Topic 1 & 2 operations mgt.doc hand out 1

PRODUCTION AND OPERATIONS MANAGEMENT.
Introduction .
Production and operations Management focuses on the processes to produce and distribute
products and services. Every organization exists for a purpose and therefore an
organization must involve itself in the production of goods and services relevant for its
purpose. Production of goods and services is therefore central to meeting the objectives of
any organization.
Production refers to the transformation of different inputs into outputs which meet the
market needs of the business. The production function is a core functional activity of the
business which must be well managed.
Operations management is an area of management concerned with overseeing,
designing, and controlling the process of production and redesigning business
operations in the production of goods or services.
The Production Manager must plan, organize, direct staff and control activities related to
the transformation of inputs into outputs. The function of production is actually the
primary engine that drives the other functions of the business. The production and
operations management function can be analyzed using the input- transformation- output
model shown below.
- Economic changes
- Socio-cultural changes
- Political changes
- International economic
& political changes
Land Design of production facility
Labour. Location & layout facility &
Capital. . Productive system & technology
Information - Workforce management
Entrepreneurship. Quality management
- Plant maintenance
Reports on
- Quality of output
- Costs of production
1
PRODUCTION AND OPERATIONS MANAGEMENT-BBA11
ELEMENTS OF PRODUCTION AND OPERATIONS MANAGEMENT-DBA11
Environmental Factors
Feed back
Transformation
Output
Goods & Services
Input

- Reliability of output
- Employee satisfaction
- Supplier relationships
The above model defines the following basic characteristics of the production and
operations management function in the business.
(1) Production requires different inputs before it can take place and the Production/
Operations manager must manage the acquisition and utilization of these inputs
efficiently. Acquiring and using the right inputs at the right time is the starting point
of successful production and operations decisions.
(2) Inputs must undergo different forms of transformation in order to create goods and
services.
Transformation involves:
(a) For physical products; the physical nature of inputs is changed in order to create
goods.
(b) In case of services it involves adjustments of characteristics of clients e.g. moving
them from place to place in transportation services.
(3) Production and operations management decisions have output of goods and services
as end results.
(4) The input - transformation - output process is a continuous process from which
managers should learn in order to subsequently make better decisions.
(5) The input - transformation - output framework affects and is affected by other factors,
which ultimately influence the ability of the business to produce efficiently. For
example, internally the finance, human resource, marketing R&D functions have a
close interface with the operations function.
Inputs.
These are sources employed in the production of goods and provision of services. Inputs
are classified as transformed and transforming resources.
Transformed resources.
These are resources that are treated/ transformed or converted in some way. These
resources which operations use are a mixture of materials, information and customers.
Some firms are predominantly material processors, yet others predominantly customer
processors.
2

All organizations process materials, information and customers. There is however one
dominant or core resources transformed.
Eg.
A hospital processes information in the form of patients’ records. It also processes
materials say when producing meals for the patients. The core task of the hospital,
however, is treating patients. A hospital therefore predominantly processes customers.
A shoe making company processes information in form of customers’ orders, suppliers’
invoices, leather science and technology. The firm will also process customers by
showing them around, enlightening them about foot were requirements. The shoe
company is, however, largely a material processor.
Bank processes material print customers’ statement, brochures, etc. it also processes
customers by giving them advice regarding their financial affairs. E.g deposits and loans.
The predominant activity is processing information about customers’ financial affairs-
accurate bank statements.
Question
Discuss how the firm processes transformed resources. With reasons give the core or
dominant of the 3 categories of transformed resources:
A. Warehouse
B. University
C. Church
D. Taxi firm
Transforming resources. These are inputs that act upon the transformed resources.
These are namely facilities and staff.
Facilities include land, buildings, equipment, and plant and process technology. Different
firms dominated by building while others are machinery dominated.
THE 5PS OF OPERATIONS MANAGEMENT.
3

The study of operations management revolve around 5ps, operations management
incorporates many tasks that are interdependent, but which can be grouped under five
main headings: product, plant, process, people and programs.
Product (a good or service).
Marketers in a business must ensure that a business sells products that meet
customer needs and wants. The role of production and operations is to ensure that
the business actually makes the required products in accordance with the plan. The
role of the production and operations management is therefore concerns areas such
as:
• What is the expected?
• What the product looks or feels like?
• What is the quality of product?
• Does it measure up to the specifications?
• Is it the right weight or units?
• Is it profitable, will the price be attractive or prohibitive?
Plant (equipment used).
To make the product. Plant of some kind is needed. This will comprise the bulk of
the fixed assets of the business. In determining which plant to use, management
must consider areas such as:
• Future demand (volume, timing)
• Design and layout of factory, equipment, office.
• Need for maintenance (cost of maintenance)
• Productivity and reliability of equipment.
• Health and safety (particularly the operation of equipment)
• Different types of activity use different type of plant.
4

