مروه عليان
09-03-2007, 02:53 PM
Total Quality Management
(TQM)
Outline
I. Introduction:
II. History and Backgrounds:
§ The evolution of quality management
§ Quality pioneers
III. Total Quality Management: The Basics,
§ The dimension of quality
§ Approach of TQM
§ Elements of TQM
IV. The influence of TQM:
§ The consequences of poor quality
§ Benefits of good quality
§ Responsibility of quality management
§ Example of success
V. Quality control and costs of quality:
§ Quality control
a. Inspection
b. Statistical process control
§ The costs of quality
a. Costs of internal failure
b. Costs of external failure
c. Costs of appraisal
d. Costs of prevention
VI. Obstacles to Implementing TQM
VII. Quality Awards:
§ The Baldrige award
§ The Deming prize
VIII. Quality certifications:
IX. Conclusion:
X. Sources and references:
I. INTRODUCTION:
A primary role of management is to lead an organization in its daily operation and to maintain it as a growing entity into the future. Quality has become an important factor in both of these objectives.
Broadly defined, quality refers to the ability of a product or service to consistently meet or exceed customer expectations. Prior to the increased level of Japanese competition in the U.S. marketplace in the 1970s and 1980s, quality was not uppermost in the minds of U.S. business organizations. They tended to focus on cost and productivity rather than on quality. It wasn’t that quality was unimportant, it just wasn’t very important.
Partly because of this thinking, foreign companies, many of them Japanese, captured a significant share of the U.S. market. In the automotive sector, leading Japanese manufacturers, Honda, Nissan, and Toyota, became major players in the auto sales market in the United States. They have built a reputation for quality and reliability in their cars.
At this point, many U.S. companies changed their views about quality. Providing high quality was recognized as a key element for success. Most large corporations taking that path have documented their success. First, they survived the strong overseas competition that had set the quality levels and now have regained some of their former markets.
The term total quality management (TQM) refers to a quest for quality in an organization. There are three philosophies in this approach. One is continuous improvement; the second is the involvement of everyone in the organization; and the third is a goal of customer satisfaction, which means meeting or exceeding customer expectations. TQM expands the traditional view of quality –looking only at the quality of the final product or services- to looking at the quality of every aspect of the process that produces the product or service.
II. HISTORY AND BACKGROUD:
· The evolution of quality management
Prior to the Industrial Revolution, skilled craftsmen performed all stages of production. Pride of workmanship and reputation often provided the motivation to see that a job was done right.
A division of labor accompanied the Industrial Revolution; each worker was then responsible for only a small portion of each product. Pride of workmanship became less meaningful because workers could no longer identify readily with the final product. The responsibility for quality control shifted to the foremen. Inspection was either nonexistent or haphazard, although in some instances 100 percent inspection was used.
World War II caused a dramatic increase in emphasis on quality control. About the same time, professional quality organizations were emerging throughout the country. One of these organizations was the American Society for Quality Control (ASQC, now known as ASQ). Over the years, the society has promoted quality with its publication, seminars and conferences, and training programs.
In the mid-1950s, Armand Feigenbaum proposed total quality control, which enlarged the concept of quality efforts from its primary focus on manufacturing to also include product design and incoming raw materials.
In the 1970s, quality assurance methods gained increasing emphasis in services including government operations, health care, banking, and the travel industry.
The evolution of quality took a dramatic shift from quality assurance to a strategic approach to quality in the late 1970s. Up until that time, the main emphasis had been on finding and correcting defective products before they reached the market. It was still a reactive approach. The strategic approach is proactive, focusing on preventing mistakes from occurring altogether.
· Quality pioneers
A core of quality experts has shaped modern quality practices. Among the most famous of this core of pioneers are Deming, Juran, Ishikawa, and Crosby. Together, these great thinkers have had a tremendous impact on the management and control of quality, and the way companies operate.
W. EDWARDS DEMING
Deming went to Japan after World War II to assist the Japanese in improving quality and productivity. The Union of Japanese Scientists, who had invited Deming were so impressed that in 1951, after a series of lectures presented by Deming, they established the Deming Prize, which is awarded annually to firms that distinguish themselves with quality management programs.
Deming compiled a famous list of 14 points he believed were the prescription needed to achieve quality in an organization. His message is that the cause of in- efficiency and poor quality is the system, not the employees. Deming felt that it was management's responsibility to correct the system to achieve the desired results.
