failure of the system. This technique is useful for describing and assessing the events within a system. Primary Symbols of Fault Tree Analysis Events Gates Link the faults to the undesired events within the diagram. Gates show how faults are related.

Types of Events (in Fault Tree Analysis) Basic events are initiating faults that do not require events below them to show how they occurred. The symbol used for a basic event is a circle. An intermediate event is the result of a combination of faults, some of which may be primary events. This intermediate event is located in the middle of a fault tree. These events are described by rectangles. An expanded event requires a separate fault tree because of its complexity. For this new fault tree, the expanded event is the undesired event and would be located at the top of the fault tree.

Fault Tree Diagram Figure 7.20

Steps in Fault Tree Analysis Become familiar with the system. Define the undesired events of the system with the related contributing and initiating events. Develop fault trees for the undesired events. Obtain probabilities for the events on the fault trees. Evaluate fault trees. Analyze the results and proposals for system improvement. Change the fault trees to reflect proposed improvements and renewed fault tree evaluation. Perform a worst case analysis.

Failure Mode, Effect, and Criticality Analysis (FMECA) An extensive, but simple method for identifying ways in which an engineered system could fail. Criticality In FMECA is important because it prioritizes how the design team should be spending its resources. In general, criticality refers to how often a failure will occur, how easy it is to diagnose, and whether it can be fixed. Critically assessment is somewhat subjective because it depends on the viewpoint of a service or field analysis.

Product Traceability The ability to trace a component part of a product back to its original manufacturer. Consumer Product Safety Commission (CPSC) An independent federal regulatory agency that helps keep American families safe by reducing the risk of injury or death from consumer products.

Environmental Conditions in Design Slide 1 of 2
Importance Currently, society demands much more from product designers than just high-quality products. Many manufacturers have turned to a more environmental form of manufacturing that offers positive returns on investment. Green Manufacturing Movement that began in Germany with requirements for importers to remove packaging materials.

Environmental Conditions in Design Slide 2 of 2
Design for Reuse Designing products so they can be used in later generations of products. Design for Disassembly A method for developing products so that they can easily be taken apart. Design for Remanufacture A method for developing products so that they parts can be used in other products. Associated with green manufacturing.

Summary Designing Products for Quality The Design Process
Quality Function Deployment (QFD) Technology in Design Prototyping Methodologies Designing for Reliability Environmental Considerations in Design

Designing Quality Services
Chapter 8 Designing Quality Services S. Thomas Foster, Jr. Boise State University PowerPoint prepared by Dave Magee University of Kentucky Lexington Community College ©2004 Prentice-Hall

Chapter Overview Differences between Services and Manufacturing
What Do Services Customers Want? SERVQUAL Designing and Improving the Services Transaction The Customer Benefits Package The Globalization of Services Improving Customer Service in Government Quality in Health Care A Theory for Service Quality Management

Differences Between Services and Manufacturing Slide 1 of 3
Unique Attributes of Services The output of services is heterogeneous Services are intangible The production and consumption of services often occur simultaneously Customers are more involved in the production of services than they are in manufacturing

Intangible Many service attributes are intangible. This means that they cannot be inventoried or carried in stock over long periods of time. Heterogeneous This means that for many companies, no two services are exactly the same. Simultaneous Production and Consumption Customer Contact Customers tend to be more involved in the production of services than they are in manufacturing.

Internal Versus External Services External services are those whose customers pay the bills. Internal services are in-house services such as data processing, printing, and mail. Voluntary Versus Involuntary Services Voluntary services are those services that we actively seek out and employ of our own accord. The quintessential example of an involuntary service is a prison. Other involuntary services include hospitals, the IRS, and the fire department.

How Are Service Quality Issues Different from Those of Manufacturing
How Are Service Quality Issues Different from Those of Manufacturing? Slide 1 of 3 Availability of Data Simultaneous Production and Consumption Customer Contact Design of Services Product Liability

How Are Service Quality Issues Different from Those of Manufacturing? Slide 2 of 3 Availability of Data Because services attributes are often intangible, it is sometimes difficult to obtain hard data relating to services. Simultaneous Production and Consumption Service must be done right the first time. Customer Contact Leads to an increase in the variability in the service, a high degree of customization and great variability in the time required to perform the service.

