,.

Principles and
Practices of Total
Quality Management

OBJECTIVES

Upon completion of this chapter, the render is expected to:

-
• Know the six basic concepts, the purpose, and benefits ofTQM.
• Understand the 12 characteristics of a leader.
• Describe the necessary management activities to implement a TQivl proram.
• Know the importance of customer satisfaction nnd how to achieve ir.
• Describe the process necessary for effective employee involvemcnr.
• Describe continuous process improvement and the problem-solving merhod.
• Know the importance of supplier partnership and techniques to measure
effectiveness.
• Be able ro describe the measures ofperfomrnnce.

II
Scanned with CamScanner
 Continuous ,._... Business
A • ' _,,,--- Improvement Gro,,.11h
IN'fRODUCTIOt-11 Supplier
Par1nering
Total Quality !vlanagcment (TQM) is an enhancement I th traditional way of I
doing business It is a proven technique 10 guarantee survival inworld-class c? Err.ptoyee
lnvolvemenl
m petition. Only by changing the actions of m:uiagement will the culture and Focus on--..
Quality.............._
actions of an enLireoronnization be transfom1ed.TQM is for the mosl part Process
commonsense. c:, Orientation
Analyzing tl1e three word!'>, we have
Leadership
Total-Made up of the whole.
Qria/iry-Dcgrcc of c/icellcn e a product or service provides. \ Customer
Management-Act, art, or manner of handling, controlling, directing, etc.
Satisfaction --- Clear
Therefore,TQl'"Iis the art of managing 1he whole to achieve excellence. The Vi ion
golden rule is :i . implt!bul effective way to explain it: Do unto others as you would
have them do unto you. .
Asstated in Chapter I TQM is defined as bolh a lulosoph and a_ set of FIGURE 2-1 The road lo business growth.
guidingprinciples I.hat represent the foundation of .a continuously 11nprovmg or
gani1,ation. It is the application of quanlilative mclhods and human resources will allow the organization to achieve the business objecLives of profit and
to improve all1hc processes within an organizarion and exceed cuslo cr need growth wilh greater ease. In addition, tl1e work force will have job security, which
n?w and in the future. TQM in1cgrate.s fundamental management tcchmqucs, will create a satisfying place lo work. The road to business growth is shown in
extsUng improvemenl efforts, and technical 1ools under a disciplined app,oach. Figure 2-1.
As p1eviously stated, TQM requires a cultural change. Table 2-1 compares
the previous state with the new TQM state for typical quality elements. As can be
BASIC APPROACH seen from the table, this change is substantial and will not be accomplished in a
short period of time. Small organizations will be able 10 make Lbe transfomiation
TQM requires six basic concepts:
in a much faster time period than large organizations.
I. A cornrni11ed and involved management co ptovide Jong-term top•lo-bouom An organization will not begin the transformation to TQM until it is aware
organizational suppor1. that the quality of the product or service must be improved. Awareness comes
2. An unwavering focus on 1he customer, both internally and externally.
TABLE 2-1 NelV and Old Cultures
J. Effec1ive invo!l•emenl and utilization of 1J1e entire work force.
4. Continuous improvement of the business and production processes. QUALITY PREVIOUS
5. Treating suppliers as partners. ELEMENT STATE TQM
G. Esrablishing performance measures for the processes. Deji11itio11 Product•oriented Customer•oiien1ed
Priorities Second to service and cosl First among equnls of service and
These concepts outline an excellent way to run a business. Decisions Short•term cost Long-lerm
'Inc purpose ofTQM is lo provide a quaHty product to customers, which will, in Emphasis Detection Prevention
rum, increase productivity and lower cost. With a higher-quality product and Errors Operations System
lower price, compclitive position in 1e markclplace will be enhanced. Th.is series of Responsiblliry Quality control Everyone
events P,oblem solving Manngers Teams
Proc11reme11t Price Life-cycle COSIS
Manager's role Pinn, assign, control, nnd enforce Delegnle, coach, focili1a1e, and mentor
'Portions of Lhis choplcr MC e 1r.1c1cd from Total Q olily Manag,rnmt. 2003, by D. De.!lcrlicld, C.
Beslerlield· Michn•. G.BeslcrlidJ, and M. Dc.11crlicld-Socrc wi1h lhe permission o(Prcolice Holl.Sc tl,is work for
1:1catcr dcla.il.

II Clli\f'T£1l 2 PRINCIPLES AND PRACTICES OF TOTAL QUALITY MANAGEMENT

Scanned with CamScanner
II
 culture. Overemphasis on short-term results and profits must be set aside so long
tenn planning and constancy of purpose will prevail.
The entire scope of the TQM activity is shown in Figure 2-2. There are two
major headings-Principles and Practices which_ are briefl _discussed in this
chapter and Tools and Techniques. Tools and Techmques are d1v1ded into the
1.00 1.00
Relative tot:il cost for 20 units cate gories of Quantitative and Nonquantitative, Under the Quantitative category
18 19
Confom1ing units the topics of SPC, Acceptance Sampling, and Reliability will be discussed in great
0,10 0.05
Relative cost for nonconforming detail in Chapters 4-11. The other topics will be very briefly discussed in Chapter
(100) = 5,6%
units Productivity increase 3. Under the Nonquantitative category, the topic of Management and Planning
(100) "'5.6%
Capacity increase 18(100) ""5.6% Tools 'is discussed in Chapter 12. In addition, ISO 9000 will be discussed in some
detail
Profit incrcnse and the other topics very briefly in Chapter 3.

:iboutwhen anoro;mizat.ion loses market shaies or realizes tl1at quality and
produc ivity gohandintiand IL also occurs when TQ!I.I is mandated b_y the
customer or when -mairngement reah·1.es that TQM 1·s a be11e,r,\\a. y to run a
busmess and compete
in domesLic-:md world markets. . Quality, like cost and service, is the responsibility of everyone in the organization espe
Automation and other productivity enhancements will not he!p orgaruza-
tion if itisunable1o market its product or service because the quality 1s poor.
The Japanese learned this fart from practical experiw e. Prior to·world \Y'JI
11.
t ey
couldsell their products only al ridiculously low prices, and even then it w_as
drffi cuh 10secure repeat sales. Until recently, organizations have nol r cogmzed
the importance of quality. Quality is first among equals of cost andservice. .
.
Quality and productivity are not mutually exclusive. Improvem ntsm quali
leaddirectly to incn:used producli\'ity and other benefits. Table 2-2.11luSLrates ,this
concep1.As ca.n bc seen from the table, Lhc improvement in qu ll): resultsm a
5.6% improvement in productivity, capacity, and profiL :Many qual!ty-1m_provement
projects are achieved with the same work force, same overhead, and no investment
in new equipment. . . ..
Recent evidence suggests that more and more orgamz.atmns are recogmzmg
the impon::mce and necessity of quality improvemenl if they are to survive domestic
and worldwide competition. ]11lon: than 60% of the organizations in the United States
alone are now r,ising TQM. !lfld greater than 80 percent are familiar with the
con cept. Tl is the best approach to winning the Baldrige Award, which sels the
na
tional standard for exccllcncc.2
Quality improvemenl is not limited to the conformance of the product to
specifications; it also involl'es the quaHty of the design of the product and the
process. The prevention of product and process problems is a more desirable ob
jective than taking corrective action after the product or service is in use.
••
TQM is not something that will occur overnight. There are no quick reme
LEADERSHIP
Senior management must recognize that the quality function is no more responsible for
product or service quality than the finance function is responsible for profit and loss.
cially the Chief Executive Officer (CEO). When a commitment to quality is made, it
be comes pa.rt of the orgariizntion's business strategy and leads to enhanced profit and
an improved competitive position. To achieve never-ending quality improvement, the
CEO must be directly involved in the organization and implementation of the quality
im provement activity. In addition, the entire management team needs to become
leaders.
There are 12 behaviors or characteristics that successful leaders demonstrate.
A brief description of each is given next.3
1. They give priority attention to external and internal customers and their
needs. Leaders place themselves in the customer's shoes and service their
needs from that perspective. They continually evaluate the customers'
changing requirements.
2. They empower, rather than control, subordinates. Leaders have tmst and con
fidence in the perfonnance of their subordinates. They provide Lhe resources,
training, and work environment to help subordinates do their jobs. However,
the decision to accept responsibility lies with the individual.
3. They emphasize improvement rather than maintenance. Leaders use the
phrase "If it isn't perfect, improve it" rather than "lf it ain't broke, don't fix
it." There is always room for improvement, even if the improvement is small.
Major breakthroughs sometimes happen, but it's the little ones that keep the
continuous process-improvement on a positive track.
3
Adnptcd from Wnrrcn H. Schmidt and Jerome P, Finriignn, Tire Race llli1/10111 11 Finis/I L/11, (San Francisco.
Jossey-Bnss, 1992.).

II
dies. Ir takes a long lime to build the appropriate emphasis and techniques into the
PRINCIPLES AND PRACTICES OI' TOTAL QUALITY MANAGEMENT
'H fame5 Jforrin:ron nnd Pr,,,•ccn Gupll, "Si, Sigma vs. TQM," Quality Digw (Novtmbcr 2006): 42-46.

II CH.Al'TEll 2
- Scanned with CamScanner

r•
TOM
Principles and Practices
Lead..rship
Customer Salisfacllon
Employ c lnvolvc.menl
Continuous lmprovcmcnl
Supplier Purlncrship
Performance
Ei-perimenl.3.J
Measu=
Tagucbi's Quality
Engince.ring
4. They emphasize prevention. "An ounce of prevention is worth a pound of
cure" is certainly true. It is also true that perfection can be the enemy of
creativity. There must be a balance between preventing problems and
develop ing bet!er processes.
5. They encourage collaboration rather than competition. When functional areas,
Tools departments, or work groups are in competition, they may find subtle ways
and of working against each ocher or withholding information. Instead, there
Techniques mus1 be collaboration among and within units.
6. They train and coach, rather than direct and supervise. Leaders know that the
development of the human resource is a necessity. As coaches they help their
Quantil:lli1·c Nonguontil:lli\'C subordinates learn to do a better job.
7. They learn from problems. When a problem exists, ii is treated as an oppor
tunity rather than something to be minimized or covered up. "What caused
SPC ISO 9000 it?" and "How can we prevent it in the future?" are the questions asked by
leaders.
Acrept:mcc
s. They continually try to improve communications. Leaders continually dis
Sampling rso 14000 seminate infonnat.ion about the TQM effort. They make ii evident thar TQM
is not just a slogan. Communication is two way-ideas will be generated by
people when leaders encourage them and act upon them. Communication is
Reliability Benchmnrking the glue lliat holds a TQM organization together.
9. They continually demonstrate their commitmenr to quality. Leaders walk
their talk-their actions, rarher than their words, communicate their level of
ToL:il Produdh•e
Maiatcnancc
Design com mitment. They lei lhe quality stalements be their decision-making
guide.
M3llagcmenl and 10. They choose suppliers on the basis of quality, not price. Suppliers are en
Planning Tools
couraged to participate on project teams and become involved. Leaders
know that quality begins with quality materials and the true measure is the
FMEA Qu.alil)' by life cycle cost.
Design
11. They establish organizational systems 10 support the quality effon. At the
senior management level a quality council is provided, and at the firs1-
ProduclS line supervisor level, work groups and project teams are organized to
QFD Liability
improve the process.
12. They encourage and recognize team effort. They encourage, provide recog
Information
Teclmology nition, and reward individuals and teams. Leaders know that people like to
know that their contributions are important. T/1is action is one of the
leader's most powerful tools.

