TECHNIQUES USED IN TOTAL QUALITY MANAGEMENT

PROCESS IMPROVEMENT
By:
Mitzi Estellero and Melanie Samsona

PROCESS IMPROVEMENT
 Process Improvement is used to identify, analyze and improve existing processes
within an organization to meet new goals and objectives. This is an at a glance
review of the top methodologies employed for Process Improvement.
 Process improvement is a simple yet powerful idea. It is how businesses identify
the parts of their business processes where they can increase their profit margins,
cut down on expenditures, and speed up their operational timelines.
It’s not a radical or new concept–it was introduced by James Harrington as early
on as 1991–but it’s especially important today.
There are a lot of methods and techniques through which a company identifies
problem areas in their business processes. These process improvement
techniques can analyze not only processes, but also design improvements that
can help scale processes once the business grows larger.
Why You Need Process Improvement
Inefficient processes lead to a waste of precious employees’ time
 The time that someone spends doing an unnecessary and redundant task could’ve
been better spent in more valuable areas.
Working standards can drop
 Inefficiently built processes often mean that work becomes defective. Reports can
go missing, deadlines can be missed, and employees can drop the ball in so many
areas.
Productivity can take a hit
 The bottom line in any business is the finances, and productivity losses first hit this
vital area. If you’re paying a team to do a job that could be easily automated, you’re
literally losing money by the minute.
Besides these reasons, you’ll also want to stay ahead of radical improvements in
technology, industry trends, and how your competition operates.
How Process Improvement Works
Business Process Improvement can work in two ways: it can flow through a structured
path, or take a more informal route. Either way, though, it tends to follow four common
steps.
Process Audits, And Finding Improvement Opportunities
 The audit is usually the best place to start process improvement efforts. Here’s
what you should be looking for: opportunities to improve process, and potential risk
 areas. This will help you strategize business improvement, especially in regard to
prioritizing specific areas.
 At this stage, it’s a good idea to get an understanding of how tweaking a particular
process will impact resources, as well as stakeholders–which may be the
organization itself, teams, individual employees, partner organizations, vendors, or
customers.
Analyze Process That Are Currently in Use
 Once you’ve established which area you want to improve, spend time analyzing
the processes that are in place. You can do this through process mapping
(workflows), cause/effect studies, and operational surveys.
 Ask the right questions: Check if the process is broken, and where. Which steps
cause delays/bottlenecks, and which ones are costly? Which steps cause quality
losses?
Build Commitment and Support
 A commonly skipped step, and often the difference between a token effort and one
that brings real change.
 Process improvement isn’t an instant do-over. It requires a dedicated commitment
across the board, and that’s why getting senior management support is crucial.
Managerial support will make the difference when you explain the change in the
status quo, and why it is necessary.
 Improving processes takes a lot of time and resources, so make sure you get the
all-important upper management approval and support.
Strategize Your Process Improvement Plan
 A good strategy will include the steps you’ve isolated as problem areas, why they
are problem areas, and how you plan to improve them. Make sure that your
process improvement objectives are realistic, measurable, and necessary in the
context of your organization’s strategic long-term and short-term goals.
Techniques of Process Improvement
1. Process mapping
It is the strategic analysis of identifying and creating a visual depiction of the process
flow of various areas of an organization. For example, the supply chain cycle is an
extensive process beginning with vendor selections, moving on to procurement,
manufacturing and quality control and ending with merchandise distribution. Business
process mapping provides benefits to organizations looking to lower costs and
improve efficiency.
Key elements of process mapping include actions, activity steps, decision points,
functions, inputs/outputs, people involved, process measurements and time required.
Basic symbols are used in a process map to describe key process elements. Each
process element is represented by a specific symbol such as an arrow, circle,
diamond, box, oval or rectangle.
Benefits
Visualization of Roles
This should go without saying – every once in a while, you end up in a situation where
no one knows what’s going on with a certain process. Who’s in charge of what? Why is
the new report not ready? Why did the manufacturing line just blow up?
A business process map helps visualize the responsibilities on everyone’s part – it’s
going to be clear who’s in charge of what for each part of a process.
Problem Solving
Spotting the problem is easy – just look at what blew up. Finding the source, however,
tends to be more difficult. A process map visualizes the entire process that led to the
bottleneck, making it a lot easier to spot what, exactly, went wrong.
Risk Management & Compliance
As well as identifying areas that are causing inefficiencies, Business Process Mapping
is a great tool for spotting potential risks caused by processes that leave the company
open to legal or health and safety problems.
If you end up missing a step that’s critical to some governmental regulations, it can be
extremely hazardous to the company – creating danger for the employees or the
environment, which in turn, leads to fines. For the same reasons, process mapping can
be a valuable resource when it comes to supplying evidence for regulatory standards in
terms of compliance.
Establishing Best Practice
Once Business Process Mapping has been introduced to a company and a process has
been mapped and optimized accordingly, the map can be used across the board as
evidence of best practice and an exemplar for the rest of the business processes. This
brings some uniformity to the way processes work within the organization and rewards
those who put in the initial effort, as well as demonstrating the importance of the
mapping.
If on the other hand, a process is underperforming, it’s easier to try out different ways to
carry it out & compare it to the original benchmark.
Showing the Big Picture
In any business larger than a handful of staff, it is inevitable that a silo mentality will
develop over time, and that staff at all levels will lose sight of the big picture of what the
business is attempting to achieve. Even when you drill down to just one process
involved in the organization, Business Process Mapping can help everyone understand
the big picture and get re-engaged with the vision and the steps required to achieve it.
Business Process Mapping allows your employees to get a very good sense of what’s
going on within the business – both on a day-to-day level and on the larger scale.
This, in turn, makes it easier to achieve the bigger goals.
How to Create a Process Map
Step 1: Identify the problem
  What is the process that needs to be visualized?
 Type its title at the top of the document.
Step 2: Brainstorm activities involved
 At this point, sequencing the steps isn’t important, but it may help you to
remember the steps needed for your process.
 Decide what level of detail to include.
 Determine who does what and when it is done.
Step 3: Figure out boundaries
 Where or when does the process start?
 Where or when does the process stop?
Step 4: Determine and sequence the steps
 It’s helpful to have a verb begin the description.
 You can show either the general flow or every detailed action or decision.
Step 5: Draw basic flowchart symbols
Each element in a process map is represented by a specific flowchart symbol. Lucid
chart makes it simple to create and rearrange shapes, add labels and comments and
even use custom styling in your process map.
 Ovals show the beginning of a process or the stopping of a process.
 Rectangles show an operation or activity that needs to be done.
 Arrows represent the flow of direction.
 Diamonds show a point where a decision must be made. Arrows coming out of a
diamond are usually labeled yes or no. Only one arrow comes out of an activity
box. If more than is needed, you should probably use a decision diamond.
 A parallelogram shows inputs or outputs.
Step 6: Finalize the process flowchart
 Review the flowchart with others stakeholders (team member, workers,
supervisors, suppliers, customers, etc.) for consensus.
 Make sure you’ve included important chart information like a title and date, which
will make it easy to reference.
 Helpful questions to ask:
o Is the process being run how it should?
o Will team members follow the charted process?
o Is everyone in agreement with the process map flow?
o Is anything redundant?
o Are any steps missing?
Types of Process Maps/Mapping
 Swimlane Diagram – This one functions almost identically the same as a
generic flowchart. The main difference, however, is that with the swimlane
diagram, each of the steps is divided between different teams or individuals who
 are responsible for them. This makes it a very clear system for processes that
need to be mapped out in this manner.
 Value stream map – Another alternative to the flowchart, a value stream map is
often used in lean six sigma applications and are much less straightforward to
analyze at a glance. This makes them potentially more useful for a more in-depth
look into a process, but also makes them less commonly used.
 SIPOC – This stands for Supplier Inputs Processes Outputs Customer and is a
very simplified process map that strips away 99% of the information to focus on
the essentials of the process and the people involved.