Processes.
There are many different ways of producing a product. Management must
choose the best process or series of processes. They will consider: Available
capacity, Available skills, type of production systems, layout of plant and
equipment, production costs, maintenance requirements.
Programmes.
The production programme concerns the dates and times of the products that are to
be produced and supplied to customers. The decisions made about programme will
be influenced by factors such as purchasing patterns (e.g. lead time), cash flows,
accounting procedures, etc.
People.
Production depend on people whose skills, experience and motivation vary. Key
people related decisions will consider the following areas:
Wages and salaries, safety and training, work conditions, leadership,
communication and motivation, and even the customers’ needs and wants.
Ways in which physical goods differ from services
(i). Physical goods are usually tangible and are amenable to the sense of touch, smell
and sight whereas services are intangible and not easily detected.
(ii). Physical products are normally movable and can be transferred from one location to
another in order to serve the market. Services are normally not transferable and
usually have to be consumed at their place of production.
(iii). Physical products have attributes and characteristics that can easily be identified and
hence they are easy to control for quality unlike services which are difficult to
measure and hence very complex to manage for quality.
(iv). Physical products can be kept in inventory which the manager can use to meet
market requirements while services on the other hand can’t be stored since they
expire during production and hence their inventories cannot be used in production &
operations management decisions.
5

(v). The production of physical products can be detached from customers who are
supposed to enjoy them e.g. you need not to be present in a factory where your shirt
or dress is made in order to enjoy its quality. In respect to services the customer
must be present in the production facility in order to enjoy that service e.g. if you
want a specific hair style you must personally present the head to the barber for hair
cut.
Note: The differences between physical products and services have serious implications
for the production/ operation management decisions. These differences will form a
basic theme in the discussion of the different aspects of production and operations
management decisions.
Basic objectives of production and operations management
(i). Customer service: to satisfy customer demand some of the customer aspects
Include specification, cost, timing i.e. when does the customer want the good.
(ii). Resource utilization; efficient use of resources is a must and should lead to value
addition. Effectiveness is more important than efficiency.
- Extent of success in achieving a given end is effectiveness.
- Doing the right thing is efficiency.
Scope of Production and Operations Management function
The scope of production and operations management decision can be appreciated from 3
perspectives.
(a) The levels within the organization at which these decisions are taken.
(b) The relationships between these decisions and other functional areas of the business.
(c) The detailed decisions of the operations and production function.
a) Levels at which decisions are made
Production/ Operations decisions are taken at three levels in the organization:
strategic, operational and short-term implementation, including day-to-day decision-
making, planning and control.
6

Production and operations management decisions are strategic in nature in the sense
that they impact on the long-term ability of the organization to create value. They play
a significant role in determining the nature of the business and the direction it actually
takes. The nature of the products, the technology to be used in production, the location
and design of production facilities and even the establishment of strategic relationships
with suppliers of inputs are all strategic decisions that have long-term consequences
for the business. In other words, these are consequences the business would have to
live with for as long as it is in existence and which affect the long-term underlying
value of the business.
Operational decisions are also of intermediate term in nature; their effect lasts for a
relatively long period. These include decisions such as the output and capacity plans.
Finally, short-term implementation decisions are concerned with the actual
implementation of the decision. It involves planning for this implementation and
checking to ensure that the actual performance of these decisions matches the planned
performance.
In the case of the level at which decisions are made, therefore, a hierarchical structure
of decision-making can be observed as follows.
Hierarchical Structure of Decision-making
7
Overall
strategic
decision
Marketing
decision
Operating decision at short-
term implementation level
decisions at short-term
implementation level
Operations/
production
implementatio
n decisions
Finance
decision
HRM
developm
ent
Research &
development

As you move up the hierarchy, the decisions become more long-term in nature, more
important is stature and the scrutiny required in decision-making increases. At the
short-term implementation level, the decisions will be taken by relatively junior
officers while at the strategic level; they will be taken by the top management in
charge of operations and the business.
b) Relationship between operations/production management and other functional
decisions in the business areas.
Production and operations management decisions are horizontally linked to other
functional areas of the business. The scope of these decisions, therefore, must take into
consideration the effect that their interface has on the decisions in the other areas. For
example, the decisions to locate a production facility in a given area impacts on the
ability to attract manpower, just like the decision to acquire modern technology
impacts on the cash flow situation of the business. Therefore, production and
operations management decisions should not be viewed from a narrow perspective but
from a broader perspective, taking into account how these decisions affect and are
affected by other decisions in business.
c) Details of the operations and production decisions
The operations function has multiple decisions, including the following:
(i) Productive system design decisions. This refers to the organization of the different
resources to be used in the production of the goods and services. Resources can be
organized on the basis of the processes/ stages that the product goes through while
being produced. In other words, the resources can be process-focused. Resources can
also be organized around the product. The focus is on getting the desired final
product other than the individual processes involved. The production system here is
said to be product-focused. An example is an assembly line.
(ii) Product design and development decision. This decision is concerned with the
generation of new products and modification of existing ones in order to meet the
changing conditions in the environment in which the business operates. This decision
is essential for continued, vibrant growth and survival of the business.
8