Implementation
FIGURE 2-2 Scope ofTQM acllrity. _ The TQM implernentalion process begins with senior management's and, most
important, the CEO's commitment. The importance of the senior management role

II CIIAl'TER 2
PRINCIPLES AND PRACTICES 01' TOTAL QUALITY MA."IAGEMENT

m
Scanned with
 ot be overstated. Leadership is essential during every phase of the implementa
tlon process :md particularly :11 the start. In fact. indifference and lack of involve
mem by senior managemen1 are frequently cited as the principal reasons for the
fai.lu of quality impro, ement efforts. Delegalion and rhetoric are insufficienl
irtvolvernent is n:quired.
If senior management has not been educated in l11e TQJ-1 concepts, that
should be accomplished ne.,t. ln addition to formal education, managers should
visi1 successful TQM organiZ3tions. read selected articles and books, and attend
seminars and conferences.
Trming of the implernentat.ion process can be very important. I the or
ganization ready 10 embark on the total quality journey? There may be some
foreseeable problem , such as a reorganization, change in senior management
pasonnel, interpersonal conflicts. a current crisis, or a time-consuming ac U\
it,. These problems may po tpone implementation to a more favorable time.
The ne:\l step is the formation of the quality council. The membership and
duties follow. lnilialion of the e duties is a subsLantial part of the
implementation of TQM. The de\•elopment of core values, a vision statement, a
mission statement, and a quulity policy st:lleme□1, wiLhinput from all personnel,
should be completed firsL
Quality CounciJ
1n orda 10 build quality into the culture, a quality council is established to
provide
O\eraJI dire Lio□. It i the dri\a for the T \1 engine.
In a typical organization the council is eornposed of the CEO; the senior
rnamgers of the funclional areas, such as design, marketing, fina.nce, produc
tion, :ind qu:ility; and a coordinalor or consulran!. lf there is a union, consider
::ition should be given to having a representative on the council. A coordinator
is necessary to assume some of the added duties that a quality improvement
activity requires. The individu::il selected for the coordinalor's posit.ion should
be a bright young person with executive potential. That person will report to
the CEO.
The respon ibi)ity ofTbe coordinator is to build two-way trust, propose
team needs to the council, share council expec1atiQns with the team, and brief
the council on tea.m progress. In add1tion, the coordina1or wiU ensure that the
learns are empowered and know their responsibilities. The coordinator's activities
are to
.1Ss1st the le.am leaders, sha1e lessons learned among teams, and have regular
Je3ders' meetings \,ilh team le:iders.
ln smaller organizations where managers may be responsible for more than
ne fun tional a.rea, the number of members will be smaller. Also, a consuJtanl
11. ouJd most likely be employed rather than a coordinator.
I CHAP'Tll 2 PRINCIPLES AND PRACTICE.'i OF TOTAL QUALITY MAN AG · MEN!"
In general the duties of the council are to
1. Develop, with input from alJ personnel, the core values, vision statement,
mission sta1ement, and quality policy statement.
2. Develop the strategic long-tenn plan with goals and the annual quality im-
provement program wiLh objectives.
3. Create ilie tota1 education and training plan.
4. Detennine and continu.ally monitor the cost of poor quality.
5. Determine the perfonnance measures for the organization, approve those for
the functional areas, and monitor them.
6. Continually detennine those projects that improve the processes, particularly
those that affect external and internal customer salisfaction.
7. Establish multifunctional project and departmental or work-group teams and
monitor their progress.
8. Establish or revise the recognition-and-reward system 10 account for the
new way of doing business.
In large organjzations, quality councils are established at lower levels of
the organization. Their duties are similar but relate to that particular level in
the organization. Initially these activities will require additional work by
council members; however, in the long term their jobs will be easier. These
councils are the instruments for perpetuating the idea of never-ending quality
improvemenL
Once the TQM program is well established, a typical meeting agenda might
have the following i1ems:
• Progress report on teams
• Customer satisfaction report
• Progress on meeting goals
• New project teams
• Recognition dinner
• Benchmarking report
Eventually, within three lo five years, the quality council activities will
become so ingrained in the cullUre of the organization that they will become a
regular part of the executive meetings. When this state is achieved, a separate
quality council is no longer needed. Quality becomes the first item on the exec
utive meeting agenda, or the executive meeting becomes part of the quality
council.
II
Scanned with

Core Values .
Core values and concepts foster TQM behavior and define the culture.
Eachor ganization will need to develop its own values. Listed here are the core
values :0r the Malcolm Baldrige National Quality Award. They can be used
asa starting point for any organization as it develops its own.
1. Visionary leadership
2. Customer-driven excellence
3. Organizational and personal learning
4. Valuing employees and partners
5. Agility
6. Focus on the future
7. Management for innovation
8. Management by fact
9. Social responsibility
JO, Focus on results and creating value
11. Systems perspective
The core values are part of the quality statements given in the next section.
They should be simplified for publication witrun and outside the organization.
Quality Statements
In addition to U1e core values, !he quality statements include the vision
statement, mission statement, and quality policy statement. Once developed,
they are only occasionally reviewed and updated. They are part of the strategic
planning process, which includes goals and objectives.
U1i!ization ot the four statements varies considerably from organizatil'n to
organization. In fact, small organizations may use only the quality policy statement.
Additionally, there may be considerable overlap among the statements.
The qualiily statemenlS or a portion thereof may be included on employee
badges. They should be developed with input from all personnel.
An example of a statement that includes vision, mission, quahty policy, and
core values follows.
Gcon has a clear corporate vision ... To be the benchmark company in the polymers
industry through superior perfonnance, demooslrated by:
• Living up to its established principles of excellence in environmenlal protec
tion, heallh, and safety
m CHAPTER 2
• Fully satisfying the expectations of its customers
•
•
Developing and commercializing innovative polymer technology
Utilizing aU resources productively
• Continually improving processes and products
• Generating sustained value for customers, employees, suppliers, and investors
• Creating an environment ofTrust, Respect, Openness, and Integrity
The Geon Company
Seven Steps to Str tegic Planning4
There are seven basic steps to strategic quality planning. The process starts with
the principle that quality and customer satisfaction are the center of an organiza
tion's future. II brings together all the key stakeholders.
1. Customer Needs. The first step is to discover the future needs of the cus
tomers. Who will they be? Will your customer base change? What wilJ they
want? How will the organization meet and exceed expectations?
2. Customer Positioning. Next, the planners detemtine where the organization
wants to be in relation to the customers. Do they want to retain, reduce, or
expand the customer base? Products or services with poor quality
perfonnance should be targeted for breakthrough or eliminated. The
organiza1ion needs to concentrate its efforts on areas of excellence.
3. Predict the Future. Next, the planners must look into their crystal balls to
predict future conditions that will affect their product or service. Demo
graphics, economic forecasts, and technical assessments or projections are
tools that help predict the future. More than one organization's product or
service has become obsolete because it failed to foresee the changing tech
nology. Note that the rate of change is continually increasing.
4. Gap Analysis. This step requires the planners to identify the gaps
between the current stale and the future state of the organization. An
analysis of the core values, given earlier in the chapter, is an excellent
technique for pinpointing gaps.
s. Closing the Gap. The plan can now be developed to close the gap by es
tablishing goals and responsibilities. All stakeholders should be included
in the development of the plan.
6. Alignme111. As the plan is developed, it must be aligned with the mission,
vision, and core values of the organization. Without this alignment, the plan
will have little chance of success.
•Ad3pled, willl permission,from John R. Dew, "Seven S1eps to S1rn1egic Pl.inning," Q,ur//ryDig s, (June 1994):34-
37. PRINCIPLES AND PRACTICES OF TOTAL QUAUTY MANAGEMEN1
II

' 7. Impfrmeritar:--,n. This last step is frequently the mosl difficulL Resourcesm_uSI
be allocated to collcctmg data desi£□ing changes. and Ol'crcommgresi l-
, ' - · · Liv ·ty 10 ensure
ance to change. Also pa. rt of this seep is the mon non ng ac 1
that
progr · is being mode. The planning group should m!'clat le.,stone
per
year to e.ss progress and take any corrective action.
St.rategk planning can be performed by any organiz..n on. I c:o.n be hifhly
dfcclh•e, nllowing organizations to do the right thing at the nghl time, every ume.
Annual Quality lmpro,·ement Program
An an11unl prog.rnm is developed along with n Jong-term su-ategic pla
.Soi,ne_of the 1r:11e ,i items will eventually become part of the annual p l a nw,
hich "111 m dud,: new lion-term iterns.
In addition to creating the ilerru, the prog m s,huJd develop among all
man-
ers, pc i:Llist·, nnd operating personnel
• As nse of rcsponsibili1y for a tive pl.T1.lci. Li0n in mak:in° improvements
• Thek.rlls needed 10 make impro\'ements
• The ha!Jil. of annual impro\ emerit o tb:u e..:icb year the organization's
quJlity is significantly better th.m the p,re,icus ye:u-
The program is deveJ ptd from the dep:uunental e,·cl with OJXmLing per-
s01111cl involvement, 1J unh lhe fun nal are:is, 10 the organization-\ ide level.
Quali1y objecli mu I be st trd 1n me urable tenns, with a timeline such
J • 1he f.-illowing:
I. All billing clerks will receive tr3inin in e voidance in the next four months.
2. A preventive nmi111enance procedure \lo i!J be developed and implemented for
the milling dqi,ll1menl during the month of June..
J. A p ject team will reduce field failures by 2 \ 'thin two years.
4. TI1e , iring-h:imess as embly department will reduce nonconformities by
0,, by l11c end of t11is fi. c:al y r
01 nnel sh uld be encoum ed 10 ser objectives or qu lily gon for
th m,;rlH·· M.urngcm('fll shonld support these goals by providing training, projects,
fr'. ,HJ .r ·,and.o f,Yth
ii- I t l1kd d1rrc will he more qu:l.lity objective than can be accompli hed
1th 1hr \.111, bk re Urt'es. Therefore, those U1t1t hove the greatest op mmiry
for rmrro\ emen1 "'ill usrd. 1'1(any objective,s ill require a project team. Some
r . nu.JU n:; h \ "ell- tru rured annun.l quality improvement programs. In or
II 114
rz 110m t . c I. ·k u h stru,turt'd progran , an improvements must come from
2
the initiatives of middle managers and specialists. lt takes a good deal of dctenni
n:ition by these people to secure result·, since they lack lh lt-git.imacy and support
tbac comes from an official, slructured progr.1.m de.signed by lhe quality council.
CEO Commitment
The most important aspect of m:rnagement commitment is the in"ohement by the
CEO. This involvement can be achieved by
Chairing or participating in lhe quality council
• Chairing or participating in the ISO 9000 team
• Coaching project teams
• MBWA (Management by Walking Around)
• Presiding at recognition ceremonies
• Wricing a column in the newsletter
• Spending one-third of their time on quality
• Meeting periodically with all employees
The benefits ofTQM will not be obtained unless the CEO is involved.
CUSTOMER SATISFACTION
Introduction
There is an old saying that the customer is o.Jways right. That saying i as true
1oday as ii was when it. was first coined. Although the cus1omer is king, educution
and diplomacy are sometimes necessary. In Chapler J, we defined quality as a
function of customer satisfaction. IA iec.ent study by Q11a/iry in Mm111fnct11ririg
showed th:11 83.6% of the respondents stated that 1heir primary me.:isure of quaJi1y
was cuslomer satisfac1ion. It is also important Lo recognize that expectation are
constantly changing. Who.I wo.s acceplnble 10 years ago is rejected loday.
Satisfaction is a function of the entire experience with the orga11ization-no1
just the purchased unit. For ex:unple, an organization orders 75 units from a uppli
1 lo be deliven:d on October 10. They receive 72 uni1s delivered on October 15 and.
r billed for 74 units. The units \Vere perfect; howeve,r,,ve have a Jis atr5fit'd c-
mtornc-r.
Org:miut.ions should strive 10 maintain customers for life. On thr .,v r:ipe, it
take five times ns much money to win a new customer as to retain nn 0.1. 1111g one.
TQM implies an organizational obsession with meeting orexc,·ding 1. tom
expeclntions, to the point that customers are delighted. Under tnnding ti • 1h
-lomer's nec::ds and expectalions is essential to winning new bu inc · nd k e1 ing
existing business. An orgnnizmion must give its customerS a qu, lity pro uct
PRINOPU' AND l'RACTI ES or TOTALO Au
Scanned with
 - · . d 1 · d ou tstandin g 4. Identify customer needs
l'J.at me ets t heir needs: a reasonable price, on-ti me e 1 very, an _ . . s. Determine oppor1unities for improvement
service. . . . . all d to examine its
To attain th is level the orgaru zau on ronl.l nu Y nee s
quality s ystem • . · requireme nts
. to see if it is respon sive to ever-changi ng cus tomer · Data collection will vary depending on the product or service and on whether the ·
and expec1auons.
customer is the end user or not. It can be accomplished by an individual, team, or
department. A brief description of various data collection tools is given in the
Who Is the Customer? information that follows.
. . , . F le the man ufacturer of For end users, warranty cards or questionnaires that are included with the
This questi on 1 s morn di fficult than i t seems. or examp ' .
tl1e . • h the following extema1 product provide an inexpensive method; however, some incentive to complete
nozzle for a gasoline pump at a self-servi ce statJ on as
cu s-
. , . d ou the user
. An auto rn-
tomers: the oil company, the service stauon owner, an y , th ·nsured as the information is needed for the customer to fill out the form. Telephone
.
surance company has brokers, cus1omer service represenlatJves, an 1
'
surveys collect the required infonnation but are time-consuming and costly and
external customers Internal customers are those in the next operauon sequenc;.
Some examples ar : Salesperson to Order Entry Clerk, Sand Muller Oper tor may alienate the customer. Mail-out surveys for end users are usually not
Mold Machine Operator, and Shipping Supervisor 10 Hillin Clerk. The qua 11Y0 completed.
everyone's performance is a function of their internal sup Jier.. . , Mail-out surveys work very well for commercial customers. A very good
The following checklist can be used 10 improve the sausfacuo11 of both mtemal technique is to request the customer to grade (A, B, C, D, etc.) the supplier in
terms of quality, delivery, and service. Another very good technique is to visit the
and external cus1omers:
customer, observe the product in action, and assist in any necessary problem
1. Who are my customers? solving. To increas!! public relations, bring along a few operating people.
For end users, focus groups of current or potential customers work very
2. What do they need?
well. The meetings are guided by a professional and explore the favorable and
3. Whal are their measures and expectations? unfavorable aspects of current and future products. Feedback is also obtained
4. What is my produce or service? by comparative evaluation of a competitor's product, packaging, and follow-up
s. Does my product or service exceed expectations? infonnation.
6. How do I satisfy their needs? Many companies rely on their service centers to provide feedback on cus
tomer satisfaction. These service centers may be organization-owned or may be
7. What corrective action is necessary?
operated by contract 1n this regard, a Pareto analysis of repair parts can indicate
8. Are customers included on teams? the location and frequency of quality problems.
Customer complaints provide the best infonnation; however, this informa
Each individual ·or group must identify and satisfy its customers while fostering a tion occurs in the worst situation. Complaints are discussed in the next section.
team effort whereby all people help the organization rather than look after personal
objectives. To aid in tfos goal, performance measures and objectives are
establis:1ed for each operating unit or subunit. Customer Complaints
A recent survey of retail customers by the American Society for Quality (ASQ)
Customer Feedback showed that dissatisfied customers rarely complain. Products included in the study
were: automobiles, mail order, radio/TV, groceries, furniture, clothing, home re
In order 10 focus on the customer, an effective feedback program is necessary. The pair, appliances, and auto repair. The study found that, on the average, only about
objectives of this program are to 1% complain to management, 18% complain to front-line people, and 81% do not
complain. About 25% of the dissatisfied customers will not buy that brand again
1. Discover customer dissatisfaction and the proi;!,ucer has lost sales without an explanation. While this study was con
2. Discover relative priorities of quality with other attributes such as price and ducted on retail customers, there is some evidence that the principle is applicable
delivery also to commercial customers. Therefore, when a complaint is received, it repre-
3. Compare performance with the competition sents not only the tip of the iceberg but an opportunity for quality improvement.

