TQM

2. 4.3 FOCUS ON FACTS
•Knowledge of customers’ experiences of products and
services is essential before the processes necessary
for creating customer satisfaction can be improved.
More and more firms are therefore coming to the
conclusion that, to realize the TQM vision, they must
first set up a system for the continuous measurement,
collection and reporting of quality facts.

3. • Milliken has written the following about the importance of quality measurements
(Dahlgaard, kristensen and kanji, 1994):
• Quality process starts with MEASUREMENTS.
Kind of Measurements:
1. External customers’ satisfaction (CSI= Customer Satisfaction Index)
2. Internal customers’ satisfaction (ESI=employee satisfaction index).
3. Other quality measurements of the firm’s internal processes, often called
‘quality
Checkpoints’ and ‘quality control points’.

4. TABLE 4.2 QUALITY MEASUREMENTS: THE EXPANDED CONCEPT
FIRM CUSTOMER SOCIETY
Process Employee Satisfaction Control And Check Points External Checkpoints
(environmental, political,
social)
Result Business Result Customer Satisfaction Ethical/ social accounting

5. • Many corporate managers are skeptical about the need for measurements. They find them
unnecessary, time-consuming and bureaucratic, relying instead on the STINGER PRINCIPLE:
ST = STRENGTH
IN = INTUITION
G = GUTS
E = EXPERIENCE
R = REASON
• While STINGER is undoubtedly useful to any manager, the complexity and dynamics of today’s
markets make it necessary to supplement STINGER with other skills than those which were sufficient
only a decade ago. Furthermore, measurements are, in themselves, both a challenge and a
motivation to achieve quality. Who could imagine playing a football match without goals?
• In short we recommend below the combination of STINGER, data and methods:
STINGER+DATA+METHODS—MBF (MANAGEMENT BY FACTS)

6. 4.3.1 MEASUREMENT OF CUSTOMER SATISFACTION
• Total quality, as experienced by the customer, consists of a large number of different elements,
one example of which is shown in figure 4.4 below.
• When measuring customers’ satisfaction it is important to realize that the importance of the
different quality parameters varies.
• Overall customer satisfaction—the CUSTOMER SATISFACTION INDEX, OR CSI—can then be
calculated as a simple weighted average:
FORMULA :
CSI=W1C1+W2C2+…+ WNCN
KINDS OF MEASUREMENTS

8. 4.3.2 MEASURING EMPLOYEE SATISFACTION
•The internal customer/supplier relationship is all-important in TQM. Being able
to satisfy external customers depends on having satisfied internal customers or,
as IMAI (1986)puts it:
•The three building blocks of any business are HARDWARE, SOFTWARE, and
‘HUMANWARE’. TQM starts with ‘HUMANWARE’. Only when the human
aspects have been taken care of can the firm start to consider the hardware and
software aspects.
•To build quality into people is synonymous with helping them to become
KAIZEN-CONSCIOUS.
•One of the main control points of ‘human quality’ is employee satisfaction, which
should be measured and balanced in the same way as customer satisfaction.

9. 4.3.3 QUALITY CONTROL POINTS AND QUALITY CHECKPOINTS
• Any firm can be described as a collection of connected processes producing some
‘result’ or other—either input to subsequent processes (the internal customers) or
output to external customers. We can measure the quality of the result of any
process, I.E. Ascertain whether we are satisfied with a particular result. When
measuring the quality of a process result, we say that we have established a ‘quality
control point’.
• The most common internal quality measurement that can be used as a control point
in most processes is:
Total defects per unit = number of defects/number of units produced or tested

10. 4.3.4 QUALITY COSTS
• Traditionally, so-called quality costs have been divided into the following four main groups:
1. Preventive costs;
2. Inspection/appraisal costs;
3. Internal failure costs;
4. External failure costs.
• In the quality literature, it is often claimed that total quality costs are very considerable, typically
between 10–40% of turnover. This is why these costs are also called ‘the hidden factory’ or ‘the
gold in the mine’. We believe these figures can be much higher, especially if invisible costs are
taken into account.
• Invisible costs are everywhere. This can easily be seen by looking at developments in quality
cost theory from before ‘the TQM age’ to the present.

11. (A) BEFORE TQM
•Quality costs consisted of the costs of the quality department
(including the inspection department), costs of scrapping, repairs
and rework and cost of complaints.
•Firms were aware of the above division of quality costs and
understood that prevention was better than inspection and that an
increase in preventive costs was the means of reducing total quality
costs. Most firms, however, did not deal either systematically or
totally (i.E. In all the processes in the firm) with these costs.

12. (B) ‘THE TQM AGE’
•Total quality costs are defined as the difference between the
firm’s costs of development, production, marketing and supply of
products and services and what the (reduced) costs would be in
the absence of defects or inefficiencies in these activities. Put
another way, total costs can be found by comparing the firm with
‘the perfect firm’ or ‘the perfect processes’. In this sense, there is
a close connection between the concept of quality cost and
benchmarking.

13. •Table 4.3 shows that total costs can be classified according to internal
and external costs on the one hand and visible and invisible quality costs
on the other. In table 4.3, we have classified total costs into six groups.
The question marks indicate that apart from the visible costs (1+2), the
size of the individual cost totals is unknown.Visible costs are costs which
the firm has decided to record. In both theory and practice, the criterion
for whether a cost should be recorded or not is that the benefit of doing so
is greater than the costs involved. In this connection, the processes’
estimated contribution to the total quality costs is a good starting point in
deciding whether it is worthwhile measuring and recording a potential
control point.

14. TABLE 4.3 A NEW CLASSIFICATION OF THE FIRM’S QUALITY
COSTS
In contrast to opinions from many writers, our view is that it is neither possible nor
economically justifiable to determine total quality costs by expanding the recordings.
There is therefore a need for other methods. One method is to compare oneself
with one’s most profitable competitor. This is a form of benchmarking, where the
ratio ‘ordinary financial result’ is used in the comparison. This and other methods
will be explained in Chapter 14.

15. THANK YOU 