(iii) Capacity decision. This capacity decision is concerned with availing the business
with means with which to produce the required goods and services. Capacity includes
long term resources like premises and buildings, plant and machinery, equipment and
short-term resources like inventory and human resources. It is essential that the
business does not find itself in a situation of under capacity as it will limit its ability
to produce goods and services and satisfy market needs. Excess capacity implies the
existence of idle resources on which return is lost. An optimal position between
excess and under capacity is desirable and the challenge of the operations/ production
manager is to strike this level, both in the short and long run.
(iv) Location and layout of production facility. Location is concerned with selecting a
site where to place the production facility while layout is concerned with the physical
arrangement of different departments or divisions within the production facility.
Location and layout have serious revenue and cost consequences, which need to be
efficiently managed.
(v) Human and layout of production facility. This decision normally employs the bulk
of the workforce in the business since it is the function where most activity takes
place. The Operations Manager must therefore take charge of this very important
resource especially in terms of defining the scope of the jobs to be performed,
measuring performance of the workforce and rewarding this performance.
(vi) Raw material-supplier-management relationship. In the Input-Transformation-
Output framework discussed before, acquisition of inputs in form of raw materials is
one of the important starting points of the production function. Without the right
materials, at the right time and at the right cost, efficient production is virtually
impossible. Whereas organizations can sometimes internally make their raw
materials, in most cases they have to rely on external suppliers to secure these inputs.
The Operations Manager must therefore set up linkages with the suppliers to ensure
that the business can access the right raw materials in a timely and cost effective
manner.
9

Other control decisions. The Operations Manager is also responsible for other
control decisions, including ensuring quality production, maintenance of safety of
operations, as well as that of physical products such as equipment and machinery.
These decisions are interactive in nature and management should take this into
account. The decisions in the operations function can be related to the wheel of a
bicycle with different spokes, as shown below.
Decisions in the Operations Function
The bicycle wheel cannot propel the bicycle properly if one of the spokes in the wheel is
missing or not working; similarly, the production and operations management function
will not drive the business towards desired competitive priorities if any of the mentioned
decisions is not properly managed. It is therefore essential that the decisions in the
operations and production function are managed in an integrated manner.
The inter-relationships among these decisions must be well articulated and
incorporated in the final decisions. This concept of integration should then extend to
the relationships between operations and production management and other
functional areas; that is, there should be horizontal integration between these
decisions and other functional areas.
These decisions finally need to be integrated with the overall strategic objectives of
the business. Operations decisions should be made to support the realization of
overall business if they are to be considered legitimate. In other words, there is need
for vertical integration between these decisions and the overall business strategy.
If these linkages are not established and managed within the production and
operations management function, then the entire scope of the function will not be
properly handled and as a consequence, the business will not realize the full potential
of the production and operation management function in the creation of value for
shareholders.
10

Competitive priorities of a business
The competitive priorities are:
(i) Quality
In production, quality is increasingly being used as a major variable for competitive
strength and creation of value for the business. Whereas the concept of quality does
not have a standard definition to explain it in absolute terms, it emphasizes that the
business must produce goods and services that meet the market needs.
When the quality of goods and services is high the products that the business
produces meet the market needs. This increases the ability of the business to fetch
high prices from its products. Market acceptance of these products will also be high,
thereby increasing the volume of the business products sold on the market. This
increase in product price (p) and volume sold (q) leads to increase in the value of
output, thereby boosting the numerator value of the productivity function and hence
the overall productivity of the business.
(ii) Cost
Costs of production are directly related to the input component of the productivity
function. When these costs are efficiently managed then productivity is boosted. The
Operations Manager can introduce efficient measures in the acquisition of inputs and
in the transformation process. These efficiency measures result in reducing the value
of inputs and hence improves productivity. The challenge for the Operations
Manager is therefore to ensure efficient production that minimizes the costs of
production. Therefore, minimization of production costs without ignoring the other
aspects of production is a crucial objective that has to be met in the production and
operations management function.
(iii) Flexibility
Flexibility refers to the ability of the business to respond to market needs and the
entire dynamic business environment as they change. The business will be flexible if
it can meet its market requirements at the shortest time possible when the
requirements change. Lack of flexibility will be reflected in rejection of clients, loss
of market share and hence loss of productivity. The Production and Operations
Manager has to ensure that the business has sufficient flexibility in production and
operations if it is to maintain and enhance its productivity.
11