I
A

CHAPTER 2 PRINClPWS AND PRACTICES OF TOTAL QUAUTY MANAGEMENT •

Scanned with

Ever.ycompany should have a procedure for using customer complaints.A
suggested one is
1. Accept complaints-don't fight them-for they are a measure of your quality.
2. Feed back complaint information to all people.
3. Analyze complaints by doing the detective work. . .
4. If possible, eliminate the root cause. More inspection is not c rrective action.
S. Report results of all investigations and solutions to everyone mvolved.
Service After the Sale
An essential characteristic of customer satisfaction occurs after the sale. An organ
ization can create a market advantage by being the best-----beyond _performance,
delivery, and price. Service quality is a product; therefore, 11 can be improved and
controlled. The basic elements of service quality are
Organization
I. Identify each market.
2. Establish the requirements and communicate them.
Customer
3. Obtain the customer's point of view.
4. Meet the customer's expectations by delivering what is promised.
5. Make the customer feel valued.
6. Respond to all complaints.
7. Overrespond to the customer.
Communication
8. Optimize the trade-off between time and personal attention.
9. Minimize the number of contact points.
IO. Write documents in customer-friendly language.
Front-Line People
11. Be sure employees are adequately trained and people-friendly.
12. Serve I hem as internal customers.
13. Give them the authority to solve problems.
14. Challenge them to develop new methods.
15. Establish performance measures, and recognize and reward performance.
II
CHAPTER 2
Leadership
16. Lead by example.
17. Listen to front-line people.
18. Strive for continuous quality improvement.
How these basic elements are addressed will vary among different organizations
and their product or service.
Final Comments
Good experiences are repeated to six people and bad experiences are repeated to 15
people. Know your customers, listen to them, and, when necessary, educate them,
for they determine their needs and u](imalely judge your ability to satisfy those
needs.
Every organization should establish a partnership relationship with its cus
tomers. The quality of U.S. products and service was outstanding during World
War II because there was the ultimate partnership with the customer---our sons,
daughters, spouses, relatives, friends, and neighbors.
EMPLOYEE INVOLVEMENT
Introduction
No resource is more valuable to an organization than its people. Although the
above expression is an old cliche, it is certainly a true one and very applicable to
quality. Mru1y organizations view quality problems in terms of operating
personnel. The frequent response is to develop motivation programs wilh goals ond
slogans. These programs result in an immediate "hype." Management actions
(quality council) and deeds (project team success), rather tllan lip service, will do
more to motivate people than short-lived programs.
Consider a situation in which an operator produces parts that have marginal
quality. If management decides to sort or scrap the parts, then concrete evidence is
given that management cares about quality. However, if lhe decision is to take a
chance and ship the parts to the customer, then all the slogans and motivational
programs will have Jiltle meaning or will even be counlerproductive..
Actually, management makes a serious mistake wl1en ii assumes that the quality
problem is due to unconcerned operating personnel. W. Edwards Deming has
estimated that only 15% of the quality problems of an organizati,on are due to local
faults (opera tors and first-line supeivisors). The rest (85%) are due to the system
(management).
Point 8 of Deming's 14 points is
Reduce fear throughout the organiza1ion by encouraging open, two-way,
nonpunitive communica1ion. The economic Joss resulting from fear to ask
questions or report trouble is appalling.
PRINCIPLES AND PRACTICES or TOTAL QUAUTY MANAGEMENT
Ill
 Deming further states that quick results in quality improvement can be obt.ained
by 3Chieving this goal. Powerful economic results are obtainable within two or
three years when I.he employment climate is changed. . areas. Occasionally, it is desirable from a management commitment and involvement
. Involving people in a quality irnprovem_ent program is an e ec ve techmqu;
to improve the quality. Management comrrutment, annual qua ty _unp v
men, education and training, project teams, and so forth, are all effecuve Ill
ulihzrng the human resources of an organization. People must come 10 work
not only to do their jobs, but also to think about how to improve their jobs.
People rn st be em powered to perform processes in an optimum manner at the
lowest possible level.
Project Teams
The Japanese have bad excellent success with their quality control circles.They
can be used at ail levels of an organization. However, the quality control circle
approach is not a panacea. It is estimated that, at best, only IO% of the Japanese
miracle in quality can be attributed to this approach. The reason for this low
value is that the vital few (85%) quality problems are inherently due to the
system (management).
For the most part, the quality circle movement outside of Japan was not
successful because of a lack of management support, little first-line
supervisor involvement, insufiicieni training, and poor proje<:ts.
In spite of the problems with quality control circles, the team concept bas
emerged as the key method to improve quality and productivity while
breaking down barriers and enhancing morale. The project and teams of seven to
JO mem bers are authorized by che qualicy council with a member of the council
serving as the coach or mencor. Teams may be departmentaJ or mullifunctional
and standing or ad hoc. The supervisor will usually be che team Jeade.r for
departmental teams whereas mu Iii functional teams might have a senior manager
from Lhe most affected functional area Whenever possible, ic is a good idea co
have an internal or external customer and an internal or external supplier on the
team.
Mulcifunctional project teams are used for bolh the development of new
processes and I.he improvement of existing ones. They may be standing or ad
hoc. New processes are developed from research and development or from unful
filled needs determined by functional areas. No matter what the source, it is
impor tant that there be early involvement of all appropriate personnel by placing
them on project teams. Typical members will be from marketing, quality, materials
manage ment, service, finance, production, and, of course, design. The project
leader will
most ltkely be from I.he design area and is described as first among equals.
The basic idea is to build quality into the design at the beginning ralher than
fix it afterwards. Each of the team members has a role to play. For example, mar
keting will continue to assess lhe customer's requirements in regard to the design.
II r, product!on ill pro ide advice about the ability of the process to meet a par
!tcular
CHAPTER 2
spec1ficauon. This approach prevents problems from occurring rather than
detecting them at a later time when the cost lo correct the problems may be ·
hibitive. Other teams might be composed of representatives from many functional
viewpoint to include tbe CEO or senior manager on a project team. This practice is a
concrete illustration of !eacling by example.
Department or operational areas have standing or ad hoc teams. Standing
teams might have weekly meetings to discuss control-chart patterns, complaints,
downtime, on-time delivery, etc. The composition of ad hoc teams will be a
func
, lion of the desired improvement. Some teams might be composed of simply the
operator, supervisor, internal customer, and a member of the quality department.
Each team should have the proper education in the basic tools. Some initial
improvement projects are order entry/invoice, customer satisfaclion, supplier man
agement, production problems, design problems, and recognition and reward.
Education and Training
The cost of education and training for all personnel is enonnous, and the time to
achieve it is lengthy. The Japanese trained hundreds of thousands of managers
and supervisors at all organizational levels plus millions of nonsupcrvisors. As
far as quality is concerned, this massive training program has made their
managers, specialists, and workers the best trained on earth. This training took
more than lO years to achieve.
To a g!'eat extent, education has been limited to the quality department. The
entire organization payroll must be educated in the new philosophy and the
quality sciences as appropriate to their positions. Top management will need a
different education than operating personnel. While some education and training
occurs concurrently, senior management will need to be first, followed by middle
management and specialists, and finally by first-line supervisors and operating
personnel.
Some education, such as an attitude change, a rudimentary knowledge of
sta tistical techniques, the quality improvement sequence of events, mid the
concept of prevention, is common to all levels. However, the educational needs
of ctifferent functional areas, departments, and jobs will vary considerably. For
example, pur chasing personnel will need a knowledge of vendor survey,
qualification, and rating; the concept of price versus cost; number of suppliers;
slatistical process control; and acceptance sampling. ,
In addition to education related to quality, a rigorous program of retraining
people in new skills to keep up with changes in materials, methods, product de
si_gns, and machinery is desirable. To a large extent, this retraining will be pro
vided to the specialists within an organization. For example, the product
engineers
·· of an appliance manufacturer must be aware of the impact of composite material
technology on that company's products.
PRINCIPLES AND PRACTICES OP TOTAL QUAUTY MANAGEMENT
II

