Chapter 5 - Total Quality Management

Operations Management
6th Edition
R. Dan Reid & Nada R. Sanders

Copyright © 2016 John Wiley & Sons, Inc.

 Learning Objectives
2

Explain the meaning of total quality

management (TQM).
Identify costs of quality.
Describe the evolution of TQM.
Identify features of the TQM philosophy.
Describe quality awards and quality
certifications.
Understand why and how TQM efforts fail.

Copyright © 2016 John Wiley & Sons, Inc.

 Defining Quality
3

Definition of quality is dependent on the people

defining it
There is no single, universal definition of quality
 “performance to standards”, “meeting customer’s needs”,
“satisfying the customer”
5 common definitions (See next slide)

Copyright © 2016 John Wiley & Sons, Inc.

 Defining Quality – 5 Ways
4

1. Conformance to specifications
 How well a product/service meet targets and tolerances defined
by its designers.
2. Fitness for use
 Evaluates performance for intended use
3. Value for price paid
 Evaluation of usefulness vs. price paid
4. Support services
 Quality of support after sale
5. Psychological
 Ambiance, prestige, friendly staff

Copyright © 2016 John Wiley & Sons, Inc.

Manufacturing Quality vs. Service Quality
5

 Manufacturing focuses on  Service produce intangible

tangible product features (can products that must be
be seen, touched, directly experienced (cannot be seen or
managed) touched)
 Conformance  Intangible factors
 Performance  Consistency
 Reliability  Responsiveness
 Features  Courtesy, friendliness
 Durability  Promptness, timeliness
 Serviceability  Atmosphere

Copyright © 2016 John Wiley & Sons, Inc.

 Cost of Quality
6

Quality affects all aspects of the organization

Quality has dramatic cost implications of:
 Quality control costs (to achieve high quality)
 Prevention costs
 Appraisal costs
 Quality failure costs (consequences of poor quality)
 Internal failure costs
 External failure costs

Copyright © 2016 John Wiley & Sons, Inc.

Cost of Quality – 4 Categories
7
Evolution of TQM – New Focus
8

Copyright © 2016 John Wiley & Sons, Inc.

Quality Gurus
9

Copyright © 2016 John Wiley & Sons, Inc.

 TQM Philosophy
10

 TQM focuses on identifying quality problem root causes

 Encompasses the entire organization
 Involves the technical as well as people
 Relies on seven basic concepts of
1. Customer focus
2. Continuous improvement
3. Employee empowerment
4. Use of quality tools
5. Product design (discussed later in Chapter)
6. Process management (discussed later in Chapter)
7. Managing supplier quality (discussed later in Chapter)

Copyright © 2016 John Wiley & Sons, Inc.

TQM Philosophy
11

Copyright © 2016 John Wiley & Sons, Inc.

TQM Philosophy Concepts
12

Focus on Customer
 Identify and meet customer needs
 Stay tuned to changing needs, e.g. fashion styles

Continuous Improvement
 Continuous learning and problem solving, e.g. Kaizen, 6
sigma
 Plan-Do-Study-Act (PDSA)
 Benchmarking

Copyright © 2016 John Wiley & Sons, Inc.

 PDSA Details
13

 Plan
 Evaluate current process
 Collect procedures, data, identify problems
 Develop an improvement plan, performance objectives
 Do
 Implement the plan – trial basis
 Study
 Collect data and evaluate against objectives
 Act
 Communicate the results from trial
 If successful, implement new process

Copyright © 2016 John Wiley & Sons, Inc.

 PDSA Details - cont'd
14

Cycle is repeated
 After act phase, start planning and repeat process
TQM Philosophy Concepts - cont'd
15

Employee Empowerment
 Empower all employees; external and internal customers
 Team Approach
 Teams formed around processes; 8-10 people
 Meet weekly to analyze and solve problems
Use of Quality Tools
 Ongoing training on analysis, assessment, and correction,
& implementation tools
 Studying practices at “best in class” companies

Copyright © 2016 John Wiley & Sons, Inc.

 Ways of Improving Quality
16

Plan-Do-Study-Act Cycle (PDSA)

Also called the Deming Wheel after originator
 Circular, never ending problem solving process or continuous
improvement process
Seven Tools of Quality Control
 Tools typically taught to problem solving teams
Quality Function Deployment (QFD)
 Used to translate customer preferences to design

Copyright © 2016 John Wiley & Sons, Inc.

Seven Tools of Quality Control
17

1. Cause-and-Effect Diagrams
2. Flowcharts
3. Checklists
4. Control Charts
5. Scatter Diagrams
6. Pareto Analysis
7. Histograms

Copyright © 2016 John Wiley & Sons, Inc.

TQM Philosophy Concepts - cont'd
18

Copyright © 2016 John Wiley & Sons, Inc.

