Total Quality Management

CII Institute of Logistics Total Quality Management

 Meaning of Quality:
Consumers Perspective
Fitness for use
how well product or
service does what it is
supposed to
Quality of design
designing quality
characteristics into a
product or service

A Mercedes and a Ford are

equally fit for use, but with
different design dimensions

3-2
CII Institute of Logistics Total Quality Management
 Dimensions of Quality:
Manufactured Products
Performance
basic operating characteristics of a product; how
well a car is handled or its gas mileage
Features
extra items added to basic features, such as a
stereo CD or a leather interior in a car
Reliability
probability that a product will operate properly
within an expected time frame; that is, a TV will
work without repair for about seven years

CII Institute of Logistics Total Quality Management

 Dimensions of Quality:
Manufactured Products (cont.)

Conformance
degree to which a product meets preestablished
standards
Durability
how long product lasts before replacement
Serviceability
ease of getting repairs, speed of repairs, courtesy
and competence of repair person

CII Institute of Logistics Total Quality Management

 Dimensions of Quality:
Manufactured Products (cont.)
Aesthetics
how a product looks, feels, sounds, smells, or
tastes
Safety
assurance that customer will not suffer injury
or harm from a product; an especially
important consideration for automobiles
Perceptions
subjective perceptions based on brand name,
advertising, and the like

CII Institute of Logistics Total Quality Management

 Dimensions of Quality:
Service
Time and Timeliness
How long must a customer wait for service,
and is it completed on time?
Is an overnight package delivered overnight?
Completeness:
Is everything customer asked for provided?
Is a mail order from a catalogue company
complete when delivered?

CII Institute of Logistics Total Quality Management

 Dimensions of Quality:
Service (cont.)

Courtesy:
How are customers treated by employees?
Are catalogue phone operators nice and are
their voices pleasant?

Consistency
Is the same level of service provided to each
customer each time?
Is your newspaper delivered on time every
morning?

CII Institute of Logistics Total Quality Management

 Dimensions of Quality:
Service (cont.)

Accessibility and convenience

How easy is it to obtain service?
Does a service representative answer you calls quickly?
Accuracy
Is the service performed right every time?
Is your bank or credit card statement correct every month?
Responsiveness
How well does the company react to unusual situations?
How well is a telephone operator able to respond to a customers
questions?

CII Institute of Logistics Total Quality Management

 Meaning of Quality:
Producers Perspective

Quality of Conformance
Making sure a product or service is
produced according to design
if new tires do not conform to
specifications, they wobble
if a hotel room is not clean when a

guest checks in, the hotel is not

functioning according to
specifications of its design
CII Institute of Logistics Total Quality Management
 Meaning of Quality:
A Final Perspective
Consumers and producers
perspectives depend on each
other
Consumers perspective: PRICE
Producers perspective: COST
Consumers view must dominate

CII Institute of Logistics Total Quality Management

 Meaning of Quality
Meaning
Meaning of
of Quality
Quality

Producers
Producers Perspective
Perspective Consumers
Consumers Perspective
Perspective

Quality
Quality of
of Conformance
Conformance Quality
Quality of
of Design
Design

Production
Production Conformance to Quality characteristics Marketing
Marketing
specifications Price
Cost

Fitness
Fitness for
for
Consumer
Consumer UseUse

CII Institute of Logistics Total Quality Management

Why TQM?
Ford Motor Company had operating losses
of $3.3 billion between 1980 and 1982.
Xerox market share dropped from 93% in
1971 to 40% in 1981.
Attention to quality was seen as a way to
combat the competition.

CII Institute of Logistics Total Quality Management

TQM: A Buzzword Losing
Popularity

For many companies, the term TQM is

associated with corporate programs (mid 1980s
~ early 1990s) aimed at implementing
employee teams and statistical process control.

Unfortunately, many companies were

dissatisfied with the perceived results of these
programs, concluding TQM does not work.

Question: Why were they dissatisfied?

Were they justified?

CII Institute of Logistics Total Quality Management

TQM
Total - made up of the whole
Quality - degree of excellence a product

or service provides
Management - act, art or manner of

planning, controlling, directing,.

Therefore, TQM is the art of managing

the whole to achieve excellence.
excellence
Total Quality Management
What does TQM mean?
Total Quality Management means that
the organization's culture is defined by
and supports the constant attainment of
customer satisfaction through an
integrated system of tools, techniques,
and training. This involves the
continuous improvement of
organizational processes, resulting in
high quality products and services.
CII Institute of Logistics Total Quality Management
Whats the goal of TQM?