· The education and training task is so fonnidable that the q_uali_ty co ncil m y
wish to establish a project team lo do the planning on an orgamzauon-wide basis.
The mission of this project team is to
l. Identify 1he subject matter for each job category
2. Identify possible sources of training materials and leaders
3. Estimate the investment required in money, facilities, and perSonnel
4. Recommend 0 program, including trainees, leaderS, and a time schedule
Upper managers should become trainees in the program. Their_ ti:ainin will
be partly "by the book" and partly by the extent to which they participatem the
management of the quality function.
A suggested startup program for small companies is that
• All managers and supervisors receive seven hours ofTQM training
• All managers and supervisors receive seven hours of SPC training
• All operating personnel receive seven hours ofTQM/SPC training
While concepts are impor1ant, the primary thrust of the training should be practical
in nature.
Suggestion System
Once the proper environment is established, a suggestion system can be devel
oped that will provide another approach for quality improve1:1ent. I ord r to be
effective, action by management is necessary on each suggestion. This action can
create qui le an increase in management's workload; however, it is the only way a
suggestion sys1em will provide the maximum benefits. A few CEOs answer each
suggesLion with a personal letter staling why the suggestion was or was nol a
good one and whether ii will or will not be implemented. Monetary and/or recog
nition reward is also an essential part of a suggestion system, and the recognition
pan may be the most important.
The suggestion system should be designed to prevent the theft of ideas and
innovat.ions. Prevention can be obtained by the use of a two-copy form. One copy
is the original and is submitted to the organization and the other copy is retained
by the employee.
Most suggestion systems require ideniification of a problem and a
solution. Another approach is 10 provide a fonn whereby people need only state
a problem. The appropriate functional area or department will develop the
solution.
II CHAPTER 2
l
Typical problems are:
1. This 1001 is not long enough for all the parts.
2. The sales department makes loo many errors on their order entry forms.
3. We make a Jot of changes in response to telephone calls, and many changes
have to be redone.
Once people know that their problems will be heard and answered,
communication ' is opened up, and the potential for quality improvement is
enhanced.
Final Comments
Employee involvement in the decision-making process improves quality and
increases productivity. Better decisions occur because the work force is more
knowledgeable about the process. They are more likely to implement and support
decisions they had a part in making. In addition, they are better able to spot end
pinpoint areas for quality improvement and better able 10 take corrective action
when a process is out of control. Employee involvement reduces the labor
management hassle and increases morale.
CONTINUOUS PROCESS IMPROVEMENT
The goal is to achieve perfection by continuously improving the business and
production processes. Of course, perfection is an elusive goal; however, we must
continually strive for its attainment.
We continuously improve by
• Viewing all work as a process, whether it is associated with production or
business activities
• Making all our processes effective, efficient, and adaptable
• Anticipating changing customer needs
• Controlting in-process performance using measures such as scrap reduction,
cycle time, control charts, etc.
• Maintaining constructive dissatisfaction with the present level ofperfonnance
• Eliminating waste and rework wherever it occurs
• lnvest:igaling activities that do not add value to the product or service, with
the aim of eliminating those activities
• Eliminating nonconfonnities in all phases of everyone's work, even if the
increment of improvement is small
PRJNCIPLES AND PRACTICF.S OF TOTAL QUALITY MANAGEMENT
 • Using benchmarking to improve competitive advantage The _proc s is the interaction of some combination of people, materials,
equipment, melhod, m asurement, nnd the environment to produce an outcome
• Innovating lo achieve breakthroughs such as a product, service, or an input to another process. In addition to having
• Ho\ding gains so there is no regression measurable input and output, a process must have value-added activities and
• Incorporating lessons learned into future activities repeatability. It must be effective, efficient, under control, and adaptable. In
• Usingtechnical tools such as statistical process control (SPC),experimental addi tion, it must adhere to certain conditions imposed by policies and
design, benchmarking, quality function deployment (QFD), etc. constraints or regulations.
All processes must have an owner. In some cases, the owner is obvious, be
cause there is only one person perfonning the activity. Frequently the process will
Process cross multiple organizational boundaries, and supporting subprocesses will be
Process refers to the business and production activities o anorganization_-Busi owned by individuals within each of the organizations. Thus, ownership must be
nessprocesses such as purchasing, engineering, account1 g,andmarke n_ga r e part of the process improvement initiatives.
areaswhere nonconformance can represent an opportunity for substantial im Al this point it is important to define an improvement. There are five basic
provement Figure 2-3 shows a process with its inputs a_n output .Inputs can be ways: (]) reduce resources, (2) reduce errors, (3) meet or exceed expectations of
materials, money, information, data, etc. OutpulS can be rnfonnauon,data, prod downstream customers, (4) make the process safer, and (5) make the rocess more
ucts, services, etc. Actually, the output of one process can be the '.npultoano er satisfying to the person doing it,
process. Outputs usually require performance measures. The are designed t A process that uses more resources than necessary is wasteful. Reports that
achieve certain outcomes such as customer satisfaction. Feedback 1s necessary to are distributed to more people than necessary waste copying and distribution time,
improve material, user read time, and, eventually, file space.
the process. For the most part, errors are a sign of poor workmanship. Keyboarding errors
Process definition begins with defining the internal and/or externalcus- that are detected after the computer printout requ_ire opening the file, making the
tomers. The customer defines the purpose of the organization and every process correction, and printing the revised document.
within it Because the organization exists to serve the customer, process improve By meeting or exceeding expeelat.ions of downstream customers, the process
ments must be defined in terms of increased customer satisfaction as a result of is improved. The better the oxyacetylene weld is made, the·1ess grinding is re
higher-quality products and services. quired, making the appearance of the finish paint more pleasing.
The fourth way a process can be improved is by making it safer. A safer
work place is a more productive one with fewer lost-time accidents and lower
FEEDBACK
worker's compensation clairns.
The fifth way to improve a process is to increase the satisfaction of the indi
vidual perfoml.ing the proce.ss. Although it is difficult to quantify, the evidence
INPUT OUTPUT sug gests tJ1at a happy, satisfied employee is a more productive one. Sometimes a
Molenals Information little change, such as a better chair, can make a substantial change in a person's
Money- lnlormauon Dala, etc.
--+i Data OUTCOMES attitude toward their work.
Product
Service, etc.
Problem-Solving Method
The project team achieves optimal results when it o'perates within the framework
of the problem-solving method. In the initial stages of a process-improvement pro
CONDITIONS gram, quick results are often obtained because the solutions are obvious or
someone has a brilliant idea. However, in the long term, a systematic approach
will yield the greatest benefits.
FIGURE 2-3 Input/oulput process model.

m CllAl'TER 2 PRINOPLES AND PRACTICES OF TOTAL QUAUTY MANAGEMENT

Iii
 The problem-solving method (nl o calkd t.he i.cienlilic metho,n 11s npplkd lo • Custruner survey
process improvement h:1s sc,cn phases:
• E111ploy c hllrveyi.
• IJrnimlomling by work r,roups
1. Identify the opportuaity.
, An:.tlyLe Lhc current prncc-s. Problems arc nnl bad or good; they provide opportuni1ics for improvement.
.). De, elop the optimal solution(s). Porn con<li1ion lo qualify as a problem, ii must meet the following thn:e criteriw
4. Implement change·.
I. Pcrformnncc voric from an c wbli hcd Mandard.
5. Srudy the re!>UH .
2. Tl1crc is dcvialion from Ilic pcrccpliori and I.he facLl..
6. St:lnd:mlizc the solution.
3. The caus • is unknown; if wc know lhc cau c, there is no problem.
7. Pl:in for th future.
Finding problems is nol too difficult, bccau e there are many more than can
t - nottoca.11 , indt"pcnd •nt; they are somrtimcs i111crrcla1cd. ln fact,
Th.e.se be onaly1ed. The qunlity council or work group muqt prioritize them U\ing lhc fol
s eps are
somete-chniqut"S, such· n the cont.rol rhn.rl, can be effccllvclyuuh
. th .
. • d c• mmore
lowing sclcclion criteiia:
an onestep.Process impro\'emenl is the goal, and the problem-solvmg process
1sa J. ls lhe problem important and nol superficial, and why?
framework to achieve 1k11goal. 2. Will problem solution contribute lo the a!tainmcnl of goals?
3. Can the problem be defined clearly using numbers?
Ph:lSe l: ldentifJ 1he Opporlunity
The objective of this phn e is 10 identify :md prioritiz.e opportunities for improve A work group that needs lo select its initial problem should find one that gives the
ment. II has three pnrts: id(•ntify the problem, fonn the team, and define the maximum benefit for the minimum amount of effort.
scope. . , The second part of Phase I is to form a team. lf the team is a natural work
Problem identificnlion ans, ers the quesLJon. What are the problems? The group, then this part is comrlcle. If the problem is of a multifunctional n:iture, as
answer leads to those probkm tJ1at have the greatest po_tenli I for improve ent are most, then the learn is selected and tasked by the qualit) council 10 ad<lres the
andhavethe gre.11est need for solution. Problems can be 1dent1tied froma variety improvement of a specific process. The learn leader is selected and becomes the
of inputs, such as the following: owner of the process. Goals and deadlines are detem1ined.
The third part of Phase 1 is to define the scope. Failure in problem solving is
• Pareto analysis of repetitive external alarm signals, such as field failures, frequently caused by poor definition of the problem. A problem well stated is half
compla.inls, returns, and others (see Chapter 3) solved. Criteria for a good problem statement are as follows:
• Pareto analysis of repetitive intern.11 alarm signals (e.g., scrap, rework, • It clearly describes the problem and is easily understood.
sorting. and the 100% 1es1)
• It states the effect-what is wrong, when it happens, and where it is occur-
Proposals from key insiders (managers, supervisors, professionals, and union ring, not why it is wrong or who is responsible.
stewards) • It focuses on what is known, what is unknown, and what needs to be done.
• Proposals from suggestion schemes
• It uses facts and is free of judgment.
• field study of users' needs
• It emphasiz.es the impact on the customer.
• Data on performance of products versus competitors (from users and from
laboratory tests) An example of a well-written problem statement is:
• Comments of key people outside the organization (customers, suppliers,
journalists, and critics) As a result of II customer satisfaction survey, a sample of 150 billing invoices showed
that 18 hod errors that required I hour to correct.
• Findings and comments of government regulators and independent laboratories