2. Histogram
 Histogram makes our task easier to identify different data, the frequency of the
data occurring in the dataset and categories which are difficult to interpret in a
tabular form.
 It helps to visualize the distribution of the data.
 When we have huge datasets it can be easily visualized using a histogram.
 It also helps get an understanding of the skewness of the data.
Benefits
o Histogram makes our task easier to identify different data, the frequency of the
data occurring in the dataset and categories which are difficult to interpret in a
tabular form.
o It helps to visualize the distribution of the data.
o When we have huge datasets it can be easily visualized using a histogram.
o It also helps get an understanding of the skewness of the data.
How to create Histogram
• Step 1 – Minimum Data Points
• Step 2 – Number of Bins
• Step 3 – Determine Bin Width
TECHNIQUES COMMONLY USED IN PROCESS IMPROVEMENT
DRIVE
DRIVE is a commonly used tool and approach in process improvement. This approach
helps us analyze the problem from different angles.
 D efine the scope of the process, the criteria to measure success by, and agree
the deliverables.
 R eview the current process, identify and collect data.
 I dentify improvements or solutions for the problem as well as necessary changes
to gain and sustain the improvements
 V erify that the improvements will achieve the goals that were defined, then
prioritize and plan the improvements
  E xecute the plan and implement the solutions and improvements, gather feedback
and review
 The process can much more easily be executed by a team of problem solvers.
This makes the approach scalable.
 Since the process is formally defined it can be continuously improved. Over time
the process can evolve to be so powerful it's your most important asset, as it is for
many of the world's largest companies like Toyota, Intel, and Exxon,
DMAIC
DMAIC is a process improvement cycle developed as part of the Lean Six Sigma
methodologies. It is a five-step process that focuses on improving quality while minimizing
defects in a process.
 Define: Define what is currently known about the process, the goals and the
deliverables for the project. This will define the scope for your simulation what
needs to be covered and what is too detailed to add value.
Helpful tools to use during this stage:
 Project charter
A document that, while describing the purpose of a project and its
scope, legally authorizes the beginning of the project. It clarifies general
specifications, the purpose of the project, the key stakeholders, and the
possible outcomes.