How Are Service Quality Issues Different from Those of Manufacturing? Slide 3 of 3 Design of Services Must take into account variables such as customer moods and feelings. Product Liability In services, liability issues often relate to malpractice, whereas in manufacturing liability issues typically relate to safety concerns.

How Are Service Quality Issues Similar to Those of Manufacturing?
For both manufacturing and service firms, the customer is the core of the business, and customer needs provide the major input to design.

What Do Services Customers Want? Slide 1 of 2
Zeithamel, Parasuraman, and Berry’s List of the Dimensions of Service Quality Tangibles Reliability Responsiveness Assurance Empathy

What Do Services Customers Want? Slide 2 of 2
Attributes of Effective Leaders in Service Industries Service Vision High Standards In-the-Field Leadership Style

SERVQUAL Instrument Slide 1 of 12
A survey instrument for assessing quality along five service dimensions Tangibles Reliability Responsiveness Assurance Empathy The SERVQUAL survey has been used by many firms and is an off-the-shelf approach that can be used in many service settings.

Advantages of SERVQUAL Accepted as a standard for assessing different dimensions of services quality. Shown to be valid for a number of different service situations. Demonstrated to be reliable, meaning that different readers interpret the questions similarly. Only has 22 items making it parsimonious. It can be filled out quickly by customers and employees. Has a standardized analysis procedure to aid interpretation and results.

SERVQUAL survey has two parts Customer expectations Customer perceptions Gap Analysis The SERVQUAL instrument is used to perform gap analysis. Gaps in communication and understanding between employees and customers have a serious negative affect on the perceptions of services quality.

SERVQUAL Items and Dimensions Dimension Items Tangibles Reliability Responsiveness Assurance Empathy

Word-of-mouth communication Personal needs Past experience Expected service Gap 5 Perceived service CUSTOMER PROVIDER Gap 4 External communications to customers Service delivery Gap 3 Service quality specifications Gap 1 Gaps Model Figure 8.4 Gap 2 Management perceptions of customer expectations

SERVQUAL Instrument (Gap Models) Slide 6 of 12
Figure 8.5 Management perceptions of customer expectations Expected service Gap 1 Gap 1 shows that there can be a difference between actual customer expectations and management’s idea or perception of customer expectations.

Figure 8.6 Service quality specifications Management perceptions of customer expectations Gap 2 Manager’s expectations of service quality may not match service quality specifications. This mismatch is demonstrated in gap 2.

Figure 8.7 Service delivery Service quality specifications Gap 3 Inadequate training, communication, and preparation of employees who interact with the customer, referred to as contact personnel, can lower the quality of service delivered. This mismatch is represented as Gap 3.

Figure 8.8 Service delivery External communications to customers Gap 4 Gap 4 shows the differences between services delivery and external communications with the customer.

Figure 8.9 Expected service Perceived service Gap 5 Gap 5 is the difference between perceived and expected services. The key to closing this gap is to first close gaps 1 through 4 through thoughtful system design, careful communication with the customer, and a workforce trained to provide consistently outstanding customer service.

Differencing Technique The differencing technique is used to assess the differences between expectations and perceptions. Simple Differencing The averages for each dimension of service quality is computed by averaging the items pertaining to each dimension and then computing the difference. Two-Dimensional Differencing Very useful for evaluating responses when there is enough variation in different dimensions. The vertical axis reflects the expectations score and the horizontal axis relates to the perceptions score.

Two-Dimensional Differencing Plane Figure 6.10 EXPECTATIONS 7 . Tangibles Reliability . 6 Empathy . 5 PERCEPTIONS 4 1 2 3 5 6 7 . Assurance 3 . Responsiveness 2 1

Designing & Improving the Services Transaction Slide 1 of 5
Services Blueprinting A services blueprint is a flowchart that isolates potential fail points in a process. Steps to developing a service blueprint. 1. Identify processes 2. Isolate fail points 3. Establish a time frame 4. Analyze profits

Designing & Improving the Services Transaction (Services Blueprinting) Slide 2 of 5
Services Blueprinting Example Figure 8.11 Standard execution time 2 minutes Brush shoes Apply polish Buff Collect payment Total acceptable execution time 5 minutes 30 seconds 30 seconds 45 seconds 15 seconds Fail point Wrong color wax Clean shoes Materials (e.g., polish, cloth) Seen by customer 45 seconds Line of visibility Not seen by customer but necessary to performance Select and purchase supplies

Designing & Improving the Services Transaction (Services Blueprinting) Slide 3 of 5
Steps in Developing a Service Blueprint Step 1: Identify processes. Processes are flowcharted so that the bounds of the process are identified. Step 2: Isolate fail points. What can happen here? What could go wrong. Mistakes can be expensive. Step 3: Establish a time frame. Time can be a major determinant of profitability. Those steps that lose time result in lost income. Time standards should be established for each step in the process. Step 4: Analyze profits. As errors occur in the process, the service provider becomes liable. Because delays and errors affect profitability, the provide could lose money.