II
PRINCIPLES AND PRACTICES OF TOTAL QUALITY MANAGEMENT
CHAPTER 2

Scanned with
 : =
. , . h e uires a comprehensive
In add.itiD:1 to the problem statement, this P aser q
charter for the learn. The charter specifies
1 Authority. Who authorized the team? 'fi
• l d tputs and spec1 c ureas
2. Objective and Scope. Whal are the expece ou
improved?
d and subprocess
3, Composition. Who are the team members an process
owners? . · f
4. Direction and Control. What are lhe guidelines for the internal operationo
the team?
S. General. Whal are the methods to be used, the resources, and the spec1 ic
milestones?
Phase 2: Analyze the Current Process
The objective of this phase is to understand the process and how it is currently
formed Key activities are to delerrnine the measurements needed to analy e e
process.; gather dnta; define the process boundaries, outputs and ustomers, inputs
and suppliers, and process flow; identify root causes; and detellllJne levels of cus-
tomer satisfaction. . d'
The first step is for the team to develop a process flow d1_agram. ow 1 -
gram translates complex work inlo an easily understood graph_idc e_scnpuon.
This activily is an "eye-opening" experience for the team, because 11 1s rare
that all members of the team understand the entire process. . skewness, kurtosis, and frequency dis1ribution
Next, the 1arge1 performance measures are defined. easurement 1s fun
damenlal lo meaningful process improvements. ff somet.hrng cannot be meas
ured, it cannot be improved. There is an old saying that what gets measured
gets done. The team will dcterrnfoe if !he measurements needed to understand
and improve the process are presently being used; if new ones are needed, the
team will
• Establish performance measures with respect to customer requirements.
• Determine dala needed to manage the process.
• Establish regular feedback with customers and suppliers.
• Establish measures for quality/cost/limelines of inputs and outputs.
Once the target performance measures are established, the team can
collect all available data and information. If these data are not enough, then
additional new information is obtained. Gathering data (I) helps confirm that a
problem exists,
(2) enables the team to work with facts, (3) makes ii possible to establish measure-
. menl cri1eria for baseline, and (4) enables the team to measure the effe.ctiveness of
II CHAPTFR 2
an implemented solution. IL is imponant Lo collect only needed dat,annJ to r, Lthe
right data for the problem. The team should develop a plan that rncludes 111pu1
from internal and external customers and ensures that the plnn ar1swtrs lhl: lol-
lowing questions:
to be
1. What problem or operation do we wish to kam about?
2. What are the data used for?
3. How many data are needed?
4. What conclusions can be drawn from the collected data?
s. What ac1ion should be taken as a result of the conclusion?
·fi
Data can be collected from check sheets, computers with application software,
data-collection devices such as hand-held gages, and on-line systems.
The team will identify the customers and their expectations as well as their
inputs, outputs, and interfaces of the process. Also, they will systematically review
the procedures that are ctmently being used.
Common items of data and information are
• Design infonnation, such as specifications, drawings, function, bills of
mate rials, costs design reviews, field data, service, and maintainability
• Process information, such as routing, equipment, operntors, rnw material,
and component parts and supplies
• Statistical information, such as average, median, range, standard deviation,
• Quality information, such as Pareto diagrams, cause-and-effect diagrams,
check sheets, scatter diagrams, control charts, histograms, process capability,
acceptance sampling, run charts, life testing, and operator and equipment
matrix analysis
• Supplier information, such as process variation, on-time delivery, and tech
nical competency
The cause-and-effect diagram is particularly effective in this phase. Deter
mining all of the causes requires experience, brninstonning, nnd a thorough
knowledge of the process. It is an excellent starling point for the project team.
One word of camion-the object is to seek causes, not solulions. Therefore, only
pos sible causes, no matter how trivial, should be listed.
It is important to identify the root', or most likely, cause. 5 This activity can
sometimes be determined by voting. IL is a good idea to verify the mosl likely
- 'Duke Okes,"Improve Your Root Couse Annlysis," Mm111fnct11ri1111 E11g/11ur/11g (Mn1ch 2005): 171-178.
m
PRINCtPI...ES M'D PRAC11CES OF TOTAL QUALITY MANAGEME.NT
Scanned with
Scanned with
 nd
cause, because a mistake pere can lead to the unnecessary waste of timea
money: Some verif.cation techniques are .
1. Examine the most likely cause against the problem statement.
2. Recheck all data that support the most likely cause.
3. Check the process when it is perfonning satisfactorily agaios when it is not
by using the who, where, when, how, what, and why approac_ • .
4. Utiliz.e an outside authority who plays "devil's advocate" with the data, m
fonnation, and reasoning.
s. Use experimental design, Taguchi's quality engine ring, and other advanced
techniques to determine the critical factors and their levels.
Onc.e the root, or most likely, cause is determined, the next phase can begin.
Phase 3: Develop the Optimal Solution(s)
This phase has the objective of establishing problem so_lutions a_nd eco ending
the optimal solution to improve the process. Once all the mfonnallon 1s available, the
project team begins its search for possible solutions. More Lhan one solution is
fre que.nlly required to remedy a situation. Sometimes the solutions are quite
evident from a cursory analysis of the data.
There are three types of creativity: (1) create new processes, (2) combine dif.
ferent processes, or (3) modify the existing process. The first type is innovation
in ils highest fonn, such as the invention of the u-ansistor. Combining two or
more processes is a synthesis activity to create a better process. It is a unique
combina tion of whal already exists. This type of creativity relies heavily on
benchmarking. Modification involves altering a process thal already exists so
that it does a better job. It succeeds when managers utilize the experience,
education, and energy of empowered work groups or project teams. There are no
distinct lines among the three types-they overlap.6
In this phase, creativity plays the major role, and brainstonning is the pri11-
cipal technique. Other group dynamics that can be considered for this phase are
the Delphi method and the nominal group technique.
Areas for possible change are the number and length of delays, number of
steps, timing and number of inspections, rework, and materials handling.
One possible solutions have been detennined, evaluation or testing of
the solutions comes next. As mentioned, more than one solution can con t
ibute to 1!1e situation. Evaluation and/or testing determines which of the pos
sible solutions have the greatest potential for success and the advantages
and
m 'Poul Malknc, "Improving Thtough Crealivi1y," Quallry Digm (Moy 1993): 81-85.
CHAPTER 2
disadvantages of these solutions. Criteria for judging the possible solutions
include such things as cost, feasibility, effect, resistance to change, conse
quences, and training. Solutions may be categorized as short range and long
range.
One of the features of control charts is the ability to evaluate possible
. solutions. Whether the idea is good, poor, or has no effect is evident from the
chart.
Phase 4: Implement Changes
Once the optimal solution is selected, it can be implemented. This phase has the
objective of preparing the implementation plan, obtaining approval, implementing
the process improvements, and studying the resulls.
Although the project team usually has some authority to institute remedial
action, more often lhan not the approval of the quality council or other appro
priate authority is required. Jf such is the case, a written and/or oral report is
given.
The contents of the implementation plan report must fully describe
• Why will it be done?
• How will it be done?
• When will ii be done?
• Who will do it?
• Where will it be done?
Answers to _these questions will designate required actions, assign responsibility,
and establish implementation milestones. The length of the report is determined by
the complexity of the change. Simple changes may require only an oral report,
whereas others require a detailed written report.
After approval by the quality council, it is desirable to obtain the advice and
consent of departments, functional areas, teams, and individuals who may be af
fected by the change. A presentation to these groups will help gain support from
those involved in the process and provide an opportunity for feedback with im
provement suggestions.
Measurement tools such as run charts, control charts, Pareto diagrams, his
tograms, check sheets, and questionnaires are used to monitor and evaluate the
process change.
Pylipow provides a combination map to help formulate an action plan to
help measure the results of an improvement. The map, shown in Table 2-3,
provides the dimensions of what is being inspected, 1he type of data, timing of
data collection, by whom, how the results will be recorded, the necessary action
that needs to be taken based on the results, and who is to take the action.
II
PRINCIPLES AND PRACllCES OF TOTAL QUALITY MANAGEMENT
Scanned with
 checklist would include items such as electrostatic discharge. temperature control,
and air purity. The supervision checkJist would include items such as suggestion
TABLEl-3 Combinatio Map oC Dimer.slons for Process Control
TYPE OF system, results feed back, and clear instruclio_s.These ch ckJists providethe
WHAT'S TYPE OF ,\CTION BYWHOM7 means to initially evaluate the peripherals and penod,cally aud1l them to ensure that
RECORD
INSP£CTfl) BYWllOM? Automate:d tlie process will meet or exceed customer requirements for the product or s rvice.
DATA TI:MING Process
Device Electronic
Process Variable During run:
improved equipment Finally, operators must be certified to know what to do and how to do 1t for a
chart particular process. Also needed is cross trainin,g in other jobs within the prix:ess to
Continuous Paper ensure next-customer knowledge and job rotal..Ion..Total product knowledge 1s
also
Process control chart desirable. Operator certification is an on-going process that must periodically occur,
Variable
Sample During run: Process Electronic Process Operator Phase 7: Plan for the Future
off-line trendtrend
Operator Paper chart adjusted
Product Attribute Lot saned This phase has the objective of achieving improved levels of process performance.
chm
Sample Regardless of how successful initial improvement efforts are, the improvement
Afler JoL Inspector Electronic list Sample Inspector or process must continue. lt is import.int to remember that Total Quality Management
complete repaired or mechanic (TQM) addresses the quality of management as well as the management of quality.
discarded Everyone in the organization is involved in a systematic long-term endeavor to
Paper list
100% of develop processes that are customer oriented, flexible, and responsive, and to con
product s nLly improve qu it
. . . f n E. ""I"""' "Unders1n11din• the Hier=hy of Proc•ss Control: Using• Comblnolion Mop 10
A key activity is to conduct regularly scheduled reviews of progress by the
Rcproduc:cd, w1lh pie.nmsstol\. rem 1-etcr , , 1..----, tt quality council and/or work group. Management must establish the systems to
Fom1uh10 an Action Plan," Quali,y Progress (Occobct 2000):63--06.
identify are::is for future improvement and to trnck perfonnance with respect to
internal and external customers.
Phase 5: Study !he Results Continuous improvement means not being satisfied with doing a good job or
lnorderto study the results, measurements must be taken. Ownership of process but striving to improve that job or process. ll is accomplished by
the measurement activity must be assigned. Measurement tools such a run incorporating process measurement and learn problem solving in all work activities.
,charts, conlrol charts, Pareto diagrams, histograms, check sheets, and TQM tools and techniques are used Lo improve quality, delivery, and cost. We
questJonnaues are mustcontinuously strive for excellence by reducing complex.ity, variation, and out-of-
used 10 monilor and evaluate lhe process change, control processes.
The team should meet periodically during lhis phase lo evaluate the results Lessons learned in problem solving, communicalions, and group dynamics
10see thatthe problem has been solved or if fine-tuning is required. in as well as technical know-how must be transferred to appropriate activities
addition, they will wish to see if any unforeseen problems have developed as a within the organization.
result of the changes, If the team is nol satisfied then some of the phases will Although the problem-solving method is no guarantee of success, experience
need to be has indicated that an orderly approach will yield the highest probability of
repeated. success. Problem solving concentrates on improvement rather than control.
Phase 6: Standardize the Solution
Once the team is satisfied with lhe change, it must be instilulionalized by
positive control of the process, process certification, and operator certification. SUPPLIER PARTNERSHIP
Positrol (positive control) ensures lhal important variables are kept under conLrol.
Introduction
It speci fies t11e what, who, how, where, and when of the process and is an
updating of lhe combination map. On average, 40% of product or service cost is due to purchased material or
In addition,the quality peripherals-the system, environment, and supervision infonnaLion; therefore, supplier management is extremely important. It follows
must be certified, A checklist for the quality system would include items such as 'ihat a substantial portion of quality problems will be due to the supplier. In order
preventative maintenance, alarm signals, and shut-down authority, An environment
I
II
J'RJNcrrLES Al\'D PRACTICES or TOTAL QUALITY MANAGEMENT

CllAP'TER 2

Scanned with
 follows supplier selection and an excellent track record over time. Part of this process
· . · . . artnership is required. may include ISO 9000 registration.
for both parties to cceed and their busin ess t o g row,a P .
. f t h d uct or serv ice process. Certification allows a supplier to ship to stock with only an identity check
The supplier should be treated as an extension
. . d
° .
e po .
They will need to work together to achieve quab1y improvemen·
eduction and
t The sup-
d
cost •re and
uc-
and statistical evidence of quality. The purchaser no longer needs to conduct re
p lier should make a positive contnbutJon to esign, pr ' th ceiving inspection, and a purchaser/supplier partnership is created. Periodic audits
tion. Emphasis should be al t, hich includes bo pnce are conducted by the purchaser to ensure conformance. Certification reduces the
placed on the tot cos w . hi d purchase
quality cost. The supplier should be given a long-tenn _relatJonsb pttanquality at a number of suppliers to a manageable level.
.
contract. In fact, s10gle .
sourcing •
with a arge con tract will create e er
1
lower cost, but delivery disruption is
possible.
·es are
. J usl-1 n- uu (TIT) r: -e • Supplier Quality Ratings
usi ng
lo order to reduce inventories, many comparu li ·
For TIT to be effective, the supplier quality must be excellent, and the supp er Ratings are based on certain measures and are weighted. A typical rating system is
must reduce the setup time. .
Supplier management activities include the following: Percent nonconfomling 45%
Price and quality costs 35%
1. Define !he product and program requirements. Delivery and service 20%
2. Evaluate potential suppliers and select the best.
3. Conductjoinl quality planning and execution. Supplier quality ratings provide an objective measure of a supplier's performance.
This measure can lead lo a supplier review and allocation of business and identify
4. Require statistical evidence of quality.
areas for quality improvement.
s. Ce.rtify suppliers or require ISO 9000 registration.
In order for supplier partnering, there must be long-term commitment, trust,
6. Conduct joint quality improvement programs. and shared vision.
7. Create and utiliz.e supplier ratings.

