CHAPTER 6

ORGANIZATIONAL INNOVATIONS:
TOTAL QUALITY MANAGEMENT;
JUST- IN- TIME PRODUCTIONS SYSTEM
1.

 In manufacturing, a measure of excellence or a state of being free from

defects, deficiencies and significant variations. It is brought about by strict
and consistent commitment to certain standards that achieve uniformity of a
product in order to satisfy specific customer or user requirements.
 ISO 8402-1986 standard defines quality as "the totality of features and
characteristics of a product or service that bears its ability to satisfy stated or
implied needs." If an automobile company finds a defect in one of their cars
and makes a product recall, customer reliability and therefore production will
decrease because trust will be lost in the car'squality.

 Quality is a perceptual, conditional, and somewhat subjective attribute and

may be understood differently by different people. Consumers may focus on
the specification quality of a product/service, or how it compares to
competitors in the marketplace. Producers might measure the conformance
quality, or degree to which the product/service was produced correctly.
Support personnel may measure quality in the degree that a product
is reliable, maintainable, or sustainable.

Quality Assurance is popularly known as QA Testing, is defined as an

activity to ensure that an organization is providing the best possible
product or service to customers. QA focuses on improving the
processes to deliver Quality Products to the customer. An organization has
to ensure, that processes are efficient and effective as per the quality
standards defined for software products.

How to do Quality Assurance: Complete Process

Quality assurance has a defined cycle called PDCA cycle or Deming cycle. The
phases of this cycle are:

 Plan
 Do
 Check
 Act

CORE PRINCIPLES

A. Focus on customer

When using total quality management it is of crucial importance to remember that

only customers determine the level of quality. Whatever efforts are made with
respect to training employees or improving processes, only customers determine,
for example through evaluation or satisfaction measurement, whether your efforts
have contributed to the continuous improvement of product quality and services.

IDENTIFYING FIRMS CUSTOMERS WHETHER INTERNAL OR EXTERNAL

- DETERMINING THEIR NEEDS , REQUIREMENTS AND EXPECTATIONS ( DO

WHATEVER IT TAKES TO SATISFY THEM
- EXTERNAL CUSTOMERS ARE ULTIMATE RECIPIENTS OF THE FIRMS PRODUCTS
OR SERVICES
- INTERNAL CUSTOMERS INDIVIDUAL OR SUBUNITS WITHIN THE FIRM
INVOLVED IN MANUFACTURING THE PRODUCT OR PROVIDING THE SERVICES,
- A FIRM CAN SERVE ITS ULTIMATE, EXTERNAL CUSTOMER BETTER IF THE FIRM
FULLY MEETS ALL REQUIREMENTS OF EACH INTERNAL CUSTOMER.

2. STRIVE FOR CONTINUOUS IMPROVEMENT (KAIZEN)

- WITHOUT CONTINUOUS IMPROVEMENT QUALITY DISAPPEARS

PDCA
EXAMPLE: KODAK

2. FULL INVOLVEMENT OF THE ENTIRE WORKPLACE

-THE REQUIREMENT OF THE FIRMS EXTERNAL CUSTOMERS CAN ONLY BE

MET IF EACH OF THE INTERNAL CUSTOMERS/SUPPLIERS IN THE PROCESS
SATISFIESNTHE REQUIREMENTS OF THE DOWNSTREAM PROCESS OR
CUSTOMER.

- ANY BREAKDOWN IN THE PROCESS NO MATTER HOW INSIGNIFICANT

CAN LEAD TO A DETECTIVE PRODUCR OR SERVICE ANAD UNSATISFIED
CUSTOMERS

( QC)

- TOP MANAGE MENT MUST ENCOURAGE EVERYONE IN THE FIRM FROM THE
LOWEST LEVEL EMPLOYEES, OFFICE CLERKS, FACTORY WORKERS,
ACCOUNTANTS, ENGINEERS TO UPPER PROFESSIONALS AND MANAGERS, TO
BE ACTIVELY INVOLVED AND TO PARTICIPATE IN THE FIRMS EFFORTS TO
CONTINUOUSLY IMPROVE QUALITY
- - EFFECTIVE APPROACH FOR EMPLOYEE IMPROVEMENT IS QC (QUALITY
CIRCLE)

IT IS A SMALL GROUP OF EMPLOYEES FROM THE SAME WORK AREA THAT MEETS
REGULARLY TO IDENTIFY AND SOLVE WORK RELATED PROBLEMS AND TO
IMPLEMENT AND MONITOR SOLUTIONS TO THE PROBLEMS.

3. ACTIVE SUPPORT AND INVOLVEMENT OF TOP MANAGEMENT

-SUCCESSFUL IMPLEMENATION OF TQM REQUIRES ACTIVE LEADERSHIP

FROM THE CEO AND SENIOR MANAGERS (TOP).

