CHAPTER 3: ON MANAGING QUALITY

DEFINING QUALITY

Quality is the ability of a product or service to meet customer needs.

Quality is the totality of features and characteristics of a product or service that bears on its
ability to satisfy stated or implied needs (American Society for Quality).

Total Quality Management (TQM) systems are driven by identifying and satisfying customer
needs. TQM takes care of the customers.

Categories of Definitions of Quality

1. User based – they proposed that quality “lies in the eyes of the beholder”. Marketing
people like this approach and so do customers. To them, higher quality means better
performance, nicer features, and other (sometimes costly) improvements. The
characteristics that connote quality must first be identified through research (a user-
based approach to quality.
2. Manufacturing based (production managers) – they believe that quality means
conforming to standards and “making it right the first time”. These characteristics are
then translated into specific product attributes (a product-based approach to quality)
3. Product based – which views quality as a precise and measurable variable. Then, the
manufacturing process is organized to ensure that products are made precisely to
specifications (a manufacturing-based approach to quality).

Two Ways Quality Improve Profitability

1. Sales Gains
 Improved response
 Higher prices
 Improved reputation
2. Reduced Costs
 Increased productivity
 Lower rework and scraps costs
 Lower warranty costs

Flow of Activities that are Necessary to Achieve Total Quality Management (TQM)
1. Organizational practices
 Leadership, Mission statement, Effective operating procedures, Staff-support,
Training
 Yields: What is important and what is to be accomplished.
2. Quality principles
 Customer focus, Continuous improvement, Benchmarking, Just-in-time, Tools of
TQM
 Yields: How to do what is important and to be accomplished.
3. Employee fulfilment
 Empowerment, Organizational commitment
 Yields: Employee attitudes that can accomplish what is important.
4. Customer satisfaction
 Winning orders, Repeat customers
 Yields: An effective organization with a competitive advantage.

Implications of Quality
1. Company reputation
2. Product liability
3. Global implications
 Malcolm Baldrige National Quality Award (Malcolm Baldrige, former Secretary of
Commerce)
 Deming prize (Dr. W. Edwards Deming)
Cost of Quality (COQ) – the cost of doing things wrong, that is, the price of non-conformance.
1. Prevention costs –costs associated with reducing the potential for defective parts or
services (e.g. training, quality improvement programs).
2. Appraisal costs related to evaluating products, processes, parts, and services (e.g.
testing, labs, inspectors)
3. Internal failure – costs that result from production of defective parts or services before
delivery to customers (e.g. rework, scrap, downtime)
4. External costs – costs that occur after delivery of defective parts or services (e.g.
rework, returned goods, liabilities, lost goodwill, costs to society)

Leaders in the Field of Quality Management

LEADER PHILOSOPHY/CONTRIBUTION
W. Edwards Deming Deming insisted management accept responsibility for building
good systems. The employee cannot produce products that on
average exceed the quality of what the process is capable of
producing.
Joseph M. Juran A pioneer in teaching the Japanese how to improve quality, Juran
believes strongly in top-management commitment, support, and
involvement in the quality effort. He is also a believer in teams
that continually seek to raise quality standards. Juran varies from
Deming somewhat in focusing on the customer and defining
quality as fitness for use, not necessarily the written
specifications.
Armand Feigenbaum His 1961 book, Total Quality Control, laid out 40 steps to quality
improvement processes. He viewed quality not as a set of tools
but as a total field that integrated the processes of a company.
His work in how people learn from each other’s successes led to
the field of cross-functional teamwork.
Philip B. Crosby Quality is free was Crosby’s attention-getting book published in
1979. Crosby believed that in the traditional trade off between
the cost of improving quality and the cost of poor quality, the
cost of poor quality is understated. The cost of poor quality
should include all of the things that are involved in not doing the
job right the first time. Crosby coined the term zero defects and
stated, “there is absolutely no reason for having errors or defects
in any product or service.”

Ethics and Quality Management

For operations managers, one of the most important jobs is to deliver healthy, safe, and
quality products and services to customers. The development of poor-quality products, because
of inadequate design and production processes, results not only in higher production costs but
leads to injuries, lawsuits, and increased government regulations.

INTERNATIONAL QUALITY STANDARDS

1. ISO 9000 – a set of quality standards developed by the International Standards
Organization (ISO). “ISO”, is Greek for equal or uniform, as uniform throughout the
world. The focus of the standards is to establish quality management procedures,
through leadership, detailed documentation, work instructions, and recordkeeping.
2. ISO 14000 – is an environmental management standard that contains five core
elements: (1) environmental management, (2) auditing, (3) performance evaluation, (4)
labelling, and (5) life-cycle assessment. The new standard could have several
advantages:
 Positive public image and reduced exposure to liability.
 Good systematic approach to pollution prevention through the minimization of
ecological impact of products and activities.
  Compliance with regulatory requirements and opportunities for competitive
advantage.
 Reduction in need for multiple audits.