JOSEPH M. JURAN
Juran, like Deming, taught Japanese manufactures how to improve the quality of their goods, and he, too, can be regarded as a major force in Japan’s success in quality. Juran’s approach to quality may be the closest to Deming’s although his approach differs on the importance of statistical methods and what an organization must do to achieve quality. Whereas Deming’s work envisioned a “transformation,” Juran believes that an organization can manage for quality.
Juran describes quality management in terms of a trilogy consisting of quality planning, quality control, and quality improvement. He also credited as one of the first to measure the cost of quality, and he demonstrated the potential for increased profits that would result if the cost of poor quality could be reduced.
PHILIP B. CROSBY
Crosby developed the concept of Zero defects and popularized the phrase “Do it right the first time.” He stressed prevention, and he refused the idea that “there will always be some level of defectives.”
According to Crosby, the costs of poor quality are so great that rather than viewing quality efforts as costs, organizations should view them as a way to reduce costs, because the improvements generated by quality efforts will more than pay for themselves.
KAORU ISHIKAWA
The Japanese expert on quality was strongly influenced by both Deming and Juran, although he made significant contribution of his own to quality management. Among his key contributions were the development of the cause-and-effect diagram (also known as a fishbone diagram) for problem solving and the implantation of quality circles, which involve workers in quality improvement.
He was a strong supporter of the need for companies to have a shared vision in order to unite everyone in the organization in a common goal, and he is widely recognized for his efforts to make quality control “user friendly” for workers.
III. TOTAL QUALITY MANAGEMENT: THE BASICS,
· The dimension of quality:
Quality experts argue that quality can be used in a strategic way to compete effectively. Choosing an appropriate quality strategy depends on understanding the important dimensions of quality. Although they may vary somewhat from product to product, or between a product and a service, generally speaking, the dimensions of quality include:
1. Performance:
Involves a product’s primary operating characteristics
2. Aesthetics:
Refers to how a product looks, feels, sounds, tastes, or smells
3. Special features:
Are supplements to the basic functioning characteristics of the product or service
4. Safety:
Refers to the degree to which a product’s design or operating characteristics conform to pre-established safety standards.
5. Reliability:
Addresses the probability of a product is not working properly or breaking down altogether within a specific period
6. Durability:
Is a measure of how much use a person gets from a product before it deteriorates or breaks down to such a point that replacement makes more sense than continual repair.
7. Perceived quality:
Refers to individuals’ subjective assessments of products or service quality
8. Service after sale:
Handling of complaints or checking on customer satisfaction
These dimensions are further described by the examples presented below:
Dimension
(Product)
Automobile
(Service)
Automobile Repair
1. Performance
Everything works, fit and finish
All work done, at agreed price
2. Aesthetics
Interior design, soft touch
Clean work/ waiting areas
3. Special features
Convenience
Placement of measures and controls
Location, call when ready
High tech
Cellular phone, DVD player
Computer diagnostics
4. Safety
Antilock brakes, airbags
Separate waiting area
5. Reliability
Infrequence of breakdowns
Work done correctly
6. Durability
Useful life in miles, resistance to rust
Work holds up over time
7. Perceived quality
Top-rated car
Award-winning service department
8. Service after sale
Handling of complaints
Handling of complaints
· Approach of TQM:
We can describe the TQM approach as follows:
1. Find out what customers want. This might involve the use of surveys, focus groups, interviews, or some other technique that integrates the customer's voice in the decision- making process. Be sure to include the internal customer (the next person in the process) as well as the external customer (the final customer).
2. Design a product or service that will meet (or exceed) what customers want. Make it easy to use and easy to produce.
3. Design processes that facilitate doing the job right the first time. Determine where mistakes are likely to occur and try to prevent them. When mistakes do occur, find out why so that they are less likely to occur again.
4. Keep track of results, and use them to guide improvement in the system. Never stop trying to improve.
5. Extend these concepts to suppliers and to distribution.
Many companies have successfully implemented TQM programs. Among them are General Electric and Motorola. In fact, competitive pressures and shorter product life cycles are leading a wide variety of companies to undertake TQM-type initiatives. General Electric puts selected employees through a high-level statistical training program. These employees then train others and also serve as consultants.
Successful TQM programs are built through the dedication and combined efforts of everyone in the organization. Top management must be committed and involved. If it isn't, TQM will become just another fad that quickly dies and fades away.
· Elements of TQM:
1. Continuous improvement.
The philosophy that seeks to improve all factors related to the process of converting inputs into outputs on an ongoing basis is called continuous improvement. It covers equipment, methods, materials, and people. Under continuous improvement, the old adage "If it isn’t broken, don't fix it" gets transformed into "Just because it isn't broken doesn't mean it can't be improved."