Supplier Selection Criteria

Effective selection requires the supplier to be knowledgeable of the purchaser's
quality philosophy and requirements. It also requires satisfaction by other cus
tomers. The supplier must demonstrate technical capability and capacity to pro
vide quality products or services. Of particular importance is the credibility of
the supplier-are the purchaser's secrets secure? The primary criterion is the
sup plier's abili1y to provide quality products or services as evidenced by the qu
ity system and improvement program. Another criterion is the supplier's control
of its suppliers. Finally, the supplier's accessibility may be critical. The criteria
are
applicable whether the selection is done by survey or by visit of a third party.A
well-designed checklist with weights for different criteria will aid in evaluation
and selection.
Supplier Certification
Incoming material is evaluated at the supplier's plant by a third party, at the purchaser's
plant by 100% inspection, by acceptance sampling, or by identifying checks and
PERFORMANCE MEASURES
The sixth and final concept of Total Quality Management is performance measures.
One of the Malcolm Baldrige National Quality Award core values is managing by
fact rather than by gut feeling. Managing an organization without performance
measures is like a captain of an ocean-going ship navigating without any instru
mentation. The captain would most likely end up traveling in circles, as would an
organization.
Effective management requires infonnation obtained from the measurement
f activ_ities. Pei:ormance measures are necessary: as a baseline, to identify poten
tial proJects; to Justify project resource allocation; and to assess the improvement
results. Production activities use measures suGh as defects per million, inventory
turns, and on-time delivery. Service activities use ,measures such as billing errors,
sales per square feet, engineering changes, and activity time. There are many
methods, and each has its place in the organization.
Performance measures should not be used as a "whip" to exhort supervisors
and employees to produce more, to the detriment of the organization. For example,
,. a su ervisor may continue to run equipment in order to meet a quota rather than
shut 1t down for preventative maintenance.

m
statistical evidence of quality by a certified supplier. A certified supplier is one
that can supply quality materials on a long-term basis. The certification process

m
PRJN01'1..£S AND PRACTICES OF TOTAL QUALITY MANAGEMENT
CHAPTER 2

Scanned with

Cost of Poor Qualit •7
ln1hc fin.ii o.n:ilysis, lhL' v.,Jm· llf qu:1lity must he h:ist·d on itsn ilityto
1 the cosls show a ncc I. Themgrn111also provides cost juscilication for corrcclivc
contribute lo l'I\.Jfit,;tht rcforc, the mostdfl·,·tive pt".1forn1cmn· nwa:illl\' lS IJ\tr'
ott of poor qu.lhty.n ourprofit-orirntcd society, dL·,·isions nre lx·twt'cnalt,•111n1
,·cs o_nJ1.he
1
effecet ach :illL'rn:itivc will haw on the rxp,·nst' nnd inrome of tht:' l:msmrssent ty.
Thte' flicit'ncy oftmy bu:-i1wss is mcastm·<lin terms ofUl)lhtrs.ThL'rcforc;
s with costs ofm:1in1cn:mec'. production. dcsign, inspection.snles, nnd other
act1v1- ties, thecost of poorquality must be k.nown. Thi cost is no different tha
I ony otherL'0SI. It can bepivgr:umucd. budgett·d, 1m·as.urt'd, am.aI nalyzed to
nun_m tl e
objectives of bcttt·rquality .rnd customer sn1isfoction nt less cost.A reductionm
tht: co·t of pm)r quality kads to innt·ast'd rotit.
The t.:ost oi' Ol't quality rn) · t.:s tkpa.rtment Iim's byjnvolvinga I activities
1
cif tlu: ,·l)nip:my--m:irht·tin . pu1d1;isr11 . dl'Sign, 1n::inufac1uring, and /:ervioe, to
namea few.Somecost·, su.:h ns inspector salaries.ond rework, are readily
idcnti lirrblc; other costs..urh as prt"vcntion costs nssoci:1ted with
ma1keting,design, nnd purchasing, are rnon: difficult 10 identify nnd allocate.
There are failure costs o.sso ci:11cd withJostsales :md lost customer goodwill,
which mny be impossible to
mcnsurc and must be estirn:ired.
Thecost ofpoor quality is defined as those costs associated wilh th
nonJchiewmc-111ofprodu1;I or service ql ality as defined by the requirements es
tablished by the org:inization :ind its contracts with customers and society.
Simply st. ted, it is tht:cos! urpol)f pnxlucts or serviC'es.
Thecost ofpl1or qu:1lity is usrd by man:igcment in its pursuit of qu:.i]ityim-
pro i.'11lent, cus10111cr s:11isfaction, m:irket share, anti profit enh:incernent. It is \he
economiic:ommon dcnomin:itor thacfonns the basic d:ita forTQM. Wl1enthecost
ofpoor C)at lrity is tQll g_1c:11, it is a sign of m(I.O:igement hich can
ineffectivenessw.
affect t.htc: ompany's compctiuve position. A cost program provides warning against
oncoming, dangerous financial_situations.
A costof poor quality program quantifies the magnitude of thequality
problem in the language tht\l management knows best--dollo.rs. The cost ofpoor
quality can exceed 20% of the s:ih:s dollar in manufacturing companiesand 35%
of Lhc sales dollar 111 scrvic:e comp.anics. In addition, the program may show
qunlity problem arc:1s that were not known to ex.isl.
The cost of poor qu:ility identities opportunities for quality improvement and
establishes funding priorities by means of Pnreto analysis. This analysis allows
the quality improvement program to concentrate on the vital few quality problem
areas. Once corrective action has been completed, the cost of poor quality will
measure the effectiveness of that action in tenns of dollars. . a trade-off between the cost benefits of enrly discovery of nonconformities and the
'nus•• tlon Is cx. c1cd fromG,'.itltf,>r1·durins Qual1ryCom. 2nd e.d, 1987, and Princ/p/tJ of Quality Cosrs,
1986, by lho Quah1y Casi Cor111_11111ee, w11h the l'('m1ission of 1hc Americ.an Socie1y for Q allty Conll-ol.
II
CllAl'TER 2
A c o_s to f poor quality program knds crcdenc to management's
commit ment 10 (]llality. Argu111t'11ts for qu:ility improvcrm·nt are :;tmnger when
nclion. All osts nssoct:1tt'd with poo1q_11:llity and irs t.:otTc,·tion un: integratt·J
inlo rn,c system in order to c11h:incc the 1_1ual ty w:rnagemcnl fnnction. Quality
improvement is syn onymous_\ 1th n_reJuctron 111 the cost of poor quality. Every
dollar of cost saved
has a pos111w eftccl on profits.
One of the principal advantages of the program is lhe identification of
, hiddennd buried costs inn// funclional areas. Costs in marl-.t'ting, purchasing,
nnd design arc h1ought to the forefront by the system. When se11ior 111a11agcmcnt
has :ill the facts on lmJden and buried costs, they demand a cost of poor quality
program.
"_ Tltc pr gr n1is oampre_hl·nsive system :md should not be perceived as
merely a Jire-fight_111g tecl mque.. l·•or example, one response 10 a custorm.'r's
problem could be to mcrease mspcctron].though this actjon might eliminate the
problem, the cost of poor qn:ihty would mcrease. Real quality improvement
occurs when the root cause of the problem is found and corrected.
Cost or 1'001· QunHtY,Catcguri s ornl EkJnc.nts
There arc four calegorics-prevention, appraisal, internal failu1c, and external
failure. Each category contains elements :rnd subelements.
The preve11tio11 category is defined as the experience gained from the identi
fication and elimi11:i1ion of specific causes of failure cost 10 prevent the rl'CllnCJlC
of the same or siu1iJ, foilUies in other µ10Jue1s or services. P1cvcntion is achieved
by exam_inin_g the total of such e:-:perit·nce and developing sprcific :11:tivi1ics for in
c?rpornuon into the basic man:1gcrne11t system that will make it difficult or impo.s
s1ble for the same e1To1:5or failures to occur again. 'Jlhc prevention costs of quality
ha_ve been defin.e<)to .u1cludc the cost of all activities specifically dt:_signe.d for
this purpose_-Each :ictivity may involve personnel from one or many departments.
o atte1 1pt IS _made to define npproprintc departments, because e,1Ch org:inization
IS orgamzed d lferently. These costs occur in activities nssoci:ited with mmleting/
customer/user mterfoce, product/setvice/design development, purchasing, operations,
and quality ndministration.
The appraisal cost catego1y is the nssur:111ce that the product or Sl'r\lke is
nccepJablc as delivered to customers. This is the responsbility for ev:1l11ating a
product or service nt sequenti:1Istages, from design to tirsl delivery and throughout
the production process, to determine its nccept:ibility for contimmtion i11 th; pro
duction or life cycle. The frequency nnd spncing of these evaluations are h:1scd on
cost of the evnluntions (inspections and tt·st ) themselves. Unless perfect control
c:in be achieved, some nppraisal cost will :1lwnys exist. An organization would
never wont the customer to be the only inspector. Thus, the npprnisal t:osts of poor
J>RINCJPU.S AND PR,\CTlcr.s OF TOTAL QLIAUTY MANAOFMFNT
Scanned with
Scanned with

l;a\ity have been defined to include al) costs incurred in the planned conduct of
roducl or service appraisals 10 detemune com liance o require ents._Tyf!ic ap
praisal costs are incoming inspection, source mspeclion, operations
mspect1ons, measurement equipment, and field setup. . . ..
Whenever quality appraisals are performed, there exists the poss1b1hty for
discovery of a failure to meet requirements. When this happens, unscheduled
and possibly unbudgeted expenses are automatic lly incu ed. When a _c plete
lot of metal parts, for example, is rejected for being oversize, the poss1b1hty
for rework must first be evaluated Then the cost orrework may be compared to
the cost of scrapping the parts and complc.tely replacing them. Finally, a
disposition is made and the action is carried out. The total cost of this
evaluation, disposition, and subsegue11t action is an integral part of internal
failure costs. ln attempting
10 covt'r all possibilities for failure to meet requirements within the internal
product or service life cycle, internal failure costs have been defined to include
basicallf all costs required to evaluate, dispose of, and either correct or replace
nonconforming p1oducts or services prior to delivery to the customer and also to
correct or replace incorrect or ineomplete product or service description (docu
mentation). [n general, 1his includes all the material and J:ibor expenses that
are lost or wasted dlte lo nonconforming or otherwise unacceptable work af
fecting the quality of end products or service. Corrective action that is directed
toward elimination of the prob em in the fulure may be classified as prevention.
Typical costs are poor design, purchasing errors and losses, rework, repair, scrap,
and reappraisal.
Tile exremal failure cosr category includes a11 cosls incurred due to noncon
fonning or suspected nonconforming g.roduct or service after delivery to the cus
tomer. These costs consist primarily of costs associated with the product or service
not meeting customer or user requirements. The responsibility for these losses
may lie in marketing or sales, design development, or operations. Determination
of responsibility is not part of the cost of poor quality system. It can come about
only through investigation and analysis of external failure cost inputs. Typ:cal
costs are complaint investigation, returned goods, retrofit, warranty costs, liability
costs, penalties, goodwill, and lost sales.
Collection and Reporting
The measurement of actual costs is essentially an accounting function. However,
the development of the collection system requires the close interaction of the
quality and accounting departments. Since accounting cost data are established by
depanmental cost codes, a significant amount of information can be obtained from
this source. ln fact, the system should be designed using the company's present
ystcm a d modif_ying it where appropriate: Some existing sources for reporting
mfor:mauon e time sheets, schedules, minutes of meetings, expense reports,
credll and debll memos, and so forth.
- pares the cost of poor quality per some index such as net sales, direct labor cost,
I
C!!Al"i'ER 2
- .
S?me cost data cross de_partmental lines, and these types of costs are the
,
mosl d1ffi_cult to collect. Special forms may be required to report some costs of
poor quality. For ex ple, scrap and rework costs may require analysis by quality
personnel to detennme the cause and the departmenls responsible.
In some cases, estimates are used to allocate the proportion of an activity
that mu_st be charged to a parti ular quality cost element. For example, when the
mar ketin department enga es m research,_ i is necessary for the departmental
supervisor to estimate the proportion of the act1v1ty that pertains to customer
quality need and should be charge a a cost in poo_r quality. Work sampling
techniques can be a valuable tool for ass1sling the supervisor in making the
estimate.
. Insignificant cos!s of poor quality, such as a secretary retyping a letter, may
be difficult t deterrmne nd may be overlooked. However, significant ones are
frequently hidden or buned because the accounting system is not designed to
han le 1!1em. The cost ?f poor quality is a tool that can determine opportunities
for
quality improvement, Justify the corrective action, and measure its effectiveness.
! eluding i s!g_nificant a tivities is not essential to use the tool effectively. All sig
ruficant acllv1t1es or maJor elements, however, must be captured even if they are
only estimated.
_ The comptroller's office must be directly involved in the design of the col
lection system. Only this office has the ability to create a new system lhat will
integrate the cost of poor quality into the existing accounling system. An ideal
system would be one in which the cost of poor quality is the difference between
actual cost and the cost if everyone did a 100% perfect job or the difference between
actual revenues and revenues if lhere were no unhappy customers.This ideal is
not necessary·and would be impossible to obtain. By having a comptroller
directly involved, high exposure for the cost of poor quality is provided. Also,
involvement leads to teamwork with quality, which will enhance the company's
ability to achieve cost reduction.
Costs should be collected by product line, projects, departments, operators,
nonconformity classification, and work cenlers. 'ohis manner of collection is suffi
cient for subsequent cost analysis. Procedures are developed to ensure that the
system functions correctly. Using spread sheet software such as Microsoft's
EXCEL, micro reports are prepared for functional areas and departments and macro
reports for the TQM function.
The basic control instrument is the cost of poor quality report, which is
usually issued by the accounting department. An example of this type of report for
all func tional areas is shown in Figure 2-4. Each functional area would most likely
have its own report. Provision is made to report the current month for each element
as well as the current and prior-year year-to-date values for the four cost categories.
Applicable baseline dala and ratios are shown at the bottom of the report.
Baseline data com-
pro duction cost, and unit. Ratios are also used to reflect management emphasis.
m
PRINCIPLES AND PRACTI O1" TOTAL QUAUTY MANAGEMENT
( >=
By comparing current costs with historical ones, a certain amount of control