Do the right things right the

first time, every time.

CII Institute of Logistics Total Quality Management

Another way to put it
At its simplest, TQM is all managers
leading and facilitating all contributors in
everyones two main objectives:
(1) total client satisfaction through
quality products and services; and
(2) continuous improvements to
processes, systems, people, suppliers,
partners, products, and services.
CII Institute of Logistics Total Quality Management
Productivity and TQM
Traditional view:
Quality cannot be improved without
significant losses in productivity.
TQM view:
Improved quality leads to improved
productivity.

CII Institute of Logistics Total Quality Management

Basic Tenets of TQM

1. The customer makes the ultimate

determination of quality.
2. Top management must provide leadership
and support for all quality initiatives.
3. Preventing variability is the key to
producing high quality.
4. Quality goals are a moving target, thereby
requiring a commitment toward continuous
improvement.
5. Improving quality requires the
establishment of effective metrics. We must
speak with data and facts not just opinions.
CII Institute of Logistics Total Quality Management
The three aspects of TQM
Tools, techniques, and training in
Counting their use for analyzing,
understanding, and solving quality
problems

Customers Quality for the customer as a

driving force and central concern.

Culture Shared values and beliefs,

expressed by leaders, that define
and support quality.

CII Institute of Logistics Total Quality Management

Total Quality Management
and Continuous Improvement

TQM is the management process used to

make continuous improvements to all
functions.
TQM represents an ongoing, continuous

commitment to improvement.
The foundation of total quality is a

management philosophy that supports

meeting customer requirements through
continuous improvement.
Total Quality Management
Continuous Improvement versus
Traditional Approach
Traditional Approach Continuous Improvement

Market-share focus
Customer focus

Individuals
Cross-functional teams
Focus on who and why Focus on what and how
Short-term focus Long-term focus
Status quo focus Continuous improvement
Product focus Process improvement
Innovation focus

Fire fighting

Incremental improvements
Problem solving

CII Institute of Logistics Total Quality Management

Quality Throughout

A Customers impression of quality begins with

the initial contact with the company and
continues through the life of the product.
Customers look to the total package - sales, service
during the sale, packaging, deliver, and service after
the sale.
Quality extends to how the receptionist answers the
phone, how managers treat subordinates, how
courteous sales and repair people are, and how the
product is serviced after the sale.

All departments of the company must strive to

improve the quality of their operations.
CII Institute of Logistics Total Quality Management
Value-based Approach

Manufacturing
Service Dimensions
Dimensions Reliability
Performance Responsiveness
Features Assurance
Reliability Empathy
Conformance Tangibles
Durability
Serviceability
Aesthetics
Perceived quality
CII Institute of Logistics Total Quality Management
The TQM System
Objective Continuous
Improvement

Principles Customer Process Total

Focus Improvement Involvement

Leadership
Education and Training
Elements Supportive structure
Communications Reward and recognition
Measurement

CII Institute of Logistics Total Quality Management

 Total Quality Management
Commitment to quality throughout organization

Principles of TQM
Customer-oriented
Leadership
Strategic planning
Employee responsibility
Continuous improvement
Cooperation
Statistical methods
Training and education

CII Institute of Logistics Total Quality Management

Quality Gurus
Walter Shewart
In 1920s, developed control charts
Introduced the term quality assurance
W. Edwards Deming
Developed courses during World War II to teach
statistical quality-control techniques to engineers and
executives of companies that were military suppliers
After the war, began teaching statistical quality
control to Japanese companies
Joseph M. Juran
Followed Deming to Japan in 1954
Focused on strategic quality planning

CII Institute of Logistics Total Quality Management

Quality Gurus (cont.)

Armand V. Feigenbaum
In 1951, introduced concepts of total quality
control and continuous quality improvement

Philip Crosby
In 1979, emphasized that costs of poor quality far
outweigh the cost of preventing poor quality
In 1984, defined absolutes of quality
managementconformance to requirements,
prevention, and zero defects

Kaoru Ishikawa
Promoted use of quality circles
Developed fishbone diagram
Emphasized importance of internal customer

CII Institute of Logistics Total Quality Management

 Demings 14 Points
1. Create constancy of purpose
2. Adopt philosophy of prevention
3. Cease mass inspection
4. Select a few suppliers based on
quality
5. Constantly improve system and
workers
CII Institute of Logistics Total Quality Management
Demings 14 Points (cont.)
6. Institute worker training
7. Instill leadership among
supervisors
8. Eliminate fear among employees
9. Eliminate barriers between
departments
10. Eliminate slogans

CII Institute of Logistics Total Quality Management

Demings 14 Points (cont.)
11. Remove numerical quotas
12. Enhance worker pride
13. Institute vigorous training and
education programs
14. Develop a commitment from top
management to implement
above 13 points

CII Institute of Logistics Total Quality Management

Deming Wheel: PDCA
Cycle
4. Act 1. Plan
Institutionalize Identify
improvement; problem and
continue develop plan
cycle. for
improvement.