The concept of continuous improvement was not new, but it did not receive much interest in the United States for a while, even though it originated there. However, many Japanese companies used it for years, and it became a cornerstone of the Japanese approach to production. The Japanese use the term kaizen to refer to continuous improvement. The successes of Japanese companies caused other companies to reexamine many of their approaches. This resulted in a strong interest in the continuous improvement approach.
2. Competitive benchmarking.
This involves identifying other organizations that are the best at something and studying how they do it to learn how to improve your operation. The company need not be in the same line of business. For example, Xerox used the mail- order company L.L. Bean to benchmark order filling.
3. Employee empowerment.
Giving workers the responsibility for improvements and the authority to make changes to accomplish them, provides strong motivation for employees. This puts decision making into the hands of those who are closest to the job and have considerable insight into problems and solutions.
4. Team approach.
The use of teams for problem solving and to achieve consensus takes advantage of group synergy, gets people involved, and promotes a spirit of cooperation and shared values among employees.
5. Decisions based on facts rather than opinions.
Management gathers and analyzes data as a basis for decision making.
6. Knowledge of tools.
Employees and managers are trained in the use of quality tools.
7. Supplier quality.
Suppliers must be included in quality assurance and quality improvement efforts so that their processes are capable of delivering quality parts and materials in a timely manner.
8. Champion.
A TQM champion's job is to promote the value and importance of TQM principles throughout the company.
9. Quality at the source.
Quality at the source refers to the philosophy of making each worker responsible for the quality of his or her work. This incorporates the notions of "do it right" and "if it isn't right, fix it." Workers are expected to provide goods or service that meet specifications and to find and correct mistakes that occur. In effect, each worker becomes a quality inspector for his or her work. When the work is passed on to the next operation in the process (the internal customer) or, if that step is the last in the process, to the ultimate customer, the worker is "certifying" that it meets quality standards.
This accomplishes a number of things: (1) it places direct responsibility for quality on the person(s) who directly affect it; (2) it removes the adversarial relationship that often exists between quality control inspectors and production workers; and (3) it motivates workers by giving them control over their work as well as pride in it.
Sign on the wall of a company Cafeteria:
Sometimes they can be cranky, and it may sometimes seem like they expect too much, but they do provide our paychecks and our benefits, such as sick leave, maternity leave, health insurance, and three weeks of paid vacation time each year. And what about all the new equipment we've been getting lately? They pay for that, too. And a lot more. So the next time you see them, give them a great big smile to show how much you appreciate them-our customers!
It would be incorrect to think of TQM as merely a collection of techniques. Rather, TQM reflects a whole new attitude towards quality. It is about the culture of an organization. To truly reap the benefits of TQM, the culture of an organization must change.
Table below illustrates the differences between cultures of a TQM organization and a more traditional organization.
Aspect
Traditional
TQM
Overall mission
Maximize return on investment
Meet or exceed customer satisfaction
Objectives
Emphasis on short term
Balance of long term and short term
Management
Not always open; sometimes inconsistent objectives
Open; encourage employee input; consistent objectives
Role of manager
Issue orders; enforce
Coach, remove barriers, built trust
Customer requirements
Not highest priority; may be unclear
Highest priority; important to identify and understand
Problems
Assign blame; punish
Identify and resolve
Problem solving
Not systematic; individuals
Systematic; teams
Improvement
Irregular
Continuous
Suppliers
Adversarial
Partners
Jobs
Narrow, specialized; much individual effort
Broad, more general; much team effort
Focus
Product oriented
Process oriented
IV. THE INFLUENCE OF TQM:
· The consequences of poor quality
It is important for management to recognize the different ways that the quality of a firm's products or services can affect the organization and to take these into account in developing and maintaining a quality assurance program. Some of the major ways that quality affects an organization are:
1. Loss of business
2. Liability
3. Productivity
4. Costs
Poor designs or defective products or services can result in loss of business. Failure to devote adequate attention to quality can damage a profit-oriented organization's image and lead to a decreased share of the market.
Organizations must pay special attention to their potential liability due to damages or injuries resulting from either faulty design or poor workmanship. This applies to both products and services. Thus, a poorly designed steering arm on a car might cause the driver to lose control of the car, but so could improper assembly of the steering arm. However, the net result is the same. Liability for poor quality has been well established in the courts. An organization's liability costs can often be substantial, especially if large numbers of items are involved, as in the automobile industry, or if potentially widespread injury or damage is involved.