(iv) Dependability
A dependable business is reliable. Reliability is related to the extent to which the
business can meet clients’ requirements. Clients will require certainty in their
dealings with the business. For example, customers want certainty regarding volume
of output available, quality of output, delivery schedules of out put, after-sales
service and other aspects. Where certainty exists, loyal and satisfied clients are
created. Where there is uncertainty, the reverse occurs. The Production and
Operations Manager has the challenge of ensuring dependability since it affects
productivity.
The discussion on productivity and competitive priorities highlights two important
features of production and operations management:
(a) Production and operations management is a crucial decision area at the firm
level
An efficient production and operations system will enable the business to realize its
overall strategic objectives through enhancement of productivity. Business with inefficient
production/operations functions will normally fail to meet their strategic objectives and
hence fail to survive in the long run. Within the business, the production and operations
functions is closely associated with the other functional areas. For example:
(i) The success of the marketing effort will depend on the productivity of the
production and operations function.
(ii) Revenues and costs managed in the finance function will definitely accrue from
goods and services produced by the production and operations function.
(iii) The human resource management function must be in place to support the
production and operations system where the core and bulk of business activities take
place.
(iv) Research and development efforts must be geared towards generating better products
and technologies to be used in the production and operations function so as to
enhance the overall productivity of the business.
Any weaknesses in the production and operations management function will therefore
permeate through the entire organization, while success will equally lead to a boost in all
aspects of the business.
12

(b) Production and operations decisions affect other aspects of national economic
life.
When productivity is high in individual firms because of efficient production and
operations decisions, the aggregate national productivity levels will equally be high.
This will boost the ability of the government to raise funds through taxation,
increasing export market due to the availability of high-quality, low-cost products
and, overall, the national economy will be boosted.
The developed economies are precisely dependant on the success of individual
micro institutions with efficient production and operations management systems for
their prosperity.
Competitive priorities of a business
The competitive priorities are:
(v) Quality
In production, quality is increasingly being used as a major variable for competitive
strength and creation of value for the business. Whereas the concept of quality does
not have a standard definition to explain it in absolute terms, it emphasizes that the
business must produce goods and services that meet the market needs.
When the quality of goods and services is high the products that the business
produces meet the market needs. This increases the ability of the business to fetch
high prices from its products. Market acceptance of these products will also be high,
thereby increasing the volume of the business products sold on the market. This
increase in product price (p) and volume sold (q) leads to increase in the value of
output, thereby boosting the numerator value of the productivity function and hence
the overall productivity of the business.
(vi) Cost
Costs of production are directly related to the input component of the productivity
function. When these costs are efficiently managed then productivity is boosted. The
Operations Manager can introduce efficient measures in the acquisition of inputs and
in the transformation process. These efficiency measures result in reducing the value
of inputs and hence improves productivity. The challenge for the Operations
Manager is therefore to ensure efficient production that minimizes the costs of
production. Therefore, minimization of production costs without ignoring the other
aspects of production is a crucial objective that has to be met in the production and
operations management function.
13

(vii) Flexibility
Flexibility refers to the ability of the business to respond to market needs and the
entire dynamic business environment as they change. The business will be flexible if
it can meet its market requirements at the shortest time possible when the
requirements change. Lack of flexibility will be reflected in rejection of clients, loss
of market share and hence loss of productivity. The Production and Operations
Manager has to ensure that the business has sufficient flexibility in production and
operations if it is to maintain and enhance its productivity.
(viii) Dependability
A dependable business is reliable. Reliability is related to the extent to which the
business can meet clients’ requirements. Clients will require certainty in their
dealings with the business. For example, customers want certainty regarding volume
of output available, quality of output, delivery schedules of out put, after-sales
service and other aspects. Where certainty exists, loyal and satisfied clients are
created. Where there is uncertainty, the reverse occurs. The Production and
Operations Manager has the challenge of ensuring dependability since it affects
productivity.
14