Line of Visibility Identifies the point beyond which activities are not seen by the customer, but still influence performance. Moments of Truth The fail points in the service blueprint are also referred to as moments of truth. These are times at which the customer expects something to happen. Poka-Yoke The idea behind poka-yoke (or fail-safing) is to ensure that certain errors will never occur.

Fail Safe Methods Can Also Be Described as the Three Ts Task Treatment Tangibles Figure 8.12

The Customer Benefits Package Slide 1 of 3
Customer Benefits Package (CBP) A customer benefits package consists of both tangibles that define the service and intangibles that make up the service. Tangibles are known as goods-content. Intangibles are referred to as service-content. Stages of Service Design Process 1. Idea/concept generation 2. The definition of a services package 3. Process definition and selection 4. Facilities requirement definition

CBP Design Process Figure 8.13 Idea/concept generation Define CBP Select and define process Define facility requirements

Process/CBP Matrix Figure 8.14 Service Process Structure Unique service package Selective service package Restricted service package Generic service package Expert service Consulting Service shop Higher Education Service factory Package Delivery

Globalization of Services
The trend toward globalization the way we manage service quality. Eastern European and Eastern Asian countries are following the lead of the United States by transferring labor and GDP into the services sector. The implication is that service competition will increase on a global scale, as has been the case in manufacturing for the past 40 years.

Improving Customer Service In Government
If customer service is the battlefield for business leading into the twenty-first century, then government is probably the last frontier. There are some evidences of improvement in several aspects of government service.

Quality in Health Care Several factors have contributed to increased attention in the area of health care Health care is facing the same “cost squeeze” that government is facing. A move toward HMO’s is causing hospitals to streamline operations. There is increasing diversity in health care. Calls for a nationalized health care system threaten the status quo an provide the competitive pressures that spur the impetus to improve.

A Theory For Service Quality Management Slide 1 of 5
Proposition 1: The Unified Services Theory Proposition 2: The Unreliable Supplier Dilemma Proposition 3: Capricious Labor Proposition 4: Everyone Presumes to be An Expert

Proposition 1: The Unified Services Theory “With services, the customer provides significant inputs into the production process. With manufacturing, groups of customers may contribute ideas to the design of the product; however, individual customers’ only part in the actual process is to select and consume the output. Nearly all other managerial themes unique to services are founded in this distinction.

Proposition 2: The Unreliable Supplier Dilemma “With services, the customer-suppliers often provide unreliable inputs.”

Proposition 3: Capricious Labor “With services, customer-labor may ignore, avoid, or reject technologies or process improvements which are intended to increase quality and productivity. As a result, customer buy-in to process changes must be carefully addressed.”

Proposition 4: Everyone Presumes to be An Expert “With services, the customer often provides product specifications (what to make) and process design (how to make it), often without the invitation of the service provider.”

Summary Differences between Services and Manufacturing
What Do Services Customers Want? SERVQUAL Designing and Improving the Services Transaction The Customer Benefits Package The Globalization of Services Improving Customer Service in Government Quality in Health Care A Theory for Service Quality Management

Managing Supplier Quality in the Supply Chain
Chapter 9 Managing Supplier Quality in the Supply Chain S. Thomas Foster, Jr. Boise State University PowerPoint prepared by Dave Magee University of Kentucky Lexington Community College ©2004 Prentice-Hall

Chapter Overview The Value Chain Supplier Partnering
Applying the Contingency Perspective to Supplier Partnering A Supplier Development Program: QS 9000 Acceptance Sampling and Statistical Sampling Techniques

The Value Chain Slide 1 of 4
A tool that disaggregates a firm into its core activities to help reduce costs and identify sources of competitiveness. Value System Consists of a network of value chains.