Productivity and quality are often closely related. Poor quality can adversely affect productivity during the manufacturing process if parts are defective and have to be reworked or if an assembler has to try a number of parts before finding one that fits properly. Also, poor quality in tools and equipment can lead to injuries and defective output, which must be reworked or scrapped, thereby reducing the amount of usable output for a given amount of input. Similarly, poor service can mean having to redo the service and reduce service productivity. Conversely, improving and maintaining good quality can have a positive effect on productivity.
· Benefit of good quality
Business organizations with good or excellent quality typically benefit in a variety of ways: an enhanced reputation for quality, an increased market share, greater customer loyalty, lower liability costs, fewer production or service problems, which yields higher productivity, fewer complaints from customers, lower production costs, and higher profits.
· Responsibility for quality
It is true that all members of an organization have some responsibility for quality, but certain areas of the organization are involved in activities that make them key areas of responsibility. They include top management, design, procurement, production/operations, quality assurance, packaging and shipping, marketing and sales, and customer service.
Top management. Top management has the ultimate responsibility for quality. While establishing strategies for quality, top management must institute programs to improve quality; guide, direct, and motivate managers and workers; and set an example by being involved in quality initiatives. Examples include taking training in quality, issuing periodic reports on quality, and attending meetings on quality.
Design. Quality products and services begin with design. This includes not only features of the product or service; it also includes attention to the processes that will be required to produce the products and/or the services that will be required to deliver the service to customers.
Procurement. The procurement department has responsibility for obtaining goods and services that will not detract from the quality of the organization's goods and services.
Production/operations. Production/operations has responsibility to ensure that processes yield products and services that conform to design specifications. Monitoring processes and finding and correcting root causes of problems are important aspects of this responsibility.
Quality assurance. Quality assurance is responsible for gathering and analyzing data on problems and working with operations to solve problems.
Packaging and shipping. This department must ensure that goods are not damaged in transit, that packages are clearly labeled, that instructions are included, that all parts are included, and shipping occurs in a timely manner.
Marketing and sales. This department has the responsibility to determine customer needs and to communicate them to appropriate areas of the organization. In addition, it has the responsibility to report any problems with products or services.
Customer service. Customer service is often the first department to learn of problems. It has the responsibility to communicate that information to appropriate departments, deal in a reasonable manner with customers, work to resolve problems, and follow up to confirm that the situation has been effectively remedied.
· Example of success
CalComp: Disaster becomes success
Flashback to the early 1980s. The only thing world-class about CalComp was the mess it was in. The company that practically invented the computer plotter-a device engineers use to print oversized schematics-had become inattentive and lazy.
Every last plotter that rolled off the assembly line didn't work well enough to ship without some reenergizing. A team offield technicians was needed to make house calls on installed machines that malfunctioned every few weeks. Competitors such as Hewlett-Packard jumped into the breach, stealing dissatisfied customers.
Flash forward to the CalComp ofthe 1990s, recognized as a leader in world class manufacturing. No more mass assembly lines. No more field technicians.
The difference between the early 1980s and the 1990s?
Quality.
Specifically, a quality program leaded by CalComp President William Conlin that saturated every square inch ofthe company and the attitudes ofits 2,800 employees.
At CalComp, quality boils down to pleasing customers with gracefully built, innovative products that work from the start, rarely break down, competitively priced and are upgraded faster than the other competitors.
"We built a manufacturing system that improves every day," said Bernard Masson, senior vice president ofthe plotter division. "The product we build tomorrow will be better than the ones we build today."
In the early 1970s and 1980s, CalComp's manufacturing process was broken. Product design and manufacturing weren't coordinated. The company stockpiled parts and the plotter division alone had more than 650 suppliers. A plotter was only tested for imperfections after it was made.
Steps CalComp took to apply total quality management program:
1. CalComp embraced the teachings of quality experts such as W. Edwards Deming and Richard J. Schonberger, focusing first on the factory.
2. In the beginning, changes were simple, such as writing down the steps it took to assemble a plotter Next, assembly workers were taught quality principles, given a say in how things were done and encouraged to catch mistakes on the line.
3. Instead of stockpiling parts, CalComp cut inventories to the bare minimum and now takes delivery of just enough parts for the next week's work. Some suppliers even deliver parts on a daily basis.