l 5 can be exercised. It is also possible to establish a budget for each cost element. By
-; · c comparing actual cost of poor quality with budget costs, favorable and
Q. i,.,
unfavorable variances can be determined.
.. t:
1- -+-----------c
/..
C
Analysis
:,
u Analysis techniques for cost of poor quality are quite varied. The quality cost re
port provides the information for the most common techniques: trend analysis and
•Pareto analysis. The objective of these techniques is to determine opportunities for
quality improvement.
Trend analysis involves simply comparing present cost levels to past levels.
Trend analysis provides information for long-range planning. It also provides in
g formation for the instigation and assessment of quality improvement programs.
"
. Data for trend analysis come from the monthly cost of poor quality report and the
detailed transactions that make up the elements.
Trend analysis can be accomplished by cost category, by subcaregory, by
product, by measurement base, by plants within a corporation, by department, by
work center, and by combinations thereof. The graphs of some of these are shown
in Figure 2-5. Time scales for the graphs may be by month, quarter, or year, de
".
; ,, pending on the purpose of the analysis; therefore, these graphs are also referred lo
.. 0
,:; as rime series.
Figure 2-5(a) shows a graph of the four cost categories by quarter and by
product. It is the cumulative type, wherein the second line from the bottom in
cludes the prevention and the appraisal costs; the third line includes the internal
failure, appraisal, and prevention costs; and the top line includes all four cost
.. .
Q
1--+-----------1
" . . J

I categories.
/..
. .. .
0
C .
The figure shows that the cost of poor qua!ity for product B is better than that
8 nlc for product A. Jn fact, product B is showing a nice improvement, whereas product
·§ A's cost is increasing. An increase in prevention and appraisal costs will, it is
.,, hoped, improve the external and internal failure costs of product A. Comparisons
a between products and plants should be made with extreme caution.
::,
A trend graph for the external failure category is shown in Figure 2-5(b).
Returned costs and lost sales costs have increased, while costs for the other sub
.O..' categories have remained unchanged. In this figure the index is by production
. 0
.. . .
C0 .
costs, and the time period is by quarters.
Figure 2-5(c) shows the trend analysis for th1ee different measurement bases.
.. u
00 "' The differences in the trends of the three bases point up the need for more than one
..
! !
base. A decrease in the percent of net sales during the fourth quarter is due toa
A
.!: seasonal variation, while the variation in production costs for the rhird quarter is
1IQ
due to excessive overtime costs during the quarter.
Figure 2-5(d) shows a short-run trend analysis chart for the assemblyarea.

m
Theratio of rework costs to total assembly costs in percenr is plotted bymonths.

m CHAP'ITR 2
PRJNCIJ'l.1'S AND PRACTICES OF TOTAL QUAUTY MANAGEMENT

J
Scanned with
 - \'roduct
External Failure liOO PereM 011,g,am ol 200 Par•IOOi1g11m
flodut.'t Re1urned
"A" ·e· ln1•rn1I hllure ol Scr•p Opo,,t,oM
1.5 400
- 15
i
B JOO
0 .0,,
00
,,., l,2 200
....
1.0
,,,, Lost Seles
..... ,oo
C ()
E C
:, Warrenty

s.
Internal 0

---­
... ti:,
0

,.
.
/:.

.".l l
Internal oD
"O
f 'I! 6 C D,partmer\\

.u . £0,5
! " 1
I
'
5
-.
a tb 8y E1,me111
:! ? Appraisal Appraisal 8 'i
0
Complaints C

.;;?
:, Prevention /4ention 0.0 L.
..........,.,Other
....
J.._ _ _.._
j l i
0 3
0 12 3 4 l•l s., C.1•aorr
1 2 2 3
Quaner Quarter

(al By Cost Category and (bl Within ;i Category

Product
FIGURE 2-6 Pareto analysis.

20
Las! Year's Average Level
18
It is also important to note that there may be.: time Jag between the occurrence of
•\ percenl Assembly Area a cost and the actual reporting of that cost.
16
14
/
\,
Nonconforming Quality Performance
The other effective cost analysis loo! is Pareto analysis, discussed in Chapter 3.
12
,.., "--•,..... A typical Pareto diagram for iulernal failures is shown in Figure 2-6(a). Items are
located in descending order, beginning with the largesr one on the Jcfl. A Pareto
10
·,,/ ' \x.....,_,.,..a;, diagram has n few irems that represent a .subslantial amount of the total. These
8 '•---;L.... 1(
items are located on the left of the diagram and are referred to as the vi,a/ fe,v. A
Rework Cost as % of
6 Pareto diagram has many items thnl represent a small amount of the total. These
..2 Total AsHmbly Costs
items are localed on the right and are referred to as the 11sef11/ many. Pareto
0 '------'---''---'--'-_, _. . . . ._.... ._ diagrams can be established for cost of poor quality by operator, by machine, by
depar1ment,
3 4 2 3 4
Jan. Mar. May July Sept. Nov. by product line, by nonconformity, by ca1ego1y, by element, and so forth.
Quarter
Once the vital few are known, projects can be developed to reduce their costs.
lei By tndoK
(d) By Ratio In other words, money is spent to reduce the vital few costs; little or no money is
spent on the useful many.
FIGURE 2-5 Typical long-range 1rend analysis graphs. Figure 2-6(b) shows a Pareto diagram by department. Th.is Pareto diagram is
actually an analysis of one of the vital few elements (operation-scrap) in the Pareto
diagram for the internal failure category as shown in Figure 2-6(a). Based on !he
This ratio is compared lo the quaUty measure, percent nonconforming. Both diagram, department D would be an excellent candidate for a quality improvement
curves show a decrease, which supports the basic concept that quality program.
improvement is syn'onymous with reduced costs
Trend analysis is an effective tool provided it is recognized that some Optimum
period lo-pcriod fluctuations arc chance variations. These variations are similar
to those that occur on an X and R chart. The important factor to observe is the analyzing quality costs, management wants to know the optimum costs. This
• .In
information is difficult 10 specify.