3. Study/Check 2. Do
Assess plan; is it Implement
working? plan on a test
basis.

CII Institute of Logistics Total Quality Management

TQM and
Partnering
a relationship between a company and
its supplier based on mutual quality
standards

Customers
system must measure customer
satisfaction

Information Technology
infrastructure of hardware, networks,
and software necessary to support a
quality program

CII Institute of Logistics Total Quality Management

Quality Improvement and Role
of Employees
Participative
problem solving
employees involved in
quality management
every employee has
undergone extensive
training to provide quality
service to Disneys guests

3-34
CII Institute of Logistics Total Quality Management
Quality Circle
Organization
8-10 members
Same area
Supervisor/moderator

Training
Presentation Group processes
Implementation Data collection
Monitoring Problem analysis

Problem
Solution Identification
Problem results List alternatives
Consensus
Brainstorming
Problem
Analysis
Cause and effect
Data collection
and analysis

CII Institute of Logistics Total Quality Management

 Strategic Implications of
TQM

Strong leadership
Goals, vision, or mission

Operational plans and policies

Mechanism for feedback

CII Institute of Logistics Total Quality Management

 Six Sigma
A process for developing and delivering
near perfect products and services
Measure of how much a process
deviates from perfection
3.4 defects per million opportunities
Champion
an executive responsible for project success

CII Institute of Logistics Total Quality Management

 Black Belts and
Green Belts
Black Belt
project leader
Master Black Belt
a teacher and mentor
for Black Belts
Green Belts
project team
members

3-38
CII Institute of Logistics Total Quality Management
 Six Sigma: DMAIC
DEFINE
DEFINE MEASURE
MEASURE ANALYZE
ANALYZE IMPROVE
IMPROVE CONTROL
CONTROL

67,000
67,000 DPMO
DPMO
cost
cost == 25%
25% of
of
sales
sales 3.4
3.4 DPMO
DPMO

CII Institute of Logistics Total Quality Management

 TQM in Service Companies

Principles of TQM apply equally well to

services and manufacturing

Services and manufacturing companies

have similar inputs but different
processes and outputs

Services tend to be labor intensive

Service defects are not always easy to

measure because service output is not
usually a tangible item

CII Institute of Logistics Total Quality Management

 Quality Attributes in Service

Benchmark
best level of quality
achievement one
company or
companies seek to
achieve

Timeliness
how quickly a service
is provided quickest, friendliest,
most accurate service
available.

3-41
CII Institute of Logistics Total Quality Management
 Cost of Quality

Cost of Achieving Good Quality

Prevention costs
costs incurred during product design
Appraisal costs
costs of measuring, testing, and analyzing

Cost of Poor Quality

Internal failure costs
include scrap, rework, process failure, downtime,
and price reductions
External failure costs
include complaints, returns, warranty claims, liability,
and lost sales

CII Institute of Logistics Total Quality Management

 Prevention Costs
Quality planning costs
costs of developing and
implementing quality
management program
Product-design costs
costs of designing products
with quality characteristics
Process costs
costs expended to make
sure productive process
conforms to quality
specifications
CII Institute of Logistics Total Quality Management
Training costs
costs of developing and
putting on quality training
programs for employees
and management
Information costs
costs of acquiring and
maintaining data related to
quality, and development of
reports on quality
performance
 Appraisal Costs

Inspection and testing

costs of testing and inspecting materials, parts, and
product at various stages and at the end of a
process

Test equipment costs

costs of maintaining equipment used in testing
quality characteristics of products

Operator costs
costs of time spent by operators to gar data for
testing product quality, to make equipment
adjustments to maintain quality, and to stop work to
assess quality

CII Institute of Logistics Total Quality Management

Internal Failure Costs
Process downtime costs
Scrap costs
costs of poor-quality products costs of shutting down
that must be discarded, productive process to fix
including labor, material, and problem
indirect costs
Rework costs Price-downgrading costs
costs of fixing defective costs of discounting poor-
products to conform to quality quality productsthat is,
specifications
selling products as
Process failure costs
seconds
costs of determining why
production process is
producing poor-quality
products

