INTEGRATING THE SUPPLY CHAIN S TOMAS FOSTER

© 2007 Pearson Education 2 - 1
Managing Quality
Integrating the Supply Chain
S. Thomas Foster
Chapter 2
Quality Theory

 Leading Contributors to Quality Theory
 Viewing Quality Theory from a Contingency Perspective
 Theoretical Framework for Quality Management
Quality Theory
Chapter 2

Quality Theory
Is there a theory of quality management?
 There is not a unified theory explaining quality management in the
supply chain that is widely accepted by the quality community. The
literature concerning quality is contradictory and somewhat confusing.
The differing approaches to quality improvement represent competing
philosophies that are seeking their place in the quality marketplace of
theories. Practicing quality managers must apply those theories that are
appropriate to their particular situations using the contingency approach.
 The contingency approach identifies the relevant conditions in a situation
and applies the appropriate theory. This means the effectiveness of the
competing philosophies depends on the context.
 You cannot buy effective quality systems off-the-shelf or apply them
without question from books. You must grow your own quality system
yourself within your firm for your firm.

Quality Theory
Leading Contributors to Theory – W. Edwards Deming
 Deming was widely accepted as the world’s leading authority on quality
management prior to his death in 1993.
 Deming significantly influenced Japanese industry before the late 1970s
when the quality of Japanese products surpassed U.S. products.
 Deming emphasized the management of a system for improving
quality and statistics for continual improvement.
 After WWII, Deming was sent to Japan by the U.S. Secretary of War to
work on a population census. During this time, Deming presented lectures
to the Japanese Union of Scientists and Engineers on statistical quality
control. Deming became impressed with the precise, single-minded,
focus of the Japanese on quality. Deming believed that the lack of focus
on quality in America led to mediocre results with regard to quality.
 Deming’s emphasis was “continuous, never-ending improvement.”

Quality Theory
Leading Contributors to Theory – Deming’s 14 Points
 The closest Deming came to expounding a theory was his 14 points
for management.
 The foundation of the 14 points was Deming’s belief that the historic
approach to quality used by American management was wrong in one
fundamental aspect: Poor quality was not the fault of labor; it resulted
from poor management of the system for continual improvement.
1. Create a constancy of purpose toward improvement of product and
service with the aim to become competitive, stay in business and
provide jobs.
 Constancy of purpose means that management commits
resources long-term to see that the quality is completed. U.S.
management is too short-term oriented.

Quality Theory
2. Adopt a new philosophy: We are in a new economic age.
 Western management must no longer accept defective
products and services as normal.
3. Cease dependence on mass inspections to improve quality.
 Build quality into the product or service – do not inspect
quality into the product or service.
 Quality at the source means management must train and trust
workers so workers can be responsible for quality and
inspections.

Quality Theory
4. End the practice of awarding business on the basis of price
tag alone.
 Minimize total cost by sole sourcing, developing long-term
relationships of loyalty and trust, JIT purchasing, and certified
suppliers (Malcolm Baldrige National Quality Award Criteria, ISO
9000:2000 international standard for quality systems).
 Using many suppliers causes an overemphasis on per piece
cost, increased variability, and increased supplier management
cost.

Quality Theory
5. Improve constantly and forever the system of production and
service to improve quality and productivity, and, thus, constantly
decrease cost.
 Management is responsible for system design. Workers can be
held responsible only for their inputs into the system. Mediocre or
poor performance of a system is most often the result of poor
performance of management.
 85% of errors and defects are caused by flaws in the system and
only 15% are caused by workers.
 80% of the errors and defects are caused by 20% of the system.

Quality Theory
6. Institute training on the job.
 Training, although a necessary condition for improvement, is not
sufficient to guarantee successful implementation of quality
management.
7. Improve leadership. This is key to improving quality.
 Improvement by employees can occur only within the realm of
influence of the employee. For wide-ranging improvements to
occur, upper management must be committed (hogs, not
chickens).

Quality Theory
Leading Contributors to Theory- Deming’s 14 Points
8. Drive out fear of admitting or identifying problems and creating
change so that everyone may work effectively for the company.
 Does an organization want employees who are satisfied with the
status quo or who are fearful of challenging the waste in the status
quo because of blame-fixing or layoffs?
9. Break down barriers between departments.
 Employees from different departments must work together in
cross-functional teams in team-based decision making.
Sequential or departmental approaches to team-based decision
making limit the knowledge, information, and perspectives. Parallel
processing in cross-functional, focused teams bring all available
knowledge, information, and perspectives to bear on the subject. In
design, parallel processing in cross-functional, focused teams is
called concurrent engineering.