4. CalComp put strict quality controls on suppliers and reduced its vendors in the plotter division to about 180. By keeping inventories down, CalComp cut its overhead costs. It also can avoid writing off obsolete parts should demand shift suddenly and can direct energies to new products more quickly.
5. Readjusting attitudes toward work was the most important part of the jump to quality. Today, front-line workers are treated with as much respect as executives.
V. QUALITY CONTROL AND COSTS OF QUALITY
· Quality control
The purpose of quality control is to assure that processes are performing in an acceptable manner. Companies accomplish this by monitoring process output using many techniques:
1. Inspection:
Is an appraisal activity that compares goods or services to a standard. Inspection can occur at three points: before production, during production, and after production. The logic of checking conformance before production is to make sure that inputs are acceptable. The logic of checking conformance during production is to make sure that the conversion of inputs into outputs is proceeding in an acceptable manner. The logic of checking conformance of output is to make a final verification of conformance before passing goods on to customers.
2. Statistical process control:
Managers use statistical process control to evaluate the output of a process to determine its acceptability. To do this, they take periodic samples from the process and compare them with a predetermined standard. If the sample results are not acceptable, they stop the process and take corrective action. If the sample results are acceptable, they allow the process to continue.
· Cost of quality:
A company may have a product with a high quality design that uses high quality components, but if the product is poorly assembled or has other defects, the company will have high warranty repair costs and dissatisfied customers. People who are dissatisfied with a product are unlikely to buy the product again. They are also likely to tell others about their bad experiences. This is the worst possible sort of advertising. To prevent such problems, companies have been expending a great effort to reduce defects. The objective is to have high quality of conformance. A product that meets or exceeds its design specifications and is free of defects that degrade its performance is said to have high quality of conformance.
Preventing, detecting, and dealing with defects causes costs that are called quality costs.The use of the term quality cost is confusing to some people. It does not refer to costs such as using a higher grade raw material to produce a product. Instead, the term quality cost refers to all of the costs that are incurred to prevent defects or that result from defects in products.
Quality costs can be broken down into four broad groups. Two of these groups- known as prevention costs and appraisal costs- are incurred in an effort to keep defective products from falling into the hands of customers. The other two groups of costs- known as internal failure costs and external failure costs- are incurred because defects are produced despite efforts to prevent them.
1. Costs of Prevention:
Generally, the most effective way to manage quality costs is to avoid having defects in the first place. It is much less costly to prevent a problem from ever happening than it is to find and correct the problem after it has occurred. Prevention costs support activities whose purpose is to reduce the number of defects. Companies employ many techniques to prevent defects including statistical process control, quality engineering, training, and a variety of tools from TQM.
2. Costs of Appraisal:
Any defective parts and products should be caught as early as sometimes called inspection costs, are incurred to identify defective products before the products are shipped to customers. Unfortunately, performing appraisal activities does not keep defects from happening again, and most managers now realize that maintaining an army of inspectors is a costly approach to quality control. Therefore, each employee should his or her own quality control person rather than relying on inspectors to get defects out.
3. Costs of Internal Failure:
Failure costs are incurred when a product fails to conform to its design specifications. Failure costs can be either internal or external. Internal failure costs result from identifying defects before they are shipped to customers. Theses costs include scrap, rejected products, reworking of defective units, and downtime caused by quality problems. The more effective a company’s appraisal activities, the greater the chance of catching defects internally and the greater the level of internal failure costs. This is the price that is paid to avoid incurring external failure costs, which can be devastating.
4. Costs of External Failure:
These costs result when a defective product is delivered to a customer. Such costs include warranty repairs and replacements, product recalls, liability arising from a reputation for poor quality. Such costs can decimate profits.
How A Company Reduces Its Total Quality Cost?
The answer lies in how the quality costs are distributed. Refer to the following graph, which shows total quality costs as a function of the quality of conformance.
The graph shows that when the quality of conformance is low, total quality cost is high and that most of this cost consists of cost of internal and external failure. A low quality of conformance means that a high percentage of units are defective and hence the company must incur high failure costs. However, as a company spends more and more on prevention and appraisal, the percentage of defective units drops. This results in lower internal and external failure costs. Ordinarily, total quality cost drops rapidly as the quality of conformance increases. Thus, a company can reduce its total quality cost by focusing its efforts on prevention and appraisal.
As a company’s quality program becomes more refined and as its failure costs begin to fall, prevention activities usually become more effective than appraisal activities. Appraisal can only find defects, whereas prevention can eliminate them. The best way to prevent defects from happening is to design processes that reduce the likelihood of defects and to continually monitor processes using statistical process control methods.