CII Institute of Logistics Total Quality Management

 External Failure Costs
Customer complaint costs
costs of investigating and
satisfactorily responding to a
customer complaint resulting
from a poor-quality product
Product return costs
costs of handling and replacing
poor-quality products returned
by customer
Warranty claims costs
costs of complying with
product warranties
Product liability costs
litigation costs
resulting from product
liability and customer
injury
Lost sales costs
costs incurred
because customers
are dissatisfied with
poor quality products
and do not make
additional purchases
Measuring and Reporting Quality
Costs

Index numbers
ratios that measure quality costs against a
base value
labor index
ratio of quality cost to labor hours
cost index
ratio of quality cost to manufacturing cost
sales index
ratio of quality cost to sales
production index
ratio of quality cost to units of final product

CII Institute of Logistics Total Quality Management

 QualityCost 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

CII Institute of Logistics Total Quality Management

 Quality Management
and Productivity
Productivity
ratio of output to input
Yield: a measure of productivity

3-49
CII Institute of Logistics Total Quality Management
QualityProductivity Ratio

QPR
productivity index that includes productivity and
quality costs

(non-defective units)
QPR =
(input) (processing cost) + (defective units) (reworked cost)

CII Institute of Logistics Total Quality Management

 Seven Quality Control Tools

Pareto Analysis Scatter Diagram

Flow Chart SPC Chart
Check Sheet Cause-and-Effect
Histogram Diagram

CII Institute of Logistics Total Quality Management

 Pareto Analysis
NUMBER OF
CAUSE DEFECTS PERCENTAGE

Poor design 80 64 %
Wrong part dimensions 16 13
Defective parts 12 10
Incorrect machine calibration 7 6
Operator errors 4 3
Defective material 3 2
Surface abrasions 3 2
125 100 %

CII Institute of Logistics Total Quality Management

 Percent from each cause

10
20
30
40
50
60
70

0
Po
W or
ro De
ng si
di gn
(64)

m
De en
fe si
ct on
iv s (13)
M e
ac pa
hi r ts
ne
(10)

ca
O
pe libr
ra at
to io
(6)

re ns
De rr
fe or
ct s
iv
(3)

e
Su m

Causes of poor quality

rfa at
er
ce ia
(2)

ab ls
ra
si
Pareto Chart

on
s
(2)

CII Institute of Logistics Total Quality Management

 Flow Chart
Start/
Operation Operation Decision Operation
Finish

Operation Operation

Decision Start/
Finish

CII Institute of Logistics Total Quality Management

Check Sheet
COMPONENTS REPLACED BY LAB
TIME PERIOD: 22 Feb to 27 Feb 2002
REPAIR TECHNICIAN: Bob

TV SET MODEL 1013

Integrated Circuits ||||
Capacitors |||| |||| |||| |||| |||| ||
Resistors ||
Transformers ||||
Commands
CRT |

CII Institute of Logistics Total Quality Management

Histogram
20

15

10

0
1 2 6 13 10 16 19 17 12 16 2017 13 5 6 2 1

CII Institute of Logistics Total Quality Management

 Scatter Diagram
Y

CII Institute of Logistics Total Quality Management

 Control Chart
24
UCL = 23.35
21
Number of defects

18 c = 12.67

15

12

6
LCL = 1.99
3
2 4 6 8 10 12 14 16
Sample number

CII Institute of Logistics Total Quality Management

 Cause-and-Effect Diagram
Measurement
Measurement Human
Human Machines
Machines
Faulty
testing equipment Poor supervision Out of adjustment

Incorrect specifications Lack of concentration Tooling problems

Improper methods Inadequate training Old / worn

Quality
Quality
Inaccurate Problem
Problem
temperature
control Defective from vendor Poor process design
Ineffective quality
Not to specifications management
Dust and Dirt Material- Deficiencies
handling problems in product design

Environment
Environment Materials
Materials Process
Process

CII Institute of Logistics Total Quality Management

 Baldrige Award
Created in 1987 to stimulate growth of
quality management in the United States

Categories
Leadership
Information and analysis
Strategic planning
Human resource
Focus
Process management
Business results
Customer and market focus
CII Institute of Logistics Total Quality Management
Other Awards for Quality
National individual awards International awards
Armand V. Feigenbaum European Quality Award
Medal Canadian Quality Award
Deming Medal Australian Business
E. Jack Lancaster Medal Excellence Award
Edwards Medal Deming Prize from Japan
Shewart Medal
Ishikawa Medal