Quality Theory
10. Eliminate slogans, exhortations and targets for the
workforce that ask for zero defects and new levels of
productivity.
 The bulk (85%) of causes of low quality and low productivity
belong to the system and lie beyond the power of the workforce.
 By pressuring employees to higher levels of productivity and
quality, managers place the onus for improvement on the
employees. If systems or the means for achieving these higher
levels of performance are not provided, workers can become jaded
and discouraged.

Quality Theory
11. Eliminate work standards on the factory floor.
 Eliminate management by objective.
 Eliminate management by numbers and numeric goals.
 Substitute leadership.
 Eliminate work measurement standards on the shop floor.
 Eliminate performance appraisals.
 Although objectives are set for employees, systems often are not
provided by management to attain these goals.

Quality Theory
12. Remove barriers that rob workers of their right to pride in the
quality of their work.
 The responsibility of supervisors must be changed from sheer
numbers to quality.
 Employees must be trusted with decisions and self-determination
or employees will suffer from low morale and low commitment.

Quality Theory
13. Institute a vigorous program of education and self
improvement.
 Learning in an organization is a function of the creativity of
employees and the ability of the organization to institutionalize
the lessons over time.
 Organizational learning requires a structure that reinforces and
rewards learning. Such an organization is difficult to create in a
command-and-control environment because command-oriented
managers will not understand what it takes to allow employees to
achieve their best.
14. Put everybody in the company to work to accomplish the
transformation. A total system for improving quality is needed that
includes all of the people in the organization.

Quality Theory
Leading Contributors to Theory – The Deadly Diseases
1. Lack of constancy of purpose.
2. Emphasis on short-term profits.
3. Evaluation of performance, merit rating, or annual
review.
4. Mobility of management.
5. Running a company on visible figures alone.
6. Excessive medical costs for employee health care.
7. Excessive cost of warranties.
Deming believed these factors would keep the U.S. from
achieving top quality or competitiveness in a world
market.

Quality Theory
Leading Contributors to Theory – An Underlying Theory
 Deming’s 14 points do not represent a theory but do represent the artifacts
of a theory. Anderson, Rungtusanatham, and Schroeder propose a
theoretical causal model underlying the Deming management method.
Visionary
Leadership
Organizational
Learning
Process
Management
Process
Outcomes
Low Cost
High Quality
Employee Satisfaction
Customer Satisfaction

Quality Theory
Leading Contributors to Theory - Juran
The Juran Trilogy – three basic processes are essential for managing
to improve quality
 Planning – provides the operating forces with the means of
producing products that can meet the customer’s needs
 Control – gathers data about processes to ensure that processes
are stable and provide a relatively consistent outcome
 Improvement – can be continuous or breakthrough improvements
which should occur simultaneously
Continuous improvement – incremental process improvements
Breakthrough improvement – major process improvements
 Improvement is accomplished on a project-by-project basis.
 Managers must prioritize projects based on financial return.
 Juran applied Pareto’s Law (80/20 rule) in stating that the majority
of quality problems are the result of relatively few causes. Focus
on the vital few instead of the trivial many.

Quality Theory
Leading Contributors to Theory – Scientific Management
 Frederick Taylor wrote The Principles of Scientific
Management.
 Scientific management separated planning from execution.
The engineers and managers did the planning and the
supervisors and workers executed the plans.
 Inspectors were moved out of the plant to a central
inspection (quality) department.
 Upper managers concluded that quality was the
responsibility of the quality department and these upper
managers became detached from quality and lost their
knowledge of how to build quality into the product.
 Inspecting quality into the product worked as long as all
competitors did the same. However, the Japanese changed
the game by building quality into the product in the 70’s.

Quality Theory
Leading Contributors to Theory – Kaoru Ishikawa
 Ishikawa became the foremost Japanese leader in the
Japanese quality movement.
 Ishikawa provided the basic seven tools of quality (B7)
for continuous improvement. The B7 tools worked well within
the Deming and Juran frameworks.
 Ishikawa democratized statistics which provided for the
complete involvement of the workforce in improving quality.
 Ishikawa’s major theoretical contribution is his emphasis
on total involvement of the operating employees in
improving quality.
 Ishikawa created the phrase company-wide quality
control.

