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  1. 1. Total QualityManagement NotesChapter 1, 2 and 4Created by Badar-e-Alam10/6/2012
  2. 2. Total Quality Management NotesOct. 6 Q1: Discuss the Benefits of implementation of TQM? Answer: Benefits of implementing Total Quality Management (TQM) .There are 5 main benefits of implementing TQM, they are:  Encourages a strategic approach to management at the operational level through involving multiple departments in cross-functional improvements and systemic innovation processes  Provides high return on investment through improving efficiency  Works equally well for service and manufacturing sectors  Allows organizations to take advantage of developments that enable managing operations as cross-functional processes  Fits an orientation toward inter-organizational collaboration and strategic alliances through establishing a culture of collaboration among different departments within organization. Greater Customer loyalty: You can use our services as a tool to create better customer loyalty. Everyone has customers who shop their business to the lowest bidder. In many cases this type of buyer can be converted in to more consistent buyer by providing an award for increasing their business with you incrementally over a particular period of time. As you can see in the following customer testimonial, many times this new buying habit will carry over after the promotion has run its course. ―The primary objectives of the vacation program were sales and customer base growth. The numbers prove that the vacation incentive programs fulfilled our objectives remarkably. In the distributorship industry, the challenge can be in finding ways to differentiate ourselves from our competitors offering the same product lines and manufacturing marketing programs as we do. Market sharing improvement: There are four basic ways you can improve your market share. You can improve your product so that it is better than your competitors or you can change the price or offer special incentives for buyers, such as discounts or sales. Alternatively, you can find new methods to distribute your product so people can buy it in more places. Finally, you can advertise and promote your product. Using these techniques in any combination may improve market share. Increased market share is not always the best solution for businesses. It might not be profitable if it is associated with expensive advertising or a big price decrease. A company may not be able to meet the demand of an increased market share without huge investments in new equipment and employees. In some cases it can be to a companys advantage to decrease market share, if the lower costs of lower market share can improve profitability. Managing market share, therefore, is a very important aspect of managing a business. Higher stock prices: Beginner investors often think if the companys stock price per share is higher then that means the companys fundamentals are more solid. This is a common misconception among all the new investors that do not understand the concept of authorized shares, float, 2
  3. 3. Total Quality Management NotesOct. 6 outstanding shares, etc. for example, costumer whose shares are currently trading at $4.89. The stock has a market capitalization of $142 billion in trailing PE of 14.05 and a forward PE of 9.06 with a PEG ratio of 0.72. Yet this costumer is overlooked by many investors because of its price being under five dollars. In addition, many institutions are not allowed to invest in a company that trades below five dollars even though its market cap is satisfactory. Reduced service prices:The ability to reduce costs can stem from a variety of sources throughout the service management lifecycle, such as improving technician productivity, call center activities, inventory/parts management, scheduling and dispatching technicians, and contract management are just a few examples. Additionally, integrating and automating processes can reduce overhead costs by eliminating paperwork, delays in communication, and reducing redundant tasks. Improving Technician Productivity Field Engineers now have access to customer service history, equipment repair records, product information, inventory and parts availability in order to provide the best possible service in the most cost efficient manner. Also with electronic data capture field engineers can eliminate mundane paperwork and focus their time on doing the best job possible rather than administrative tasks. By giving field engineers on-demand information they can eliminate over-performing on a customer contract and ensures that they bill for services delivered, no more or no less. Improving Inventory/Parts Management Astea Alliance enables companies to enhance asset management, wherever the product resides. It tracks component/equipment relationships and monitors inventories for automatic replenishment. By implementing tightly integrated inventory management process companies are able to reduce inventory size and carrying costs. Astea’s service management solution gives technicians access to real time inventory information, as well as the ability to order parts from the field. This web-based solution gives the field the ability to transmit parts information and gain a view of inventory stocking levels and location. Optimizing Service Delivery By leveraging Astea’s robust decision support tools in conjunction with customer self-service capabilities, full customer visibility, and dynamic scheduling companies can benefit by minimizing time to dispatch, increase first-time fix rate, enabling customer self-diagnosis and problem resolution over the web, and ultimately improving customer service response time. All large enterprises can benefit from outsourcing their accounting and payroll. As a Visma customer, you have access to our unique combination of expert knowledge and automation technology, and a full suite of scalable services. By outsourcing your payroll and accounting you will achieve Increased efficiency Scalability and flexibility Expert handling of your accounts Greater commercial focus on your core business 3