 Workflow diagram
A visual representation of a business process (or workflow), usually done
through a flowchart. It uses standardized symbols to describe the exact steps
needed to complete a process, as well as pointing out individuals responsible
for each step.
 Measure: Collect the data; decide what to measure and how to measure it. This
data will be the inputs of your simulation so that you can create an accurate model
of your current process and defects.
 Analyze: Analyze the data collected to determine the cause of problems (defects)
in the process. Using simulation at this stage provides the ability to experiment
with the process, test improvements and see how the process responds to
changes.
 Improve: Identify and implement solutions to address these defects.
 Control : Monitor the improvements to ensure sustained success.
 Six Sigma is a set of management techniques that helps companies minimize the
likelihood of errors and improve the customer experience.
 If Six Sigma is the methodology, then DMAIC serves as the roadmap for business
to solve problems and improve their processes.
  By using DMAIC, businesses can improve the quality of their products and
services, increase their revenue, and decrease their overall costs. However, even
though it is a proven strategy its effectiveness depends mostly on how well it is
implemented and maintained.
The Benefits of DMAIC
 Higher revenue
When companies streamline their processes through DMAIC they will have higher levels
of productivity. As they begin to increase their production with fewer defects they will
typically begin to bring in more revenue.
 Decreased Cost
Many companies don’t realize how much time and resources they are wasting. DMAIC
helps companies reduce the amount of wasted time and resources which will save them
money in the long run.
 Increased productivity
The sole purpose of implementing Six Sigma is to reduce waste. This will increase an
organization’s productivity as they are able to produce more while using fewer resources.
SIMULATION
 A simulation is a computer model that mimics the operation of a real or proposed
system, such as the day-to-day operation of a bank, the running of an assembly
line in a factory, or the staff assignment of a hospital or call center.
 The simulation is time based, and takes into account all the resources and
constraints involved, as well as the way these things interact with each other as
time passes. Simulation also builds in the randomness you would see in real life.
For example, it doesn't always take exactly 5 minutes for a customer to be served and a
customer doesn't always arrive every 15 minutes. This means that the simulation really
can match reality, so when you make changes to the simulation it will demonstrate exactly
how the system would behave in real life.
 With simulation software you can quickly try out your ideas at a fraction of the cost
of trying them in the real organization. And, because you can try ideas quickly, you
can have many more ideas, and gain many insights, into how to run the
organization more effectively.
 Simulation offers a powerful, evidence-based approach to decision making - by
using a virtual representation to test the impact of process changes and 'what if'
scenarios, you can find an approach that delivers the best results.
PARETO CHART
A Pareto chart is a ranking of defects, causes, and/or data in a process. They’re
ranked from the most significant to the least significant. This kind of ranking helps in
process improvement analysis, since you can filter out the major factors that need
attention and the details that don’t affect the process much. It is named after the Pareto
principle, which is named for the Italian economist Vilfredo Pareto.
 Using this data, you can channel your efforts into focusing on those factors that cause
the greatest impact, while leaving the smaller details for a later time. It contains
both bars and a line graph, where individual values are represented in descending order
by bars, and the cumulative total is represented by the line. It is used to identify the vital
few problems or causes of problems that have the greatest impact.
When to use a Pareto Chart?
 When analyzing data about the frequency of problems or causes in a process.
 When there are many problems or causes and you want to focus on the most
significant.
 When analyzing broad causes by looking at their specific components.
 When communicating with others about your data.
Pareto Chart Example
Chart 1 shows how many customer
complaints were received in each of
five categories.

Chart 2 takes the largest category,

“documents” from chart 1, breaks it
down into six categories of document-
related complaints and shows
cumulative values.

If all complaints cause equal distress to

the customer, working on eliminating
document-related complaints would have
the most impact, and of those, working on
quality certificates should be most fruitful.
 BENCHMARKING
By:
Kristel Mae Hecto and Arvin Jay Emia

What is benchmarking?
 Benchmarking is a systematic process for identifying and implementing best or
better practices.
 Is a way to go backstage and watch another company’s performance from the
wings, where all stage tricks and hurried realignments are visible.
(Joseph Juran’s, 1964) ”What is that organizations do that gets result so much
better than ours”
The answer to this question opens door to benchmarking, an approach that is
accelerating among many firms that have adopted the total quality management (TQM)
philosophy.

Types of Benchmarking
It is useful to distinguish between the main types of benchmarking: Firstly, there is
Informal Benchmarking. This is the type of benchmarking that most of us do
unconsciously at work and in our home life. Secondly, there is Formal Benchmarking
of which there are two types: Performance Benchmarking and Best Practice
Benchmarking.

What is Informal Benchmarking?

This is a type of benchmarking that most of us do unconsciously at work and in our
home life. We constantly compare and learn from the behavior and practices of
others – whether it is how to use a software program, how to cook a better meal, or
 play our favorite sport. In the context of work, most learning from informal
benchmarking comes from the following:
 Talking to work colleagues and learning from their experience (coffee breaks
and team meetings are a great place to network and learn from others).
 Consulting with experts (for example, business consultants who have
experience of implementing a particular process or activity in many business
environments.
 Networking with other people from other organizations at conferences,
seminars, and Internet forums.
What is Formal Benchmarking?
There are two types of Formal Benchmarking - Performance and Best Practice
Benchmarking.
Performance benchmarking
 this involves comparing the performance levels of organizations for a specific
process. This information can then be used for identifying opportunities for
improvement and/or setting performance targets. Performance levels of other
organizations are normally called benchmarks and the ideal benchmark is one
that originates from an organizationrecognized as being a leader in the related
area.
 Performance benchmarking may involve the comparison of financial measures
(such as expenditure, cost of labor, cost of buildings/equipment, cost of energy,
adherence to budget, cash flow, revenue collected) or non-financial measures
(such as absenteeism, staff turnover, the percentage of administrative staff to
front-line staff, budget processing time, complaints, environmental impact or call
Centre performance).
Best practice benchmarking
 this is where organizations search for and study organizations that are high
performers in particular areas of interest. The processes themselves of these
organizations are studied rather than just the associated performance levels,
normally through some mutually beneficial agreement that follows a
benchmarking code of conduct. Knowledge gained through the study is taken
back to the organization and where feasible and appropriate, these high
performing or best practices are adapted and incorporated into the
organization’s own processes.
 Therefore best practice benchmarking involves the whole process of
identifying, capturing, analyzing, and implementing best practices . There
are a number of best practice benchmarking methodologies. One of which
is the TRADE Best Practice Benchmarking Methodology.
Drivers for benchmarking
  customers continually demand better quality, lower prices, shorter lead times,
etc.
 competitors are constantly trying to get ahead and steal markets
 legislation – changes in our laws place ever greater demands for improvement.
Internal drivers include:
 targets which require improvements on our ‘best ever’ performance
 technology – a fundamental change in processes is often required to benefit fully
from introducing new technologies
 self-assessment results, which provide opportunities to learn from adapting best
practices.
The word ‘benchmark’ is a reference or measurement standard used for
comparison, and benchmarking is the continuous process of identifying, understanding
and adapting best practice and processes that will lead to superior performance.
Benchmarking is not:
o a panacea to cure the organization’s problems, but simply a practical tool to drive
up process performance
o primarily a cost reduction exercise, although many benchmarking studies will
result in improved financial performance
o industrial tourism – study tours have their place, but proper benchmarking goes
beyond ‘tourism’ to really understanding the enablers to outstanding results
o spying – use of a benchmarking code of conduct ensures the work is done with
the agreement and openness of all parties
o catching up with the best – the aim is to reach out and extend the current best
practice (by the time we have caught up, the benchmark will have moved
anyway).

