•Location decisions:

–Are closely tied to an organization’s strategies

1. Low-cost
2. Convenience to attract market share

–Effect capacity and flexibility

–Represent a long-term commitment of resources
–Effect investment requirements, operating costs, revenues, and operations
–Impact competitive advantage
–Importance to supply chains

•Location decisions are based on:

–Profit potential or cost and customer service
–Finding a number of acceptable locations from which to choose
–Position in the supply chain

1. End: accessibility, consumer demographics, traffic patterns, and local customs are
important
2. Middle: locate near suppliers or markets
3. Beginning: locate near the source of raw materials

–Web-based retail organizations are effectively location independent

Supply Chain Considerations.

•Supply chain management must address supply chain configuration:

–Number and location of suppliers, production facilities, warehouses and distribution centers
–Centralized vs. decentralized distribution
•The importance of such decisions is underscored by their reflection of the basic strategy for
accessing customer markets

•Existing companies generally have four options available in location planning:

1. Expand an existing facility

2. Add new locations while retaining existing facilities
3. Shut down one location and move to another
4. Do nothing

Global Location: Facilitating Factors

•Two key factors have contributed to the attractiveness of globalization:
–Trade agreements such as

1. North American Free Trade Agreement (NAFTA)

2. General Agreement on Tariffs and Trade (GATT)
3. U.S.-China Trade Relations Act
4. EU and WTO efforts to facilitate trade

–Technology

1. Advances in communication and information technology

•A wide range of benefits have accrued to organizations that have globalized operations:

1. Markets
2. Cost savings
3. Legal and regulatory
4. Financial
5. Other

Global Location: Disadvantages

•There are a number of disadvantages that may arise when locating globally:

1. Transportation costs
2. Security costs
3. Unskilled labor
4. Import restrictions
5. Criticism for locating out-of-country

Global Location: Risks

•Organizations locating globally should be aware of potential risk factors related to:

1. Political instability and unrest

2. Terrorism
3. Economic instability
4. Legal regulation
5. Ethical considerations
6. Cultural differences
Managing Global Operations
•Managerial implications for global operations:
–Language and cultural differences

1. Risk of miscommunication
2. Development of trust
3. Different management styles
4. Corruption and bribery

–Increased travel (and related) costs

–Challenges associated with managing far-flung operations
–Level of technology and resistance to technological change
–Domestic personnel may resist locating, even temporarily

•Steps:
1.Decide on the criteria to use for evaluating location alternatives
2.Identify important factors, such as location of markets or raw materials

3. Develop location alternatives

• Identify the country or countries for location

• Identify the general region for location
• Identify a small number of community alternatives
• Identify the site alternatives among the community alternatives

4. Evaluate the alternatives and make a decision

Location: Identifying a Country

Location: Identifying a Region

•Primary regional factors:
–Location of raw materials
 1. Necessity
2. Perishability
3. Transportation costs

–Location of markets

1. As part of a profit-oriented company’s competitive strategy

2. So not-for-profits can meet the needs of their service users
3. Distribution costs and perishability

–Labor factors

1. Cost of labor
2. Availability of suitably skilled workers
3. Wage rates in the area
4. Labor productivity
5. Attitudes toward work
6. Whether unions pose a serious potential problem

–Other factors

1. Climate and taxes may play an important role in location decisions

Location: Identifying a Community

•Many communities actively attempt to attract new businesses they perceive to be a good fit
for the community
•Businesses also actively seek attractive communities based on such factors such as:
–Quality of life
–Services
–Attitudes
–Taxes
–Environmental regulations
–Utilities
–Development support

Location: Identifying a Site

•Primary site location considerations are

–Land
–Transportation
–Zoning
–Other restrictions

Service and Retail Locations

•Considerations:
–Nearness to raw materials is not usually a consideration
–Customer access is a

1. Prime consideration for some: restaurants, hotels, etc.

2. Not an important consideration for others: service call centers, etc.

–Tend to be profit or revenue driven, and so are

1. Concerned with demographics, competition, traffic volume patterns, and convenience

–Clustering

1. Similar types of businesses locate near one another

THE EVOLUTION OF QUALITY MANAGEMENT

Broadly defined, quality refers to the ability of a product or service to consistently meet
or exceed customer requirements or expectations. However, different customers will have
different requirements, so a working definition of quality is customer-dependent. For a decade or
so, quality was an important focal point in business. But after a while, the emphasis on quality
began to fade, and quality took a backseat to other concerns. However, there has been an upsurge
recently in the need for attention to quality. Much of this has been driven by recent experience
with costs and adverse publicity associated with wide ranging recalls that have included
automobiles, ground meat, toys, produce, dog food, and pharmaceuticals.

Prior to the Industrial Revolution, skilled craftsmen performed all stages of production. Pride of
workmanship and reputation often provided the motivation to see that a job was done
right. Lengthy guild apprenticeships caused this attitude to carry over to new workers.
Moreover, one person or a small group of people were responsible for an entire product.

A division of labor accompanied the Industrial Revolution; each worker was then responsible for
only a small portion of each product. Pride of workmanship became less meaningful because
workers could no longer identify readily with the final product. The responsibility for quality
shifted to the foremen. Inspection was either nonexistent or haphazard, although in some
instances 100 percent inspection was used.
Frederick Winslow Taylor, the “Father of Scientific Management,” gave new emphasis to quality
by including product inspection and gauging in his list of fundamental areas of
manufacturing management. G. S. Radford improved Taylor’s methods. Two of his most
significant contributions were the notions of involving quality considerations early in the product
design stage and making connections among high quality, increased productivity, and lower
costs.

In 1924, Bell Telephone Laboratories introduced statistical control charts that could be used to
monitor production. Around 1930, H. F. Dodge and H. G. Romig, also of Bell Labs, introduced
tables for sampling. Nevertheless, statistical quality control procedures were not widely used
until World War II, when the U.S. government began to require vendors to use them.

World War II caused a dramatic increase in emphasis on quality control. The U.S. Army refined
sampling techniques for dealing with large shipments of arms from many suppliers. By the end
of the 1940s, the U.S. Army, Bell Labs, and major universities were training engineers in other
industries in the use of statistical sampling techniques. About the same time, professional quality
organizations were emerging throughout the country. One of these organizations was the
American Society for Quality Control (ASQC, now known as ASQ). Over the years, the society
has promoted quality with its publications, seminars and conferences, and training programs.

During the 1950s, the quality movement evolved into quality assurance. In the mid-1950s, total
quality control efforts enlarged the realm of quality efforts from its primary focus
on manufacturing to include product design and incoming raw materials. One important
feature of this work was greater involvement of upper management in quality.

During the 1960s, the concept of “zero defects” gained favor. This approach focused
on employee motivation and awareness, and the expectation of perfection from each employee. It
evolved from the success of the Martin Company in producing a “perfect” missile for the U.S.
Army.

In the 1970s, quality assurance methods gained increasing emphasis in services

including government operations, health care, banking, and the travel industry. Something else
happened in the 1970s that had a global impact on quality. An embargoon oil sales instituted by
the Organization of Petroleum Exporting Countries (OPEC) caused an increase in energy costs,
and automobile buyers became more interested in fuel-efficient, lower-cost vehicles. Japanese
auto producers, who had been improving their products, were poised to take advantage of these
changes, and they captured an increased share of the automobile market. The quality of their
automobiles enhanced the reputation of Japanese producers,

opening the door for a wide array of Japanese-produced goods. American producers, alarmed by
their loss of market share, spent much of the late 1970s and the 1980s trying to improve the
quality of their goods while lowering their costs. The evolution of quality took a dramatic shift
from quality assurance to a strategic approach to quality in the late 1970s. Up until that time, the
main emphasis had been on finding and correcting defective products before they reached the
market. It was still a reactive approach.
The strategic approach is proactive, focusing on preventing mistakes from occurring in the first
place. The idea is to design quality into products, rather than to find and correct defects after the
fact. This approach has now expanded to include processes and services. Quality and profits are
more closely linked. This approach also places greater emphasis on customer satisfaction, and it
involves all levels of management as well as workers in a continuing effort to increase quality.

2. The Foundations of Modern Quality Management: The Gurus

A core of quality pioneers shaped current thinking and practice. This section describes someof
their key contributions to the field.

Walter Shewhart. Walter Shewhart was a genuine pioneer in the field of quality control, and he
became known as the “father of statistical quality control.” He developed control charts for
analyzing the output of processes to determine when corrective action was necessary.

W. Edwards Deming. Deming, a statistics professor at New York University in the 1940s, went
to Japan after World War II to assist the Japanese in improving quality and productivity. The
Union of Japanese Scientists, who had invited Deming, were so impressed that in 1951, after a
series of lectures presented by Deming, they established the Deming Prize, which is awarded
annually to firms that distinguish themselves with quality management programs.

Joseph M. Juran. Juran, like Deming, taught Japanese manufacturers how to improve
the quality of their goods, and he, too, can be regarded as a major force in Japan’s success
in quality. Juran viewed quality as fitness-for-use. He also believed that roughly 80 percent of
quality defects are management controllable; thus, management has the responsibility to
correct this deficiency. He described quality management in terms of a trilogy consisting of
quality planning, quality control, and quality improvement. According to Juran, quality planning
is necessary to establish processes that are capable of meeting quality standards; quality
control is necessary in order to know when corrective action is needed; and quality improvement
will help to find better ways of doing things. A key element of Juran’s philosophy is the
commitment of management to continual improvement.

Armand Feigenbaum. Feigenbaum was instrumental in advancing the “cost of

nonconformance” approach as a reason for management to commit to quality. He recognized
that quality was not simply a collection of tools and techniques, but a “total field.” According
to Feigenbaum, it is the customer who defines quality.
Philip B. Crosby. Crosby developed the concept of zero defects and popularized the phrase “Do
it right the first time.” He stressed prevention, and he argued against the idea that “there will
always be some level of defectives.” The quality-is-free concept presented in his book, Quality Is
Free, is that the costs of poor quality are much greater than traditionally defined.

Kaoru Ishikawa. The late Japanese expert on quality was strongly influenced by both Deming
and Juran, although he made significant contributions of his own to quality management. Among
his key contributions were the development of the cause-and-effect diagram (also known as a
fishbone diagram) for problem solving and the implementation of quality circles, which involve
workers in quality improvement. He was the first quality expert to call attention to the internal
customer—the next person in the process, the next operation, within the organization.

Genichi Taguchi. Taguchi is best known for the Taguchi loss function, which involves
a formula for determining the cost of poor quality. The idea is that the deviation of a part from
a standard causes a loss, and the combined effect of deviations of all parts from their
standards can be large, even though each individual deviation is small. An important part of his
philosophy is the cost to society of poor quality.

Taiichi Ohno and Shigeo Shingo. Taiichi Ohno and Shigeo Shingo both developed
the philosophy and methods of kaizen, a Japanese term for continuous improvement
(defined more fully later in this chapter), at Toyota. Continuous improvement is one of the
hallmarks of successful quality management.

3. Quality Management
Successful management of quality requires that managers have insights on various aspects of
quality. These include defining quality in operational terms, understanding the costs and benefits
of quality, recognizing the consequences of poor quality, and recognizing the need for ethical
behavior. We begin with defining quality.

Defining Quality: The Dimensions of Quality

One way to think about quality is the degree to which performance of a product or service meets
or exceeds customer expectations. The difference between these two, that is
Performance— Expectations, is of great interest. If these two measures are equal, the difference
is zero, and expectations have been met. If the difference is negative, expectations have not
been met, whereas if the difference is positive, performance has exceeded customer
expectations. Customer expectations can be broken down into a number of categories, or
dimensions, that customers use to judge the quality of a product or service. Understanding these
helps organizations in their efforts to meet or exceed customer expectations. The dimensions
used for goods are somewhat different from those used for services.
Product Quality. Product quality is often judged on nine dimensions of quality:

1. Performance—main characteristics of the product

2. Aesthetics—appearance, feel, smell, taste
3. Special features—extra characteristics
4. Conformance—how well a product corresponds to design specifications
5. Reliability—dependable performance
6. Durability—ability to perform over time
7. Perceived quality—indirect evaluation of quality (e.g., reputation)
8. Serviceability—handling of complaints or repairs
9. Consistency—quality doesn’t vary

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Service Quality. The dimensions of product quality don’t adequately describe service
quality. Instead, service quality is often described using the following dimensions:
 1. Convenience—the availability and accessibility of the service
2. Reliability—the ability to perform a service dependably, consistently, and accurately
3. Responsiveness—the willingness of service providers to help customers in unusual
situations and to deal with problems
4. Time—the speed with which service is delivered
5. Assurance—the knowledge exhibited by personnel who come into contact with a
customer and their ability to convey trust and confidence
6. Courtesy—the way customers are treated by employees who come into contact with
them
7. Tangibles—the physical appearance of facilities, equipment, personnel, and
communication materials
8. Consistency—the ability to provide the same level of good quality repeatedly
9. Expectations—meet (or exceed) customer expectations

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Assessing Service Quality

A widely used tool for assessing service quality is SERVQUAL,3 an instrument designed to
obtain feedback on an organization’s ability to provide quality service to customers. It focuses on
five of the previously mentioned service dimensions that influence customers’ perceptions of
service quality: tangibles, reliability, responsiveness, assurance, and empathy. The results of this
service quality audit help management identify service strengths and weaknesses. Of particular
interest are any gaps or discrepancies in service quality. There may be discrepancies between:

1. Actual customer expectations and management perceptions of those expectations

2. Management perceptions of customer expectations and service-quality specifications
 3. Service quality and service actually delivered
4. Service actually delivered and what is communicated about the service to customers
5. Customers’ expectations of the service provider and their perceptions of
provider delivery.