  4. 4. Total Quality Management NotesOct. 6 Higher Prices: 1. Increasing the sale volume 2. Increasing the sale revenues 3. Keep or building the market share 4. Meet or preventing the competition 5. Target low cost buyers. 6. Increasing profits or return on investment specific Greater productivity: Organizations today are under intense pressure to do more with their existing resources. At the same time, product lifecycles are shrinking, global competition is increasing, and customer expectations are higher than ever. Engineering products the way you have for the last 20 years is simply no longer an option if you expect to survive — much less thrive —in this hyper-competitive marketplace. You can achieve greater productivity with your existing engineering and design forces by amplifying and democratizing the use of engineering simulation. These approaches enable the team to be more productive and extend the value of simulation across your organization. Driving engineering productivity and doing more with limited resources, Q: Discuss Baldrige Award framework? Table 1-1 Examination Items and points PTS Table 1-1 Examination PTS Items and points Leader ship 95 5.0 Management of process Quality 140 1.1 Senior executive 45 5.1 Design and introduction of leadership Quality and product and services 40 5.2 process management product 1.2 Management for quality 25 And service production and delivery 35 process 5.3 process management ; business 1.3 Public Responsibility and 25 processes and support services 30 corporate citizenship 5.4 suppliers Quality 5.5 Quality Assessment 20 15 2.0 Information and Analysis 75 6.0 Quality and Operational Results 180 2.1 Scope and management of quality and 15 6.1 Product and services results 70 performance data and information 6.2 Company operational results 50 2.2 Competitive comparisons and 20 6.3 Business process and support 25 benchmarking services result 2. 3 Analysis and uses of company-level 40 6.4 Supplier Quality result 35 data 3.0 Strategic Quality Planning 60 7.0 Customer focus and Satisfaction 300 3.1 Strategic Quality and company 35 7.1 Customer expectation: current and 35 performance planning process future 4
  5. 5. Total Quality Management NotesOct. 6 3.2 Quality and performance plans 25 7.2 Customer relationships 65 management 7.3 Commitment to Costumer 15 7.4 Customer Satisfaction Determine 30 7.5 Customer satisfaction results 85 7.6 Customer satisfaction comperison 70 4.0 Human Resource Development and 150 Total points 1000 Management 4.1 Human Resource planning and 20 Management 4.2 Employee involvement 40 4.3 Employee education and training 40 4.4 Employee performance and recognition 25 4.5 Employee well-being and satisfaction 25 Baldrige Criteria framework: Dynamic relationships Goal: Customer satisfaction Customer satisfaction relative to competitors Customer retention Market share gain Measure of progress: Product and service Quality Productivity Improvement Waste Reduction/ Elimination Supplier Quality 5
  6. 6. Total Quality Management NotesOct. 6 Fig.1.2 Baldrige Criteria framework: Dynamic relationships System Management of process Quality Customer 5.0 focus and satisfaction 7.0 Human Driver Resource Senior Executive leadership 1.0 Development and Management 4.0 Quality and operational results 6.0 Strategic Quality Planning 3.0 Information And Analysis 2.0 6
  7. 7. Total Quality Management NotesOct. 6 Q: Discuss contribution of Deming, Crosby and Juran towards TQM in general. Inspection is never the answer to quality improvement, nor is ―policies‖. Involvement of and leadership by top management are essential to the necessary culture of commitment to quality. A program for quality requires organization-wide efforts and long term commitment, accompanied by the necessary investment of training. Quality is first and schedules are secondary. 7
  8. 8. Total Quality Management NotesOct. 6 Deming Contribution Deming developed fourteen points for management which can be summarized as: 1. Create a plan; publish the aims and purposes of the organization. 2. Learn and adopt the new philosophy of quality. 3. Understand the purpose of inspection; stop depending on inspection. 4. Stop awarding business based on price alone. 5. Improve the system constantly. 6. Institute training. 7. Teach and institute leadership. 8. Drive out fear, create trust, and create a climate for innovation. 9. Optimize the efforts of teams, groups and staff areas. 10. Eliminate exhortations, and targets for the work force; provide methods of achievement. 11. Eliminate numerical quotas for the work force. 12. Remove barriers that rob people of pride for workmanship. 13. Encourage education and self improvement for everyone. 14. Make action to accomplish the transformation, make it everyones job. Besides the fourteen points, Deming is known for the Deming Cycle and the Seven Deadly Diseases. The Deming Cycle is illustrated in Figure 1. It involves five steps: consumer research and planning of the product (plan), producing the product (do), checking the product (check), marketing the product (act), and analyzing how the product is received (analyze.) The Seven Deadly Diseases can be summarized as: The Deming Cycle 1. Lack of constancy of purpose to plan products and services. 8