TOTAL QUALITY MANAGEMENT

Total quality management (TQM) refers to a quality emphasis that encompasses the entire
organization, from supplier to customer. TQM stresses a commitment by management to have
a continuing companywide drive toward excellence in all aspects of products and services that
are important to the customer.

Deming’s 14 Points for Implementing Quality Improvement

1. Create consistency of purpose.
2. Lead to promote change.
3. Build quality into the product; stop depending on inspections to catch problems.
4. Build long-term relationships based on performance instead of awarding business on
the basis of price.
5. Continuously improve product, quality, and service.
6. Start training.
7. Emphasize leadership.
8. Drive out fear.
9. Break down barriers between departments.
10. Stop haranguing workers.
11. Support, help, and improve
12. Remove barriers to pride in work.
13. Institute a vigorous program of education and self-improvement.
14. Put everybody in the company to work on the transformation.

Seven Concepts for an Effective TQM Program

1. Continuous Improvement
2. Six Sigma
3. Employee Empowerment
4. Benchmarking
5. Just-in-time (JIT)
6. Taguchi Concepts
7. Knowledge of TQM Tools

Continuous Improvement
Total quality management requires a never-ending process of continuous improvement
that covers people, equipment, suppliers, materials, and procedures. The basis of the
philosophy is that every aspect of an operation can be improved. The end goal is perfection,
which is never achieved but always sought.
Walter Shewhart, another pioneer in quality management, developed a circular model
known as PDCA (plan, do, check, act) as his version of continuous improvement.
1. Plan – identify the improvement and make a plan.
2. Do – test the plan.
3. Check – is the plan working?
4. Act – implement the plan.

Six Sigma
Six Sigma is a program designed to reduce defects to help lower costs, save time, and
improve customer satisfaction. Six Sigma is a comprehensive system – a strategy, a discipline,
and a set of tools – for achieving and sustaining a business success.

Six Sigma Improvement Model (DMAIC)

1. Defines crucial outputs and identifies gaps for improvement.
2. Measures the work and collects data for processes that can help close the gaps.
3. Analyzes the data.
 4. Improves, by modifying or redesigning, existing procedures.
5. Controls the new process to make sure performance levels are maintained.

Employee Empowerment
Employee empowerment means enlarging employee jobs so that the added
responsibility and authority is moved to the lowest level possible in the organization.

Techniques for Building Employee Empowerment

1. Building communication networks that include employees.
2. Developing open, supportive supervisors.
3. Moving responsibility from both managers and staff to production employees.
4. Building high-morale organizations.
5. Creating such formal organization structures as teams and quality circles.

Quality Circle is a group of employees meeting regularly with a facilitator to solve work-related
problems in their work area.

Benchmarking
Benchmarking involves selecting a demonstrated standard of products, services, costs,
or practices that represent the very best performance for processes or activities very similar to
your own. The idea is to develop a target at which to shoot and then to develop a standard or
benchmark against which to compare your performance.

Steps for Developing Benchmarks

1. Determine what to benchmark.
2. Form a benchmark team.
3. Identify benchmark partners.
4. Collect and analyse benchmarking information.
5. Take action to match or exceed the benchmark.

Internal Benchmarking takes place when an organization is large enough to have many
divisions or business units. Data are usually much more accessible than from outside firms.
Typically, one internal unit has superior performance worth learning from.

Best Practices for Resolving Customer Complaints

1. Make it easy for clients to complain: It is free market research.
2. Respond quickly to complaints: It adds customers and loyalty.
3. Resolve complaints on the first contact: It reduces cost.
4. Use computers to manage complaints: Discover trends, share them, and align your
services.
5. Recruit the best for customer service jobs: It should be part of formal training and
career advancement.

Just-in-Time (JIT)
The philosophy behind just-in-time is one of continuing improvement and enforced
problem solving. JIT systems are designed to produce or deliver goods just as they are needed.
JIT is related to quality in three ways:
1. JIT cuts the cost of quality
2. JIT improves quality
3. Better quality means less inventory and a better, easier-to-employ JIT systems

Taguchi Concepts
Most quality problems are the result of poor product and process design. Genichi
Taguchi has provided us with three concepts aimed at improving both product and process
quality. They are:
1. Quality robust products are products that are consistently built to meet customer
needs in spite of adverse condition in the production process.
 2. Quality loss function (QLF) is a mathematical function that identifies all costs connected
with poor quality and shows how these costs increase as product quality moves from
what the customer wants.
3. Target-oriented quality is a philosophy of continuous improvement to bring the product
exactly on target.