As an initial step in quality improvement programs, companies often construct a quality cost report that provides an estimate of the financial consequences of the company’s current level of defects.
A typical quality cost report is shown as follows:
Several things should be noted from the data in the report:
Ø First, Ventura Company’s quality costs are poorly distributed in both years, with most of the costs being traceable to either internal failure or external failure. The external failure costs are particularly high in year 1 in comparison to other costs.
Ø Second, note that the company increased its spending on prevention and appraisal activities in year 2. As a result, internal failure costs went up in that year, but external failure costs dropped sharply. Because of the increase in the appraisal activity in year 2, more defects were caught inside the company before they were shipped to customers. This resulted in more cost for scrap, rework, and so forth, but saved huge amounts in warranty repairs, warranty replacements, and other external failure costs.
Ø Third, note that as a result of greater emphasis on prevention and appraisal, total quality cost decreased in year 2. As continued emphasis is placed on prevention and appraisal in future years, total quality cost should continue to decrease. That is, future increases in prevention and appraisal costs should be more than offset by decreases in failure costs. Moreover, appraisal costs should also decrease as more effort is placed in prevention.
As a supplement to the quality cost report, companies frequently prepare quality cost information in graphic form as follows:
Data in graphic form help managers to see trends more clearly and to see the magnitude of the various costs in relation to each other. Such graphs are easily prepared using computer graphics and spreadsheet applications.
A quality cost report has several uses:
1. Quality cost information helps managers see the financial significance of defects.
2. Quality cost information helps managers identify the relative importance of the quality problems faced by their companies. And thus, managers will have better idea of where to focus their efforts.
3. Quality cost information helps managers see whether their quality costs are poorly distributed.
VI. OBSTACLES TO IMPLEMENTING TQM:
Companies have had varying success in implementing TQM. Some have been quite successful, but others have struggled. Part of the difficulty may be with the process by which it is implemented rather than with the principles of TQM. Among the factors are:
1. Lack of a companywide definition of quality: Efforts aren't coordinated; people are working at cross-purposes, addressing different issues, using different measures of success.
2. Lack of a strategic plan for change: Lessens the chance of success; ignores need to address strategic implications of change.
3. Lack of a customer focus: Without this, there is a risk of customer dissatisfaction.
4. Poor interorganizational communication: The left hand doesn't know what the right hand is doing; frustration, waste, and confusion results.
5. Lack of employee empowerment: Gives the impression of not trusting employees to fix problems; adds "red tape" and delays solutions.
6. View of quality as a "quick fix": Needs to be a long-term, continuing effort.
7. Emphasis on short-term financial results: "Duct-tape" solutions often treat symptoms; spend a little now-a lot more later.
8. Lack of strong motivation: Managers need to make sure employees are motivated.
9. Don't add more work without adding additional resources.
10. Lack of leadership, Managers need to be leaders.
This list of potential problems can serve as a guideline for organizations helping in the implementation of TQM or as a checklist for those having trouble in implementing it.
VII. QUALITY AWARDS
Quality awards have been established to generate awareness and interest in quality. The Malcolm Baldrige Award and the Deming Prize are two well-known awards given annually to firms that have integrated quality management in their operations.
· The Baldrige award:
In 1987, Congress passed the Malcolm Baldrige National Quality Improvement Act. This legislation was designed to inspire increased efforts on the part of businesses located in the United States to improve the quality of their products and services. Named after the late Malcolm Baldrige, an industrialist and former secretary of commerce, the annual Baldrige Award is administered by the National Institute of Standards and Technology.
The purpose of the award competition is to stimulate efforts to improve quality, to recognize quality achievements of U.S. companies, and to publicize successful programs. A maximum of two awards are given annually in each of three categories: large manufacturer, large service organization, and small business (500 or fewer employees).
Businesses that compete for the award are required to submit an application of no more than 75 pages documenting their quality systems. Those who pass an initial screening must undergo a more intense evaluation by examiners from government and. industry, and consultants. The examination includes an on-site visit. Applicants are evaluated in seven main areas: leadership, information and analysis, strategic planning, human resource management, quality assurance of products and services, quality results, and customer satisfaction.
Examiners check the extent to which top management incorporates quality values in daily management; whether products or services are at least as good as those of competitors; whether employees receive training in quality techniques; if the business works with suppliers to improve quality; and if customers are satisfied. All applicants receive a written summary of the strengths and weaknesses of their quality management and suggestions for improvement.
