Lecture 9:

Total Quality Management

 Outline
I. Quality
1. Defining quality
2. Four dimensions of quality
3. Why cares about quality
4. Costs of quality
5. Quality awards and standards
II. Total Quality Management
1. What is TQM?
2. The evolution of TQM
3. TQM Philosophy
4. Ways of improving quality
5. Why TQM efforts fail?
6. TQM within Operations Management
 I. Quality

I. Quality
Quality is defined as “the totality of features and
characteristics of a product or service which bears on its
ability to meet stated or implied needs”
(Holmes, 1992)
1. Five ways of defining quality
• Conformance to specifications
– Does product/service meet targets and tolerances defined by designers?
• Fitness for use
– Evaluates performance for intended use
• Value for price paid
– Evaluation of usefulness vs. price paid
• Support services
– Quality of support after sale
• Psychological
– E.g. ambiance, prestige, friendly staff
2. Four dimensions of quality
• Quality of design
– Determining which features to include in the final design
• Quality of conformance to design
– Production processes are set up to meet design
specifications
• Ease of use
– Instructions, operation, maintenance & safety
• Post-sale service
– Responsiveness, rapid repair, spare parts, etc.
3. Why cares about quality?
Two Ways Quality Improves Profitability

Source: Paracha, 2015

3. Why cares about quality? (cont)
Deming gave a new perspective to the benefits of
improving quality, in the form of a chain reaction

Deming Chain Reaction

Source: Beaver, 2016
4. Costs of quality
• Quality affects all aspects of the organization and have dramatic cost
implications.
• When talking about quality-related costs, remember that a concern for good
quality saves money, it is poor quality costs money.

Source: CQE Academy, 2016

4. Costs of quality (cont)
• Prevention costs – costs of any action taken to investigate, prevent
or reduce defects and failures
• Appraisal costs – costs of assessing quality achieved
• Internal failure costs – costs of scrap, rework and material losses
• External failure costs – costs of failure at customer site, including
returns, repairs and recalls
– External failures can sometimes put a company out of business almost
overnight
– External failure costs tend to be particularly high for service organizations
4. Costs of quality (cont)

Source: CQE Academy, 2016

 5. Quality awards & standards
• Malcolm Baldrige National Quality
Award
• The Deming Prize
• ISO 9000 Certification
• ISO 14000 Standards
 ISO Standards
• ISO 9000 Standards:
– Certification developed by International Organization for
Standardization
– Set of 5 internationally recognized quality standards (ISO 9000,
9001, 9002, 9003, 9004)
– Companies are periodically audited and certified
– More than 40,000 companies have been certified
• ISO 14000:
– Focuses on a company’s environmental responsibility
II. Total Quality Management
1. What is TQM?
“TQM is a management philosophy that seeks to integrate all
organizational functions (marketing, finance, design, engineering,
production, customer service, etc.) to focus on meeting customer needs
and organizational objectives. It views organization as a collection of
processes”.
(BPP, 2013)
• The simple objective of TQM:
Do the right things, right at the first time, every time!
2. The evolution of TQM
• Early 20th century – Quality meant inspection. Reactive in nature
• 1980s – Quality began to have strategic meaning. Proactive in
nature
• Successful companies understand that quality provides a
competitive advantage
• Put customer first, and define quality as meeting or exceeding
customers expectation
• Quality excellence has become a standard for doing business
3. TQM Philosophy
• TQM attempts to embed quality in every aspect of the organization
• 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
• Quality at the source
✔ Inspection vs. prevention and problem solving
• Employee empowerment
✔ Empower all employees, external & internal customers
✔ Team approach, quality circle
3. TQM Philosophy (cont)
• Understanding quality tools
✔ Ongoing training on analysis, assessment, correction, & implementation of quality
tools
• Team approach
✔ Teams formed around processes – 8 to 10 ppl
✔ Meet weekly to analyze and solve problems
• Benchmarking
✔ Studying practices at “best in class” companies
• Managing supplier quality
✔ Certifying suppliers vs. receiving inspection
4. Ways of improving quality
• Plan-Do-Check-Act (PDCA)
✔ Also called the Deming Wheel after its originator
✔ Circular, never ending problem solving process
• Holmes’ 8 stage model for improving quality
✔ Typically useful for continuous improvement
• Deming’s 14 steps to implement a TQM program
✔ Based on Deming’s work with Japanese managers and others
• Quality Function Deployment
✔ Used to translate customer preferences to design
• Seven tools of quality control
✔ Tools typically taught to problem solving teams
• Continuous improvement
✔ Kaizen
✔ Six sigma
a. PDCA Details
• Plan
✔ Evaluate current process
✔ Collect procedures, data, identify problems
✔ Develop an improvement plan, performance objectives
• Do
✔ Implement the plan – trial basis
• Check
✔ Collect data and evaluate against objectives
• Act
✔ Communicate the results from trial
✔ If successful, implement new process
a. PDCA Details
• Cycle is repeated
• After act phase, start planning and repeat process