TOPIC………….
Quality Management
For a very long time, quality has been looked at as just the activity that takes place
somewhere near to the end of the process to control the success or the failure of the
product on the market. However the current trend is to look at quality as an inner
ingredient of the overall business that cannot be separated from other facets of business
and therefore it is a matter of concern for the entire organization.
The road towards attaining quality requires the dedication and commitment of top
management to continuous improvement.
Various Definitions of Quality
The oxford American dictionary defines quality as “a degree or level of excellence”
Garvin D.A. (1985) Quality is “a measure of customer satisfaction with a product over
nits life time, relative to customer satisfaction with competitors’ product offerings.
A. Muhlemann, et al (1992) “Fitness for use and conformance to requirements”.
Quality should be aimed at the needs of the consumer. Hence product and service quality
a v v nhre determined by what the consumer wants and is willing to pay for.
Different consumers have different product needs with different quality expectations.
Therefore products are designed differently for different types of consumers. This is
called quality design, which refers to the degree to which quality characteristics are
designed into the product or service.
Importance of Quality
As a rule, consumers are influenced by three major factors when making buying decisions
i.e. price, availability and quality. It is therefore important for managers to recognize, the
different ways in which the quality of a firm’s product or services can affect the
organization and to take these into account in developing and maintaining a quality
assurance programme.
15

Quality is important because it affects the organization in a number of ways as indicated
below:
1. Reputation and image
Failure to develop adequate attention to quality can damage the organizations image and
perhaps lead to a decreased share of the market.
2. Liability
Organization must pay special attention to their potential liability due to damages or
injuries resulting from either faulty design or poor workmanship e.g. a poorly designed
steering wheel of a car might cause the driver to lose control of the steering wheel.
3. Productivity
Poor quality can adversely affect productivity during the manufacturing process, if the
parts are defective and have to be reworked. Similarly poor quality in tools and equipment
can lead to injuries and defective output.
4. Cost
Poor quality increases certain costs incurred by the organization. They include scrap and
rework costs, warranty costs, replacement and repair costs, after purchase and any other
costs incurred in transportation, inspection in the field, and discounts used to off set the
inferior quality.
5. Quality also has international implication if a company is to compete effectively in
the world market, its products must compare favorably with its competitors’ products in
terms of price, availability and quality. If the product of a country’s major industries are
consistently inferior to those of other industrial nations, that country can lose out at home
and abroad.
Quality Dimensions/ways of how people perceive quality
A consumer vies the quality of a product or service in terms of the following dimensions;
1. Operation/ performance
This is how well the product works. e.g. does a car accelerate and stop quickly?
2. Reliability
16

This reflects the probability of a product failing or deteriorating. e.g. does a car always
start on a cold morning?
3. Durability
This reflects the length of time the product takes in use before it is replaced by another
e.g. what is the life span of a car?
4. Conformance
This relates to the degree at which a product meets pre-established specifications. e.g.
are all seat of a particular model of car adjustable to suit the required specifications?
5. Serviceability
This refers to courtesy, speed and accuracy of repairs.
6. Appearance
Reflects personal feelings and includes such variables as looks, touch, sound, taste and
smell. e.g. does a car look good in terms of shape, colour and size?
7. Perceived quality
Many products are judged by their brand names, images and advertising. e.g. Mercedes
Benz S-class.
Determinants of Quality
The degree to which a product or service successfully satisfies its intended purpose has
four primary determinants and these are as follows:
1. Quality of design: This involves decisions regarding specific characteristics of a
product or service such as the methods, materials processes and equipment that will be
employed. Design decisions must take into account the wants, needs of a consumer,
production, and service capabilities, safety and liability both during production and
after delivery and projected costs and profits.
2. Conformance to design: Once the design has been selected, the operations manager
must ensure that operation follow through as intended. This involves concern of
various areas like workmanship, inspection etc, and corrective action where necessary.
3. Customer education: This is necessary because it increases the chances that the
product will be used for its intended purpose and in such a way that it will continue to
17

function properly and safely. Much customer education takes the form of printed
instructions and labeling.
4. Service after delivery: Products do not always perform as expected and services do
not always yield the desired results for various reasons. Whatever the reason it is
important from a quality point of view to rectify the situation either through recall and
repair of the product, adjustments, replacement, or re-evaluation of a service and then
doing what ever is necessary to bring the product or service up to standard.
Dimension of Service Quality (L.L. Berry et al (1985), “Quality counts in services
too”
Reliability Consistency of performance and dependability
Responsiveness Willingness or readiness to provide service; timeliness
Competence Possession of the skills and knowledge required to perform
Access Approachability and ease of obtaining service
Courtesy Politeness, respect, consideration for property, appearance
Communication Educating and informing customers in the language they can understand;
listening to customers
Credibility Trustworthiness, believability, having customer’s best interest at heart
Security Freedom from danger, risk or doubt
Understanding Making an effort to understand the customers’ needs, learning the
specific requirements, providing individualized attention, recognizing the
regular customer.
Tangibles The physical evidence of service, (facilities, tools, equipment)
Dimensions of Quality for goods (D.A. Garvin (1988) “Managing Quality; the
strategic and competitive edge”, Harvard Business Review
Performance Primary operating characteristics
Features Little extras added to basic features
Reliability Probability product will operate over time
Conformance Meeting pre-established standards
Durability Length of usefulness, economically and technically; life span
Serviceability Ease of getting repairs; speed and competence and of repair
Aesthetics Pleasing to the sense; look, feel, smell or taste
Accuracy Performed right every time
Completeness Customer gets all they asked for
Consistency Same level of service for all customers
Perceived quality Indirect evaluations e.g. reputation, advertisement, brand name
18