The Baldrige Award has been both praised and criticized. Among the praises are: It has raised the quality-consciousness of U.S. businesses, those who compete find the process motivating, and some contenders have made giant strides in quality and competitiveness. Among the criticisms: The award process involves tremendous amounts of time and effort for both employees and top management at substantial cost (sometimes millions of dollars); applicants nominate themselves (as opposed to being nominated by satisfied customers): winning does not mean that a business has top-quality products or has solved all of its quality problems; and winning may be followed by relaxation under the belief that "we have it made." Some critics say that the number of awards (a maximum of six per year) is too few, considering the large number of organizations that are potential candidates.
· The Deming prize:
The Deming Prize, named in honor of the late W. Edwards Deming, is Japan's highly popular award recognizing successful quality efforts. It is given annually to any company that meets the award's standards. Although typically given to Japanese firms, in 1989, Florida Power and Light became the first U.S. company to win the award.
The major focus of the judging is on statistical quality control, making it much narrower in scope than the Baldrige Award, which focuses more on customer satisfaction. Companies that win the Deming Prize tend to have quality programs that are detailed and well-communicated throughout the company. Their quality improvement programs also reflect the involvement of senior management and employees, customer satisfaction, and training.
Japan also has an additional award, the Japan Prize, fashioned roughly after the Baldrige Award.
IX. QUALITY CERTIFICATIONS:
Many firms that do business internationally recognize the importance of quality certification.
· ISO 9000
The purpose of the International Organization for Standardization (ISO) is to promote worldwide standards that will improve operating efficiency, improve productivity, and reduce costs.
The ISO 9000 series is a set of international standards on quality management and quality assurance. These standards are critical for companies doing business internationally, particularly in Europe. They must go through a process that involves documenting quality procedures and on-site assessment. The process often takes 12 to 18 months. With certification comes registration in an ISO directory that companies seeking suppliers can refer to for a list of certified companies. They are generally given preference over unregistered companies. More than 40,000 companies are registered worldwide; three-fourths of them are located in Europe.
A key requirement for registration is that a company review, refine, map functions such as process control, inspection, purchasing, training, packaging, and delivery. Similar to the Baldrige Award, the review process involves considerable self-appraisal, resulting in problem identification and improvement. Unlike the Baldrige Award, registered companies face an ongoing series of audits, and they must be reregistered every three years.
There are essentially seven standards associated with the ISO 9000 series are:
ISO 9000
Helps companies determine which standard of ISO 9001, 9002, and 9003 applies.
ISO 9001
Outlines guidelines for companies that engage in design, development, production, installation, and servicing of products or service.
ISO 9002
Similar to ISO 9001, but excludes companies engaged in design and development.
ISO 9003
Covers companies engaged in final inspection and testing.
ISO 9004
The guidelines for applying the elements of the Quality Management System.
ISO 10011
Quality system auditing guide.
ISO 10013
Quality manual development guide.
In addition to the obvious benefits of certification for companies who want to deal with the European Union, the ISO 9000 certification and registration process is particularly helpful for companies that do not currently have a quality management system; it provides guidelines for establishing the system and making it effective.
Critics complain that the emphasis is on documentation and procedures rather than quality of output.
Eight quality management principles formed the basis of the new standards
Documentation requirements reduced
Measuring and monitoring of customer satisfaction required
Emphasis on continual improvement
The quality management principles are:
1. A systems approach to management.
2. Continual improvement.
3. Factual approach to decision making.
4. Mutually beneficial supplier relationships.
5. Customer focus.
6. Leadership.
7. People involvement.
8. Process approach.
· ISO 14000
The International Organization for Standardization introduced a set of environmental standards in 1996: ISO 14000 is intended to assess a company's performance in terms of environmental responsibility. Initially, ISO 14000 began as a program of voluntary guidelines and certification. The standards for certification bear upon three major areas:
Management systems: Systemsdevelopment and integration of environmental responsibilities into business planning.
Operations: Consumptionof natural resources and energy.
Environmental systems: Measuring, assessing, and managing emissions, effluents, and other waste streams.
Proponents hope that the ISO 14000 will receive the same high interest that the ISO 9000 standards have in the international business community, and will result in businesses giving more attention to environmental responsibilities.