  9. 9. Total Quality Management NotesOct. 6 2. Emphasis on short-term profits. 3. Personal review systems for managers and management by objectives. 4. Job hopping by managers. 5. Using only visible data in decision making. 6. Excessive medial costs. 7. Excessive costs of liability driven up by lawyers that works on contingency. JURANS CONTRIBUTIONS It can be expressed as: "concentrate on the vital few sources of problems; dont be distracted by less important problems." Jurans trilogy involves: 1. Quality planning (determine customer needs, develop product in response to needs). 2. Quality control (assess performance, compare performance with goals, act on differences between performance and goals). 3. Quality improvement (develop infrastructure, identify areas of improvement and implement projects, establish project team, provide teams with what they need). Jurans ten steps to quality improvement are: 1. Build awareness of opportunities to improve. 2. Set goals. 3. Organize to reach goals. 4. Provide training. 5. Carry out projects to solve problems. 6. Report progress. 7. Give recognition. 8. Communicate results. 9. Keep score. 10. Maintain momentum by making annual improvement part of the systems and processes of the company. The Union of Japanese Scientists and Engineers (JUSE) considered Jurans vision of top-to- bottom quality management even more important to their quality turnaround than Demings insights. JUSE asked Juran if it could name its top-level award, a super-Deming award after him, but he declined. This medal is called the Japan Quality Control Medal. CROSBYS CONTRIBUTIONS Philip Crosby, author of Quality is Free, founded the Quality College in Winter Park, Florida. Crosby emphasized meeting customer requirements by focusing on prevention rather than correction. He claimed that poor quality costs about 20 percent of the revenue; a cost that could be avoided by using good quality practices. Crosby describe about quality of measurement He pushed for zero defects. His "absolutes" are: (1) quality is defined as conformance to requirements, not goodness; (2) the system for achieving quality is prevention, not appraisal; (3) the performance standard is zero defects, not thats close enough; and (4) the measure of quality is the price of non-conformance, not indexes. Crosbys method does not dwell on statistical process control and problem solving techniques that the Deming method uses. He stated that quality is free because prevention will always be lower than the costs of detection, correction and failure. Like Deming, Crosby had fourteen points: 1. Manage commitment: that is top level management must be convinced and committed and communicated to the entire company. 9
  10. 10. Total Quality Management NotesOct. 6 2. Quality improvement team: composed of department heads, oversee improvements. 3. Quality measurement: are established for every activity. 4. Cost of quality: is estimated to identify areas of improvement. 5. Quality awareness: is raised among all employees. 6. Corrective action: is taken. 7. Zero defects: is planned for. 8. Supervisor training: in quality implementation. 9. Zero defects: day is scheduled. 10. Goal setting: for individuals. 11. Error causes are removed: by having employees inform management of problems. 12. Recognition: is given, but it is non-financial, to those who meet quality goals. 13. Quality councils: meet regularly. 14. Do it all over again: (i.e., repeat steps one through thirteen). Chapter #2 Q: Discuss characteristics of Hand-on, continuous leadership. Answer: CHARACTERISTICS OF EXCELLENT LEADERSHIP  Visible, committed and knowledgeable: they promote the emphasis on quality and know the detail and how well the company is doing. Personal involvement in education, training and recognition. Accessible to and routine contact with employees, customers and suppliers.  A missionary zeal: the leaders are trying to effect as too much change as possible through their suppliers, through the government and through any other vehicles that promote quality in the United States. Active in promotion of quality outside the company.  Aggressive targets: Going beyond incremental improvement and looking at the possible of making large gains, getting the whole work force thinking about different processes. Not just improving processes.  Strong drivers: cycle time, zero defects, six sigma or others targets to driving improvements. Clearly defined customer satisfaction and quality improvement objectives.  Communication of values: effecting cultural change related to quality. Written policy, mission, guidelines and other documented statements of quality values, or others bases for clear and consistent communications.  Organization: flat structure that allow more authority at lower levels. Empowering employees. Managers as coaches rather than bosses. Cross-functional management processes and focuses on internal as well as external customers, interdepartmental improvement teams.  Customer contact: CEO and all senior managers are accessible to customers. 10