If gaps are found, they can be related to tangibles or other service quality dimensions to address
the discrepancies.

The Determinants of Quality

The degree to which a product or a service successfully satisfies its intended purpose has
four primary determinants:

1. Design. Quality of design refers to the intention of designers to include or exclude certain
features in a product or service. For example, many different models of automobiles are
on the market today. They differ in size, appearance, roominess, fuel economy, comfort,
and materials used.
2. How well the product or service conforms to the design. Quality of conformance
refers to the degree to which goods and services conform to(i.e., achieve) the intent of the
designers. This is affected by factors such as the capability of equipment used; the skills,
training, and motivation of workers; the extent to which the design lends itself to
production; the monitoring process to assess conformance; and the taking of corrective
action (e.g., through problem solving) when necessary. One important key to quality is
reducing the variability in process outputs (i.e., reducing the degree to which individual
items or individual service acts vary from one another).
3. Ease of use. The determination of quality does not stop once the product or service has
been sold or delivered. Ease of use and user instructions are important. They increase the
chances, but do not guarantee, that a product will be used for its intended purposes and in
such a way that it will continue to function properly and safely. (When faced with
liability litigation, companies often argue that injuries and damages occurred because the
user misused the product.) Much of the same reasoning can be applied to services.
Customers, patients, clients, or other users must be clearly informed on what they should
or should not do; otherwise, there is the danger that they will take some action that will
adversely affect quality. Some examples include the doctor who fails to specify that a
medication should be taken before meals and not with orange juice and the attorney who
neglects to inform a client of a deadline for filing a claim.
4. Service after delivery. For a variety of reasons, products do not always perform as
expected, and services do not always yield the desired results. Whatever the reason, it is
important from a quality standpoint to remedy the situation—through recall and repair of
the product, adjustment, replacement or buyback, or reevaluation of a service—and do
whatever is necessary to bring the product or service up to standard.
Responsibility for Quality

Top management. Top management has the ultimate responsibility for quality.
While establishing strategies for quality, top management must institute programs to
improve quality; guide, direct, and motivate managers and workers; and set an example by
being involved in quality initiatives. Examples include taking training in quality, issuing
periodic reports on quality, and attending meetings on quality.

Design. Quality products and services begin with design. This includes not only features of the
product or service; it also includes attention to the processes that will be required to produce the
products and/or the services that will be required to deliver the service to customers.

Procurement. The procurement department has responsibility for obtaining goods and services
that will not detract from the quality of the organization’s goods and services.

Production/operations. Production/operations has responsibility to ensure that processes yield

products and services that conform to design specifications. Monitoring processes and finding
and correcting root causes of problems are important aspects of this responsibility.

Quality assurance. Quality assurance is responsible for gathering and analyzing data
on problems and working with operations to solve problems.

Packaging and shipping. This department must ensure that goods are not damaged in transit,
that packages are clearly labeled, that instructions are included, that all parts are included, and
that shipping occurs in a timely manner.

Marketing and sales. This department has the responsibility to determine customer needs and to
communicate them to appropriate areas of the organization. In addition, it has the responsibility
to report any problems with products or services.

Customer service. Customer service is often the first department to learn of problems. It has the
responsibility to communicate that information to appropriate departments, deal in a reasonable
manner with customers, work to resolve problems, and follow up to confirm that the situation
has been effectively remedied.

4. Benefits of Good Quality

Business organizations with good or excellent quality typically benefit in a variety of ways: an
enhanced reputation for quality, the ability to command premium prices, an increased market
share, greater customer loyalty, lower liability costs, and fewer production or service problems—
which yields higher productivity, fewer complaints from customers, lower production costs, and
higher profits.
The Consequences of Poor Quality

It is important for management to recognize the different ways in which the quality of a
firm’s products or services can affect the organization and to take these into account in
developing and maintaining a quality assurance program. Some of the major areas affected by
quality are:

1. Loss of business
2. Liability
3. Productivity
4. Costs

The Costs of Quality

Appraisal costs relate to inspection, testing, and other activities intended to uncover
defective products or services, or to assure that there are none. They include the cost of
inspectors, testing, test equipment, labs, quality audits, and field testing.

Prevention costs relate to attempts to prevent defects from occurring. They include costs such as
planning and administration systems, working with vendors, training, quality control procedures,
and extra attention in both the design and production phases to decrease the probability of
defective workmanship.

Failure costs are incurred by defective parts or products or by faulty services. Internal failures
are those discovered during the production process; external failures are those discovered after
delivery to the customer.
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Ethics and Quality Management

All members of an organization have an

obligation to perform their duties in an ethical manner. Ethical behavior comes into play in many
situations that involve quality. One major category is substandard work, including defective
products and substandard service, poor designs, shoddy workmanship, and substandard parts and
raw materials. Having knowledge of this and failing to correct and report it in a timely manner is
unethical and can have a number of negative consequences. These can include increased costs
for organizations in terms of decreased productivity, an increase in the accident rate among
employees, inconveniences and injuries to customers, and increased liability costs.

A related issue is how an organization chooses to deal with information about quality
problems in products that are already in service. For example, automakers and tire makers
in recent years have been accused of withholding information about actual or potential
quality problems; they failed to issue product recalls, or failed to divulge information,
choosing instead to handle any complaints that arose on an individual basis.

5. Quality Awards
Quality awards have been established to generate improvement in quality. The Malcolm
Baldrige Award, the European Quality Award, and the Deming Prize are well-known awards
given annually to recognize firms that have integrated quality management into their operations.

The Baldrige Award

Named after the late Malcolm Baldrige, an industrialist and former

secretary of commerce, the annual Baldrige Award is administered by the National Institute of
Standards and Technology. The purpose of the award competition is to stimulate efforts to
improve quality, to recognize quality achievements, and to publicize successful programs.

For more information, visit www.nist.gov/baldrige.

The European Quality Award

The European Quality Award is Europe’s most prestigious award for organizational
excellence. The European Quality Award sits at the top of regional and national quality
awards, and applicants have often won one or more of those awards prior to applying for the
European Quality Award.

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The Deming Prize

The Deming Prize, named in honor of the late W. Edwards

Deming, is Japan’s highly coveted award recognizing successful quality efforts. It is given
annually to any company that meets the award’s standards. Although typically given to Japanese
firms, in 1989, Florida Power and Light became the first U.S. company to win the award. The
major focus of the judging is on statistical quality control, making it much narrower in scope
than the Baldrige Award, which focuses more on customer satisfaction. Companies that win the
Deming Prize tend to have quality programs that are detailed and well-communicated throughout
the company. Their quality improvement programs also reflect the involvement of senior
management and employees, customer satisfaction, and training.

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QUALITY CERTIFICATION

ISO 9000, 14000, and 24700

The International Organization for Standardization (ISO) promotes worldwide standards for the
improvement of quality, productivity, and operating efficiency through a series of standards and
guidelines. Used by industrial and business organizations, regulatory agencies, governments, and
trade organizations, the standards have important economic and social benefits. Not only are they
tremendously important for designers, manufacturers, suppliers, service providers, and
customers, but the standards make a tremendous contribution to society in general: They increase
the levels of quality and reliability, productivity, and safety, while making products and services
affordable. The standards help facilitate international trade. They provide governments with a
basis for health, safety, and environmental legislation. And they aid in transferring technology to
developing countries.

Two of the most well-known of these are ISO 9000 and ISO 14000. ISO 9000 pertains
to quality management. It concerns what an organization does to ensure that its products or
services conform to its customers’ requirements. ISO 14000 concerns what an organization
does to minimize harmful effects to the environment caused by its operations. Both ISO 9000
and ISO 14000 relate to an organization’s processes rather than its products and services, and
both stress continual improvement. Moreover, the standards are meant to be generic; no
matter what the organization’s business, if it wants to establish a quality management system or
an environmental management system, the system must have the essential elements contained
in ISO 9000 or in ISO 14000. The ISO 9000 standards are critical for companies doing
business internationally, particularly in Europe. They must go through a process that involves
documenting quality procedures and on-site assessment. The process often takes 12 to 18
months. With certification comes registration in an ISO directory that companies seeking
suppliers can refer to for a list of certified companies. They are generally given preference over
unregistered companies. More than 40,000 companies are registered worldwide; three-fourths
of them are located in Europe.

Eight quality management principles form the basis of the latest version of ISO 9000:

1. A customer focus
2. Leadership
3. Involvement of people
4. A process approach
5. A system approach to management
6. Continual improvement
7. Use of a factual approach to decision making
8. Mutually beneficial supplier relationships

The standards for ISO 14000 certification bear upon three major areas:

• Management systems—systems development and integration of environmental

responsibilities into business planning
• Operations—consumption of natural resources and energy
• Environmental systems—measuring, assessing, and managing emissions, effluents,
and other waste streams

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TOTAL QUALITY MANAGEMENT

A primary role of management is to lead an organization in its daily operation and to maintain it
as a viable entity into the future. Quality has become an important factor in both of
these objectives.

The term total quality management (TQM) refers to a quest for quality in an organization.

There are three key philosophies in this approach. One is a never-ending push to improve, which
is referred to as continuous improvement; the second is the involvement of everyone in the
organization; and the third is a goal of customer satisfaction, which means meeting or exceeding
customer expectations. TQM expands the traditional view of quality—looking only at the quality
of the final product or services—to looking at the quality of every aspect of the process that
produces the product or service. TQM systems are intended to prevent poor quality from
occurring.

We can describe the TQM approach as

follows:

1. Find out what customers want. This might involve the use of surveys, focus
groups, interviews, or some other technique that integrates the customer’s voice in the
decision making process. Be sure to include the internal customer (the next person in the
process) as well as the external customer (the final customer).
2. Design a product or service that will meet (or exceed) what customers want. Make it easy
to use and easy to produce.
3. Design processes that facilitate doing the job right the first time. Determine where
mistakes are likely to occur and try to prevent them. When mistakes do occur, find out
why so that they are less likely to occur again. Strive to make the process “mistake-
proof.” This is sometimes referred to as a fail-safing: Elements are incorporated in
product or service design that make it virtually impossible for an employee (or sometimes
a customer) to do something incorrectly. The Japanese term for this is pokayoke.
Examples include parts that fit together one way only and appliance plugs that can be
inserted into a wall outlet the correct way only. Another term that is sometimes used is
 fool proofing, but use of this term may be taken to imply that employees (or customers)
are fools—not a wise choice!
4. Keep track of results, and use them to guide improvement in the system. Never stop
trying to improve.
5. Extend these concepts throughout the supply chain.
6. Top management must be involved and committed. Otherwise, TQM will just be another
fad that fails and fades away.