Source: APMC, 2016

b. Holmes’ eight-stage model
Step 1 – Find out the problem (e.g. from customers & employees)
Step 2 – Select action targets from the no. of improvement projects identified instep
1, on the basis of cost, safety, importance and feasibility with current resources.
Step 3 – Collect data about the problem
Step 4 – Analyze data by a variety of techniques to assess common factors behind
the data, to tease out any hidden messages the data might contain
Step 5 – Identify possible causes, (using brainstorming sessions), no ideas are
ruled out of order
Step 6 – Plan improvement action, significant help might be required
Step 7 – Monitor the effects of the improvement.
Step 8 – Communicate the result.
c. Deming’s 14 steps
• W. Edwards Deming outlined 14 steps that managers in any type
of organization can take to implement a TQM program.
• The key points include:
– Create constancy of purpose
– Cease mass production
– Drive out fear and build employee trust
– Break down departmental barrier (create win-win situations)
– Seek long-term supplier relationships
– Eliminate numerical goals
– Eliminate slogans
d. Seven tools of quality control
– Tools for generating ideas
• Check sheets
• Scatter diagrams
• Cause-and-effect diagrams
– Tools to organize the data
• Pareto charts
• Flowcharts
– Tools for identifying problems
• Histogram
• Statistical Process Control Chart
Check sheets
Simple data check-off sheet designed to identify type of quality
problems at each work station; (e.g. per shift, per machine, per
operator)
Scatter diagram
– A graph that shows how two variable are related to each other.
– Data can be used in a regression analysis to establish equation for
the relationship
Cause and effect diagram
A tool that identifies process elements (causes) that might affect an
outcome
Pareto chart
– 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, e.g. 80% of the problems caused by 20% of causes
Flow chart
– Used to document the detailed steps in a process
– Often the first step in Process Re-Engineering
Histogram
– A chart shows the frequency distribution of observed values of a variable like
the repair time at a motorbike service station.
– displays whether the distribution is symmetrical (normal) or skewed
Statistical Process Control Chart
– Uses statistics and control charts to tell when to take corrective action
– The UCL and LOC are calculated limits used to show when process is
in or out of control
e. Continuous improvement
❖ Kaizen (or continuous improvement)
Kaizen is an approach of constantly introducing small
incremental changes in a business in order to improve
quality and/or efficiency

Source: Kaizen Institute, 2016

❖ Kaizen (cont)
How Kaizen works
– Leaner production is based on making many small changes
– As the ideas come from employees, they are less likely to be radically
different and probably easier to implement
– Small improvements are less likely to require major capital investment than
major process changes
– The culture – all employees should continually look for ways to improve
their own performance
– Kaizen encourages employees to take ownership for their work = can help
reinforce team working and improve motivation
❖ Six sigma
▪ Two meanings:
✔ Statistical definition of a process that is 99.9997% capable, 3.4 defects per
million opportunities (DPMO)
✔ A program designed to reduce defects, lower costs, and improve customer
satisfaction

Source:
Paracha, 2015
❖ Six sigma (cont)
▪ Six Sigma Program
✔ Originally developed by Motorola, adopted and enhanced by Honeywell and GE
✔ Highly structured approach to process improvement
• A strategy
• A discipline – DMAIC

Source: Maxim Consultants, 2015

▪ Six Sigma Implementation
✔ Emphasize defects per million opportunities as a standard
metric
✔Provide extensive training
✔ Focus on corporate sponsor support (Champions)
✔Create qualified process improvement experts
✔Set stretch objectives

This cannot be accomplished without major commitment from top

level management!!!
5. Why TQM efforts fail
– Lack of a genuine quality culture
– Lack of top management support and commitment
– Over-and-under-reliance on SPC methods
6. TQM within OM
– 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 skills necessary
✔ Information systems – increased need for accessible information