  11. 11. Total Quality Management NotesOct. 6 Q: Discuss feature of effective communication and list names of three vehicles for communication. Answer: THE VEHICLE FOR COMMUNICATING ABOUT QUALITY ARE SELECTED COMPONENTS OF THE TQM SYSTEM  Training and development for both managers and employees. Managers must understand the process they manage as well as the basic concept of systems optimization. Employee training should focus on the integration and appropriate use of statistical tools and problem-solving methods.  Participation at all levels in establishing benchmarks and measures of process quality. Involvement is both vertical in the hierarchy as well as horizontal by cross-functional teams.  Empowerment of employees by delegating authority to make decisions regarding process improvement within individual areas of responsibility, so that the individual ―owns‖ the particular process step.  Quality assurance in all organization process, not only in manufacturing or operations but in business and supporting process as well. The objective throughout is continuous improvement.  Human resource management systems that facilitate contributions at all levels (up and down and across) the organizational chart. The Essential Features of Effective Communication 1. Simple language : The language used in the communication should be simple and understandable. 2. Clearness : The communicator should be clear in his mind about the objective of his communication. There should not be any ambiguity in communication. 3. Adequacy of information : It should contain adequate information and should be complete in all respect; otherwise it will not serve the purpose of communication. 4. Proper medium of communication : The communicator should select the proper media of communication by considering such factors as the nature of communication, urgency of communication, distance between communicator and recipient of communication etc. 5. Accurate : An effective communication should be accurate. False and misleading statement will seriously undermine the reputation of the business. It may also lead to expensive litigation. 6. Courtesy : Politeness is, of course, one of the important attributes of good business communication. A polite language should be used in communication. It helps improve business relations. Elements of Communication The basic elements of communication are : a) Communicator : The sender, speaker, issuer, or writer who intends to convey or transmit a message. b) Message : The subject matter of communication. 11
  12. 12. Total Quality Management NotesOct. 6 c) Transmission : The act of conveying the message. d) Channel : The medium used to transmit the message. e) Receiver : The person to whom the message is meant f) Response : Replying or reaction of the receiver. Importance of Communication Communication is one of the important functions of a manager. Every manager must communicate in order to get things done through others. Communication is indispensable for all managerial controlling. In the opinion of Chester Barnard "The first executive function is to develop and maintain a system of communication. In the words of George R. Terry "Communication serves as the lubricant, fostering for the smooth operations of the management process". The importance of communication could be stated as under : a) Communication is the basis for decision making and planning. b) It helps in smooth and efficient working of an organisation. c) It facilitates co-ordination. d) It increases managerial efficiency. e) It promotes co-operation and industrial peace. f) It motivates employees and increases employee morale g) It helps in effective control of the entire operations of the organisation. h) It helps to maintain public relations. Chapter #4 Q: Definition of Quality and five Approaches or product based Quality Harvard professor David Garvin, in his book Managing Quality, summarized five principal approaches to defining quality: transcendent, product based, user based, manufacturing based, and value based. Let’s discuss each one of them: 1. Transcendental View of Quality: Those who hold transcendental view would say, ―I can’t define it, but I know when I see it.‖ Advertisers are fond of promoting products in these terms. ―Where shoping is a pleasure‖ (supermarket), ―We love to fly and it shows‖ (airline), and ―It means beautiful eyes‖ (cosmetics) are example. 2. Product-Based View: Product based definitions are different. Quality is viewed as quantifiable and measurable characteristics or attributes. For example durability or reliability can be measured (e.g. mean time between failure, fit and finish), and the engineer can design to that benchmark. Quality is determined 12