Benefits of Benchmarking
There may be many reasons for carrying out benchmarking. Some of
them are set against various objectives in Table 1.1. The links between benchmarking
and TQM are clear – establishing objectives based on industry best practice should
directly contribute to better meeting of the internal and external customer requirements.
The benefits of benchmarking can be numerous but include:
creating a better understanding of the current position
heightening sensitivity to changing customer needs
encouraging innovation
developing realistic stretch goals
establishing realistic action plans.

Four basic categories of benchmarking:

  Internal – the search for best practice of internal operations by
comparison, e.g. multi-site comparison of polymerization processes and
performance.
Table 1.1
Objectives Without benchmarking With benchmarking
Becoming Internally focused Understanding of
competitiveness
Competitive Evolutionary change Ideas from proven
practices
Industry best practices Few solutions Many options
Frantic catch up activity Superior performance
Defining customer Based on history or gut Market reality
requirements feeling
Perception Objective evaluation
Establishing effective Lacking external focus Credible, unarguable
goals and objectives
Reactive Proactive
Developing true measures Pursuing pet projects Solving real problems
of productivity
Strength and weaknesses Understanding outputs
not understood
Route of least resistance Based on industry best
practices

 Functional – seeking functional best practice outside an industry, e.g.

mining company benchmarking preventative maintenance of
pneumatic/hydraulic equipment with Disney.
 Generic – comparison of outstanding processes irrespective of industry or
function, e.g. restaurant chain benchmarking kitchen design with US
nuclear submarine fleet to improve restaurant to kitchen space ratios.
 Competitive – specific competitor to competitor comparisons for a product,
service, or function of interest, e.g. retail outlets comparing price
performance and efficiency of internet ordering systems.

THE PURPOSE AND PRACTICE OF BENCHMARKING

At its simplest, competitive benchmarking, the most common form requires every
department/function/process to examine itself against the counterpart in the best
competing companies. This includes a scrutiny of all aspects of their activities.
Benchmarks which may be important for customer satisfaction, for example, might
include:
  Product or service quality and consistency.
 Correct and on-time delivery.
 Speed of response or new product development.
 Correct billing. For internal impact the benchmarks may include:
 Waste, rejects or errors.
 Inventory levels/work in progress.
 Costs of operation.
 Staff turnover.

Benchmarking is very important in the ‘administration’ areas, since it continuously

measures services and practices against the equivalent operation in the toughest direct
competitors or organizations renowned as leaders in the areas, even if they are in the
same organization. An example of quantitative benchmarks in absenteeism is given in
Table 1.2.

Table 1.2.
Organisation’s Productivity opportunity
absence level
(%)
Under 3 This level matches an aggressive benchmark that has been achieved
in ‘excellent’ organizations.
3–4 This level may be viewed within the organization as a good
performance – representing a moderate productivity opportunity
improvement.
5–8 This level is tolerated by many organizations but represents a major
improvement opportunity.
9–10 This level indicates that a serious absenteeism problem exists
Over 10 This level of absenteeism is extremely high and requires immediate
senior management attention.

The purpose of benchmarking then is predominantly to:

 change the perspectives of executives and managers
 compare business practices with those of world class organizations
 challenge current practices and processes
 create improved goals and practices for the organization.
 For organizations which have not carried out benchmarking before, it may be
useful initially to carry out a simple self-assessment of their readiness in terms of:
∞ how well processes are understood
∞ how much customers are listened to
∞ how committed the senior team is.

Table 1.3 provides a simple pro forma for this purpose. The score derived gives a crude
guide to the readiness of the organization for benchmarking:
32–48 Ready for benchmarking
16–31 Some further preparation required before the benefits of benchmarking can be
fully derived
0–15 Some help is required to establish the foundations and a suitable platform for
benchmarking
Table 1.3
After studying the statements below tick one box for each to reflect the level to
which the statement is true for the organization.
Most Same Few None
Processes have been documented with measures to
understand performance.
Employees understand the processes that are related to
their own work.
Direct customer interactions, feedback or studies about
customers influence decisions about products and
services
Problems are solved by teams.
Employees demonstrate by words and deeds that they
understand the organization’s mission,vision and
values.
Senior executives sponsor and actively support quality
improvement projects.
The organization demonstrates by words and by deeds
that continuous improvement is part of the culture.
Commitment to change is articulated in the
organization’s strategic plan.
Add the columns:
x6 x4 x2 x0
Multiply by the factor
Obtain the grand total?
The benchmarking process has five main stages which are all focused on trying to
measure comparisons and identify areas for action and change (Figure 1.1).