Knowledge of TQM Tools

TOOLS OF TQM
1. Check Sheet is any kind of form that is designed for recording data.
2. Scatter Diagrams show the relationship between two measurements.
3. Cause-and-Effect Diagram (Ishikawa diagram or Fish-bone chart) is a schematic
technique used to discover possible locations of quality problems.
4. Pareto Chart is a graphic way of identifying the few critical items as opposed to many
less important ones.
5. Flowcharts are block diagrams that graphically describe a process system.
6. Histograms show the range of values of a measurement and the frequency with which
each value occurs.
7. Statistical Process Control (SPC) is a process used to monitor standards, making
measurements and taking corrective action as a product or service is being produced.
 Control charts are graphic presentations of process data over time with
predetermined control limits.

THE ROLE OF INSPECTION

Inspection (audit) a means of ensuring that an operation is producing at the quality

level expected. This inspection can involve measurement, tasting, touching, weighing, or testing
of the product (sometimes even destroying it when doing so).

When and Where to Inspect

1. At your supplier’s plant while the supplier is producing.
2. At your facility upon receipt of goods from your supplier.
3. Before costly or irreversible processes.
4. During the step-by-step production process.
5. When production or service is complete.
6. Before delivery from your facility.
7. At the point of customer contact.

Source Inspection is controlling or monitoring at the point of production or purchase – at the

source.

Poka-yoke which is literally translated, “foolproof”; it has come to mean a device or technique
that ensures the production of a good unit every time.

Service Industry Inspection

In service-oriented organizations, inspection points can be assigned at a wide range of
locations.

Examples of Inspection in Services

ORGANIZATION WHAT IS INSPECTED STANDARD

Jones Law Offices Receptionist performance Phone answered by the
second ring
Billing Accurate, timely, and correct
format
Attorney Promptness in returning calls
Hard Rock Hotel Reception desk Use customer’s name
Doorman Greet guest in less than 30
 seconds
Room All lights working, spotless
bathroom
Minibar Restocked and charges
accurately posted to bill
Arnold Palmer Hospital Billing Accurate, timely, and correct
format
Pharmacy Prescription accuracy,
inventory accuracy
Lab Audit for lab-test accuracy
Nurses Charts immediately updated
Admissions Data entered correctly and
completely
Hard Rock Cafe Busboy Serves water and bread within
1 minute
Busboy Clears all entrée items and
crumbs prior to dessert
Waiter Knows and suggests specials,
desserts
Nordstrom’s Department Display areas Attractive, well organized,
Store stocked, good lighting
Stockrooms Rotation of goods, organized,
clean
Salesclerks Neat, courteous, very
knowledgeable

Inspection of Attributes versus Variables

1. Attribution inspection – an inspection that classifies items as being either good or
defective.
2. Variable inspection – classifications of inspected items as falling on a continuum scale
such as dimension, size, or strength.

TQM IN SERVICES
The operations manager plays a significant role in addressing several major aspects of
service quality.
1. First, the tangible component of man services is important.
2. Second, another aspect of service and service quality is the process.
3. Third, the operations manager should realize that the customer’s expectations are the
standard against which the service is judged.
4. Fourth, the manager must expect exceptions.

Determinants of Service Quality

1. Reliability involves consistency of performance and dependability. It means that the
firm performs the service right the first time and the firm honors its promises.
2. Responsiveness concerns the willingness or readiness of employees to provide service.
It involves timeliness of service.
3. Competence means possession of the required skills and knowledge to perform the
service.
4. Access involves approachability and ease of contact.
5. Courtesy involves politeness, respect, consideration, and friendliness of contact
personnel (including receptionists, telephone operators, etc.).
6. Communication means keeping customers informed in language they can understand
and listening to them. It may mean that the company has to adjust its language for
different consumers – increasing the level of sophistication with a well-educated
customer and speaking simply and plainly with a novice.
7. Credibility involves trustworthiness, believability, and honesty. It involves having the
customer’s interests at heart.
 8. Security is the freedom from danger, risk, or doubt.
9. Understanding/knowing the customer involves making the effort to understand the
customer’s needs.
10. Tangibles include the physical evidence of the service.

Reference: An Introduction to Operations Management 8th Edition

By Jay Heizer and Barry Render