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The preceding description provides a good idea of what TQM is all about, but it doesn’t tell the
whole story. A number of other elements of TQM are important:

1. Continuous improvement. The philosophy that seeks to improve all factors related to the
process of converting inputs into outputs on an ongoing basis is called
continuous improvement. It covers equipment, methods, materials, and people. Under
continuous improvement, the old adage “If it ain’t broke, don’t fix it” gets transformed
into “Just because it isn’t broke doesn’t mean it can’t be improved.”
2. Competitive benchmarking. This involves identifying other organizations that are the best
at something and studying how they do it to learn how to improve your operation. The
company need not be in the same line of business. For example, Xerox used the mail-
order company L.L. Bean to benchmark order filling.
3. Employee empowerment. Giving workers the responsibility for improvements and
the authority to make changes to accomplish them provides strong motivation for
employees. This puts decision making into the hands of those who are closest to the job
and have considerable insight into problems and solutions.
4. Team approach. The use of teams for problem solving and to achieve consensus
takes advantage of group synergy, gets people involved, and promotes a spirit of
cooperation and shared values among employees.
5. Decisions based on facts rather than opinions. Management gathers and analyzes data as
a basis for decision making.
6. Knowledge of tools. Employees and managers are trained in the use of quality tools.
7. Supplier quality. Suppliers must be included in quality assurance and quality
improvement efforts so that their processes are capable of delivering quality parts and
materials in a timely manner.
8. Champion. A TQM champion’s job is to promote the value and importance of
TQM principles throughout the company.
9. Quality at the source. Quality at the source refers to the philosophy of making each
worker responsible for the quality of his or her work. The idea is to “Do it right the first
time.”
10. Suppliers are partners in the process, and long-term relationships are encouraged. This
gives suppliers a vital stake in providing quality goods and services. Suppliers, too, are
expected to provide quality at the source, thereby reducing or eliminating the need to
inspect deliveries from suppliers.
Obstacles to Implementing TQM

1. Lack of a companywide definition of quality: Efforts aren’t coordinated; people

are working at cross-purposes, addressing different issues, and using different measures
of success.
2. Lack of a strategic plan for change: Without such a plan the chance of success is
lessened and the need to address strategic implications of change is ignored.
3. Lack of a customer focus: Without a customer focus, there is a risk of
customer dissatisfaction.
4. Poor intraorganizational communication: The left hand doesn’t know what the right hand
is doing; frustration, waste, and confusion ensue.
5. Lack of employee empowerment: Not empowering employees gives the impression
of not trusting employees to fix problems, adds red tape, and delays solutions.
6. View of quality as a “quick fix”: Quality needs to be a long-term, continuing effort.
7. Emphasis on short-term financial results: “Duct-tape” solutions often treat
symptoms; spend a little now—a lot more later.
8. Inordinate presence of internal politics and “turf” issues: These can sap the energy of
an organization and derail the best of ideas.
9. Lack of strong motivation: Managers need to make sure employees are motivated.
10. Lack of time to devote to quality initiatives: Don’t add more work without adding
additional resources.
11. Lack of leadership: Managers need to be leaders.

6. Quality Tools

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Source: https://th.bing.com/th/id/OIP.YjuK108lXbQiJzxDsjHGFQHaEE?w=328&h=180&c=7
&o=5&pid=1.7

There are a number of tools that an organization can use for problem solving and
process improvement. This section describes eight of these tools. The tools aid in data
collection and interpretation, and provide the basis for decision making. The first seven tools
are often referred to as the seven basic quality tools.
 Flowcharts.

A flowchart is a visual representation of a process. As a problem-solving tool, a flowchart can

help investigators in identifying possible points in a process where problems occur. The
diamond shapes in the flowchart represent decision points in the process, and the
rectangular shapes represent procedures. The arrows show the direction of “flow” of the
steps in the process. To construct a simple flowchart, begin by listing the steps in a process.
Then classify each step as either a procedure or a decision (or check) point. Try to not make
the flowchart too detailed or it may be overwhelming, but be careful not to omit any key
steps.

Check sheets.

A check sheet is a simple tool frequently used for problem identification. Check sheets
provide a format that enables users to record and organize data in a way that facilitates
collection and analysis. This format might be one of simple checkmarks. Check sheets are
designed on the basis of what the users are attempting to learn by collecting data.

Histograms.

A histogram can be useful in getting a sense of the distribution of observed values. Among
other things, one can see if the distribution is symmetrical, what the range of values is, and if
there are any unusual values.
 Pareto Analysis.

Pareto analysis is a technique for focusing attention on the most important problem areas.
The Pareto concept, named after the 19th-century Italian economist Vilfredo Pareto, is that a
relatively few factors generally account for a large percentage of the

Scatter Diagrams.

A scatter diagram can be useful in deciding if there is a correlation between the values of two
variables. A correlation may point to a cause of a problem. Figure 9.8 shows an example of a
scatter diagram. In this particular diagram, there is a positive (upwardsloping) relationship
between the humidity and the number of errors per hour. High values of humidity
correspond to high numbers of errors, and vice versa. On the other hand, a
negative (downward-sloping) relationship would mean that when values of one variable are
low, values of the other variable are high, and vice versa.

Control Charts.

A control chart can be used to monitor a process to see if the process output is random. It can
help detect the presence of correctable causes of variation.
Cause-and-Effect Diagrams.

A cause-and-effect diagram offers a structured approach to the search for the possible
cause(s) of a problem. It is also known as a fishbone diagram because of its shape, or an
Ishikawa diagram, after the Japanese professor who developed the approach to aid workers
overwhelmed by the number of possible sources of problems when problem solving. This
tool helps to organize problem-solving efforts by identifying categories of factors that might
be causing problems. Often this tool is used after brainstorming sessions to organize the ideas
generated.

Run Charts.

A run chart can be used to track the values of a variable over time. This can aid in identifying
trends or other patterns that may be occurring.

2. The Foundations of Modern Quality Management: The Gurus

A core of quality pioneers shaped current thinking and practice. This section describes someof
their key contributions to the field.

Walter Shewhart. Walter Shewhart was a genuine pioneer in the field of quality control, and he
became known as the “father of statistical quality control.” He developed control charts for
analyzing the output of processes to determine when corrective action was necessary.

W. Edwards Deming. Deming, a statistics professor at New York University in the 1940s, went
to Japan after World War II to assist the Japanese in improving quality and productivity. The
Union of Japanese Scientists, who had invited Deming, were so impressed that in 1951, after a
series of lectures presented by Deming, they established the Deming Prize, which is awarded
annually to firms that distinguish themselves with quality management programs.
Joseph M. Juran. Juran, like Deming, taught Japanese manufacturers how to improve
the quality of their goods, and he, too, can be regarded as a major force in Japan’s success
in quality. Juran viewed quality as fitness-for-use. He also believed that roughly 80 percent of
quality defects are management controllable; thus, management has the responsibility to
correct this deficiency. He described quality management in terms of a trilogy consisting of
quality planning, quality control, and quality improvement. According to Juran, quality planning
is necessary to establish processes that are capable of meeting quality standards; quality
control is necessary in order to know when corrective action is needed; and quality improvement
will help to find better ways of doing things. A key element of Juran’s philosophy is the
commitment of management to continual improvement.

Armand Feigenbaum. Feigenbaum was instrumental in advancing the “cost of

nonconformance” approach as a reason for management to commit to quality. He recognized
that quality was not simply a collection of tools and techniques, but a “total field.” According
to Feigenbaum, it is the customer who defines quality.

Philip B. Crosby. Crosby developed the concept of zero defects and popularized the phrase “Do
it right the first time.” He stressed prevention, and he argued against the idea that “there will
always be some level of defectives.” The quality-is-free concept presented in his book, Quality Is
Free, is that the costs of poor quality are much greater than traditionally defined.

Kaoru Ishikawa. The late Japanese expert on quality was strongly influenced by both Deming
and Juran, although he made significant contributions of his own to quality management. Among
his key contributions were the development of the cause-and-effect diagram (also known as a
fishbone diagram) for problem solving and the implementation of quality circles, which involve
workers in quality improvement. He was the first quality expert to call attention to the internal
customer—the next person in the process, the next operation, within the organization.

Genichi Taguchi. Taguchi is best known for the Taguchi loss function, which involves
a formula for determining the cost of poor quality. The idea is that the deviation of a part from
a standard causes a loss, and the combined effect of deviations of all parts from their
standards can be large, even though each individual deviation is small. An important part of his
philosophy is the cost to society of poor quality.

Taiichi Ohno and Shigeo Shingo. Taiichi Ohno and Shigeo Shingo both developed
the philosophy and methods of kaizen, a Japanese term for continuous improvement
(defined more fully later in this chapter), at Toyota. Continuous improvement is one of the
hallmarks of successful quality management.

3. Quality Management
Successful management of quality requires that managers have insights on various aspects of
quality. These include defining quality in operational terms, understanding the costs and benefits
of quality, recognizing the consequences of poor quality, and recognizing the need for ethical
behavior. We begin with defining quality.

Defining Quality: The Dimensions of Quality

One way to think about quality is the degree to which performance of a product or service meets
or exceeds customer expectations. The difference between these two, that is
Performance— Expectations, is of great interest. If these two measures are equal, the difference
is zero, and expectations have been met. If the difference is negative, expectations have not
been met, whereas if the difference is positive, performance has exceeded customer
expectations. Customer expectations can be broken down into a number of categories, or
dimensions, that customers use to judge the quality of a product or service. Understanding these
helps organizations in their efforts to meet or exceed customer expectations. The dimensions
used for goods are somewhat different from those used for services.

Product Quality. Product quality is often judged on nine dimensions of quality:

1. Performance—main characteristics of the product

2. Aesthetics—appearance, feel, smell, taste
3. Special features—extra characteristics
4. Conformance—how well a product corresponds to design specifications
5. Reliability—dependable performance
6. Durability—ability to perform over time
7. Perceived quality—indirect evaluation of quality (e.g., reputation)
8. Serviceability—handling of complaints or repairs
9. Consistency—quality doesn’t vary

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Service Quality. The dimensions of product quality don’t adequately describe service
quality. Instead, service quality is often described using the following dimensions:

1. Convenience—the availability and accessibility of the service

2. Reliability—the ability to perform a service dependably, consistently, and accurately
3. Responsiveness—the willingness of service providers to help customers in unusual
situations and to deal with problems
4. Time—the speed with which service is delivered
5. Assurance—the knowledge exhibited by personnel who come into contact with a
customer and their ability to convey trust and confidence
6. Courtesy—the way customers are treated by employees who come into contact with
them
7. Tangibles—the physical appearance of facilities, equipment, personnel, and
communication materials
8. Consistency—the ability to provide the same level of good quality repeatedly
9. Expectations—meet (or exceed) customer expectations

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Source: https://th.bing.com/th/id/OIP.ag7pEihV3kpQP0KrZeeziwHaFO?w=256&h=180&c=7&
o=5&pid=1.7

Assessing Service Quality

A widely used tool for assessing service quality is SERVQUAL,3 an instrument designed to
obtain feedback on an organization’s ability to provide quality service to customers. It focuses on
five of the previously mentioned service dimensions that influence customers’ perceptions of
service quality: tangibles, reliability, responsiveness, assurance, and empathy. The results of this
service quality audit help management identify service strengths and weaknesses. Of particular
interest are any gaps or discrepancies in service quality. There may be discrepancies between:

1. Actual customer expectations and management perceptions of those expectations

2. Management perceptions of customer expectations and service-quality specifications
3. Service quality and service actually delivered
4. Service actually delivered and what is communicated about the service to customers
5. Customers’ expectations of the service provider and their perceptions of
provider delivery.

If gaps are found, they can be related to tangibles or other service quality dimensions to address
the discrepancies.

The Determinants of Quality

The degree to which a product or a service successfully satisfies its intended purpose has
four primary determinants:

1. Design. Quality of design refers to the intention of designers to include or exclude certain
features in a product or service. For example, many different models of automobiles are
on the market today. They differ in size, appearance, roominess, fuel economy, comfort,
and materials used.
2. How well the product or service conforms to the design. Quality of conformance
refers to the degree to which goods and services conform to(i.e., achieve) the intent of the
designers. This is affected by factors such as the capability of equipment used; the skills,
training, and motivation of workers; the extent to which the design lends itself to
production; the monitoring process to assess conformance; and the taking of corrective
action (e.g., through problem solving) when necessary. One important key to quality is
reducing the variability in process outputs (i.e., reducing the degree to which individual
items or individual service acts vary from one another).
3. Ease of use. The determination of quality does not stop once the product or service has
been sold or delivered. Ease of use and user instructions are important. They increase the
chances, but do not guarantee, that a product will be used for its intended purposes and in
such a way that it will continue to function properly and safely. (When faced with
liability litigation, companies often argue that injuries and damages occurred because the
user misused the product.) Much of the same reasoning can be applied to services.
Customers, patients, clients, or other users must be clearly informed on what they should
or should not do; otherwise, there is the danger that they will take some action that will
adversely affect quality. Some examples include the doctor who fails to specify that a
medication should be taken before meals and not with orange juice and the attorney who
neglects to inform a client of a deadline for filing a claim.
4. Service after delivery. For a variety of reasons, products do not always perform as
expected, and services do not always yield the desired results. Whatever the reason, it is
 important from a quality standpoint to remedy the situation—through recall and repair of
the product, adjustment, replacement or buyback, or reevaluation of a service—and do
whatever is necessary to bring the product or service up to standard.