Figure 9.1 Firm infrastructure Support Activities (Hidden factory) Human resource management Technology development Margin Procurement Inbound logistics Operations Outbound logistics Marketing and sales Service Margin Core Activities

The Chain of Customers Looking at the activities along the value chain sequentially, we see that the links in the value chain are really people performing different functions. The chain of customers is revealed when you view the next step in the chain after you as your own customer. This means that if you work at workstation 4 in a process at the core of the value chain, you will make sure that the work you do is absolutely impeccable before you release it to your “customer” in workstation 5.

Managing the Supply Chain The concept of supply chain management extends the economic concept of value chain. One of the most significant aspects of the value chain is the linkage between a series of suppliers and consumers. This linkage is especially tenuous because it involves the complex interaction of logistics, systems, and human behavior.

Supplier Partnering Slide 1 of 5
Supplier Partnering Concept Several approaches to improving suppliers result in what is called supplier partnering. Inspired by JIT purchasing approaches learned from Japanese industry, supplier-partner relationships have emerged that treat suppliers as de facto subsidiaries of the customer organization.

Supplier Development Approaches Single sourcing Dual sourcing Supplier evaluation Souring filters ISO 9000:2000 MBNQA Supplier certification or qualification programs Supplier development programs Supplier audits Partnering

Supplier Partnering Approaches Single sourcing Refers to narrowing down the list of approved supplier for a single component to just one supplier. Dual Sourcing Companies that are uncomfortable with using a single supplier may use dual sourcing where the number of approved suppliers is reduced to just a few. Supplier Evaluation Is a tool used by many firms to differentiate and discriminate between suppliers. Supplier evaluations are often recorded on report cards in which potential supplier are rated on criteria such as quality, technical capability, or ability to meet schedule demands.

Supplier Partnering Approaches Sole-Source Filters That are used in many companies rely on external validation of quality programs. Two of the most common filters are the Baldrige criteria and ISO 9000:2000. Supplier Evaluations Many companies perform lengthy inspections of their suppliers. These programs are often called supplier certification or qualification programs if the focus is entirely on evaluation. Supplier Development If the focus is on helping the supplier improve, then the programs are called supplier development programs.

Supplier Partnering Approaches Supplier Audit Similar to supplier certification except that a team of auditors visits the supplier and then provides results to the customer. Performed to ensure that product quality and procedural objectives are being met. Tend to not have the developmental component that is found in supplier development programs.

Electronic Data Interchange
Is a system that aids customer and supplier communication by linking together supplier and customer information systems. Customer now are helping suppliers to isolate bottlenecks in operations, balance production systems, and reduce setup times in an effort to reduce lead times.

Supply Chain Priorities
Table depicts relative priorities between auto assemblers, their direct suppliers and their indirect suppliers. Ranks Auto Assemblers Importance Direct Suppliers Importance Indirect Suppliers Importance Factors Consistency Reliability Relationship Technological capability Flexibility Price Services Finances

A Supplier Development Program: QS 9000
A supplier development program developed by a Chrysler/Ford/GM supplier requirement task force. The task force was impaneled to develop standard reference manuals, reporting formats, and technical terminology. The goal of QS 9000 is to enhance quality systems for suppliers while eliminating redundant requirements and reducing costs.

QS 9000 Requirements Slide 1 of 10
Requirement Section Number Management responsibility Quality system Contract review Design control Document and data control Purchasing Control of customer-supplier product 4.7 Product identification and traceability 4.8 Process control Inspection and testing

Requirement Section Number Control of inspection, measuring, and test equipment 4.11 Inspection and test status Control of nonconforming product Corrective and preventive action Handling, storage, packaging, preservation, and delivery 4.15 Control of quality records Internal quality audits Training Servicing Statistical techniques

Management Responsibility Supplier management is responsible for defining and documenting its policies for quality along with its objectives and its level of commitment. Quality System The supplier firm is required to establish, document, and maintain a quality system so that the product conforms to requirements. Contract Review The supplier examines the steps associated with contracting with its own suppliers.

Design Control This standard focuses on designing processes. To meet requirements, suppliers establish and maintain procedures for controlling the design of the product. Document and Data Control Includes the procedures or approvals used in issuing documents and data and making changes to such data. Purchasing To satisfy requirements for purchasing, the supplier must establish and maintain documents of procedures to ensure that purchased products conform to specified standards.

