2. Managing for Total Quality in Organizations Chapter 21

3. Describe the connection between productivity and quality. Understand the importance of increasing productivity. Explain total and partial measures of productivity and show how they are used to keep track of national, industry-wide, and company-wide productivity. Identify the activities involved in total quality management and describe four tools that companies can use to achieve it. List six ways in which companies can compete by improving productivity and quality. Learning Objectives

4. Definition of Quality Quality – the totality of features & characteristics of a product or service that bear on its ability to satisfy stated or implied needs Total Quality Management – a strategic commitment by top management to change its whole approach to business to make quality a guiding factor in everything it does

5. Eight Dimensions of Quality Performance Features Reliability Conformance Durability Serviceability Aesthetics Perceived quality

6. Total Quality Management Employee involvement Employee involvement Materials Technology Methods Strategic commitment Quality improvement

7. Managing Productivity Improving operations Increasing employee involvement Improving productivity

8. Designing Operations Systems for Quality Product service mix Capacity Facilities

9. Productivity a measure of efficiency that compares how much is produced with the resources used to produce it productivity grows if an organization can produce more of an item with a given amount of resources than it could in the past all stakeholders (employees, business, economy) benefit from increased productivity

10. The Productivity Paradox despite massive investment in computers, the rate of productivity growth is now lower than it was before computers were introduced...Why? possibly measures of productivity are not sensitive enough to detect growth in the area of services where most of the growth has occurred perhaps gains in productivity are still building and may become apparent in the next few years perhaps information technology is not the boon to productivity that it was anticipated to be

11. Quality a product’s fitness for use in terms of offering the features that consumers want quality and quantity are not the same: quantity measures efficiency of production, not product quality firms may be efficient but still lack the quality that consumers seek Canada’s competitive problems are largely linked to focusing on quantity instead of quality global competitors are focusing on both quality and quantity to “out-compete” Canadian firms

12. International Productivity Affects Wealth countries with greater productivity on an international scale: have a larger share of the global resource base have greater wealth to divide among their citizens have a population which enjoys a greater standard of living relative to other nations

13. National Productivity Affects Wealth countries with greater domestic productivity: have greater wealth for all citizens countries with limited domestic productivity: can only allocate limited wealth to their citizens an individual’s wealth can only increase at the expense of another individual investors, employees, business and individuals are negatively affected

14. Industry Productivity differences exist in the productivity between services and goods manufacturing sectors, with the services sector showing slower growth differences also exist within specific industries agriculture is more productive internationally for Canada than steel or automobile production due to investment in technology and superior natural resources

15. Company Productivity a more productive company: enjoys lower costs can pass on savings in reduced prices can obtain a competitive edge enjoys better stock prices can offer employee profit-sharing plans based on productivity-improvement can rely on productivity-planning to maintain a long-term market advantage

16. Measuring Productivity productivity is measured as a ratio of outputs to inputs managers must choose which inputs or outputs they desire to use in the ratio outputs may include sales in units or dollars inputs may include labour, capital, materials, and energy required to produce the output

17. Productivity Ratios

18. Total Quality Management (TQM) requires attention to both efficiency (quantity produced) and quality (the ability of the product to deliver the consumers’ expectations) and recognizes that: no defects are tolerable all employees are responsible for maintaining quality standards

19. Quality Assurance also called quality management: those activities necessary to get quality goods and services into the marketplace planning organizing leading controlling ManagingQualityEfforts

20. Planning for Quality quality planning must begin before goods are designed, or redesigned performance quality (the overall degree of quality): the features of the product to meet consumers’ needs how well the product performs quality reliability: the consistency of quality from product unit to product unit

21. Controlling for Quality establish specific quality standards and measurements compare results to standards using quality assurance tools detect mistakes and make corrections

22. Quality Assurance Tools competitive product analysis value-added analysis statistical process control quality/cost studies for quality improvement quality circles benchmarking cause & effect diagrams ISO 9000 Re-engineering

23. Competitive Product Analysis dismantling a competitor’s product to test each component against a firm’s own equivalent product and components determine areas for improvement to maintain competitiveness in the marketplace

24. Quality/Cost Studies improving product quality by determining the firm’s quality-related costs and identifying areas with the greatest cost-saving potential quality costs are associated with making, finding, repairing or preventing product defects requires determining the costs of internal and external failures through objective analysis (not guesswork or hunches)

25. Internal Failures internal failures include expenses associated with substandard products from their manufacture, until they leave the plant, including detection up to 50% of total costs is attributable to internal failures individual costs of internal failures must be objectively determined

26. External Failures external failures include expenses associated with substandard products that occur outside of the plant these include difficulties due to customer complaints and the cost of correcting the problem (replacement/repair, transportation, legal costs)

27. Quality Circles employees are grouped into small teams (called quality circles) each group chooses a team leader and determines rules for discussion each team must define, analyze, and solve quality and other process-related problems within their areas of responsibility may involve brainstorming, discussion and the use of quality/cost study

28. ISO 9000 a system developed by the International Standards Organization (ISO) to “score” a firm’s quality to receive the rating firms must be formally measured by qualified consultants the rating addresses: product testing, employee training, record-keeping, correcting defects A+

29. Statistical Process Control statistical analysis techniques that allow managers to: analyze variations in production data detect when adjustments are needed to create products with high quality reliability

30. Statistical Process Control Procedures process variation process capability study specification limits control charts

31. Process Variation any change in employees, materials, work methods, or equipment that affects output quality some variation is acceptable any variation outside of the acceptable range must be detected and eliminated

32. An Example: Process Variation in Filling Cereal Boxes

33. Control Charts a sample is tested and the results are displayed graphically control limits are critical values which are noted on the graph to depict the acceptable range of the specification limits the point of production where results begin to deviate from the requirements can be spotted and remedied

34. Quality-of-Work-Life employees have a dramatic effect on product quality product quality has improved in small business relative to large business often due to a better work- life for employees employees must be empowered to make decisions which allow their work to flow better and increase product quality often, the ability to empower employees is limited by inadequate employee training