Responsibility for Quality

Top management. Top management has the ultimate responsibility for quality.
While establishing strategies for quality, top management must institute programs to
improve quality; guide, direct, and motivate managers and workers; and set an example by
being involved in quality initiatives. Examples include taking training in quality, issuing
periodic reports on quality, and attending meetings on quality.

Design. Quality products and services begin with design. This includes not only features of the
product or service; it also includes attention to the processes that will be required to produce the
products and/or the services that will be required to deliver the service to customers.

Procurement. The procurement department has responsibility for obtaining goods and services
that will not detract from the quality of the organization’s goods and services.

Production/operations. Production/operations has responsibility to ensure that processes yield

products and services that conform to design specifications. Monitoring processes and finding
and correcting root causes of problems are important aspects of this responsibility.

Quality assurance. Quality assurance is responsible for gathering and analyzing data
on problems and working with operations to solve problems.

Packaging and shipping. This department must ensure that goods are not damaged in transit,
that packages are clearly labeled, that instructions are included, that all parts are included, and
that shipping occurs in a timely manner.

Marketing and sales. This department has the responsibility to determine customer needs and to
communicate them to appropriate areas of the organization. In addition, it has the responsibility
to report any problems with products or services.

Customer service. Customer service is often the first department to learn of problems. It has the
responsibility to communicate that information to appropriate departments, deal in a reasonable
manner with customers, work to resolve problems, and follow up to confirm that the situation
has been effectively remedied.

4. Benefits of Good Quality

Business organizations with good or excellent quality typically benefit in a variety of ways: an
enhanced reputation for quality, the ability to command premium prices, an increased market
share, greater customer loyalty, lower liability costs, and fewer production or service problems—
which yields higher productivity, fewer complaints from customers, lower production costs, and
higher profits.

The Consequences of Poor Quality

It is important for management to recognize the different ways in which the quality of a
firm’s products or services can affect the organization and to take these into account in
developing and maintaining a quality assurance program. Some of the major areas affected by
quality are:

1. Loss of business
2. Liability
3. Productivity
4. Costs

The Costs of Quality

Appraisal costs relate to inspection, testing, and other activities intended to uncover
defective products or services, or to assure that there are none. They include the cost of
inspectors, testing, test equipment, labs, quality audits, and field testing.

Prevention costs relate to attempts to prevent defects from occurring. They include costs such as
planning and administration systems, working with vendors, training, quality control procedures,
and extra attention in both the design and production phases to decrease the probability of
defective workmanship.

Failure costs are incurred by defective parts or products or by faulty services. Internal failures
are those discovered during the production process; external failures are those discovered after
delivery to the customer.
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Ethics and Quality Management

All members of an organization have an

obligation to perform their duties in an ethical manner. Ethical behavior comes into play in many
situations that involve quality. One major category is substandard work, including defective
products and substandard service, poor designs, shoddy workmanship, and substandard parts and
raw materials. Having knowledge of this and failing to correct and report it in a timely manner is
unethical and can have a number of negative consequences. These can include increased costs
for organizations in terms of decreased productivity, an increase in the accident rate among
employees, inconveniences and injuries to customers, and increased liability costs.

A related issue is how an organization chooses to deal with information about quality
problems in products that are already in service. For example, automakers and tire makers
in recent years have been accused of withholding information about actual or potential
quality problems; they failed to issue product recalls, or failed to divulge information,
choosing instead to handle any complaints that arose on an individual basis.

5. Quality Awards
Quality awards have been established to generate improvement in quality. The Malcolm
Baldrige Award, the European Quality Award, and the Deming Prize are well-known awards
given annually to recognize firms that have integrated quality management into their operations.

The Baldrige Award

Named after the late Malcolm Baldrige, an industrialist and former

secretary of commerce, the annual Baldrige Award is administered by the National Institute of
Standards and Technology. The purpose of the award competition is to stimulate efforts to
improve quality, to recognize quality achievements, and to publicize successful programs.

For more information, visit www.nist.gov/baldrige.

The European Quality Award

The European Quality Award is Europe’s most prestigious award for organizational
excellence. The European Quality Award sits at the top of regional and national quality
awards, and applicants have often won one or more of those awards prior to applying for the
European Quality Award.

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The Deming Prize

The Deming Prize, named in honor of the late W. Edwards

Deming, is Japan’s highly coveted award recognizing successful quality efforts. It is given
annually to any company that meets the award’s standards. Although typically given to Japanese
firms, in 1989, Florida Power and Light became the first U.S. company to win the award. The
major focus of the judging is on statistical quality control, making it much narrower in scope
than the Baldrige Award, which focuses more on customer satisfaction. Companies that win the
Deming Prize tend to have quality programs that are detailed and well-communicated throughout
the company. Their quality improvement programs also reflect the involvement of senior
management and employees, customer satisfaction, and training.

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7&o=5&pid=1.7

QUALITY CERTIFICATION

ISO 9000, 14000, and 24700

The International Organization for Standardization (ISO) promotes worldwide standards for the
improvement of quality, productivity, and operating efficiency through a series of standards and
guidelines. Used by industrial and business organizations, regulatory agencies, governments, and
trade organizations, the standards have important economic and social benefits. Not only are they
tremendously important for designers, manufacturers, suppliers, service providers, and
customers, but the standards make a tremendous contribution to society in general: They increase
the levels of quality and reliability, productivity, and safety, while making products and services
affordable. The standards help facilitate international trade. They provide governments with a
basis for health, safety, and environmental legislation. And they aid in transferring technology to
developing countries.

Two of the most well-known of these are ISO 9000 and ISO 14000. ISO 9000 pertains
to quality management. It concerns what an organization does to ensure that its products or
services conform to its customers’ requirements. ISO 14000 concerns what an organization
does to minimize harmful effects to the environment caused by its operations. Both ISO 9000
and ISO 14000 relate to an organization’s processes rather than its products and services, and
both stress continual improvement. Moreover, the standards are meant to be generic; no
matter what the organization’s business, if it wants to establish a quality management system or
an environmental management system, the system must have the essential elements contained
in ISO 9000 or in ISO 14000. The ISO 9000 standards are critical for companies doing
business internationally, particularly in Europe. They must go through a process that involves
documenting quality procedures and on-site assessment. The process often takes 12 to 18
months. With certification comes registration in an ISO directory that companies seeking
suppliers can refer to for a list of certified companies. They are generally given preference over
unregistered companies. More than 40,000 companies are registered worldwide; three-fourths
of them are located in Europe.

Eight quality management principles form the basis of the latest version of ISO 9000:

1. A customer focus
2. Leadership
3. Involvement of people
4. A process approach
5. A system approach to management
6. Continual improvement
7. Use of a factual approach to decision making
8. Mutually beneficial supplier relationships

The standards for ISO 14000 certification bear upon three major areas:

• Management systems—systems development and integration of environmental

responsibilities into business planning
• Operations—consumption of natural resources and energy
• Environmental systems—measuring, assessing, and managing emissions, effluents,
and other waste streams

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TOTAL QUALITY MANAGEMENT

A primary role of management is to lead an organization in its daily operation and to maintain it
as a viable entity into the future. Quality has become an important factor in both of
these objectives.

The term total quality management (TQM) refers to a quest for quality in an organization.

There are three key philosophies in this approach. One is a never-ending push to improve, which
is referred to as continuous improvement; the second is the involvement of everyone in the
organization; and the third is a goal of customer satisfaction, which means meeting or exceeding
customer expectations. TQM expands the traditional view of quality—looking only at the quality
of the final product or services—to looking at the quality of every aspect of the process that
produces the product or service. TQM systems are intended to prevent poor quality from
occurring.

We can describe the TQM approach as

follows:

1. Find out what customers want. This might involve the use of surveys, focus
groups, interviews, or some other technique that integrates the customer’s voice in the
decision making process. Be sure to include the internal customer (the next person in the
process) as well as the external customer (the final customer).
2. Design a product or service that will meet (or exceed) what customers want. Make it easy
to use and easy to produce.
3. Design processes that facilitate doing the job right the first time. Determine where
mistakes are likely to occur and try to prevent them. When mistakes do occur, find out
why so that they are less likely to occur again. Strive to make the process “mistake-
proof.” This is sometimes referred to as a fail-safing: Elements are incorporated in
product or service design that make it virtually impossible for an employee (or sometimes
a customer) to do something incorrectly. The Japanese term for this is pokayoke.
Examples include parts that fit together one way only and appliance plugs that can be
inserted into a wall outlet the correct way only. Another term that is sometimes used is
 fool proofing, but use of this term may be taken to imply that employees (or customers)
are fools—not a wise choice!
4. Keep track of results, and use them to guide improvement in the system. Never stop
trying to improve.
5. Extend these concepts throughout the supply chain.
6. Top management must be involved and committed. Otherwise, TQM will just be another
fad that fails and fades away.

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The preceding description provides a good idea of what TQM is all about, but it doesn’t tell the
whole story. A number of other elements of TQM are important:

1. Continuous improvement. The philosophy that seeks to improve all factors related to the
process of converting inputs into outputs on an ongoing basis is called
continuous improvement. It covers equipment, methods, materials, and people. Under
continuous improvement, the old adage “If it ain’t broke, don’t fix it” gets transformed
into “Just because it isn’t broke doesn’t mean it can’t be improved.”
2. Competitive benchmarking. This involves identifying other organizations that are the best
at something and studying how they do it to learn how to improve your operation. The
company need not be in the same line of business. For example, Xerox used the mail-
order company L.L. Bean to benchmark order filling.
3. Employee empowerment. Giving workers the responsibility for improvements and
the authority to make changes to accomplish them provides strong motivation for
employees. This puts decision making into the hands of those who are closest to the job
and have considerable insight into problems and solutions.
4. Team approach. The use of teams for problem solving and to achieve consensus
takes advantage of group synergy, gets people involved, and promotes a spirit of
cooperation and shared values among employees.
5. Decisions based on facts rather than opinions. Management gathers and analyzes data as
a basis for decision making.
6. Knowledge of tools. Employees and managers are trained in the use of quality tools.
7. Supplier quality. Suppliers must be included in quality assurance and quality
improvement efforts so that their processes are capable of delivering quality parts and
materials in a timely manner.
8. Champion. A TQM champion’s job is to promote the value and importance of
TQM principles throughout the company.
9. Quality at the source. Quality at the source refers to the philosophy of making each
worker responsible for the quality of his or her work. The idea is to “Do it right the first
time.”
10. Suppliers are partners in the process, and long-term relationships are encouraged. This
gives suppliers a vital stake in providing quality goods and services. Suppliers, too, are
expected to provide quality at the source, thereby reducing or eliminating the need to
inspect deliveries from suppliers.
Obstacles to Implementing TQM

1. Lack of a companywide definition of quality: Efforts aren’t coordinated; people

are working at cross-purposes, addressing different issues, and using different measures
of success.
2. Lack of a strategic plan for change: Without such a plan the chance of success is
lessened and the need to address strategic implications of change is ignored.
3. Lack of a customer focus: Without a customer focus, there is a risk of
customer dissatisfaction.
4. Poor intraorganizational communication: The left hand doesn’t know what the right hand
is doing; frustration, waste, and confusion ensue.
5. Lack of employee empowerment: Not empowering employees gives the impression
of not trusting employees to fix problems, adds red tape, and delays solutions.
6. View of quality as a “quick fix”: Quality needs to be a long-term, continuing effort.
7. Emphasis on short-term financial results: “Duct-tape” solutions often treat
symptoms; spend a little now—a lot more later.
8. Inordinate presence of internal politics and “turf” issues: These can sap the energy of
an organization and derail the best of ideas.
9. Lack of strong motivation: Managers need to make sure employees are motivated.
10. Lack of time to devote to quality initiatives: Don’t add more work without adding
additional resources.
11. Lack of leadership: Managers need to be leaders.

6. Quality Tools

Image
Source: https://th.bing.com/th/id/OIP.YjuK108lXbQiJzxDsjHGFQHaEE?w=328&h=180&c=7
&o=5&pid=1.7

There are a number of tools that an organization can use for problem solving and
process improvement. This section describes eight of these tools. The tools aid in data
collection and interpretation, and provide the basis for decision making. The first seven tools
are often referred to as the seven basic quality tools.
 Flowcharts.