Control of Customer-Supplied Product The standard for this part of the QS 9000 standard is worded as follows, “Suppliers must establish and maintain documented procedures for the control of verification, storage, and maintenance of customer-supplied product provided for incorporation into supplies or for related activities.” Product Identification and Traceability QS 9000 requires documented procedures for product traceability during all stages of the production process.

Process Control The element relating to process control establishes that suppliers identify and plan the production, installation, and servicing processes that result in quality products. Inspection and Testing These activities are put in place to ensure that specified requirements for products are met. Control of Inspection, Measuring, and Test Equipment Suppliers must establish and document procedures to control, calibrate, and maintain test equipment.

Inspection and Test Status The QS 9000 standard requires that inspection test status be maintained throughout the production process, installation process, and service processes of the product. Control of of Nonconforming Product When nonconforming products are produced, they can be reworked to meet specified requirements accepted with or without repair concessions regraded for alternative applications rejected and scrapped.

Corrective and Preventive Action When problems result in defective products, a standard process for addressing them is needed so that corrective and preventive action can take place in a disciplined way. Handling, Storage, Packaging, Preservation, and Delivery This standard addresses logistics and inventory control. Among the areas to be documented are inventory control methods, such as models, the way inventory turnovers are optimized and how inventory levels are minimized.

Control of Quality Records The records control standard states that the supplier must establish and follow documented procedures for identifying, collecting, indexing, accessing, filing, storing, maintaining, and disposing of quality-related records. Internal Quality Audits Suppliers are required to perform internal quality audits to ensure compliance with QS 9000 requirements.

Training A supplier firm must have documented procedures for assessing training needs and for training all personnel who might impact a company’s quality. Servicing This requirement states that servicing efforts should meet the customer’s specified requirements. Statistical Techniques SPC and process capability measures must be maintained. Appropriate statistical techniques are chosen during advanced quality planning and must be maintained in the control plan.

Reflecting on QS 9000 QS 9000 is fundamentally different from ISO 9000. QS 9000 is specifically designed to help automakers prove they have standardized processes for dealing with their customers. There is much more guidance given to suppliers in the QS 9000 standard.

Acceptance Sampling Slide 1 of 4
Technique used to verify that incoming goods from a supplier adhere to quality standards. Acceptance sampling inspection can range from 100% of the delivery to a relatively few items from which the receiving firm draws inferences about the whole shipment.

Examples of when acceptance sampling might be needed When dealing with new or unproven suppliers. During start-ups and when building new products. When products can be damaged in shipment. When dealing with extremely sensitive products that can be damaged easily. When products can spoil during shipment. When problems with a certain supplier have been noticed in the production process that bring the supplier’s performance into question.

Acceptance Sampling Fundamentals We define acceptance sampling as a statistical quality control technique used in deciding to accept or reject a shipment of input or output. Producer’s and Consumer’s Risk Producer’s risk is the risk associated with rejecting a lot of materials that has good quality. Consumers risk is the risk associated with accepting a lot of materials that has poor quality.

Statistical Sampling Techniques Slide 1 of 8
Acceptable Quality Level (AQL) The maximum percentage or proportion of nonconformities in a lot or batch that can be considered satisfactory as a process average. Lot Tolerance Percent Defective (LTPD) The level of poor quality that is included in a lot of goods.

n and c Assignment of AQL, LTPD, alpha and beta is a management decision for the most part. These values define the sampling plan n = the sample size of a particular sampling plan c = the maximum number of defective pieces for a sample to be rejected

OC Curves The operating characteristic (OC) curve provides an assessment of the probabilities of acceptance for a shipment, given the existing quality of the shipment. Constructed to show the probability of accepting individual lots. Higher values of c lead to higher probabilities of accepting bad shipments (consumer’s risk). Higher values of n create a greater confidence that a good shipment has been accepted.

Pa 1.00 Probability of acceptance P’ .01 .02 .03 .04 Lot fraction nonconforming

Various OC Curves Figure 9.4

Building an OC Curve Binomial distribution Poisson distribution. Estimating AQL and LTPD OC curves can be used to estimate both AQLs and LTPDs. The figure on the next slide (Figure 9.8 in the text) shows an OC curve for a single sampling plan with n = 50 and c = 1.

