1. Total Quality Management
Chapter 5
© 2005 Wiley

2. Management 326 Operations and Strategy Designing an Operations System
Managing an
Operations
System
Improving an
Operations
System

3. Designing an Operations System
Product Design
Project
Management:
A Design Tool
Process Design
Total Quality
Management
Statistical
Process Control

4. Total Quality Management (TQM)
Chapter 5
What is
quality?
Measurement
and costs of
quality
Total Quality
Management (TQM)
Quality Awards
and
Certifications

5. Why Quality is Important
Increases value of products to customers
Reduces expensive mistakes
Increases profits  Shareholder value
© 2005 Wiley

6. How Customers Define Quality
Customer-defined quality: Meeting quality expectations as defined by the customer
High performance design vs. product or service consistency
Psychological (perceived quality): the quality that the customer thinks he/she got
Value: the good or service is superior to others with similar prices (getting more for your money)
Product and service characteristics
© 2005 Wiley

7. How Customers Define Quality (2)
Value: the good or service is superior to others in the same price range (getting more for your money)
Product and service characteristics
Quality includes all characteristics that are important to customers – not just the core product
© 2005 Wiley

8. How Companies Define Quality Product or Service Specification
Characteristics of the product or service which will be measured to determine quality
Target values (ideal values) for each characteristic
Should be based on customer expectations
Should meet any legal requirements
Conformance quality: If a product or service consistently meets specifications, it has conformance quality.
© 2005 Wiley

9. Quality Measurement in Services
Qualitative measures of quality are based on customer perceptions
Customer satisfaction surveys
Teacher evaluations
Quantitative measures of quality are based on numerical data
Waiting time
Percentage of transaction errors
Product availability
Web site availability
© 2005 Wiley

10. Cost of Quality – 4 Categories
Early detection/prevention is less costly
Costs may be less by a factor of 10
© 2005 Wiley

11. Quality–Cost Relationship
Cost of quality
Difference between price of nonconformance and conformance
Cost of doing things wrong
20 to 35% of revenues
Cost of doing things right
3 to 4% of revenues
Profitability
In the long run, quality is free
© 2005 Wiley

12. Total Quality Management (TQM)
Chapter 5
What is
quality?
Measurement
and costs of
quality
Total Quality
Management (TQM)
Quality Awards
And Certifications
TQM
Philosophy
Quality in
Product Design
Why TQM
Programs
Fail

13. Total Quality Management (TQM)
Customer-defined quality: Meeting quality expectations as defined by the customer
Integrated organizational effort designed to improve quality on all quality characteristics that are important to customers (core product and anything else that affects customers)
Requires a coordinated effort
All levels of the organization
All functions (departments) in the organization
Work with suppliers and listen to customers
© 2005 Wiley

14. Evolution of TQM – New Focus
© 2005 Wiley

15. TQM Philosophy Focus on Customer Identify and meet customer needs
Stay tuned to changing needs, e.g. fashion styles
Continuous Improvement: Continuous learning and problem solving
Quality at the Source: Find the problem when it occurs and fix it.
Employee Empowerment and problem solving (pages ): Empower all employees. Serve external and internal customers
© 2005 Wiley

16. TQM Philosophy (2)
Quality improvement teams (QIT's or quality circles)
Teams formed around processes – 8 to 10 people
Meet regularly to analyze and solve problems
Self-managed work teams: a work group is responsible for managing its responsibilities. Managers are coaches, not bosses. (less common than QIT's)
Benchmarking: Studying practices at “best in class” companies
Managing Supplier Quality: Certify suppliers and eliminate receiving inspection
© 2005 Wiley

17. Quality in Product Design
Quality function deployment (QFD)
Used by product design teams
Used to translate customer preferences into specific technical requirements
The technical requirements are used to develop the product specification
Operations is responsible for making the product to specifications
Products that meet specifications have conformance quality
Objective is to satisfy customers
Principal tool is House of Quality (pages )
© 2005 Wiley

18. QFD Details
Process used to ensure that the product meets customer specifications
Voice of the
engineer
Customer-based
benchmarks
Voice
of the
customer

19. QFD - House of Quality
Adding trade-offs, targets & developing product specifications
Trade-offs
Technical
Benchmarks
Targets

20. Why TQM Efforts Fail Lack of top management support and commitment
Lack of a genuine quality culture
Continuous improvement
Teamwork
Training
Employee empowerment
Recognition and rewards (team or individual)
Under-reliance or over-reliance on statistical process control (SPC)
SPC is an essential tool for identifying problems and monitoring quality
It is important to solve the problems (PDSA, 7 quality tools)
© 2005 Wiley

21. Total Quality Management (TQM)
Chapter 5
What is
quality?
Measurement
and costs of
quality
Total Quality
Management (TQM)
Quality Awards
And Certifications
TQM
Philosophy
Quality in
Product Design
Why TQM
Programs
Fail

22. Quality Award and Certifications
Malcolm Baldrige National Quality Award
ISO 9000 Certification
ISO Certifications
© 2005 Wiley

23. Baldrige Award Competitive quality award presented by U. S. government
5 award categories: Manufacturing, services, small business, health care, education
All written applications are reviewed by trained examiners
Site visits to leading candidates
Maximum of 2 awards per category
© 2005 Wiley

24. Baldrige Award Criteria Framework A Systems Perspective
Total =
1,000 pts
Organizational Profile
Strategic
Planning
(85 pts)
Human Resource
Development
& Mgmt. (85 pts)
Business
Results
(450 pts)
Leadership
(120 pts)
Customer &
Market Focus
(85 pts)
Process
Mgmt. (85 pts)
Measurement, analysis, & knowledge management (90 pts)
© 2005 Wiley

25. Baldrige Award - Business Results
Customer-focused results
Product and service performance
Financial and market results
Human resource results
© 2005 Wiley

26. ISO 9000 Standards
International quality certification program guided by the International Standards Organization (ISO)
Any firm that passes an ISO standards audit will be certified.
U. S. participates in the development of these standards:
American National Standards Institute (ANSI)
American Society for Quality (ASQ)
Professional organizations
© 2005 Wiley

27. ISO 9000
ISO 9000 standards audits must be performed by a registrar, a firm that is certified to do ISO 9000 audits
Some companies require their suppliers to be certified
Be sure that your registrar is acceptable to your customers
Firms must be re-certified periodically.
© 2005 Wiley

28. ISO 14000 A certification program in environmental management
Standard-setting and certification procedures are similar to ISO 9000
© 2005 Wiley

29. Total Quality Management (TQM)
Chapter 5
What is
quality?
Measurement
and costs of
quality
Total Quality
Management (TQM)
Quality Awards
And Certifications
TQM
Philosophy
Quality in
Product Design
Why TQM
Programs
Fail