A flowchart is a visual representation of a process. As a problem-solving tool, a flowchart can

help investigators in identifying possible points in a process where problems occur. The
diamond shapes in the flowchart represent decision points in the process, and the
rectangular shapes represent procedures. The arrows show the direction of “flow” of the
steps in the process. To construct a simple flowchart, begin by listing the steps in a process.
Then classify each step as either a procedure or a decision (or check) point. Try to not make
the flowchart too detailed or it may be overwhelming, but be careful not to omit any key
steps.

Check sheets.

A check sheet is a simple tool frequently used for problem identification. Check sheets
provide a format that enables users to record and organize data in a way that facilitates
collection and analysis. This format might be one of simple checkmarks. Check sheets are
designed on the basis of what the users are attempting to learn by collecting data.

Histograms.

A histogram can be useful in getting a sense of the distribution of observed values. Among
other things, one can see if the distribution is symmetrical, what the range of values is, and if
there are any unusual values.
 Pareto Analysis.

Pareto analysis is a technique for focusing attention on the most important problem areas.
The Pareto concept, named after the 19th-century Italian economist Vilfredo Pareto, is that a
relatively few factors generally account for a large percentage of the

Scatter Diagrams.

A scatter diagram can be useful in deciding if there is a correlation between the values of two
variables. A correlation may point to a cause of a problem. Figure 9.8 shows an example of a
scatter diagram. In this particular diagram, there is a positive (upwardsloping) relationship
between the humidity and the number of errors per hour. High values of humidity
correspond to high numbers of errors, and vice versa. On the other hand, a
negative (downward-sloping) relationship would mean that when values of one variable are
low, values of the other variable are high, and vice versa.

Control Charts.

A control chart can be used to monitor a process to see if the process output is random. It can
help detect the presence of correctable causes of variation.
Cause-and-Effect Diagrams.

A cause-and-effect diagram offers a structured approach to the search for the possible
cause(s) of a problem. It is also known as a fishbone diagram because of its shape, or an
Ishikawa diagram, after the Japanese professor who developed the approach to aid workers
overwhelmed by the number of possible sources of problems when problem solving. This
tool helps to organize problem-solving efforts by identifying categories of factors that might
be causing problems. Often this tool is used after brainstorming sessions to organize the ideas
generated.

Run Charts.

A run chart can be used to track the values of a variable over time. This can aid in identifying
trends or other patterns that may be occurring.

3. Quality Management
Successful management of quality requires that managers have insights on various aspects of
quality. These include defining quality in operational terms, understanding the costs
and benefits of quality, recognizing the consequences of poor quality, and recognizing the
need for ethical behavior. We begin with defining quality.

Defining Quality: The Dimensions of Quality

One way to think about quality is the degree to which performance of a product or
service meets or exceeds customer expectations. The difference between these two, that is
Performance— Expectations, is of great interest. If these two measures are equal, the
difference is zero, and expectations have been met. If the difference is negative, expectations
have not been met, whereas if the difference is positive, performance has exceeded customer
expectations. Customer expectations can be broken down into a number of categories, or
dimensions, that customers use to judge the quality of a product or service. Understanding
these helps organizations in their efforts to meet or exceed customer expectations. The
dimensions used for goods are somewhat different from those used for services.

Product Quality. Product quality is often judged on nine dimensions of quality:

 1. Performance—main characteristics of the product
2. Aesthetics—appearance, feel, smell, taste
3. Special features—extra characteristics
4. Conformance—how well a product corresponds to design specifications
5. Reliability—dependable performance
6. Durability—ability to perform over time
7. Perceived quality—indirect evaluation of quality (e.g., reputation)
8. Serviceability—handling of complaints or repairs
9. Consistency—quality doesn’t vary

Image
Source:https://th.bing.com/th/id/OIP.tLHAW4_9DV9RkA_Xo4g_OwHaEK?w=317&h=180&
c=7&o=5&pid=1.7

Service Quality. The dimensions of product quality don’t adequately describe service
quality. Instead, service quality is often described using the following dimensions:
 1. Convenience—the availability and accessibility of the service
2. Reliability—the ability to perform a service dependably, consistently, and accurately
3. Responsiveness—the willingness of service providers to help customers in unusual
situations and to deal with problems
4. Time—the speed with which service is delivered
5. Assurance—the knowledge exhibited by personnel who come into contact with a
customer and their ability to convey trust and confidence
6. Courtesy—the way customers are treated by employees who come into contact with
them
7. Tangibles—the physical appearance of facilities, equipment, personnel, and
communication materials
8. Consistency—the ability to provide the same level of good quality repeatedly
9. Expectations—meet (or exceed) customer expectations

Image
Source: https://th.bing.com/th/id/OIP.ag7pEihV3kpQP0KrZeeziwHaFO?w=256&h=180&c=7
&o=5&pid=1.7

Assessing Service Quality

A widely used tool for assessing service quality is SERVQUAL,3 an instrument designed to
obtain feedback on an organization’s ability to provide quality service to customers. It
focuses on five of the previously mentioned service dimensions that influence customers’
perceptions of service quality: tangibles, reliability, responsiveness, assurance, and empathy.
The results of this service quality audit help management identify service strengths and
weaknesses. Of particular interest are any gaps or discrepancies in service quality. There may
be discrepancies between:

1. Actual customer expectations and management perceptions of those expectations

2. Management perceptions of customer expectations and service-quality specifications
3. Service quality and service actually delivered
4. Service actually delivered and what is communicated about the service to customers
5. Customers’ expectations of the service provider and their perceptions of
provider delivery.

If gaps are found, they can be related to tangibles or other service quality dimensions
to address the discrepancies.

The Determinants of Quality

The degree to which a product or a service successfully satisfies its intended purpose has
four primary determinants:

1. Design. Quality of design refers to the intention of designers to include or exclude

certain features in a product or service. For example, many different models of
automobiles are on the market today. They differ in size, appearance, roominess, fuel
economy, comfort, and materials used.
2. How well the product or service conforms to the design. Quality of conformance
refers to the degree to which goods and services conform to(i.e., achieve) the intent of
the designers. This is affected by factors such as the capability of equipment used; the
skills, training, and motivation of workers; the extent to which the design lends itself
to production; the monitoring process to assess conformance; and the taking of
corrective action (e.g., through problem solving) when necessary. One important key
to quality is reducing the variability in process outputs (i.e., reducing the degree to
which individual items or individual service acts vary from one another).
3. Ease of use. The determination of quality does not stop once the product or service
has been sold or delivered. Ease of use and user instructions are important. They
increase the chances, but do not guarantee, that a product will be used for its
intended purposes and in such a way that it will continue to function properly and
safely. (When faced with liability litigation, companies often argue that injuries and
damages occurred because the user misused the product.) Much of the same reasoning
can be applied to services. Customers, patients, clients, or other users must be clearly
informed on what they should or should not do; otherwise, there is the danger that
 they will take some action that will adversely affect quality. Some examples include
the doctor who fails to specify that a medication should be taken before meals and not
with orange juice and the attorney who neglects to inform a client of a deadline for
filing a claim.
4. Service after delivery. For a variety of reasons, products do not always perform as
expected, and services do not always yield the desired results. Whatever the reason, it
is important from a quality standpoint to remedy the situation—through recall and
repair of the product, adjustment, replacement or buyback, or reevaluation of a
service—and do whatever is necessary to bring the product or service up to standard.

Responsibility for Quality

Top management. Top management has the ultimate responsibility for quality.
While establishing strategies for quality, top management must institute programs to
improve quality; guide, direct, and motivate managers and workers; and set an example by
being involved in quality initiatives. Examples include taking training in quality, issuing
periodic reports on quality, and attending meetings on quality.

Design. Quality products and services begin with design. This includes not only features of
the product or service; it also includes attention to the processes that will be required to
produce the products and/or the services that will be required to deliver the service
to customers.

Procurement. The procurement department has responsibility for obtaining goods

and services that will not detract from the quality of the organization’s goods and services.

Production/operations. Production/operations has responsibility to ensure that

processes yield products and services that conform to design specifications. Monitoring
processes and finding and correcting root causes of problems are important aspects of
this responsibility.

Quality assurance. Quality assurance is responsible for gathering and analyzing data
on problems and working with operations to solve problems.

Packaging and shipping. This department must ensure that goods are not damaged in transit,
that packages are clearly labeled, that instructions are included, that all parts are included,
and that shipping occurs in a timely manner.
Marketing and sales. This department has the responsibility to determine customer needs
and to communicate them to appropriate areas of the organization. In addition, it has the
responsibility to report any problems with products or services.

Customer service. Customer service is often the first department to learn of problems. It has
the responsibility to communicate that information to appropriate departments, deal in a
reasonable manner with customers, work to resolve problems, and follow up to confirm that
the situation has been effectively remedied.

C 10 MANAGEMENT OF QUALITY

1. The Evolution of Quality Management

THE EVOLUTION OF QUALITY MANAGEMENT

Broadly defined, quality refers to the ability of a product or service to consistently meet
or exceed customer requirements or expectations. However, different customers will have
different requirements, so a working definition of quality is customer-dependent. For a
decade or so, quality was an important focal point in business. But after a while, the emphasis
on quality began to fade, and quality took a backseat to other concerns. However, there has
been an upsurge recently in the need for attention to quality. Much of this has been driven
by recent experience with costs and adverse publicity associated with wide ranging recalls
that have included automobiles, ground meat, toys, produce, dog food, and pharmaceuticals.

Prior to the Industrial Revolution, skilled craftsmen performed all stages of production.
Pride of workmanship and reputation often provided the motivation to see that a job was
done right. Lengthy guild apprenticeships caused this attitude to carry over to new workers.
Moreover, one person or a small group of people were responsible for an entire product.

A division of labor accompanied the Industrial Revolution; each worker was then
responsible for only a small portion of each product. Pride of workmanship became less
meaningful because workers could no longer identify readily with the final product. The
responsibility for quality shifted to the foremen. Inspection was either nonexistent or
haphazard, although in some instances 100 percent inspection was used.

Frederick Winslow Taylor, the “Father of Scientific Management,” gave new emphasis
to quality by including product inspection and gauging in his list of fundamental areas of
manufacturing management. G. S. Radford improved Taylor’s methods. Two of his most
significant contributions were the notions of involving quality considerations early in the
product design stage and making connections among high quality, increased productivity,
and lower costs.

In 1924, Bell Telephone Laboratories introduced statistical control charts that could be used
to monitor production. Around 1930, H. F. Dodge and H. G. Romig, also of Bell
Labs, introduced tables for sampling. Nevertheless, statistical quality control procedures were
not widely used until World War II, when the U.S. government began to require vendors to
use them.

World War II caused a dramatic increase in emphasis on quality control. The U.S.
Army refined sampling techniques for dealing with large shipments of arms from many
suppliers. By the end of the 1940s, the U.S. Army, Bell Labs, and major universities were
training engineers in other industries in the use of statistical sampling techniques. About the
same time, professional quality organizations were emerging throughout the country. One of
these organizations was the American Society for Quality Control (ASQC, now known as
ASQ). Over the years, the society has promoted quality with its publications, seminars and
conferences, and training programs.

During the 1950s, the quality movement evolved into quality assurance. In the mid-
1950s, total quality control efforts enlarged the realm of quality efforts from its primary focus
on manufacturing to include product design and incoming raw materials. One important
feature of this work was greater involvement of upper management in quality.

During the 1960s, the concept of “zero defects” gained favor. This approach focused
on employee motivation and awareness, and the expectation of perfection from each
employee. It evolved from the success of the Martin Company in producing a “perfect”
missile for the U.S. Army.

In the 1970s, quality assurance methods gained increasing emphasis in services

including government operations, health care, banking, and the travel industry. Something
else happened in the 1970s that had a global impact on quality. An embargoon oil sales
instituted by the Organization of Petroleum Exporting Countries (OPEC) caused an increase
in energy costs, and automobile buyers became more interested in fuel-efficient, lower-cost
vehicles. Japanese auto producers, who had been improving their products, were poised to
take advantage of these changes, and they captured an increased share of the
automobile market. The quality of their automobiles enhanced the reputation of Japanese
producers,

opening the door for a wide array of Japanese-produced goods. American producers, alarmed
by their loss of market share, spent much of the late 1970s and the 1980s trying to improve
the quality of their goods while lowering their costs. The evolution of quality took a
dramatic shift from quality assurance to a strategic approach to quality in the late 1970s. Up
until that time, the main emphasis had been on finding and correcting defective products
before they reached the market. It was still a reactive approach.

The strategic approach is proactive, focusing on preventing mistakes from occurring in

the first place. The idea is to design quality into products, rather than to find and correct
defects after the fact. This approach has now expanded to include processes and services.
Quality and profits are more closely linked. This approach also places greater emphasis on
customer satisfaction, and it involves all levels of management as well as workers in a
continuing effort to increase quality.