-HOWEVER, THE CEO OR TOP MANAGEMENT ALONE CANNOT BRING FORTH ALL THE
DESIRED BENEFITS OF TQM. KAYLANGAN DIN NILA NG SUPPORT SA LAHAT NG
MANAGERSIN THE TOP ECHELON PARA MA ATTAIN YUNG DESIRABLE RESULTS NA
PLINAN NATIN.

- HINDI LANG DAPAT TOP MANAGEMENT MAG FO FOCUS KUNDI DAPAT DIN NILA
IPAKITA YUNG DEDICATION TQ SA EMPLOYEES SA LAHAT NG LEVEL FROM TOP TO
BOTTOM. VENDORS MAN OR SUPPLIERS. LAHAT DAPAT NG CUSTOMERS AWARE SA
IMPORTANCE NG TQ SA LAHAT NG ASPETO SA OPERASYON NG FIRM

4. USE CLEAR AND MEASURABLE OBJECTIVES

-PROGRESS CAN EASILY BE SEEN KAPAG CLEAR ANG OBJECTIVES

-MEASURABLE OBJECTIVES CAN LEAD TO COMMON GOAL

-TO ENSURE SUCCESS THEY MUST SET UNAMBIGUOUS AND MEASURABLE

OBJECTIVES

(CLEARLY EXPRESSED OR UNDERSTOOD)

4. TIMELY RECOGNITION OF QUALITY ACHIEVEMENT

- PAG REREWARD SA EMPLOYEE PARA MAS MAGANDA AT MAMOTIVATE SILA

LALO PARA MAG EFFORT SA PAG ACHIEVE NG TOTAL QUALITY.
- - EFFORTS AND PROGRESS WILL MOST LIKELY TO BE SHORT LIVED IF THE
FIRM MAKES NO CHANGE TO ITS COMPENSATION, APPRAISAL, RECOGNITION
SYSTEM.

5. CONTINUING EDUCATION AND TRAINING

KAYLANGAN DIN MAG UNDERGO NG MGA TRAINING PROGRAMS TO

ENHANCE THEIR SKILLS TO TOTAL QUALITY and PROVIDE EMPLOYEES
WITH NECESSARY SKILLS TO ACHIEVE TOTAL QUALITY.
 -MANDATORY CONTINUING EDUCATION AND TRAINING OF EMPLOYEES AT
ALL LEVELS IS NECESSARY TO ACHIEVE CULTURE CHANGE AND
COMTINUOUS FOCUS REQUIRED IN TQM ENVIRONMENT.

TQM IPLEMENTATION GUIDELINES

YEAR ONE – PREPARATION AND PLANNING

• CREATE QUALITY COUNCIL AND STAFF

• CONDUCT EXECUTIVE – QUALITY TRAINING PROGRAMS

• CONDUCT QUALITY AUDITS

• PREPARE GAP ANALYSIS

• DEVELOP STRATEGY ON QUALITY IMPROVEMENT

• YEAR TWO – TRAINING AND IMPLEMENTATION

• CONDUCT EMPLOYEE COMMUNICATION AND TRAINING PROGRAM

• ESTABLISH QUALITY TEAMS

• CREATE A MEASUREMENT SYSTEM AND SET GOALS

• YEAR THREE

• REVISE COMPENSATION/APPRAISAL/ RECOGNITION SYSTEMS

• LAUNCH EXTERNAL INITIATIVE WITH SUPPLIERS

• REVIEW AND REVISE

 COST OF QUALITY

• THREE FACTORS UNDERLIE THE QUALITY OF A PRODUCT OR SERVICE.

THESE FACTORS ARE GRADE QUALITY OF DESIGN, AND QUALITY
PERFORMANCE. QUALITY COSTS ARE ASSOCIATED WITH QUALITY OF
CONFORMANCE AND THESE COSTS CAN BE BROKEN DOWN INTO FOUR
BROAD GROUPS.

1. PREVENTION COSTS- THESE ARE COST INCURRED TO AVOID POOR

QUALITY GOODS OR SSRVICES OR REDUCE THE NUMBER OF DEFECTS
IN PRODUCTS OR SERVICES. THESE INCLUDES:

• SYSTEM DEVELOPMENTS -QUALITY IMPROVEMENT PROJECTS

• QUALITY ENGINEERING -TECHNICAL SUPPORT PROVIDED TO

SUPPLIERS

• QUALITY TRAINING -AUDITS OF THE EFFECTIVENESS OF

QUALITY

• QUALITY CIRCLES

• STATISTICAL PROCESS CONTROL ACTIVITIES

• SUPERVISION OF PREVENTION ACTIVITIES

• QUALITY DATA GATHERING, ANALYSIS, AND REPORTING

• II. APPRAISAL COSTS – THESE COSTS, ALSO CALLED INSPECTION

COSTS, ARE INCURRED TO IDENTIFY PRODUCTS BEFORE THE
PRODUCTS ARE SHIPPED TO CUSTOMERS. THESE INCLUDES:
• TEST AND INSPECTION OF INCOMING MATERIALS