PLAN the study

- Select the process(es) for benchmarking.
- Bring together the appropriate team to be involved and establish roles and
responsibilities.
- Identify and define benchmarks and measures for data collection.
- Identify best competitors or operators of the process(es), perhaps using
customer feedback or industry observers.
- Document the current process(es).
COLLECT data and information
- Decide information and data collection methodology, including desk
research.
o Record current performance levels.
o Identify benchmarking partners.
o Conduct a preliminary investigation.
o Prepare for any site visits and interact with target organizations.
o Use chosen data collection methodology.
o Carry out site visits
ANALYSE the data and information
- Normalize the performance data, as appropriate.
- Construct a matrix to compare current performance with benchmarking
competitors’/partners’ performance.
- Identify outstanding practices.
- Isolate and understand the process enablers, as well as the performance
measures.
ADAPT the approaches
- Catalogue the information and create a ‘competency profile’ of the
organization.
- Develop new performance level objectives/targets/standards.
- Vision alternative process(es) incorporating best practice enablers
- Identify and minimize barriers to change.
- Develop action plans to adapt and implement best practices, make
process changes, and achieve goals.
- Implement specific actions and integrate them into the organization.

REVIEW performance and the study

- Monitor the results/improvements.
- Assess outcomes and learnings from the study.
- Review benchmarks.
- Share experiences and best practice learnings from implementation.
- Review relationships with target/partner organizations.
- Identify further opportunities for improving and sustaining performance.

THE ROLE OF BENCHMARKING IN CHANGE

One aspect of benchmarking is to enable organizations to gauge how well they
are performing against others who undertake similar tasks and activities. But a more
important aspect of best practice benchmarking is gaining an understanding of how
other organizations achieve superior performance. A good benchmarking study, for
example in customer satisfaction and retention, will provide its participants with data
and ideas on how excellent organizations undertake their activities and demonstrate
best practices that may be adopted, adapted and used.
This new knowledge will result in the benchmarking team being able to judge the
gap between leading and less good performance, as well as planning considered
actions to bring about changes to bridge that gap. These changes may be things that
184 Performance can be undertaken quickly, with little adaptation and at a minimum of
cost and disruption. Such changes, often brought about by the effected operational
team, are often called ‘quick wins’. This type of change is incremental and carries low
levels of risk but usually lower levels of benefit.
These types of change projects are sometimes referred to as ‘step change’ or
‘breakthrough’ projects/programmes (see Figure 1.2).
 Whatever type of change is involved, a key ingredient of success is taking the
people along. A first class communication strategy is required throughout and beyond
any change activity, as well as the linked activity of stakeholder management. The
benchmarking efforts need to fit into the change model deployed – such a framework is
proposed in Figure 1.3. Many change models exist in diagrammatic form and are often,
in both intent and structure, quite similar. Such a model may be considered as a
‘footprint’ that will lead to the chosen destination, in this case the desired.
 Performance improvements through adoption of best practice. The footprint in
Figure 1.3 demonstrates where benchmarking activities link in to the general flow of
change activity leading to better results.
The success and benefits derived from any benchmarking and change related
activity are directly related to the excellence of the preparation. It is necessary to
consider both the ‘hard’ and ‘soft’ aspects represented in Figure 1.3 and to
systematically plan to meet and overcome any difficulties and challenges identified.
 CAUSE AND EFFECT
By:
Cyd Clarence Lagunday and Renzyl Pagayon

History
Ishikawa diagrams were proposed by Kaoru Ishikawa in the 1960s, who pioneered
quality management processes in the Kawasaki shipyards, and in the process became
one of the founding fathers of modern management.
It was first used in the 1960s and is considered one of the seven basic tools of quality
control. It is known as a fishbone diagram because of its shape, similar to the side view
of a fish skeleton.
Definition of Cause & Effect Diagram
Fishbone diagrams (Ishikawa diagram, Cause and Effect diagram) are successfully used
in various fields of industries and manufacturing to analyze the set of possible causes
and their effects.
The cause and effect diagram is used to explore all the potential or real causes (or
inputs) that result in a single effect (or output). Causes are arranged according to their
level of importance or detail, resulting in a depiction of relationships and hierarchy of
events. This can help you search for root causes, identify areas where there may be
problems, and compare the relative importance of different causes. Typical categories
commonly present in different nature of
business are: The 4 S’s (used in service
The 4 M’s (used in manufacturing) industry)
understanding of the problem.
• Surroundings
 Machine • Suppliers
 Method • Systems
 Material • Skills
 Man Power
The 8 P’s (used in service industry)
 Product=Service More M’s
 Price
 Mother Nature
 Place
(Environment)
 Promotion  Measurement (Inspection)
 People  Maintenance
 Process  Money Power
 Physical Evidence
 Productivity & Quality
When to used it?

• Identify the possible root causes, the basic reasons, for a specific effect, problem
or condition.
• Sort out and relate some of the interactions among the factors affecting a
particular process or effect.
• Analyze existing problems so that corrective action can be taken.
Example of Fishbone Diagram