2. The Foundations of Modern Quality Management: The Gurus

A core of quality pioneers shaped current thinking and practice. This section describes
someof their key contributions to the field.

Walter Shewhart. Walter Shewhart was a genuine pioneer in the field of quality control, and
he became known as the “father of statistical quality control.” He developed control
charts for analyzing the output of processes to determine when corrective action was
necessary.

W. Edwards Deming. Deming, a statistics professor at New York University in the 1940s,
went to Japan after World War II to assist the Japanese in improving quality and
productivity. The Union of Japanese Scientists, who had invited Deming, were so impressed
that in 1951, after a series of lectures presented by Deming, they established the Deming
Prize, which is awarded annually to firms that distinguish themselves with quality
management programs.

Joseph M. Juran. Juran, like Deming, taught Japanese manufacturers how to improve
the quality of their goods, and he, too, can be regarded as a major force in Japan’s success
in quality. Juran viewed quality as fitness-for-use. He also believed that roughly 80 percent
of quality defects are management controllable; thus, management has the responsibility to
correct this deficiency. He described quality management in terms of a trilogy consisting of
quality planning, quality control, and quality improvement. According to Juran, quality
planning is necessary to establish processes that are capable of meeting quality standards;
quality control is necessary in order to know when corrective action is needed; and quality
improvement will help to find better ways of doing things. A key element of Juran’s
philosophy is the commitment of management to continual improvement.

Armand Feigenbaum. Feigenbaum was instrumental in advancing the “cost of

nonconformance” approach as a reason for management to commit to quality. He recognized
that quality was not simply a collection of tools and techniques, but a “total field.” According
to Feigenbaum, it is the customer who defines quality.

Philip B. Crosby. Crosby developed the concept of zero defects and popularized the phrase
“Do it right the first time.” He stressed prevention, and he argued against the idea that “there
will always be some level of defectives.” The quality-is-free concept presented in his book,
Quality Is Free, is that the costs of poor quality are much greater than traditionally defined.

Kaoru Ishikawa. The late Japanese expert on quality was strongly influenced by both Deming
and Juran, although he made significant contributions of his own to quality
management. Among his key contributions were the development of the cause-and-effect
diagram (also known as a fishbone diagram) for problem solving and the implementation of
quality circles, which involve workers in quality improvement. He was the first quality
expert to call attention to the internal customer—the next person in the process, the next
operation, within the organization.

Genichi Taguchi. Taguchi is best known for the Taguchi loss function, which involves
a formula for determining the cost of poor quality. The idea is that the deviation of a part
from a standard causes a loss, and the combined effect of deviations of all parts from their
standards can be large, even though each individual deviation is small. An important part of
his philosophy is the cost to society of poor quality.

Taiichi Ohno and Shigeo Shingo. Taiichi Ohno and Shigeo Shingo both developed
the philosophy and methods of kaizen, a Japanese term for continuous improvement
(defined more fully later in this chapter), at Toyota. Continuous improvement is one of the
hallmarks of successful quality management.

3. Quality Management
Successful management of quality requires that managers have insights on various aspects of
quality. These include defining quality in operational terms, understanding the costs
and benefits of quality, recognizing the consequences of poor quality, and recognizing the
need for ethical behavior. We begin with defining quality.

Defining Quality: The Dimensions of Quality

One way to think about quality is the degree to which performance of a product or
service meets or exceeds customer expectations. The difference between these two, that is
Performance— Expectations, is of great interest. If these two measures are equal, the
difference is zero, and expectations have been met. If the difference is negative, expectations
have not been met, whereas if the difference is positive, performance has exceeded customer
expectations. Customer expectations can be broken down into a number of categories, or
dimensions, that customers use to judge the quality of a product or service. Understanding
these helps organizations in their efforts to meet or exceed customer expectations. The
dimensions used for goods are somewhat different from those used for services.

Product Quality. Product quality is often judged on nine dimensions of quality:

1. Performance—main characteristics of the product

2. Aesthetics—appearance, feel, smell, taste
3. Special features—extra characteristics
4. Conformance—how well a product corresponds to design specifications
5. Reliability—dependable performance
6. Durability—ability to perform over time
7. Perceived quality—indirect evaluation of quality (e.g., reputation)
8. Serviceability—handling of complaints or repairs
9. Consistency—quality doesn’t vary
Image
Source:https://th.bing.com/th/id/OIP.tLHAW4_9DV9RkA_Xo4g_OwHaEK?w=317&h=180&
c=7&o=5&pid=1.7

Service Quality. The dimensions of product quality don’t adequately describe service
quality. Instead, service quality is often described using the following dimensions:

1. Convenience—the availability and accessibility of the service

2. Reliability—the ability to perform a service dependably, consistently, and accurately
3. Responsiveness—the willingness of service providers to help customers in unusual
situations and to deal with problems
4. Time—the speed with which service is delivered
5. Assurance—the knowledge exhibited by personnel who come into contact with a
customer and their ability to convey trust and confidence
6. Courtesy—the way customers are treated by employees who come into contact with
them
7. Tangibles—the physical appearance of facilities, equipment, personnel, and
communication materials
8. Consistency—the ability to provide the same level of good quality repeatedly
9. Expectations—meet (or exceed) customer expectations

Image
Source: https://th.bing.com/th/id/OIP.ag7pEihV3kpQP0KrZeeziwHaFO?w=256&h=180&c=7
&o=5&pid=1.7
Assessing Service Quality

A widely used tool for assessing service quality is SERVQUAL,3 an instrument designed to
obtain feedback on an organization’s ability to provide quality service to customers. It
focuses on five of the previously mentioned service dimensions that influence customers’
perceptions of service quality: tangibles, reliability, responsiveness, assurance, and empathy.
The results of this service quality audit help management identify service strengths and
weaknesses. Of particular interest are any gaps or discrepancies in service quality. There may
be discrepancies between:

1. Actual customer expectations and management perceptions of those expectations

2. Management perceptions of customer expectations and service-quality specifications
3. Service quality and service actually delivered
4. Service actually delivered and what is communicated about the service to customers
5. Customers’ expectations of the service provider and their perceptions of
provider delivery.

If gaps are found, they can be related to tangibles or other service quality dimensions
to address the discrepancies.

The Determinants of Quality

The degree to which a product or a service successfully satisfies its intended purpose has
four primary determinants:

1. Design. Quality of design refers to the intention of designers to include or exclude

certain features in a product or service. For example, many different models of
automobiles are on the market today. They differ in size, appearance, roominess, fuel
economy, comfort, and materials used.
2. How well the product or service conforms to the design. Quality of conformance
refers to the degree to which goods and services conform to(i.e., achieve) the intent of
the designers. This is affected by factors such as the capability of equipment used; the
skills, training, and motivation of workers; the extent to which the design lends itself
to production; the monitoring process to assess conformance; and the taking of
corrective action (e.g., through problem solving) when necessary. One important key
to quality is reducing the variability in process outputs (i.e., reducing the degree to
which individual items or individual service acts vary from one another).
 3. Ease of use. The determination of quality does not stop once the product or service
has been sold or delivered. Ease of use and user instructions are important. They
increase the chances, but do not guarantee, that a product will be used for its
intended purposes and in such a way that it will continue to function properly and
safely. (When faced with liability litigation, companies often argue that injuries and
damages occurred because the user misused the product.) Much of the same reasoning
can be applied to services. Customers, patients, clients, or other users must be clearly
informed on what they should or should not do; otherwise, there is the danger that
they will take some action that will adversely affect quality. Some examples include
the doctor who fails to specify that a medication should be taken before meals and not
with orange juice and the attorney who neglects to inform a client of a deadline for
filing a claim.
4. Service after delivery. For a variety of reasons, products do not always perform as
expected, and services do not always yield the desired results. Whatever the reason, it
is important from a quality standpoint to remedy the situation—through recall and
repair of the product, adjustment, replacement or buyback, or reevaluation of a
service—and do whatever is necessary to bring the product or service up to standard.

Responsibility for Quality

Top management. Top management has the ultimate responsibility for quality.
While establishing strategies for quality, top management must institute programs to
improve quality; guide, direct, and motivate managers and workers; and set an example by
being involved in quality initiatives. Examples include taking training in quality, issuing
periodic reports on quality, and attending meetings on quality.

Design. Quality products and services begin with design. This includes not only features of
the product or service; it also includes attention to the processes that will be required to
produce the products and/or the services that will be required to deliver the service
to customers.

Procurement. The procurement department has responsibility for obtaining goods

and services that will not detract from the quality of the organization’s goods and services.

Production/operations. Production/operations has responsibility to ensure that

processes yield products and services that conform to design specifications. Monitoring
processes and finding and correcting root causes of problems are important aspects of
this responsibility.
Quality assurance. Quality assurance is responsible for gathering and analyzing data
on problems and working with operations to solve problems.

Packaging and shipping. This department must ensure that goods are not damaged in transit,
that packages are clearly labeled, that instructions are included, that all parts are included,
and that shipping occurs in a timely manner.

Marketing and sales. This department has the responsibility to determine customer needs
and to communicate them to appropriate areas of the organization. In addition, it has the
responsibility to report any problems with products or services.

Customer service. Customer service is often the first department to learn of problems. It has
the responsibility to communicate that information to appropriate departments, deal in a
reasonable manner with customers, work to resolve problems, and follow up to confirm that
the situation has been effectively remedied.

4. Benefits of Good Quality

Business organizations with good or excellent quality typically benefit in a variety of
ways: an enhanced reputation for quality, the ability to command premium prices, an
increased market share, greater customer loyalty, lower liability costs, and fewer production
or service problems—which yields higher productivity, fewer complaints from customers,
lower production costs, and higher profits.

The Consequences of Poor Quality

It is important for management to recognize the different ways in which the quality of a
firm’s products or services can affect the organization and to take these into account in
developing and maintaining a quality assurance program. Some of the major areas affected by
quality are:

1. Loss of business
2. Liability
3. Productivity
4. Costs
The Costs of Quality

Appraisal costs relate to inspection, testing, and other activities intended to uncover
defective products or services, or to assure that there are none. They include the cost of
inspectors, testing, test equipment, labs, quality audits, and field testing.

Prevention costs relate to attempts to prevent defects from occurring. They include
costs such as planning and administration systems, working with vendors, training, quality
control procedures, and extra attention in both the design and production phases to decrease
the probability of defective workmanship.

Failure costs are incurred by defective parts or products or by faulty services.

Internal failures are those discovered during the production process; external failures are
those discovered after delivery to the customer.

Image
Source: https://th.bing.com/th/id/OIP.bwX7S4G6Pwtpkj5R0r6omAHaD6?pid=Api&rs=1

Ethics and Quality Management

 All members of an organization have an
obligation to perform their duties in an ethical manner. Ethical behavior comes into play in
many situations that involve quality. One major category is substandard work, including
defective products and substandard service, poor designs, shoddy workmanship, and
substandard parts and raw materials. Having knowledge of this and failing to correct and
report it in a timely manner is unethical and can have a number of negative consequences.
These can include increased costs for organizations in terms of decreased productivity, an
increase in the accident rate among employees, inconveniences and injuries to customers,
and increased liability costs.

A related issue is how an organization chooses to deal with information about quality
problems in products that are already in service. For example, automakers and tire makers
in recent years have been accused of withholding information about actual or potential
quality problems; they failed to issue product recalls, or failed to divulge information,
choosing instead to handle any complaints that arose on an individual basis.

5. Quality Awards
Quality awards have been established to generate improvement in quality. The Malcolm
Baldrige Award, the European Quality Award, and the Deming Prize are well-known awards
given annually to recognize firms that have integrated quality management into their
operations.

The Baldrige Award

 Named after the late Malcolm Baldrige, an industrialist and former
secretary of commerce, the annual Baldrige Award is administered by the National Institute
of Standards and Technology. The purpose of the award competition is to stimulate efforts to
improve quality, to recognize quality achievements, and to publicize successful programs.

As it relates to ISO standards, certification is a certifying body's assurance that a service,

product or system meets the requirements of the standard. While ISO develops the
standards, third-party certification bodies certify conformity with those standards.

According to the ISO, the phrase "ISO certification" should never be used to indicate that a
product or system has been certified by a certification body as conforming to an ISO
standard. Instead, ISO suggests referring to certified products or systems using the full
identification of the ISO standard.

For example, instead of "ISO certified", ISO recommends using the phrase "ISO 9001:2015
certified." This fully identifies the standard being certified, including the version -- in this
case, the version of ISO 9001 released in 2015.