  13. 13. Total Quality Management NotesOct. 6 objectively. Although this approach has many benefits, it has limitations as well. Where quality is based on individual taste or preference, the benchmark for measurement may be misleading. 3. User-Based View: User based definitions are based on the idea that quality is an individual matter, and products that best satisfy their preferences (i.e. perceived quality) are those with the highest quality. This is a rational approach but leads to two problems. First, consumer preferences vary widely, and it is difficult to aggregate these preferences into products with wide appeal. This leads to the choice between a niche strategy or a market aggregation approach which tries to identify those product attributes that meet the needs of the largest number of consumers. 4. Manufacturing-Based View: Manufacturing-based definitions are concerned primarily with engineering and manufacturing practices and use the universal definition of ―conformance to requirements.‖ Requirements, or specifications, are established design, and any deviation implies a reduction in quality. The concept applies to services as well as products. Excellence in quality is not necessarily in the eye of the beholder but rather in the standards set by the organization. This approach has serious weaknesses. The consumer’s perception of quality is equated with conformance and hence is internally focused. Emphasis on reliability in design and manufacturing tends to address cost reduction as the objective, and cost reduction is perceived in a limited way–invest in design and manufacturing improvement until these incremental costs equal the costs of non-quality such as rework or scrap. 5. Value-Based View: Value-based quality is defined in terms of costs and prices as well as a number of other attributes. Thus, the consumer’s purchase decision is based on quality (however it is defined) at the acceptable price. Five Ways of Looking at Quality Definitions 1. Customer - based "Quality consists of the capacity to satisfy wants."(C.D. Edwards, "The Meaning of Quality", in Quality Progress Oct.1968) "Quality is fitness for use." (J.M. Juran, ed. Quality Control Handbook 1988) 2. Manufacturing - based "Quality is the degree to which a specific product conforms to a design or specification" (H.L. Gilmore: Product Conformance Cost. Quality progress June 1974) "Quality [means] conformance to requirements." (P.B. Crosby: Quality Is Free) 3. Product - based "Quality refers to the amount of the unpriced attributes contained in each unit of the priced attribute." (K. B. Leifler: Ambiguous Chamges in Product Quality, American Economic Review Dec.1982) 13
  14. 14. Total Quality Management NotesOct. 6 4. Value - based "Quality is the degree of excellence at an acceptable price and the control of variability at an acceptable cost." (R. A. Broh: Managing Quality for Higher Profits, 1982) 5. Transcendent "Quality is neither mind nor matter, but a third entity independent of the two, even though Quality cannot be defined, you know what it is." (R. M. Pirsig: Zen and the Art of Motorcycle Maintenance) Quality in different areas of society Area Examples Airlines On-time, comfortable, low-cost service Health Care Correct diagnosis, minimum wait time, lower cost, security Food Services Good product, fast delivery, good environment Postal Services fast delivery, correct delivery, cost containment Academia Proper preparation for future, on-time knowledge delivery Consumer Products Properly made, defect-free, cost effective Insurance Payoff on time, reasonable cost Military Rapid deployment, decreased wages, no graft Automotive Defect-free Communications Clearer, faster, cheaper service Quality of Differentiation: Differentiation strategies are an attractive competitive approach when buyer preferences are too diverse to be fully satisfied by a standardized product or when buyer requirements are too diverse to be fully satisfied by sellers with identical capabilities. In simple words, the concentrate of a differentiation strategy is to be unique in ways that are valuable to customers and that can be sustained. To be successful with a differentiation strategy, a company has to study buyer’s need and behaviour carefully to learn that: 1. What they consider important 2. Why they think has value, and 3. What they are willing to pay for Competitive advantage results once sufficient number of buyers becomes strongly attached to the differentiated offering, the more that customers bond with the company and the stronger the resulting competitive advantage. Successful differentiation allows a firm to: Command premium price for its product, and or 14
  15. 15. Total Quality Management NotesOct. 6 Increasing unit sales (because additional buyers are won over by the differentiating features), and or Gain buyer loyalty to its brand (because some buyers are strongly attracted to differentiating features and bond with the company and its products). Company’s differentiation strategies fail when buyer don’t value the brand uniqueness enough to buy it instead of rivals’ brands and/or when a company’s approach to differentiation is easily copied or matched by its rivals. Therefore, the most appealing approaches to differentiation are those that are hard or expensive for competitor to duplicate. Indeed, resourceful competitors can, in time, clone almost any product or feature or attribute. Therefore, when a company has competencies and capabilities that competitors can cannot readily match and when its expertise can be used to perform activities in the value chain where differentiation potential exists, then it has a strong basis for sustainable differentiation. As a rule differentiation yields a longer-lasting and more profitable competitive edge when it is based on new product innovation, technical superiority, product quality, and reliability, and comprehensive customer services. In other words, an organization which is operating based upon the fundamental principle of Total Quality Management can achieve this remarkable feat in today’s uncertain world of buyer’s preferences. 15