Quality Theory
Leading Contributors to Theory – Armand Feigenbaum
 Feigenbaum wrote Total Quality Control which studied
quality in the context of the business organization.
 Feigenbaum’s primary contribution to quality thinking
in America was his assertion that the entire organization
should be involved in improving quality.
 Feigenbaum’s three step process to improving quality:
 quality leadership – the motivating force for quality
improvement
 quality technology – includes statistics and machinery
 organizational commitment – including everyone in
the quality struggle

Quality Theory
Leading Contributors to Theory – Armand Feigenbaum
 Major impediments to improving quality:
 Hothouse thinking – quality programs that receive a lot of hoopla and
no follow-through which happens when firms do not commit resources
over time
 Wishful thinking – occurs with those who would pursue protectionism
to keep American firms from having to compete on quality
 Producing overseas – used by managers who wish that out of sight,
out of mind could solve quality-related problems
 Confining quality to the factory floor – quality is the responsibility of
the shop-floor and not everyone’s responsibility
 Feigenbaum proposed 19 steps for improving quality which emphasize
total organizational involvement in improving quality.

Quality Theory
Leading Contributors to Theory – Philip Crosby
 Crosby wrote Quality Is Free – in this book he stressed that
quality, as a managed process, can be a source of profit.
 Crosby specified a 14 step quality improvement program.
These steps provide the Crosby zero-defects approach to quality,
the behavior and motivational aspects of quality rather than
statistical approaches, and his prescribed actions for management
and workers.
 Although he prescribes quality teams consisting of department
heads, Crosby did not promote the same kind of strategic
planning proposed by Deming and Juran.
 Crosby adopted a human resources approach similar to
Deming’s in that worker input is valued and is encouraged as
central to quality improvement.

Quality Theory
Leading Contributors to Theory – Genichi Taguchi
 The Taguchi method was first introduced by Dr. Genichi Taguchi to AT&T
Bell Laboratories in the U.S. in 1980. The Taguchi method for improving
quality is now believed to be comparable in importance to the Deming
approach and to the Ishikawa concept of total quality control.
 Unique aspects of the Taguchi Method:
 Definition of Quality - Ideal quality is a function of customer
perceptions and satisfaction. The target specification should be a
measure of the targeted customer perception and satisfaction.
 Quality Loss Function - Any deviation from the target specification
results in a loss to society. The magnitude of the loss to society is
directly related to the degree of deviation.
 Robust Design – Products and services should be designed so that
they are inherently defect-free and of high quality. Robust design is
achieved in a three-step process: concept design, parameter
design, tolerance design.

Quality Theory
Leading Contributors to Theory – Stephan Covey
 Stephan Covey wrote The 7 Habits of Highly Effective People.
 Dr. Covey’s approach to management is value-based.
 According to Dr. Covey, our beliefs affect how we interact with others,
which in turn affects how they interact with us. Therefore, we need to
focus on how we approach our lives rather than focusing on external
factors that affect our lives.
 Many quality management principles from people such as Deming are
integrated into Dr. Covey’s habits.
 Dr. Covey’s 7 habits include:
 Be proactive. Control your environment, instead of having it control
you, in the way you react to your environment.
 Begin with the end in mind. Identify the desired outcome and focus
on activities that achieve that end.

Quality Theory
Leading Contributors to Theory – Stephan Covey
 Put first things first. Managers need to personally manage
themselves and implement activities that aim to achieve the second
habit – looking to the desired outcome. Habit two is the first, or mental,
creation; habit three is the second, or physical creation.
 Think win-win. This is the most important aspect of interpersonal
leadership because most achievements are based on cooperative
effort. Therefore, the aim needs to be win-win solutions for all.
 Seek first to understand and then to be understood. Listening well
is more important than speaking well. Be interested, not interesting.
Once you understand their perspective then you can be understood.
 Synergize. Through creative cooperation, collaboration often achieves
more than could be achieved by individuals working independently.
 Sharpen the saw. Learn from previous experience and encourage
others to do the same.
 Find your voice, and inspire others to find theirs. Merge talent,
passion, and conscience to achieve, and to help others to achieve.

Quality Theory
Leading Contributors to Theory – Other Quality Researchers
 Robert C. Camp – Pioneered benchmarking with the sharing of
information between companies so that both can improve.
 Tom Peters – wrote In Search of Excellence which produced
eight best practices from empirical research of successful quality
practices in the form of case studies of firms. The book is thought-
provoking, though methodologically loose. His latest book, In
Search of Wow!, is entertainment coupled with serious
management thinking.