Quality Related Costs
1. Cost of poor quality
Internal failure - costs the provider incurs directly; prior to delivery to customers, as a
result of defective output e.g.
• Wasted time,
• Rework: i.e. the cost of redoing the product which can now be made to conform to
specifications,
• Scrap: the cost of labor and materials for the product which can not be used or
sold,
• Down grading: the product which must be sold at less than full value due to
quality, problems,
• Downtime: idle facilities and personnel due to quality failures,
• Retesting: costs of inspection and tests after rework.
External failure costs to the provider when defects are discovered after delivery to
customers. e.g. costs of settling customer complaints, claims, lost orders and goodwill,
returns, warranty expenses and costs of concessions made to customers due to substandard
quality. In a service environment this could include costs of errors and delays.
2. Cost of achieving good quality
a) Appraisal costs
Costs of determining the degree of quality. They are incurred for auditing service
procedures to make sure they conform to prescribed work practices. e.g.
• Inspection, measurement, testing, checking, maintenance of test equipment and
other resources consumed during inspection and testing.
• Other costs include; incoming materials inspection such as the cost of determining
the quality of incoming raw materials.
• Quality laboratory tests i.e. the cost of operating laboratories to inspect materials
at all stages of production.
19

In effect they are expenses necessary to determine the condition of the product after it has
been made but before it has been released to the customer.
b) Prevention Costs
Costs of efforts to minimize failure and appraisal costs. The cost of preventing defective
work is usually expended before the product is made or the service is rendered. The costs
include quality planning, training, education, activities to prevent defects in systems
design, before items are manufactured or services are performed.
Total Quality Management (TQM)
Managing the entire organization so that it excels on all dimensions of products and
services that are vital to customer.
A wide-reaching, integrated quality program and philosophy that synchronizes the most
important quality principles and practices proposed by quality gurus such as Joseph Juran,
Edwards W. Demming, Philip Cosby, Walter Shewhart, Ishikawa etc.
TQM addressed both the design and conformance aspects of quality and it provides a
coherent approach that readily encompasses all the quality management principles and
tools.
TQM is the process of redirecting organizational cultures towards superior product
quality. It is an approach that involves everyone in an organization, in continuously
improving products and processes to achieve on every occasion, quality that meets
customer satisfaction.
TQM has two major themes that is:-
- Get it right the first time (zero defect). This is important because the cost of
preventing mistakes is less than the cost of correcting them.
- Continuous improvement. It is always possible to improve quality, thus emphasizing
the issue of getting it right the first time.
Principles of Achieving Total Quality Management
20

1. Create awareness of TQM
This can be done by holding meetings in quality management, with top management,
suppliers, staff and customers to create awareness of the concept, highlighting the benefits
of the concept. It must highlight the requirements for its success and emphasize that, it’s
every body’s responsibility to implement the concept of TQM.
2. Ensure top management commitment and full involvement
This is a primary pillar towards the success of any organization plan. Top management
commit ment could be reflected in developing favorable policies like rewarding
employees for excellence and innovativeness.
3. Designing product for quality
This cou ld involve taking into account and defining dimensions of quality, like
performance, reliability, durability, appearance, etc.
4. Supplier partnerships
This should be developed to ensure that materials and other supplies are of the highest
quality. i.e. companies should choose suppliers based on consistent delivery of a quality
product or service. This also calls for treating suppliers as business partners.
5. Functional Departments’ commitment
Ensure that all functional areas like marketing, accounting, purchasing etc, are committed
to a culture of getting it right the first time. This can be done through improved inter-
functional committees formal and informal meetings and discussions.
6. Quality circles
This ensures that groups of employees meet regularly to discuss problems of quality and
quality control and come up with suggestions for improvement. This encourages the spirit
of innovativeness and team coherence.
7. Capacity building
21