While ISO does not do certifications, its Committee on Conformity Assessment works on
standards related to the certification process.

How do businesses become ISO certified?

The process of getting certified for an ISO standard can be expensive, time-consuming and
potentially disruptive to the business. Before taking any steps to get certified, determining
the need for certification can be the most important step.

The first step in becoming certified is determining whether certification is worth the costs.
Some reasons that organizations pursue certifications include the following:
 • Regulatory requirements. Some businesses and products require certification that
they meet common standards.
• Commercial standards. When certification is not a regulatory requirement, products
and services that are certified to meet minimum standards are a necessity for some
industries.
• Customer requirements. Even where there is an industry standard or regulatory
requirement for certification, some customers such as government agencies, may
prefer or require certification.
• Improved consistency. Certification can help large organizations deliver
consistent quality assurance across business units as well as across international
borders.
• Customer satisfaction. Enterprise customers that use a product or service in different
contexts and countries appreciate consistent performance. Compliance with standards
can also help the certified organization resolve customer issues.

The certification process for ISO standards varies, depending on the standard and the
certifying body. For popular standards, organizations may need to first review and select a
suitable certification body. Recommendations for the steps to follow to get certified in the
ISO's quality management standard, ISO 9001:2015, include the following:

• understand the ISO standard;

• identify trouble areas, where operations do not meet ISO requirements;
• formally document processes, procedures and plans to improve trouble areas;
• implement ISO standards;
• conduct an internal audit to check conformance with the standard before the official
audit; and
• undergo formal compliance audit or certification process.

source: What is the ISO (International Organization for Standardization)? (techtarget.com)

The process of getting certified for an ISO standard can be expensive, time-consuming and
potentially disruptive to the business. Before taking any steps to get certified, determining
the need for certification can be the most important step.

The first step in becoming certified is determining whether certification is worth the costs.
Some reasons that organizations pursue certifications include the following:

• Regulatory requirements. Some businesses and products require certification that

they meet common standards.
 • Commercial standards. When certification is not a regulatory requirement, products
and services that are certified to meet minimum standards are a necessity for some
industries.
• Customer requirements. Even where there is an industry standard or regulatory
requirement for certification, some customers such as government agencies, may
prefer or require certification.
• Improved consistency. Certification can help large organizations deliver
consistent quality assurance across business units as well as across international
borders.
• Customer satisfaction. Enterprise customers that use a product or service in different
contexts and countries appreciate consistent performance. Compliance with standards
can also help the certified organization resolve customer issues.

The certification process for ISO standards varies, depending on the standard and the
certifying body. For popular standards, organizations may need to first review and select a
suitable certification body. Recommendations for the steps to follow to get certified in the
ISO's quality management standard, ISO 9001:2015, include the following:

• understand the ISO standard;

• identify trouble areas, where operations do not meet ISO requirements;
• formally document processes, procedures and plans to improve trouble areas;
• implement ISO standards;
• conduct an internal audit to check conformance with the standard before the official
audit; and
• undergo formal compliance audit or certification process.

The process of getting certified for an ISO standard can be expensive, time-consuming and
potentially disruptive to the business. Before taking any steps to get certified, determining
the need for certification can be the most important step.

The first step in becoming certified is determining whether certification is worth the costs.
Some reasons that organizations pursue certifications include the following:

• Regulatory requirements. Some businesses and products require certification that

they meet common standards.
• Commercial standards. When certification is not a regulatory requirement, products
and services that are certified to meet minimum standards are a necessity for some
industries.
• Customer requirements. Even where there is an industry standard or regulatory
requirement for certification, some customers such as government agencies, may
prefer or require certification.
 • Improved consistency. Certification can help large organizations deliver
consistent quality assurance across business units as well as across international
borders.
• Customer satisfaction. Enterprise customers that use a product or service in different
contexts and countries appreciate consistent performance. Compliance with standards
can also help the certified organization resolve customer issues.

The certification process for ISO standards varies, depending on the standard and the
certifying body. For popular standards, organizations may need to first review and select a
suitable certification body. Recommendations for the steps to follow to get certified in the
ISO's quality management standard, ISO 9001:2015, include the following:

• understand the ISO standard;

• identify trouble areas, where operations do not meet ISO requirements;
• formally document processes, procedures and plans to improve trouble areas;
• implement ISO standards;
• conduct an internal audit to check conformance with the standard before the official
audit; and
• undergo formal compliance audit or certification process.

3. QUALITY CERTIFICATION
QUALITY CERTIFICATION

ISO 9000, 14000, and 24700

The International Organization for Standardization (ISO) promotes worldwide standards

for the improvement of quality, productivity, and operating efficiency through a series of
standards and guidelines. Used by industrial and business organizations, regulatory agencies,
governments, and trade organizations, the standards have important economic and social
benefits. Not only are they tremendously important for designers, manufacturers, suppliers,
service providers, and customers, but the standards make a tremendous contribution to
society in general: They increase the levels of quality and reliability, productivity, and safety,
while making products and services affordable. The standards help facilitate international
trade. They provide governments with a basis for health, safety, and environmental
legislation. And they aid in transferring technology to developing countries.

Two of the most well-known of these are ISO 9000 and ISO 14000. ISO 9000 pertains
to quality management. It concerns what an organization does to ensure that its products or
services conform to its customers’ requirements. ISO 14000 concerns what an organization
does to minimize harmful effects to the environment caused by its operations. Both ISO 9000
and ISO 14000 relate to an organization’s processes rather than its products and services, and
both stress continual improvement. Moreover, the standards are meant to be generic; no
matter what the organization’s business, if it wants to establish a quality management system
or an environmental management system, the system must have the essential elements
contained in ISO 9000 or in ISO 14000. The ISO 9000 standards are critical for companies
doing business internationally, particularly in Europe. They must go through a process that
involves documenting quality procedures and on-site assessment. The process often takes 12
to 18 months. With certification comes registration in an ISO directory that companies
seeking suppliers can refer to for a list of certified companies. They are generally given
preference over unregistered companies. More than 40,000 companies are registered
worldwide; three-fourths of them are located in Europe.

Eight quality management principles form the basis of the latest version of ISO 9000:

1. A customer focus
2. Leadership
3. Involvement of people
4. A process approach
5. A system approach to management
6. Continual improvement
7. Use of a factual approach to decision making
8. Mutually beneficial supplier relationships

The standards for ISO 14000 certification bear upon three major areas:

• Management systems—systems development and integration of environmental

responsibilities into business planning
• Operations—consumption of natural resources and energy
• Environmental systems—measuring, assessing, and managing emissions, effluents,
and other waste streams

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4. SGS IN BRIEF
We are SGS – the world’s leading testing, inspection and certification company.
We are recognized as the global benchmark for quality and integrity. Our 96,000 employees
operate a network of 2,700 offices and laboratories, working together to enable a better, safer
and more interconnected world.

Wherever you are, whatever your industry, our experts worldwide provide specialized
solutions to make your business faster, simpler and more efficient.

https://youtu.be/OqtbPxsP89E

VALUE TO SOCIETY IS ENABLING A BETTER, SAFER

AND MORE INTERCONNECTED WORLD
• We enable a better world by helping businesses everywhere to work efficiently,
deliver with quality, and trade with integrity and trust
• We enable a safer world by ensuring that the environment where you work and live
is secure and clean, and that the products you use or consume are safe
• We enable a more interconnected world by helping new technology reach consumers
quickly and affordably, ensuring IT and data security, and using AI and IoT to
develop smart cities

CORE SERVICES
We provide worldwide, independent services that make a difference in people’s lives. Our
core services can be divided into three main categories:

• Testing: Reduce risks, shorten time to market and test the quality, safety and
performance of your products against relevant health, safety and regulatory standards
with our global network of testing facilities
• Inspection: Control quantity and quality, and meet all relevant regulatory
requirements across different regions and markets with our world-leading inspection
and verification services
• Certification: Ensure that your products, processes, systems or services meet national
and international standards and regulations with our comprehensive certification
services

We also offer training and consultancy services:

 • Training: Keep up with the latest developments in standards, regulations and
technology with high-quality training and development for every level of your
organization – anywhere in the world
• Consultancy: Gain full market access by identifying, meeting and complying with the
requirements of your target market, anywhere in the world, whatever your industry

ISO 9001 – CERTIFICATION – QUALITY

MANAGEMENT SYSTEMS
Stand out from the competition with ISO 9001:2015 certification with an audit against this
internationally-recognized quality management system (QMS) standard from SGS.

WHAT IS AN ISO 9001:2015 QUALITY MANAGEMENT

SYSTEM?
Supporting an organization’s aims and objectives, an ISO 9001 QMS documents the
processes, procedures, and responsibilities for achieving quality policies and objectives. Based
on seven quality management principles, the ISO 9001:2015 standard defines the way an
organization operates to meet the requirements of its customers and stakeholders:

• Customer focus
• Leadership
• Engagement of people
• Process approach
• Improvement
• Evidence-based decision making
• Relationship management

WHAT ARE THE BENEFITS OF ISO 9001:2015

CERTIFICATION?
ISO 9001 certification helps organizations to develop and improve performance, as well as
demonstrate high levels of service quality when bidding for contracts. Certification follows
successful completion of an audit against the ISO 9001 standard and enables organizations to:

• Operate more efficiently

 • Meet statutory and regulatory requirements
• Reach new markets
• Identify and address risks

ISO 14001:2015 REVISION - REQUIREMENTS,

CERTIFICATION, GAP ANALYSIS
ISO 14001:2015 proposes an increasingly strategic approach to environmental management –
work with SGS to transition to the new edition.

ISO 14001:2015 – THE MAIN CHANGES

The ISO 14001:2015 adopts the High Level Structure specified in ISO Annex SL. This
structure is now the required framework for all new and revised management system
standards.

The ISO team responsible for the revision process (subcommittee ISO/TC 207/SC1) has
identified the following emerging changes as a result of their revision.

STRATEGIC ENVIRONMENTAL MANAGEMENT

There is a new requirement to understand the context of an organization when determining
external and internal issues relating to its activities and the environment. Actions to address
these issues within the Environmental Management System (EMS) are also required.

LEADERSHIP
A new clause has been added with particular responsibilities for top-level management to
express their leadership and commitment to environmental management. Top-level
management may assign this responsibility to others, but will retain accountability.

PROTECTING THE ENVIRONMENT

Environmental policy shall incorporate a commitment to the ‘protection of the
environment’, this includes ‘prevention of pollution’ and ‘other’ commitments, such as
sustainable resource use, climate change mitigation and adaptation, protection of biodiversity
and ecosystems.
ENVIRONMENTAL PERFORMANCE
The key focus is on improving performance related to the management of environmental
aspects. The organization shall decide on criteria to evaluate its environmental performance,
using correct indicators.

LIFECYCLE THINKING
The organization will need to extend its control and influence of its environmental impacts
from raw material acquisition/generation to end-of-life treatment. This does not imply a
requirement to perform a lifecycle assessment (LCA), however the organization will need to
carefully consider the stages of product/service that can be controlled or influenced.

COMMUNICATION
Emphasis on internal and external communication, and equal treatment of both, has been
added. The decision to communicate externally is retained by the organization while taking
into account its compliance obligations.

DOCUMENTATION
The term ‘documented information’ is used instead of ‘documents’ and ‘records’. The
organization has the flexibility to conclude when ‘procedures’ are required. Any format
(paper, cloud, etc.) would be valid.

ISO 14001: 2004 TRANSITION

Organizations already certified to ISO 14001:2004 have three years from publication of the
new version in which to transfer. This transition period ends in September 2018.

1. The OSHC Story

The Occupational Safety and Health (OSHC) was established through Executive Order No. 307,
signed by the late President Corazon C. Aquino, on November 4, 1987.

Based on its mandate, the OSHC champions the cause of work safety and health in the
Philippines.

The OSHC is the front-runner of two much-awaited events on OSH. Held every two years, the
Gawad Kaligtasan at Kasalusugan (GKK) and the National Occupational Safety and Health
(NOSH) Congress serve as centerpiece programs on increasing awareness and strengthening
commitment for safe and healthier workplaces nationwide.

The GKK is a national award given by DOLE to companies and individuals with outstanding
achievements on work safety and health while the NOSH Congress provides a venue for the
exchange of experiences and new trends on OSH.

The services of the OSHC cover the preventive aspects of occupational safety and health both
public and private workplaces. As the authority on OSH, the OSHC fulfills its mission through
research, training, information dissemination, and technical services. The OSHC has a staff of
specialists in various fields of OSH and draws on national and foreign expertise when needed.