Quality Theory
Leading Contributors to Theory – Other Quality Researchers
 Michael Hammer and James Champy – Their collaboration is termed
reengineering, which has produced unfortunate consequences for many
companies. Their underlying model is sound: Firms can become
inflexible and resistant to change and must be able to change in order to
become competitive. The problem is in the flawed process for
reengineering they promote in their book Reengineering the
Corporation. They admit their failure rate is 70% or higher. By ignoring
the necessity for attention to detail and analysis, they led many firms to
make radical changes to reengineer processes that led to major failures.
 Lesson to be learned from reengineering failures – Some quality and
performance improvement approaches are brainchildren. Others have
been observed to work in a number of organizations, in a variety of
cultures, and in a number of economic sectors. Avoid the former until
they become part of the latter.

Quality Theory
Quality Theory from a Contingency Perspective
There is a mass of contradictory, conflicting information and
disagreement… it is best to focus on fundamental
questions during the self-assessment phase of strategic
planning such as the following types of questions:
What are our strengths?
What are our competencies?
In what areas do we need to improve?
What are our competitors doing to improve?
What is our organizational structure?
What do our customers want?
What are our customer’s unmet needs?
Where are our customers going?

Quality Theory
Quality Theory from a Contingency Perspective
 Once you answer these types of questions, you will have a deep
understanding of your business. You combine your business
understanding with your understanding of the major approaches
to quality improvement. This combination will provide the basis
for selecting those points, philosophies, concepts, and tools that
will form the basis for your quality improvement plans. Then you
creatively apply your selected quality approaches to your
business.
 Firms well known for quality do not adopt only one quality
philosophy. The successful firms adopt aspects of each of the
various approaches that help them improve. This is called the
contingency perspective.

Quality Theory
Resolving Differences – An Integrative View
Reviewing the literature identifies common variables used by
Deming, Juran, Crosby, Taguchi, Ishikawa, and Feigenbaum and by
Parasurmaman, Zeithamel, and Berry for the services approach.
 Leadership
 Information Analysis
 Strategic Planning
 Employee Improvement
 Quality Assurance
 Customer role in Quality
 Quality Department
 Environment
 Philosophy Driven
 Quality Breakthrough
 Project/team-based
improvement
The core variables are in red. The second layer variables are in
blue. And the third layer variables are in black. The primary
driver is a customer focus.

Quality Theory
The core variables:
 Leadership – The role of the leader in being the champion and major
force behind quality improvement is critical. Companies having weak
leadership in quality will not achieve a market advantage in quality.
Leaders must become proficient in quality management approaches and
must be willing to lead by example, not just by words.
 Employee Improvement – Employees must be trained and developed.
This training is a long-term undertaking requiring direct investment in
training delivery costs and indirect costs associated with temporary lost
productivity and time spent in training.
 Quality Assurance – Quality can be assured only during the design
phase. Although statistical inspection is important to improving quality, it
is inherently reactive. Effort must be invested in designing products,
services, and processes so they are consistently of high quality.

Quality Theory
 Customer Focus – An understanding of the customer is key to quality
management efforts. Unless firms are gathering data about customers and
analyzing these data, they are poorly informed about customer needs and
wants. You will not go wrong if you continuously focus on your
customer’s needs.
 Quality Philosophy – Adoption of a philosophy toward quality
improvement should establish a clear, simple, focused message
providing the company with a map to follow during their quest for
improvement. It is up to each organization to determine its own
philosophy.

Quality Theory
The second layer variables.
 Information Analysis – Fact-based improvement requires information
gathering and analysis. Data gathering is a key variable for quality
improvement. Included in data gathering are statistically related quality
control activities.
 Strategic Planning – This provides a framework for a rational quality
strategy that will align your key business factors with your quality
management philosophy.
 Environment or Infrastructure – This infrastructure must provide human
resource systems and technological networks that support all other
variables in this list.
 Team approach – Cross-functional teams achieve process improvement
and manage key processes. The firm should become a collection of
loosely related cross-functional teams performing the work of the firm.

Quality Theory
The third layer variables.
 Focus of the Quality Department – Rather than performing the policing
function, these departments fill more of a coaching role. Also, the
knowledge these quality specialists have is useful for training and in-
house consulting.
 Breakthrough – The need to make large improvements is not precluded
by continuous improvement. Firms must find ways to achieve radical
improvements. You must run the firm with excellent execution and control
processes, grow the firm with continuous improvement, and destroy the
firm with radical breakthroughs. The processes used to achieve this often
involve technological or organizational redesign. Analysis and data are
necessary for successful continuous improvements and breakthrough
implementations.
The power of these common variables is that they focus management
on systemic issues rather than the tactical, day-to-day problems.

Quality Theory
Theoretical Framework for Quality Management
Core Variables
2nd Layer
Variables
3rd Layer
Variables
The Primary
Driver Variable

INTEGRATING THE SUPPLY CHAIN S TOMAS FOSTER

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