OC Curve of Single Sampling Plan n = 50 and c = 1 Figure 9.8

More Complex Sampling Plans Multiple sampling plans have advantages over single sampling plans. Samples sizes will be smaller on average with the same amount of protection. Developing Double Sampling Plans Although OC curves can be used to develop double sampling plans, the calculations to develop the OC curves are much more complex than for single sampling plans. The textbook uses a standard approach that is used by many practitioners. The main limitation of this plan is that sample sizes must be specified, as well as AQL, LTPD, producer’s risk, and consumer’s risk.

Summary The Value Chain Supplier Partnering

Managing Supplier Quality in the Supply Chain
Chapter 9 Managing Supplier Quality in the Supply Chain S. Thomas Foster, Jr. Boise State University PowerPoint prepared by Dave Magee University of Kentucky Lexington Community College ©2004 Prentice-Hall

Chapter Overview The Value Chain Supplier Partnering

A tool that disaggregates a firm into its core activities to help reduce costs and identify sources of competitiveness. Value System Consists of a network of value chains.

Figure 9.1 Firm infrastructure Support Activities (Hidden factory) Human resource management Technology development Margin Procurement Inbound logistics Operations Outbound logistics Marketing and sales Service Margin Core Activities

The Chain of Customers Looking at the activities along the value chain sequentially, we see that the links in the value chain are really people performing different functions. The chain of customers is revealed when you view the next step in the chain after you as your own customer. This means that if you work at workstation 4 in a process at the core of the value chain, you will make sure that the work you do is absolutely impeccable before you release it to your “customer” in workstation 5.

Managing the Supply Chain The concept of supply chain management extends the economic concept of value chain. One of the most significant aspects of the value chain is the linkage between a series of suppliers and consumers. This linkage is especially tenuous because it involves the complex interaction of logistics, systems, and human behavior.

Supplier Partnering Concept Several approaches to improving suppliers result in what is called supplier partnering. Inspired by JIT purchasing approaches learned from Japanese industry, supplier-partner relationships have emerged that treat suppliers as de facto subsidiaries of the customer organization.

Supplier Development Approaches Single sourcing Dual sourcing Supplier evaluation Souring filters ISO 9000:2000 MBNQA Supplier certification or qualification programs Supplier development programs Supplier audits Partnering

Supplier Partnering Approaches Single sourcing Refers to narrowing down the list of approved supplier for a single component to just one supplier. Dual Sourcing Companies that are uncomfortable with using a single supplier may use dual sourcing where the number of approved suppliers is reduced to just a few. Supplier Evaluation Is a tool used by many firms to differentiate and discriminate between suppliers. Supplier evaluations are often recorded on report cards in which potential supplier are rated on criteria such as quality, technical capability, or ability to meet schedule demands.

Supplier Partnering Approaches Sole-Source Filters That are used in many companies rely on external validation of quality programs. Two of the most common filters are the Baldrige criteria and ISO 9000:2000. Supplier Evaluations Many companies perform lengthy inspections of their suppliers. These programs are often called supplier certification or qualification programs if the focus is entirely on evaluation. Supplier Development If the focus is on helping the supplier improve, then the programs are called supplier development programs.

Supplier Partnering Approaches Supplier Audit Similar to supplier certification except that a team of auditors visits the supplier and then provides results to the customer. Performed to ensure that product quality and procedural objectives are being met. Tend to not have the developmental component that is found in supplier development programs.

Electronic Data Interchange
Is a system that aids customer and supplier communication by linking together supplier and customer information systems. Customer now are helping suppliers to isolate bottlenecks in operations, balance production systems, and reduce setup times in an effort to reduce lead times.

Supply Chain Priorities
Table depicts relative priorities between auto assemblers, their direct suppliers and their indirect suppliers. Ranks Auto Assemblers Importance Direct Suppliers Importance Indirect Suppliers Importance Factors Consistency Reliability Relationship Technological capability Flexibility Price Services Finances

A Supplier Development Program: QS 9000
A supplier development program developed by a Chrysler/Ford/GM supplier requirement task force. The task force was impaneled to develop standard reference manuals, reporting formats, and technical terminology. The goal of QS 9000 is to enhance quality systems for suppliers while eliminating redundant requirements and reducing costs.

Requirement Section Number Management responsibility Quality system Contract review Design control Document and data control Purchasing Control of customer-supplier product 4.7 Product identification and traceability 4.8 Process control Inspection and testing