This requires training staff to perfect the skills in quality implementations. It may involve
training staff into research skills of customer needs. Training should include everyone
involved in quality management.
8. Use of quality assurance
This may include re-engineering and bench marking.
Re-engineering refers to the overhaul of the production function process.
Bench marking is the practice of establishing international standards of performance by
looking at how world-class companies run their businesses and carry out innovative
activities.
9. Acquire appropriate technology
Why TQM Fails
• Lack of commitment by top management
• Focusing on specific techniques rather than on the system
• Not obtaining employee buy-in and participation
• Programme stops with training, i.e. failure to turn training into practice
• Expecting immediate results, not a long-term payoff
• Forcing the organization to adopt methods that are not productive or compatible
with its production system and personnel.
Quality Control and Inspection
Quality control involves setting control for the process of manufacture or service delivery.
It is aimed at preventing the manufacture of defective units or provision of defective
services.
There are three points in the production process where monitoring actual quality take
place. i.e.
• Before production - make sure that input are acceptable
22

• During production - make sure that conversion of input into output is proceeding
in an acceptable manner.
• After production - make a final check on conformance before passing goods on to
customers.
Tools used in Monitoring Quality
1. Control charts (process control)
The aim of such charts is to prevent or detect production of defective product or services.
These can be used to encourage quality during production. A control chart has three
control limits
 Upper limit
 Central limit
 Lower limit
Process control is concerned with ensuring that future output is accepted. Samples are
taken and evaluated in the course of production. If the output is acceptable, the process is
said to be in control and if the output is not acceptable, the process is said to be out of
control. This then necessitates corrective action.
2. Acceptance sampling
This is the application of statistical techniques to determine whether a quantity of material
should be accepted or rejected based on inspection or test of sample. The purpose of
acceptance sampling is to decide or determine whether a batch satisfies the predetermined
standards.
NB: Monitoring quality before and after production involves acceptance sampling while
monitoring quality during the production process involves control.
3.P-C-D-A CYCLE, (or Shewhart Cycle or Deming wheel)
23
Plan
Identify
the
problem
and
develop
the plan
for a
product
or
service
Do
Impleme
nt the
plan on a
test basis

Why TQM Fails
• Lack of commitment by top management
• Focusing on specific techniques rather than on the system
• Not obtaining employee buy-in and participation
• Programme stops with training, i.e. failure to turn training into practice
• Expecting immediate results, not a long-term pay-off
• Forcing the organization to adopt methods that are not productive or compatible
with its production system and personnel.
Factors impeding Quality programmes in developing countries
(M. Higenyi, Quality in Developing Countries in Success Magazine, Vol. 2 No. 2, 1999)
Low purchasing power: Due to wide spread poverty, purchase decisions are based on
price rather than quality, consequently producers and service providers aim at low prices
using cheap and low quality materials arid methods.
Absence of competitors: there are few producers thus whatever is produced is assured of
being sold hence no interest in quality.
Foreign Exchange constraints can only manage obsolete technology, inadequate
machinery and poor quality materials, which have an impact on overall quality.
Incomplete infrastructure: i.e. shortage of adequately developed power supply,
transport, and communication and education systems impairs quality. Specific services in
24
Act
Institutio
nalize
improve
ment,
continue
the
search
for
quality
Check
Is the
plan
wrong
?
Or did it
work

areas such as standardization, testing, training and consulting which are vital to quality
development are lacking.
Leadership: quality is regarded as only a technical issue managed by technicians. They
are not aware of the strategic importance of quality; quality is supposed to be
“everybody’s business”.
Knowledge: both managerial and technical is lacking.
Quality Control and Inspection
Quality control involves setting control for the process of manufacturing or service
delivery. It is aimed at preventing the manufacture of defective units or provision of
defective services.
There are three points in the production process where monitoring actual quality takes
place. i.e.
• Before production - make sure that inputs are acceptable.
• During production - make sure that conversion of input into output is proceeding
in an acceptable manner.
• After production - make a final check on conformance before passing goods on to
customers.
Levels of Quality Management
(Elaine La Monica, (1994) Management in Health Care, Springer Publishing Co.)
1. Uncertainty or Dormant: Management has no knowledge, and/or does not
recognize and appreciate quality as a positive management tool. Quality is not an
issue and is not discussed at all; they do not feel any market threat and are happy
with their income.
2. Awakening: Dramatic change in market forces; i.e. loss of market share,
reduction in revenue, profits drop, employee morale is low and they are openly
disgruntled. Management awakens and recognizes that there is a crisis.
25