 1. Cause-and-Effect Diagrams
19

 Called Fishbone
Diagram
 Focused on
solving
identified
quality problem
 Used by quality
control teams;
brainstorming
 2. Flowcharts
20

 Schematic diagram
 Used to document the detailed steps in a process
 Often the first step in Process Re-Engineering
 3. Checklist
21

 Simple data check-off sheet

 Designed to identify type of quality problems at each work
station; per shift, per machine, per operator
 4. Control Charts
22

 The UCL and LCL are calculated limits used to show when a
process is in or out of control i.e.; weight, width, or volume
 Key tool used in Statistical Process Control - Chap. 6
 5. Scatter Diagrams
23

 A graph showing how two variables are related to one

another
 The greater the degree of correlation, the more linear are the
observations
 6. Pareto Analysis
24

 Technique that displays the degree of importance for each element

 Named after the 19th century Italian economist; often called the
80-20 Rule
 Principle is that quality problems are the result of only a few problems i.e.;
80% of problems are caused by 20% of causes
 7. Histograms
25

 A chart that shows the frequency distribution of observed values of a

variable (i.e.; service time
at a bank drive-up window)
 Displays whether the distribution is symmetrical (normal) or skewed
Product Design - Quality Function Deployment (QFD)
26

 Critical to ensure product design meets customer

expectations (and enhance communications internally)
 QFD is a useful tool for translating customer specifications
into technical requirements
 QFD encompasses
 Customer requirements
 Competitive evaluation
 Product characteristics
 Relationship matrix
 Trade-off matrix
 Setting Targets

Copyright © 2016 John Wiley & Sons, Inc.

Quality Function Deployment
(QFD) Details
27
QFD - House of Quality
28
Reliability – Critical to Quality
29

Reliability is the probability that the product, service or

part will function as expected
No product is 100% certain to function properly
Reliability is a probability function dependent on sub-
parts or components

Copyright © 2016 John Wiley & Sons, Inc.

 Reliability; Critical to Quality - cont’d
30

Reliability of a system is the product of component

reliabilities

RS = (R1) (R2) (R3) . . . (Rn)

RS = reliability of the product or system
R1 = reliability of the components 1 thru n

Copyright © 2016 John Wiley & Sons, Inc.

Reliability; Critical to Quality - cont’d
31

Increase reliability by placing components in parallel

Parallel components allow system to operate if one or
the other fails

RS = R1 + (R2* Probability of needing 2nd component)

Copyright © 2016 John Wiley & Sons, Inc.

Process Management & Managing Supplier
Quality
32

Quality products come from quality sources

Quality must be built into the process
Quality at the source is the belief that it is better to
uncover source of quality problems and correct it
TQM extends to quality of product from company’s
suppliers

Copyright © 2016 John Wiley & Sons, Inc.

Quality Awards and Standards
33

Malcolm Baldrige National Quality Award (MBNQA)

The Deming Prize
ISO 9000 Certification
ISO 14000 Standards

Copyright © 2016 John Wiley & Sons, Inc.

 MBNQA- What Is It?
34

Award named after the former Secretary of Commerce –

Regan Administration
Intended to reward and stimulate quality initiatives
Given to no more that two companies in each of three
categories; manufacturing, service, and small business
Past winners; Motorola Corp., Xerox, FedEx, 3M, IBM,
Ritz-Carlton

Copyright © 2016 John Wiley & Sons, Inc.

 MBNQA- Criteria
35

# Categories Points
1 Leadership 120
2 Strategic Planning 85
3 Customer and Market Focus 85
4 Information and Analysis 90
5 Human Resource Focus 85
6 Process Management 85
7 Business Results 450
TOTAL POINTS 1000

Criteria represents Quality belongs to everyone!

And criteria promotes “continuous improvement”.
Copyright © 2016 John Wiley & Sons, Inc.
 The Deming Prize
36

 Given by the Union of Japanese Scientists and Engineers

since 1951
 Named after W. Edwards Deming who worked to improve

Japanese quality after WWII

 Not open to foreign companies until 1984

 1989 - Florida P & L was first US company winner

Copyright © 2016 John Wiley & Sons, Inc.

 ISO Standards
37

 ISO 9000 Standards: (1987)

 Certification developed by International Organization for
Standardization
 Set of internationally recognized quality standards
 Companies are periodically audited & certified
 ISO 9000:2000 QMS – Fundamentals and
Standards
 ISO 9001:2000 QMS – Requirements
 ISO 9004:2000 QMS - Guidelines for Performance
 More than 40,000 companies have been certified
 ISO 14000: (1987)
 Focuses on a company’s environmental responsibility

Copyright © 2016 John Wiley & Sons, Inc.

 Why TQM Efforts Fail
38

Lack of a genuine quality culture

Lack of top management support and commitment
Over- and under-reliance on SPC methods

Copyright © 2016 John Wiley & Sons, Inc.

 TQM Within OM
39

 TQM is broad sweeping organizational change

 TQM impacts
 Marketing – providing key inputs of customer information
 Finance – evaluating and monitoring financial impact
 Accounting – provides exact costing
 Engineering – translate customer requirements into specific
engineering terms
 Purchasing – acquiring materials to support product development
 Human Resources – hire employees with necessary skills
 Information systems – increased need for accessible information

Copyright © 2016 John Wiley & Sons, Inc.

 Chapter 5 Highlights
40

 TQM is different from the old concept of quality

 Focus is on serving customers, identifying the causes of quality
problems, and building quality into the production process
 Four categories of quality costs:
 Prevention, Appraisal, Internal and External
 Seven TQM notable individuals include:
 Walter A. Shewhart, W. Edwards Demings, Joseph M. Juran,
Armand V. Feigenbaum, Philip B. Crosby, Kaoru Ishikawa, &
Genichi Taguchi

Copyright © 2016 John Wiley & Sons, Inc.

 Chapter 5 Highlights – cont'd
41

 Seven features of TQM combine to create TQM philosophy:

 Customer focus, continuous improvement, employee
empowerment, use of quality tools, product design, process
management, and managing supplier quality
 QFD
 a tool used to translate customer needs into specific engineering
requirements
 Reliability
 the probability that the product will functions as expected
 The Malcolm Baldrige Award
 given to companies to recognize excellence in quality management.

Copyright © 2016 John Wiley & Sons, Inc.