I
cost trend.
CHAPTER 2 PRINCPLES ANO PRACTICESOF TOTAL QUAI.JTY MANAGEMENT
m
Scanned with
Scanned with
 · One technique is to make comparisons with other organizations . More and
more organization use net sales as an index, which makes comparison somewhat
easier. Difficulties arise, however, because many organizations keep their costs
secreL Also, accounting systems treat the collection of costs differently. For example,
overhead costs inay or may not be included in a particular cost element. There
are many variations in types of manufacturing and service organizations that
cause quality cost to vary appreciably. Where complex, highly reliable products
are involved, the cost of poor quality may be as high as 20% of sales; in industries
that produce simple products with low tolerance requirements, costs of less than
5% of sales may be commonplace.
Another technique is to optimize the individual categories. Failure costs are
optimized when there are no identifiable and pro.fil:lble projects for reducing
them. Appraisal costs are also optimized when there are no identifiable and
profitable projects for reducing 1J1em. Prevention costs are optimized when most of
the dollar
cost is used for improvement projects, when the prevention work itself bas been
analyzed for improvement, and when non-project prevention work is controlled by
sound budgeting.
A third technique to determine the optimum is to analyze the relationships
among tile cost caregories. Figure 2-7 shows an economic model for the cost of
poor quality. As the quality of conformance improves and approaches 100%,
failure cost are reduced until they approach zero. In other words, if the product or
service is perfecl, there are no failure costs. To achieve a reduc1jon in failure
costs, it is
00
.., I
..., .
0
u maintenance supervisor, and other appropriate personnel such as an internal cus
-
-;;;
::,
0 to enact corrective action without approval by !heir superiors. Problems of this type
Internal and External Failure Costs
o '--'v-----=eo:-------!-_so:-----.....:.:-:.:-:..:-,-J
100
Prevention and Quality
AppraisalofCosts
Conformance - %
m
FIGURE 2-7 Optimum cost or poor quality concept.
nurn.1<2
necessary to increase appraisal and prevention costs. Combinino 1he two curves
• 0
gives the total cost curve. The model shows that as quality increases, the cost of
poor quality decreases. When the quality of conformance reaches JOO%, the
failure costs are zero and the prevention and appraisal cost are equal 10 the total
cost. Perfection is being economically achieved as the inspection process is auto
mated and when the customer is willing to pay for perfect quality. Also, perfrction
is the goal where quality has a critical impact on safety, such as in the nuclear
power field, or where lost sales might lead to bankruptcy. Therefore, this theore1-
ic l model appears to represent quality costs quite well.
To further support the contention that perfection (100% conformance) is an
achievable goal, 99.9% conformance for a few activities is given below:
1. 16,000 pieces of lost mail every hour
2. 500 failed surgical operations each week
3. 1\vo unsafe airplane landings at O'Hare airport (Chicago) every day
4. 22,000 checks deducted from the wrong account each month
5. 2,000,000 people dead or sick from food poisoning each year
6. 45 minutes of unsafe drinking water each month
Note that the model of Figure 2-7 is for an entire system. When analyzing an
individual quality characteristic, it is possible to make the quality so good that it
would be uneconomical.8
Quality Improvement Strategy
Once the problem area has been determined using the analysis techniques, a
project team can be established. There are two ty es of problems: those that a
department can correct with little or no outside help; anil those that require coordi
nated aotion from several functional areas in the organization.
Problems of the first type do not require an elaborate system. The project
team might be composed of the operating supervisor, operator, quality engineer,
tomer or internal supplier. Usually the team has sufficient authority and resources
usually account for about 15% of the total.
Unfortunately, about 85% of quality problemsross depa1tmentnl and func
tional area lines. Since these problems are usually more costly and mo1e
difficulc to solve, a more elaborate and structured project team is established.
Members of
'There is n school of tl1oughIIhn1 ftcls ii is llllCConomicnl to nchievc 100% confor111ancc. In this model 1hc Iwo
upp<1 curv turn upward nnd Ih<:ircosIs go to infinity rnIher 1han converge n_sshown by lhc dashed lines in
m
1l1e ligur,,.
PRINCIPLLS AND PRACTICES OF TOTAL QU/\UTY MANAGE f T
Scanned with
Scanned with
 'le t would most likely be composed of personnel from operations, qua ty,
design, marketing: purchasing, and any other ea affected. The team receives
written aulhority from the quality council or a smular body. Rcs?urces are allocat d
and a schedule of activities is prepared. Periodic reports are given to the council.
A member of the quality council should act as a coach to the team.
The basic concept is that each failure has a root cause, auses are p ventable,
and prevention is che2per. Based on this concept, the followmg strategy 1s used:
1. Reduce failure costs by problem solving.
2. lnvest in the "right" prevention activities.
J. Reduce appraisal costs where appropriate and in a statistically sound manner.
4. Continuously evaluate and redirect lhe prevention effort to gain further
quality improvement.
1. Reduce Failure Costs. Most of the quality improvement projects will be
di rected toward reducing failure costs. It is a fact that failures detected at the
beginning of operations are less costly than failures detected at the end of operations
or by the customer, and such failures are cheaper to correct. Therefore, external
failures are frequently targeted for improvl'ment because they can give tJ1e greatest
return on investment, that is, increased customer satisfaction and reduced
production costs.
The projecr learn must concentrate on finding tl1e root cause of the
problem. ln this regard, it may be necessary to trace the potential cause to
purchasing, de sign, or markeling. Care must be exercised 10 ensure that the basic
cause has been found ralhrr than some "pseudo-cause." Once the cause has been
determined, the project team can concentrate on developing the correcrjve action
to control or, preferably, eliminate the problem.
Follow-up activities are conducted to ensure tbat the corrective action was
effective in solving the problem. The team should also review similar problems to
detennine if a similar solution might be effective. Finally, the quality cost saving is
calculated, and a final report is presented to the quality council.
2. Prevention of Costs Dlle to Poor Quality. Rather than solve problems that are
costing money, it would be much better if problems could be prevented. Prevention
activities are related 10 employee altitudes and to fonnal techniques to eliminate
problems in the product cycle before they become costly.
EL1111ployee attitudes toward quahty are determined by top management's com
mitment Lo qu_aJity and th i volv:ment of both in the quality-improvement pro
gram. Suggcsuons for achieving this commitment and involvement are
1. Include both groups as members of project team.
2. Establish a quality council with lhe CEO and functional area managers as
m
OIArn:. members.
3. Involve employees in the annual quality improvement program.
4. Provide a system whereby employees can present quality improvement ideas.
5. Communicate quality expectations to employees.
6. Publish a company newsletter.
7. Hold a quarterly meeting of all employees.
Using fonnal techniques to prevent quality problems before they occur is a
more desirable activity than problem solving. The following are some examples of
ihese techniques:
l. New-product verification programs that require a comprehensive review
before release for quantity production
2. Design-review programs of new or changed designs that require involvement
of oppropriate functional areas at the beginning of tJ1e design process
(concurrent engineering)
3. Supplier selection programs that concentrate on quality rather than price
4. Reliability testing to prevent high field-faflure costs
5. Thorough Lraining and testing of employees so that their jobs are done right
the first lime
6. Voice of the customer, such as quality function deployment
Effeclive managemen1 of prevention costs will provide the greatest quality
improvement potential.
3. Reduce Appraisal Costs. As failure cosls are reduced, the need for appraisal
activities will most likely be reduced as well. Programs for cost improvement can
have a significant impact on the total quality costs. Periodically, a project team
should review the entire appraisal ac1ivity to determine its effectiveness.
Typical questions that the project team might investigate are
l. Is 100% inspection necessary?
2. Can inspection stations be combined, relocated, or eliminated?
3. Are inspection methods the mos1 efficient?
4. Could the inspection and test activity be automated?
5. Could da1a be more efficiently collected,· reported, and analyzed using
computers?
6. Should statistical process control be used?
7. Should operating personnel be responsible for inspection?
m
8. Is appraisal being used as a substitute for prevention?
PRINCIPLES AND PRACTICES or TOTAL QUALITY
Scanned with
 --
• A,,;o;d Calegories/lle,;.sand Point Values Acco,rding to1. M. .Juran, who studied the wi·nners or hl e award , .u..,e ga·msh ave
• = 120 been stunnmg. The gams ca•n be• accomplishe.d by large and sm a11u s. organi•za,u; ons
/ LEADERSHIP . and by U.S. workers. The gams mclude quality, prm.luclivity, and cycle time.
I ISenior Leadership ... 70
50
_12 Govtmance and Social Respons1bihty 85 Other Performance Measures
.2 STRATEGIC PLANNING 40
2.1 Strattgy Development Cost of poor quality and the MBNQA measure the performance of the entire
45
2.2 Strategy Deployment 85 organ ization. Given below are techniques that measure a small portion of the
3 CUSTOMER AND MARKET E'OCUS organization. Another performance measure is control charts, as given in
3.1 Customer and M:uket Knowledge
40
45 Chapters 5, 6,
3.2 Customer Relat.ionships and Satisfaction
90 and 8. These statistical techniques measure directly the effect of quality improve
4 •-t 'SUREMENT ANALYSIS, AND KNOWLEDGE MANAGEMENT
4.1"' ""Measurement,
' Analysis and Improvement of Orgamzahon
· · pe rfonn 45 ment on an existing product or process. An overall measure such as percent non
4.2 Information and Knowledge 45 conforming is necessary for the plant or the entire corporation. This measure can
85
s WORKFORCE OCUS
45
also effectively evaluate rhe CEO's performance. Each functional area and depart
5.J Workforce Engagement ment within a functional area should have a measure that is displayed in some type
5.2 Workfo,cc Environment 40 of chart so it can be viewed by all personnel. These char1s create quality awareness
85
6 PROCESS MANAGEMENT and measure U1e progress of quality improvemenL A few companies have improved
6.1 WOJII. Systems Design 35 their performance to the point where a nonconformity-per-million char1 is more
6.2 Work Prucess Management and lmprovcmcnl 50
450 appropriate than a count-of-nonconformity chart.
7 RESULTS
70 Nonsratistical charts, such as the u·eml analysis (also called time series) or
7.1 Product and Service Outcomes
7.2 Customer Focused Outcomes 100 Pareto analysis that were previously discussed, are also used. These simple graphs
7.3 Financial and Market Outcomes 70 effectively portray the performance of key indicators for many business and pro
7.4 Workforce-Pocuscd Oulcomes 70 duction processes.
7.5 Piocess Effe liveness Outcomes 70 Quality can be measured by comparing the specifications to the process
7.6 Leadership Outcomes 70 capability. W. Edwards Deming stated that we need to drive the specifications
TO'rAL POINTS 1000 over the horizon. This statement is a figure of speech that actually means the
process variability is so small around the target value and the specifications are so
far away that they have the appearance of being out of sight. This concept is
discussed in
The Results category examines lhe organization's performance and improve Chapter 5. Specifications are dynamic in that they are constantly getting smaller,
ment in key business areas-customer satisfaction, product and service performance, which requires never-ending improvemenl in the process capability.
financial and marketplace performance, human resource results, supplier and partner Conventional practice assumes that loss occurs only when a characteristic is
results, and operational perfonnance. Also examined are perfonnance levels outside the specifications. Genichi Taguchi states that loss to the customer and society
relative occurs as soon as the characteristic deviates from the large! value. Figure 2-9 illus
to competitors. trates this concept. The target value and specifications are shown on the x scale and the
The MBNQA provides a plan.to keep improving all operations continuously loss in dollars is shown on the/(x) scale. The more the characteristic tlevi::ites from
and a system to measure these improvements accurately. Benchmarks are used to the target value, the greater is the Joss. Although the actual shape of the curve may
compare the organization's performance witl1 the world's best and to establish be difficult to predict, the quadratic approximation shqwn in the figure frequently
stretch goals. A close partnership with suppliers and customers tbat feeds im rep resents the economic loss function. Where the curve crosses the specifications,
provements back into the operation is required.There is a long-lasting relationship the cost of repairing or discarding the product is given in dollars al D. Using 1his
with customers, so that their wants are translated into products and services value, the equation for the curve can be derennined. The concept (with a different-
that go beyond delivery. Management from top to bottom is committed to shaped curv ) can be used for other situations, such as where the larger value is rhe
improving quality. Preventing mistakes and looking for improvement brgesr
opportunities is built into the culture. There is a major investment in human
- possible value or where the target value is zero. Taguchi has combined specifications,

m
resources by means of training, motivation, and empowerment.
target value, minimum variation, and dollars inro one package to measure quality.
CllAl'rUl
PRINClPL£S AND PRACTICES OF TOTAL Qt AUTY MANAGEME./IIT

Scanned with
m
 I
- ,J
f(x)
12. Remove barriers tJ1at rob people of pride of workmanship.
13. Encourage education and improvement.
14. TaJce action to accomplish the transformation.

Many of Deming's 14 points have been incorporated into the material of this
chapter. TI1ey are discussed in detail in D. Besterfield, C. Besterfield-Michna, G.
Target Besterfield, and M. Besterfield-Sacre, Total Quality Managemenl, 3rd ed.: Prentice
Hall, 2003.
OL--LSLL------ X o----- U S L:--+-X
Characteristic FINAL COMMENTS

Management must know tJ1at quality is first among the equals of cost and service.
FIGURE 2-9 Taguchi's loss £unction. In lhis regard, there is no economic level of quaJjty or. if there is such a level. few,
if any, organizations have achieved it. The ultimate goal is exceeding customer
All the measures are needed for the TQM program. They are each applied in expectations. The old atlitudes toward quality are no longer acceptable. New
products and services must be developed and existing products and services
different situations.
modified to meet customers' requirements. Optimum process paramelers need to
be determined in order to achieve the smallest possible variation. The evidence
- DEMING'S 14 POINTS10 shows that high quality products and services increase productivity and provide
the compelitive
A chapter on TQM would not be complete without listing Deming's 14 advantage for organization survival.
obligations of senior management. They are as follows: The effective implementation of TQM will allow organizations to achieve
the vision given below:
1. Create and publish the aims and purposes of the organization.
2. Learn the new philosophy. • Customers receive what they order without nonconformities, on time, in the
right quantity, shipped and billed on time.
3. Understand the purpose of inspection.
4. Stop awarding business based on price aloooe. • Suppliers meet our requirements.
s. Improve constantly and forever the system. • SalespeopJe determine customer needs.
6. Institute training. • New products and processes are developed to agreed-on requirements, as
7. Teach and institute leadership. scheduled, and at lower costs.
8. Drive out fear, create trust, and create a climate for innovation. • People enjoy their work.
9. Optimize the efforts of teams, groups, and staff areas. • Organization makes a profit or serves its constituency effectively.
10. Eliminate exhortations for the work force.
Ha. Eliminate numerical quotas for the work force.
EXERCJSES
11b. Eliminate management by objectives.
l. Working in a leant of l11ree or more people, visit one or more of the
,.'II Ed•.,••d• D<minr,, "Out ol •he Crisis," pp 23-24, Cl 2000 W. Edwords Deming lnsritulc, b.i:,-rmission following organizations. Detem1ine if they have a quality council or similar

m
of Tot MIT Poe •-
structure. If so, describe its composilion and duties.
CIIAl'TU 1 (a) Large bank
(b) Health-care facility
(c) University academic department

Scanned with
PRIN<IPI...ES AND PRACTICES OF TOTAL QUALITY MANAGEMENT
II

Scanned with