6 Ms and 8 Ms are globally recognized standards for manufacturing. First you need to
define an effect of the analysis and add it as a head of your diagram, all causes listed
above on this page are added as the bones (without particular order). If necessary, you
can also use on the diagram another terms that better suit for your company.
Step by step process
Steps to solve a problem with a Cause and Effect Diagram:
1. Identify the problem:
Write down the exact problem you face in detail. Where appropriate identify who is
involved, what the problem is, and when and where it occurs. Write the problem in a box
on the left hand side of a large sheet of paper. Draw a line across the paper horizontally
from the box. This arrangement, looking like the head and spine of a fish, gives you
space to develop ideas.
2. Work out the major factors involved:
Next identify the factors that may contribute to the problem. Draw lines off the spine for
each factor, and label it. These may be people involved with the problem, systems,
equipment, materials, external forces, etc. Try to draw out as many possible factors as
possible. If you are trying to solve the problem as part of a group, then this may be a
good time for some brainstorming.
Using the ‘Fish bone’ analogy, the factors you find can be thought of as the bones of the
fish.
3. Identify possible causes:
For each of the factors you considered in stage 2, brainstorm possible causes of the
problem that may be related to the factor. Show these as smaller lines coming off the
‘bones’ of the fish. Where a cause is large or complex, then it may be best to break the
it down into sub-causes. Show these as lines coming off each cause line.
4. Analyze your diagram:
By this stage you should have a diagram showing all the possible causes of your
problem that you can think of. Depending on the complexity and importance of the
problem, you can now investigate the most likely causes further. This may involve
setting up investigations, carrying out surveys, etc. These will be designed to test
whether your assessments are correct.
Advantages and Disadvantages
ADVANTAGES
 Fishbone diagrams permit a thoughtful analysis that avoids overlooking any
possible root causes for a need.
 The fishbone technique is easy to implement and creates an easy‐to‐understand
visual representation of the causes, categories of causes, and the need.
 By using a fishbone diagram, you are able to focus the group on the ʺbig pictureʺ
as to possible causes or factors influencing the problem/need.
 Even after the need has been addressed, the fishbone diagram shows areas of
weakness that ‐ once exposed ‐ can be rectified before causing more sustained
difficulties.
DISADVANTAGE
 The simplicity of a fishbone diagram can be both its strength and its weakness.
As a weakness, the simplicity of the fishbone diagram may make it difficult.
 MEASUREMENT
By:
Clarice E. Montano and Leovelyn Nebres

QUALITATIVE MEASUREMENT

Performance measurement

Measurement of quality performance plays an important role in terms of tracking

progress, identifying opportunities and comparing performance internally and externally.
Measurement should focus on setting specific, agreed and measurable objectives
against each core concept as follows:

• Customer satisfaction- measures ability of satisfying customers completely

• Internal customers are real- targets and measures of internal customer
satisfaction
• All work as a process- involving all personnel for measurement activities
• Measurement- setting measurement activities for subordinates
• Teamwork- setting people involved in teamwork and measure performance
• People make quality- sharing subordinates opinions, suggestions, judgments
• Prevention- setting goals for prevention activities
• Continuous improvement- targets continuous improvement of performance
through involving all personnel

In the organization that is to succeed over the long term, performance must be
measured by the improvements seen by the customer.

In the cycle of never ending improvement, measurement plays an important role in:

• Tracking progress against organizational goals.

• Identifying opportunities for improvement.
• Comparing performance against internal standards.
• Comparing performance against external standards.

Measures are used in process control (e.g. control charts) and in performance
improvement (e.g. improvement teams), so they should give information about how well
processes and people are doing and motivate them to perform better in the future.

The critical elements of a good performance measurement framework (PMF) are:

• Leadership and commitment.
• Full employee involvement.
 • Good planning.
• Sound implementation strategy.
• Measurement and evaluation.
• Control and improvement.
• Achieving and maintaining standards of excellence.

QUANTITATIVE MEASUREMENT

Performance Measurement and the Improvement Cycle

The Deming cycle of continuous improvement – Plan, Do, Check, Act – clearly
requires measurement to drive it, and yet it is a useful design aid for the measurement
system itself:

• PLAN: establish performance objective and standards.

• DO: measure actual performance.
• CHECK: compare actual performance with the objectives and standards –
determine the gap.
• ACT: take the necessary actions to close the gap and make the necessary
improvements.

Before we use performance measurement in the improvement cycle, however, we

should attempt to answer four basic questions:

1. Why measure?
2. What to measure?
3. Where to measure?
4. How to measure?

Why measure?

In a quality-driven, never-ending improvement environment, the following are

some of the main reasons why measurement is needed and why it plays a key role in
quality and productivity improvement:

 To ensure customer requirements have been met.

 To be able to set sensible objectives and comply with them.
 To provide standards for establishing comparisons.
 To provide visibility and provide a ‘balanced scoreboard’ for people to monitor
their own performance levels.
  To highlight quality problems and determine which areas require priority
attention.
 To give an indication of the costs of poor quality.
 To justify the use of resources.
 To provide feedback for driving the improvement effort.

It is also important to know the impact of TQM on improvements in business

performance, on sustaining current performance and perhaps on reducing any decline
in performance.

What to measure?

A good start-point for deciding what to measure is to look at what are the key
goals of senior management; what problems need to be solved; what opportunities are
there to be taken advantage of; and what customers perceive to be the key ingredients
that influence their satisfaction.

Where to measure?

If true measures of the effectiveness of TQM are to be obtained, there are three
components that must be examined – the human, technical and business
components.

The human component is clearly of major importance and the key tests are that
wherever measures are used they must be:

1. Transparent –understood by all the people being measured

2. Non-controversial – accepted by the individuals concerned
3. Internally consistent – compatible with the rewards and recognition systems
4. Objective – designed to offer minimal opportunity for manipulation
5. Motivational – trigger a response to improve outcomes.

How to measure?

Measurement, as any other management system, requires the stages of design,

analysis, development, evaluation, implementation and review. The system should be
designed to measure progress, otherwise it will not engage the improvement cycle.
 Progress is important in five main areas: effectiveness, efficiency,
productivity, quality and impact.

Effectiveness

Effectiveness may be defined as the percentage actual output over the expected output:

Actual output
Effectiveness =Expected output– × 100 per cent

Effectiveness then looks at the output side of the process and is about the
implementation of the objectives – doing what you said you would do. Effectiveness
measures should reflect whether the organization, group or process owner(s) are
achieving the desired results, accomplishing the right things.

Measures of this may include:

• Quality, e.g. a grade of product, or a level of service.
• Quantity, e.g. tonnes, lots, bedrooms cleaned, accounts opened.
• Timeliness, e.g. speed of response, product lead times, cycle time.
• Cost/price, e.g. unit costs.

