1. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 4 1 Management’s Commitments to Quality and Productivity MANAGEMENT Meeting and Exceeding Customer Expectations EIGHTH EDITION Prepared by Deborah Baker Texas Christian University

2. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 4 2 learning objectives 1. Discuss how customers influence the quality of goods and services 2. Explain why quality must be cost effective 3. Relate quality, productivity, and profitability to one another

3. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 4 3 learning objectives (continued) 4. Discuss the commitments required to improve quality and productivity at the following: a. The top of organizations b. The middle of organizations c. The bottom of organizations 5. Discuss the external commitments required to improve an organization’s quality and productivity

4. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 4 4 Customer Satisfaction Model 1 1 Quality Component Customer Satisfaction Customer Satisfaction Handle Complaints Company’s Representative Product Availability Product Availability Billing Price and Contracts Services Performance Satisfaction Recommendation Profitability Retention

5. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 4 5 Origination of Quality Features 1 1 Internal Designers External Designers Users Producers Customers

6. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 4 6 Quality Function Deployment 1 1 A disciplined approach to solving quality problems before the design phase of a product Purpose is to assure customer obtains high value from product Benchmark The product to meet or beat in terms of design, manufacture, performance, and service

7. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 4 7 Quality Function Deployment 1 1 Long-Term Value Disciplines Product leadership Operational excellence Customer intimacy

8. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 4 8 Total Quality Management 1 1 Total Quality Management Total Quality Management A strategy for continuously improving performance at ever level, and in all areas of responsibility Managing total quality Continuous quality improvement Total quality control Leadership through quality

9. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 4 9 The TQM Model 1 1 Source: Department of Defense, Quality and Productivity Self-Assessment Guide for Defense Organizations (Washington, D.C. Department of Defense, 1990).

10. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 4 10 TQM Principles 1 1. Quality improvements create productivity gains. Quality is defined as conformance to requirements that satisfy user needs. Quality is measured by continual process and product improvement and user satisfaction. Quality is determined by product design and achieved by effective process controls. Process-control techniques are used to prevent defects. Quality is part of every function in all phases of the product life cycle. Management is responsible for quality. Relationships with suppliers are formed for the long term and are quality-oriented

11. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 4 11 Productivity 2 2 Output Input Productivity Index = Productivity The relationship between the amount of input needed to produce a given amount of output and the output itself

12. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 4 12 Improving Productivity 2 2. Increase the amount of output generated by a fixed amount of input. Reduce the amount of input required to generate a fixed amount of output. Use a combination of both approaches

13. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 4 13 Quality–Productivity–Profitability 3 3 Edwards Deming on Decreasing Costs Edwards Deming on Decreasing Costs Reduce the need to rework parts Reduce mistakes and waste Improve productivity

14. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 4 14 Deming’s Chain Reaction 3 3 Costs decrease because of fewer mistakes, delays, and snags; less need to rework materials; better use of machine time and materials Costs decrease because of fewer mistakes, delays, and snags; less need to rework materials; better use of machine time and materials Improve Quality Improve Quality Productivity improves Capture the market with better quality and lower price Capture the market with better quality and lower price Stay in business Provide jobs and more jobs Source: W. Edwards Deming, Out of the Crisis (Cambridge, Mass.: Massachusetts Institute of Technology Press, 1988), p. 3.

15. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 4 15 Minimizing Resistance to Change 3 3 2. Provide enough time 3. Keep proposals free of excess baggage 1. Provide participation 5. Treat people with dignity 6. Take the other person’s point of view 4. Work with the recognized leadership 7. Look at the alternatives

16. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 4 16 Commitments at the Top 4a Mission A written declaration of an organization’s central and common purpose, its reason for existence Vision Where an organization wants to be in the future Core Values Core Values Values that should never change, “bedrock principles”

17. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 4 17 Ford’s Vision, Mission, and Core Values 4a Our Vision To become the world’s leading consumer company for automotive products and services. Our Mission We are a global, diverse family with a proud heritage passionately committed to provided outstanding products and services that improve people’s lives. Our Values The customer is Job 1. We do the right thing for our people, our environment and our society. By improving everything we do, we provide superior returns to our shareholders. Source: http://www.mycareer.ford.com/OURCOMPANY.ASP?CID=23.

18. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 4 18 Commitments at the Middle 4b Quality Improvement Team Quality Improvement Team Meet to assess progress toward goals, identify and solve problems, plan for the future Process Improvement Team Process Improvement Team Meet to analyze how they can improve the process Project Improvement Team Project Improvement Team Determine how to make the project better

19. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 4 19 Quality Control Audits 4b 1. How are we doing? 2. What are the problems?

20. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 4 20 Measurements 4b Statistical Process Control (SPC) Statistical Process Control (SPC) Statistical Quality Control (SQC) Statistical Quality Control (SQC)

21. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 4 21 Commitments at the Bottom 4c Quality Circle A temporary team, consisting primarily of workers who share a problem, who meets regularly until the problem is solved

22. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 4 22 External Commitments 5 5 “Winning a new customer typically costs a company up to five times as much as keeping a current one and the average business loses 20 percent of its accounts each year.” “Winning a new customer typically costs a company up to five times as much as keeping a current one and the average business loses 20 percent of its accounts each year.”

23. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 4 23 Questions for Outsourcing 5 5. Do they know their costs?. Do we know them?. Are their costs out of line or in check?. Are they working on cost reductions?. Can we help them to reduce costs?

24. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 4 24 Internal Influences 5 5 Information Facilities Materials and Supplies Machinery and Equipment Finances

25. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 4 25 World-Class Manufacturing 5 5. Direct links to customers and suppliers. Flexible production lines. Short cycle times. Horizontal product, project, and process teams. Just-in-time delivery. Cleanliness. Empowered teams and individuals. Focus on efforts to improve quality and productivity Characteristics

26. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 4 26 External Influences 5 5 Economic Legal / Political Natural Forces Sociocultural Technological Competitors