• TEST AND INSPECTION OF IN-PROCESS GOODS

• FINISHED PRODUCT TESTING AND INSPECTION

• SUPPLIES USED IN TESTING INSPECTION

• SUPERVISION OF TESTING AND INSPECTION ACTIVITIES

• DEPRECIATION OF TEST EQUIPMENT

• MAINTENANCE OF TEST EQUIPMENT

• PLANT UTILITIES IN THE INSPECTION AREA

• FIELD TESTING AND APPRAISAL AT CUSTOMER SITE

• III. INTERNAL FAILURE COSTS- THESE ARE COSTS THAT RESULT

FROM IDENTIFICATION OF DEFECTS DURING THE APPRAISAL
PROCESS.

• NET COST OF SCRAP

• NET COST OF SPOILAGE

• REWORK LABOR AND OVERHEAD

• REINSPECTION OF REWORKED PRODUCTS

• RETESTING OF REWORK PRODUCTS

• DOWNTIME CAUSED BY QUALITY PROBLEMS

• DISPOSAL OF DEFECTIVE PRODUCTS

• ANALYSIS OF THE CAUSE OF DEFECTS IN PRODUCTION

• RE-ENTERING DATA BECAUSE OF KEYING ERRORS

• DEBUGGING OF SOFTWARE ERRORS

• IV. EXTERNAL FAILURE COSTS- THESE ARE INCURRED WHEN

POOR QUALITY GOODS OR SERVICES ARE DETECTED AFTER
DELIVERY TO CUSTOMERS. THEY INCLUDE:

• COST OF FIELD SERVICING AND HANDLING COMPLAINTS

• WARRANTY REPAIRS AND REPLACEMENTS

• REPAIRS AND REPLACEMENTS BEYOND THE WARRANTY PERIOD

• PRODUCT RECALLS

• LIABILITY ARISING FROM DEFECTIVE PRODUCTS

• RETURNS AND ALLOWANCES ARISING FROM QUALITY

PROBLEMS

• LOST SALES ARISING FROM A REPUTATION FOR POOR QUALITY.

NOTE:
• PREVENTION AND APPRAISAL COSTS ARE COSTS OF
CONFORMANCE BECAUSE THEY ARE INCURRED TO ENSURE
THAT PRODUCTS AND SERVICES MEET CUSTOMERS’
EXPECTATIONS

• INTERNAL FAILURE AND EXTERNAL FAILURE COSTS ARE COSTS

OF NONCONFORMANCE BECAUSE THEY ARE COST INCURRED
AND OPPORTUNITY COSTS BECAUSE OF REJECTION OF
PRODUCTS OR SERVICES

• THE COST 0F QUALITY IS THE SUM OF CONFORMANCE AND

NONCONFORMANCE COSTS.

USES OF QUALITY COST INFORMATION

THE QUALITY COST INFORMATION ID USED BY MANAGERS IN

SEVERAL WAYS, THESE ARE

1. QUALITY COST INFORMATION PROVIDES BASIS FOR

ESTABLISHING BUDGETS FOR QUALITY COSTS AS
MANAGEMENT LOOKS FOR WAYS TO REDUCE THE TOTAL COST
INVOLVED.

II. QUALITY COST INFORMATION HELPS MANAGERS SEE THE

FINANCIAL SIGNIFICANCE OF QUALITY

111. HELPS MANAGERS IDENTIFY THE RELATIVE IMPORTANCE

OF THE QUALITY PROBLEMS FACED BY THE FIRM.

IV. HELPS MANAGERS SEE WHETHER THEIR QUALITY COSTS

ARE POORLY DISTRIBUTED AND WHEN NEEDED, IT HELPS THEM
DISTRIBUTE THE COSTS BETTER.
 LIMITATIONS OF QUALITY COST INFORMATION

• Some important quality costs are typically omitted from the quality
cost report. EX. OPPORTUNITY COST OF LOST SALES, COST OF TOP
MANAGEMENT TIME IN DESIGNING AND ADMINISTERING THE QUALITY
PROGRAM

• Simply measuring and reporting quality costs does not solve quality
programs. Only management action can solve them.

• A log may exist between when quality improvement programs are put
into effect and when the results are seen.

REPORTING QUALITY COSTS

THE PURPOSE OF REPORTING QUALITY COST IS TO MAKE MANAGEMENT

AWARE OF THE MAGNITUDE OF QUALITY COSTS AND TO PROVIDE A
BASELINE AGAINST WHICH THE IMPACT OF QUALITY IMPROVEMENT
ACTIVITIES COULD BE MEASURED.

- IT INCLUDES DATA DEFINITIONS, IDENTIFICATION OF DATA SOURCES.

DATA COLLECTION, AND PREPARATION AND DISTRIBUTION OF QUALITY
COSTS REPORT
-