Efficiency

Efficiency is concerned with the percentage resource actually used over the resources
that were planned to be used:

Resources actually used

Efficiency =Resources planned to be used– × 100 per cent

Clearly, this is a process input issue and measures the performance of the process
system management. It is, of course, possible to use resources ‘efficiently’ while being
ineffective, so performance efficiency improvement must be related to certain output
objectives.

All process inputs may be subjected to efficiency measurement, so we may use

labor/staff efficiency, equipment efficiency (or utilization), materials efficiency,
information efficiency, etc. Inventory data and throughput times are often used in
efficiency and productivity ratios.

Productivity
Productivity measures should be designed to relate the process outputs to its inputs:

Expected output
Expected productivity =Resources expected to be consumed–

and this may be quoted as expected or actual productivity:

Actual output
Actual productivity=Resources actually consumed–

Quality

The non-quality related measures include the simple counts of defect or error rates
(perhaps in parts per million, numbers per square meter or per thousand dollars spent),
percentage outside specification or Cp/Cpk values, deliveries not on time or, more
generally, as the costs of poor quality. When the positive costs of prevention of poor
quality are included, these provide a balanced measure of the costs of quality.

The quality measures should also indicate positively whether we are doing a good job in
terms of customer satisfaction, implementing the objectives and whether the designs,
systems and solutions to problems are meeting the requirements. These really are
‘voice-of-the-customer’ measures.

Impact and value added

Impact measures should lead to key performance indicators for the business or
organization, including monitoring improvement over time. Value-added management
(VAM) requires the identification and elimination of all non-value adding wastes,
including time, often through the use of ‘Lean’ approaches. Value added is simply the
volume of sales (or other measure of ‘turnover’) minus the total input costs, and
provides a good direct measure of the impact of the improvement process on the
performance of the business.

A related ratio, percentage return on value added (ROVA) is another financial indicator
that may be used:

Net profits before tax

ROVA= Value added
– × 100 per cent
Other measures or indicators of impact on the business are growth in sales, assets,
numbers of passengers/students, etc., and asset-utilization measures, such as return
on investment (ROI) or capital employed (ROCE), earnings per share, etc.

Some of the impact measures may be converted to people productivity ratios, e.g.:

Value added
–
Number of employees (or employee costs)

Activity-based costing (ABC)

Activity-based costing (ABC) is an information system that maintains and processes

data on an organization’s activities and cost objectives. It is based on the activities
performed being identified and the costs being traced to them. ABC uses various ‘cost
drivers’ to trace the cost of activities to the cost of the products or services. The activity
and cost-driver concepts are the heart of ABC. Cost drivers reflect the demands placed
on activities by products, services or other cost targets. Activities are processes or
procedures that cause work and thereby consume resources. This is clearly capable of
measuring impact, both on and by the organization.
 THE COST OF QUALITY
By:
Jariz Jane C. Talaguia and Rose Di-An F. Dela Cruz

THE COST OF POOR QUALITY

By: Jariz Jane C. Talaguia

The Cost of Poor Quality

Also referred to as costs of nonconformance, or failure costs.
These are associated with products or services that do not conforms with the
customer's requirement.
The cost of failures is the difference between what it actually costs to produce a product
or deliver a service and what it would cost if there were no failures.
Actual Cost - Minimum Cost= COPQ

Traditional Cost of Poor Quality

Two Categories of Poor Quality Cost

1. Internal Failure Cost
 costs incurred prior to the shipment of the product or the delivery of the
service.
 These costs are associated with defects that are found prior to customer
delivery.
 These costs would disappear if there were no defects in the product.
Examples of Internal Failure Costs
 Scrap costs: the net loss of labor, material and overhead (fixed costs) resulting
from defective product that can not economically be repaired or used.
 Rework: the cost of fixing defective products to conform with quality
specification. Rework costs usually include additional operations or steps in
the manufacturing process, thus includes extra direct labor, machine time and
supplies costs.
 Retest Cost: the cost of reinspection and retesting of products that have
undergone rework or other modification.
 Process Failure Cost: the cost determining why the production process is
producing poor quality products.
  Process-Downtime Cost: the cost of shutting down the productive process to fix
the problem.
 Process-Downgrading Cost: the price differential between the normal selling
price and any selling price that might be obtained for a product that does not
meet the customer's requirements.
 Supplier Problem: cost of products supplied that aren't conformed with the
product needed.
1. External Failure Cost
 costs of discovered defects occurring after product shipment or service
delivery.
 These costs are associated with defects that are found prior to customer
delivery.
 These costs would disappear if every unit of product conformed to
requirements and specifications.
Examples of External Failure Costs
 Customer Complaint Cost: the cost of investigating and satisfactorily responding
to a customer complaint resulting from a poor-quality product.
 Product Return Cost: the cost of handling and replacing poor-quality product
returned by customer.
 Warranty Claim Cost: the cost complying with the product warranties.
 Product Liability Cost: the litigation costs resulting from product liability and
customer injury.
 Lost Sales Cost: the cost incurred because customers are dissatisfied with poor-
quality products and do not make additional purchases
Effects of Poor Quality Product
 Financial cost
 Lost customer loyalty
 Damage business reputation
 Need for greater control and checks
1. Competitive take advantage
THE COST OF ACHIEVING GOOD QUALITY
BY: Rose Di-An F. Dela Cruz