The management is headed by the Executive Director who oversees the planning,
implementation, monitoring, and evaluation of OSHC’s operations. Programs are carried out
through the following work centers: Office of the Executive Director (OED), Environment
Control Division (ECD), Health Control Division (HCD), Safety Control Division (SCD),
Training and Public Information Division (TPID), and the Finance and Administrative Division
(FAD).

MANDATE
• Legal Basis

Created by virtue of Executive Order No. 307, on November 1987 by then President Corazon C.
Aquino.

VISION
A healthy and well-protected working population in a caring and responsive work environment
brought about by sound OSH policies and laws, research, training, information exchange,
technical expertise and extensive networking.

MISSION
To develop effective, responsive, and sustainable OSH programs, policies and services; promote
excellent management of resources and foster mutually beneficial linkages that will create a
healthy and safe work environment for workers in all industries.

QUALITY POLICY
The OSHC is committed to:
 • Provide a high quality service to protect the workers through preventive safety and health
policies and programs.
• Meet client requirements and expectations to improve client satisfaction.
• Compliance to applicable standards and regulatory requirements.
• Ensuring continuous improvement of the Quality Management System to fulfill the
requirements of the standards of ISO 9001:2015.

FUNCTIONS
• Undertake continuing studies and researches on occupational safety and health.
• Plan, develop and implement occupational safety and health training programs.
• Serve as clearing house for occupational safety and health information, methods,
techniques, and approaches; and, institute an information dissemination mechanism.
• Monitor work environment and conduct medical examinations of workers.
• Serve as duly recognized agency for testing and setting standard specifications of
Personal Protective Equipment and other safety devices.
• Assist other GO’s in policy and standards formulation on occupational safety and health
matters; issue technical guidelines for prevention of occupational disease and accidents.
• Enlist assistance of GO’s and NGO’s in achieving the objectives of the Center.
• Perform such other acts appropriate for attainment of the above functions and
enforcement of the provisions of Executive Order 307.

CREDO
O – Outstanding professionalism

S – Service with dedication

H – Honesty and Integrity

C – Competent workforce

2. SALIENT FEATURES:OCCUPATIONAL SAFETY AND

HEALTH STANDARDS (As Amended, 1989)
RULE 1000

GENERAL PROVISION
1001 : Purpose and Scope:

(1) The objective of this issuance is to protect every workingman against the dangers
of injury, sickness or death through safe and healthful working conditions, thereby
assuring the conservation of valuable manpower resources and the prevention of loss or
damage to lives and properties, consistent with national development goals and with the
State’s commitment for the total development of every worker as a complete human being.

(2) This Standards shall apply to all places of employment except as otherwise provided in
this Standard.

1002 : Definitions:

For purposes of this Standards and except as otherwise indicated, the following shall mean:

(1) “Employer” includes any person acting directly or indirectly in the interest of an
employer, in relation to an employee, and shall include government-owned or controlled
corporations and institutions, as well as non-profit private institutions or organizations.

(2) “Employee” shall mean any person hired, permitted or suffered to work by an employer.

(3) “Industrial Enterprise” shall mean any workplace, permanent or temporary, including
any building or collection of buildings, shed, structure, yard or any other place,
where permanently or temporarily one or more persons are employed in any manufacturing
of goods or products processing and any other activity similar and incidental thereto.

(4) “Agricultural Enterprise” shall include forestry and logging operations, farming in all
its branches, and among other things, includes cultivation and tillage of the soil, dairying,
the production, cultivation, growing and harvesting of any agricultural and
horticultural commodities, the raising of livestock and poultry, and any practice performed
by a farmer on a farm as an incident to or in conjunction with such farming operations, but
does not include the manufacturing or processing of sugar, coconut, abaca , tobacco,
pineapple or other farm products.

(5) “Dry Dock” shall include premises where work is performed on shore or on board ships
in which ships or vessels are constructed, repaired, refitted, finished or broken up and
housed.

(6) “Health” shall connote a sound state of the body and mind of the worker, which
enables him to perform his job normally, in a state of well-being.
 (7) “Safe or Safety” shall refer to the physical or environmental conditions of work or
employment, which substantially comply with the provisions of this Standards.

(8) “Work Accident” shall mean an unplanned or unexpected occurrence that may or may
not result in personal injury, property damage, work stoppage or interference or any
combination thereof, which arises out of and in the course of employment.

(9) “Work Injury” shall mean any injury or occupational illness suffered by a person,
which arises out of or in the course of his employment.

(10) ”Occupational Illness” shall mean any illness caused by environmental factors, the
exposure to which is characterized or peculiar to a particular process, trade or occupation
and to which an employee or worker is not ordinarily subjected to or exposed outside of or
away from such employment.

(11) ”Recognized Hazards” are those which do not require technical or testing devices to
detect.

(12) ”Workplace” means the office, premises or work site, where the workers are habitually
employed and shall include the office or place where the workers, who have no fixed or
definite work site, regularly report for assignment in the course of their employment.

1005 : Duties of Employers, Workers and other Persons:

(1) Each employer covered by the provisions of this Standards shall:

a. furnish his workers a place of employment free from hazardous conditions that are
causing or are likely to cause death, illness or physical harm to his workers;

b. give complete job safety instructions to all his workers, especially to those entering the
job for the first time, including those relating to the familiarization with their work
environment, hazards to which the workers are exposed to and steps taken in case of
emergency;

c. comply with the requirements of this Standards; and

d. use only approved devices and equipment in his workplace.

GENERAL PROVISIONS
 (2) Every worker shall cooperate with the employer in carrying out the provisions of
this Standards. He shall report to his supervisor any work hazard that may be discovered
in his workplace.

(3) Every worker shall make proper use of all safeguards and safety devices furnished
in accordance with the provisions of this Standards for his protection and that of others,
and shall follow all instructions given by the employer in compliance with the provisions of
this Standards.

(4) It shall be the duty of any person, including any builder or contractor or
enforcement agent, who visits, builds, renovates, or installs devices, or conducts business in
any establishment or workplace, to comply with the provisions of this Standards and
all regulations of the employer issued there under as well as with other subsequent
issuances of the Secretary.

1013 : Hazardous Workplaces:

For purposes of this Standards, the following are considered “hazardous workplaces:”

a. Where the nature of work exposes the workers to dangerous environmental

elements, contaminants or work conditions including ionizing radiation, chemicals, fire,
flammable substances, noxious components and the like;

b. Where the workers are engaged in construction work, logging, fire fighting,
mining, quarrying, blasting, stevedoring, dock work, deep-sea fishing and mechanized
farming;

c. Where the workers are engaged in the manufacture or handling of explosives and
other pyrotechnic products;

d. Where the workers use or are exposed to power driven or explosive powder actuated
tools;

e. Where the workers are exposed to biologic agents such as bacteria, fungi, viruses,
protozoas, nematodes, and other parasites

1045 : Duties of the Employers:

Health and Safety committees play very important roles in eliminating work hazards.
Developing workers’ interest and participation in the planning and development of safety
program is the responsibility of the employer. The employer must exercise the necessary
leadership and provide support to make the program work. The principal duties of the
employer are:

(1) Establishes and adopts in writing administrative policies on safety in conformity with
the provisions of this Standards outlining therein his responsibility and authority delegated.

(2) Reports to the enforcing authority in two (2) copies of the policies adopted and the
health and safety organization established to carry out the program on safety and health
within one month after the organization or reorganization of the health and safety
committee.

(3) Reports to the enforcing authority having jurisdiction at least once in every three
(3) months, counting from January, the health and safety program of the organization
outlining the activities undertaken including its safety performance, health and safety
committee meetings and its recommendations and measures taken to implement
such recommendations.

(4) Acts on recommended measures by the health and safety committee by adopting
the elements of the health and safety program in the production process or workplace and
in case of non-adoption of the Health and Safety Committee’s recommendation, to
inform the committee of his reasons.

1046 : Duties of the Workers:

(1) Works in accordance with accepted safety practices and standards established by
the employer in compliance with the provisions of this Standards.

(2) Reports unsafe conditions and practices to the supervisor by making suggestions
for correction or removal of accident hazards.

(3) Serves as members of the Health and Safety Committee.

(4) Cooperates actively with the Health and Safety Committee.

(5) Assists government agencies in the conduct of health and safety inspection or
other programs.

HAZARDOUS MATERIALS
The provisions of this Rule shall apply to all workplaces in which hazardous substances in
solid, liquid or gaseous forms are manufactured, handled and used or in which flammable,
irritating,

offensive or toxic dusts, fibers, gases, mists or vapors are generated or released in
quantities injurious to health.

1092 : Definitions:

When used in this Rule the following shall mean as follows:

(1) “Hazardous materials or substances” mean substances in solid, liquid or gaseous

forms known to constitute poison, fire, explosion or health hazard.

(2) “Corrosive” when referred to the action on inanimate surface such as metal, glass or
wood means that a substance will cause the wearing away, or the gradual changing or
destroying

of the texture or substance of such materials. When referred to the action on living
tissue, means that it will cause more or less severe destruction of the tissue by chemical
action.

(3) “Hot” means that a material or substance possesses or is characterized by a relatively

high temperature.

(4) “Gases” means normally aeroform fluid, which have neither shape nor specific volume
but tend to expand indefinitely and which can be changed to the liquid or solid state by
the effect of increased pressure or decreased temperature.

(5) “Fumes” means suspended solid particles, which are generated by condensation
from gaseous state, generally after volatilisations from molten metals.

(6) “Vapor” means gaseous form of substances which are normally in the liquid or solid
state, and which can be changed to these states either by increasing the pressure or
decreasing the temperature.

(7) “Mists” means suspended liquid droplets generated by condensation from the gaseous
to the liquid state or by breaking up of a liquid into a dispersed state, such as by atomizing,

foaming or splashing.
 (8) “Fibers” means any tough solid substance composed of thread-like tissue, whether
of mineral, vegetable or animal origin.

(9) “Dust” means solid particles capable of being blown about or suspended in the air.
generated by handling, crushing, cutting, drilling, grinding, rapid impact, spraying,
detonations, or disintegration of inorganic or organic materials and are of a composition
similar to the substance or substances from which derived.

(10) “Toxic” means acting or likely to act as a poison, or may chemically produce injurious
or deadly effect.

(11) ”Irritating” means causing undue sensitiveness of an organ or part of the body

Where Did the 5S Methodology Begin?

A Internet company called Quality Assurance
Solutions reveals that the history of 5S goes back as far as the 16th Century and Venice shipbuilders. In an effort to
streamline the assembly process, workers used quality process production to build ships in hours instead of days or
weeks.
From there, it was Sakichi Toyoda and son Kiichiro as well as Toyota engineer Taiichi Ohno who developed the 5S
methodology or what they called the Total Production System of TPS after World War Il.
The three Toyota representatives looked at both Ford Motor Company's assembly lines and the inventory process at
the supermarket chain Piggly Wiggly. Through analysis at Ford, they did notice waste along with workers who had to
wait for one step to be completed which resulted in layoffs and rehiring. At Piggly Wiggly supermarkets, their
inventory system of ordering only what was needed based on demand helped them understand and implement the
Just-In-Time or JIT process into the 5S methodology.
The 5S Methodology formed by Toyota offered each employee a level of importance and encouragement that every
job was essential to the process and end product. Waste was kept to a minimum and workspace organization led to
timely outcomes with genuine employee pride.
The Concept Becomes a Methodology
Perhaps the innovation into workplace and quality product process improvement led the Toyota Motor Corporation to
first utilize
The Concept Becomes a Methodology
Perhaps the innovation into workplace and quality product process improvement led the Toyota Motor Corporation to
first utilize the 5S Methodology. To the layperson, think of the history of 5S as a way to utilize good
"housekeeping" skills to achieve the best and most efficient results.
The 5S Methodology has exploded in other areas of quality improvement including total productive maintenance, the
visual workplace, the Just-In-Time (JIT) process, and Lean manufacturing. Often associated with Six Sigma or
Kaizen, the 5S Methodology was founded through five Japanese words, which have been translated to English
words:
Japanese / English Translation
o Seiri / Sort - Sorting only the materials or inventory needed for each task at hand
o Seiton / Straighten - Create an orderly workplace where everything has its place
o Seiso / Shine - Extreme efforts to keep the workplace clean for functionality
o Seiketsu / Standardize - Similar and controlled task assignments that are uniform
o Shitsuke / Sustain - Safe manufacturing process policies
Suffice it to say, many of these Japanese words are translated differently depending upon the website you land on.
Because 5S is based on improving processes to better improve production, the five Japanese
"housekeeping" words have grown to include
English word variations.