3. Enlightenment or Groping: Management realizes that they have to do something
in the area of quality. Nonetheless they embark on trial and error methods acquired
from seminars and conferences.
4. Wisdom or action: The trial and error methods may fail and management decides
to engage formal quality programs for a more effective change; where problems
are identified and implemented with employees’ participation.
5. Certainty or maturity: Full customer satisfaction is achieved through perfect
processes in all area of the organization. Quality programs are applied and at this
level, the organization trains for TQM and gets certified by reputable quality
standard organizations.
Brief history of TQM
Several basic ideas of TQM originated in the USA and then were organized and presented
to Japanese companies. During the 1920s Walter Shewhart developed the technical tools
that formed the beginning of statistical quality control. These became the foundation of
the modern total quality management movement in Japan and later in the United States.
He introduced the term quality assurance so as to improve the quality at Bell Telephone
laboratories (where he was employed) using statistical quality methods. W. E Deming
changed the focus of quality assurance from the technical aspects to more of a managerial
philosophy after almost five decades.
Deming W. E was most widely noted for teaching the need for management to take
responsibility for the quality system and for having organization’s wide participation. He
especially emphasized the need for total quality system to make products right the first
time rather than inspecting away defects.
Deming’s 14 - point program for quality. Source: Adapted from Deming W. E, (1982,
Quality, productivity and competitive position.
• Create a constancy of purpose toward product improvement to achieve long term
organizational goals.
• Adopt a philosophy of preventing poor quality products instead of acceptable
levels of poor quality as necessary to compete internationally.
26

• Eliminate the need for inspection to achieve by relying instead on statistical
quality control to improve product and process design.
• Select a few suppliers or vendors based on quality commitment rather than
competitive prices.
• Constantly improve the production process by focusing on the two primary sources
of quality problems i.e. the system and workers, thus increasing productivity and
reducing costs.
• Institute worker training that focuses on the prevention of quality problems and the
use of statistical quality-control techniques.
• Instill leadership among supervisors to help workers perform better.
• Encourage employee involvement by eliminating the fear of reprisal for asking
questions or identifying quality problems.
• Eliminate barriers between departments and promote cooperation and a team
approach for working together.
• Eliminate slogans and numerical target that urge workers to achieve higher
performance levels without first showing them how to do it.
• Eliminate numerical quotas that employees attempt to meet at any cost without
regard for quality.
• Enhance worker pride and self-esteem by improving supervision and the
production process so that workers can perform to their capabilities.
• Institute vigorous education and, training programmes in methods of quality
improvement throughout the organization, from top management down, so that
continuous improvement can occur.
• Develop a commitment from top management to implement the previous 13
points.
Juran focused on strategic quality planning, he lays the blame for poor quality on
management and insists that good quality requires an organization wide approach
and management involvement.
Juran provides the following as the ingredients of quality program;
27

• Quality planning
• Quality monitoring and control
• Quality improvement.
He emphasized;
• Attention to the customer as the determiner of quality
• Identification of the true costs of quality
• vNecessity to trade-off that promotes the use of more quality planning
rather than corrective action after poor products are made.
• Aiming at continuous improvements.
• Under the direction of Deming and Juran, many Japanese firms
implemented companywide quality management systems that focused on
and expanded the responsibilities of individual employees.
Foundations of TQM
• Companywide integration of purpose - a shared culture manifested by a top down
commitment to quality that is embraced at all levels.
• High regard for humans, as individuals and as vital components of teams.
• Continuous improvement in all facets of operations - a never ending program for
looking for problems (defects, delays, wastes, etc), finding and eliminating root
causes of those problems.
• Wide spread service to all segments of society through sharing of TQM ideas,
programs, data and results.
Process
INPUT
Material
Procedures
Methods
Information
People
Skills
28
FEED
BACK
Process
OUTPU
T
Service
Information
Paper work
Products

Knowledge
Training
Equipment
Customers (Know them)
• Who are my immediate customers?
• What are their true requirements?
• How do or can I find out what their requirements are?
• Do I have the necessary capability to meet the requirements (if not, what must
change?)
• Do I continually meet the requirements (if not, what prevents this?)
• How do I monitor change in requirements?
Suppliers - (clear communication)
• Who are my immediate suppliers?
• What are my true requirements?
• How do I communicate my requirements?
• Can my suppliers measure and meet my requirements?
• How do I inform them of changes in my requirements?
Read about
a) Tools of Quality Management
b) Other Literature on Quality Management.
c) Obstacles to implementing Total quality Management i.e. factors that make it
difficult to implement the principle of Total Quality Management.
d) Criticism of Total Quality Management
e) Responsibility for Total Quality Management.
29

Topic 1 & 2 operations mgt.doc hand out 1

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Topic 1 & 2 operations mgt.doc hand out 1

Similar to Topic 1 & 2 operations mgt.doc hand out 1 (20)

Recently uploaded

Recently uploaded (20)