I. Prevention Costs
- The cost of trying to prevent poor-quality products from reaching the
customer
- Reflects the quality philosophy of “do it right the first time”: the goal of total
quality-management program
- “The cost of doing things right the first time”
Examples:
1. Quality Planning Costs: The costs of developing and implementing quality-
management program
- Plans required to achieve the quality objective: production, supervision,
process control, inspection and other special plans with quality and
reliability.
2. Product-Design Costs: The costs of designing products with quality
characteristics.
- The determination of requirements and the setting of corresponding
specifications (which also takes account of process capability) for
incoming materials, processes, intermediates, finished products and
services
3. Quality Assurance and Inspection: The creation of maintenance of the
quality management systems.
- The design, development and/or purchase of equipment for use in
inspection work
4. Training Costs: The cost of developing and putting on quality training
programs for employees and management
5. Information Costs: The costs of acquiring and maintaining (typically on
computers) data related to quality, and the development and analysis of
reports on quality performance

II. Appraisal Cost

- Are the costs of measuring, testing, and analyzing materials, parts,
products, and the productive process to ensure that product-quality
specifications are being met.
- The costs associated with the supplier’s and customer’s evaluation or
purchased materials, processes, intermediates, products and services to
assure conformance with the specified requirements.
- The cost of “Checking if it is right”
- Higher in Service Organization than in Manufacturing Company
 - Quality in services is related primarily to the interaction between an
employee and a customer
- Quality appraisal in a Manufacturing Operation take place most
exclusively in-house
- Appraisal of service quality requires: customer interviews, survey,
questionnaires, and the like.
Examples:
1. Inspection and Testing: The costs of testing and inspecting materials,
parts, and the products of various stages and at the end of the process.
2. Test Equipment Cost: The costs of maintaining equipment used in testing
the quality characteristics of products.
3. Operator Costs: The cost of the time spent by operators to gather data for
testing product quality, to make equipment adjustments to maintain
quality, and to stop work to assess quality
4. Supply Chain and Vendor Rating: The assessment and approval of all
suppliers and customers, of both products and services.

MEASURING AND REPORTING QUALITY COSTS

- Management wants quality costs reported in a manner that can be easily

interpreted and is meaningful.
One format is:
1. Index Numbers or Indices: ratios that measure costs relative to some base
value, such as the ratio of quality costs to total sales revenue or the ratio
of quality costs to units of final product.
a. Labor Index: The ratio of quality cost to labor hours
b. Cost Index: The ratio of quality cost to manufacturing cost
c. Sales Index: The ratio of quality cost to sales
d. Production Index: The ratio of quality cost to units of final product

The following example illustrates several of these index numbers:

H&S MOTOR COMPANY

The H&S Motor Company produces small motors for use in lawnmowers and
garden equipment. The company instituted a quality-management program in
2001 and has recorded the following quality cost data and accounting measures
for four years.

YEAR
 2001 2002 2003 2004
QUALITY
COSTS
Prevention 27,000 41,500 74,600 112,300
Appraisal 155,000 122,500 113,400 107,000
Internal Failure 386,400 469,200 347,800 219,100
External
Failure 242,000 196,000 103,500 106,000
Total 810,000 829,200 693,300 544,400
ACCOUNTING
MEASURES
Sales 4,360,000 4,445,000 5,050,000 5,190,000
Manufacturing
Costs 1,760,000 1,810,000 1,880,000 1,890,000

The H&S Company also desired to develop index numbers using quality costs as
a proportion of sales and manufacturing costs, generally two of the more popular
quality indexes. The general formula for these index numbers is:

𝑡𝑜𝑡𝑎𝑙 𝑞𝑢𝑎𝑙𝑖𝑡𝑦 𝑐𝑜𝑠𝑡𝑠

𝑄𝑢𝑎𝑙𝑖𝑡𝑦 𝐼𝑛𝑑𝑒𝑥 = (100)
𝑏𝑎𝑠𝑒

For example, the index number for 2001 sales is:

810,400
𝑄𝑢𝑎𝑙𝑖𝑡𝑦 𝐼𝑛𝑑𝑒𝑥 = (100)
4,360,000
= 18.58

The quality index numbers for sales and manufacturing cost for the four-year
period are given in the following table:
QUALITY SALES QUALITY
INDEX MANUFACTURING
COST INDEX
Year Sales Index Cost Index
2001 18.58 46.04
2002 18.63 45.18
2003 12.66 34.00
2004 10.49 28.80

These index numbers alone provide little insight into the effectiveness of the
quality-management program; however, as a standard to make comparisons
 over time they can be useful. The H&S Company quality index numbers reflect
dramatically improved quality during the four-year period. The index shows a
significant decrease in the next 4 years as the company already implemented the
Total Quality Management.

THE QUALITY-COST RELATIONSHIP

Philip Crosby’s Fourth Absolute (Quality Without Tears, 1984)
- Cost of Quality is the difference between the price of nonconformance and
the cost of conformance
- The cost of doing things wrong can account for 20 to 35%
The cost of doing things right is typically 3 to 4%

LEVELS OF QUALITY COSTS

The European Centre for Business Excellence (the Research and Education
Division of Oakland Consulting) conducted a study into the costs of failure in
commercial and public sector organizations, the key findings of which included:
1. Product/Manufacturing Organizations – costs of failure
- Nearly 1 in 3 of the organizations that were able to provide figure were
spending more than 20% of their turnover on costs of failure, with 10% of
the organizations reporting over 30%
- These high costs were in spite of the fact that, on average, only 40% of
the failure costs categories were being measured
- Only 50% of organizations measured the costs of re-inspecting/re-testing
products and dealing with customer complaints and product returns
- CoQ is more than cost – poor quality impacts customers, damages
reputation and distracts management
- World-leading product manufacturers achieve 5-10% as their CoQ

2. Service Organization – costs of Failure

- 25% of the service organizations that responded to the survey did not
measure any of the failure cost categories at all
- The total costs of failure for the service organizations that had information
available ranged from 2-19% of annual spend
- The majority of service organization did not measure the cost of failure

-
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