X. CONCLUSION:
A business organisation is no more alone in the market! Infact, for an organisation to survive in the market, it must stand the strong competition faced from similar organisations. And thus, each organisation must be able to understand, learn, use, and implement quality programs effectively; inorder to be able to enhance and improve the organisation as a whole to be competitive. Finally, for an organisation to implement a successful quality program, it must conform to the three main quality approach philosiphies; continuous improvement, involvement of everyone, and a goal of customer satisfaction.
(TQM)
Outline
I. Introduction:
II. History and Backgrounds:
§ The evolution of quality management
§ Quality pioneers
III. Total Quality Management: The Basics,
§ The dimension of quality
§ Approach of TQM
§ Elements of TQM
IV. The influence of TQM:
§ The consequences of poor quality
§ Benefits of good quality
§ Responsibility of quality management
§ Example of success
V. Quality control and costs of quality:
§ Quality control
a. Inspection
b. Statistical process control
§ The costs of quality
a. Costs of internal failure
b. Costs of external failure
c. Costs of appraisal
d. Costs of prevention
VI. Obstacles to Implementing TQM
VII. Quality Awards:
§ The Baldrige award
§ The Deming prize
VIII. Quality certifications:
IX. Conclusion:
X. Sources and references:
I. INTRODUCTION:
A primary role of management is to lead an organization in its daily operation and to maintain it as a growing entity into the future. Quality has become an important factor in both of these objectives.
Broadly defined, quality refers to the ability of a product or service to consistently meet or exceed customer expectations. Prior to the increased level of Japanese competition in the U.S. marketplace in the 1970s and 1980s, quality was not uppermost in the minds of U.S. business organizations. They tended to focus on cost and productivity rather than on quality. It wasn’t that quality was unimportant, it just wasn’t very important.
Partly because of this thinking, foreign companies, many of them Japanese, captured a significant share of the U.S. market. In the automotive sector, leading Japanese manufacturers, Honda, Nissan, and Toyota, became major players in the auto sales market in the United States. They have built a reputation for quality and reliability in their cars.
At this point, many U.S. companies changed their views about quality. Providing high quality was recognized as a key element for success. Most large corporations taking that path have documented their success. First, they survived the strong overseas competition that had set the quality levels and now have regained some of their former markets.
The term total quality management (TQM) refers to a quest for quality in an organization. There are three philosophies in this approach. One is continuous improvement; the second is the involvement of everyone in the organization; and the third is a goal of customer satisfaction, which means meeting or exceeding customer expectations. TQM expands the traditional view of quality –looking only at the quality of the final product or services- to looking at the quality of every aspect of the process that produces the product or service.
II. HISTORY AND BACKGROUD:
· The evolution of quality management
Prior to the Industrial Revolution, skilled craftsmen performed all stages of production. Pride of workmanship and reputation often provided the motivation to see that a job was done right.
A division of labor accompanied the Industrial Revolution; each worker was then responsible for only a small portion of each product. Pride of workmanship became less meaningful because workers could no longer identify readily with the final product. The responsibility for quality control shifted to the foremen. Inspection was either nonexistent or haphazard, although in some instances 100 percent inspection was used.
World War II caused a dramatic increase in emphasis on quality control. About the same time, professional quality organizations were emerging throughout the country. One of these organizations was the American Society for Quality Control (ASQC, now known as ASQ). Over the years, the society has promoted quality with its publication, seminars and conferences, and training programs.
In the mid-1950s, Armand Feigenbaum proposed total quality control, which enlarged the concept of quality efforts from its primary focus on manufacturing to also include product design and incoming raw materials.
In the 1970s, quality assurance methods gained increasing emphasis in services including government operations, health care, banking, and the travel industry.
The evolution of quality took a dramatic shift from quality assurance to a strategic approach to quality in the late 1970s. Up until that time, the main emphasis had been on finding and correcting defective products before they reached the market. It was still a reactive approach. The strategic approach is proactive, focusing on preventing mistakes from occurring altogether.
· Quality pioneers
A core of quality experts has shaped modern quality practices. Among the most famous of this core of pioneers are Deming, Juran, Ishikawa, and Crosby. Together, these great thinkers have had a tremendous impact on the management and control of quality, and the way companies operate.
W. EDWARDS DEMING
Deming went to Japan after World War II to assist the Japanese in improving quality and productivity. The Union of Japanese Scientists, who had invited Deming were so impressed that in 1951, after a series of lectures presented by Deming, they established the Deming Prize, which is awarded annually to firms that distinguish themselves with quality management programs.
Deming compiled a famous list of 14 points he believed were the prescription needed to achieve quality in an organization. His message is that the cause of in- efficiency and poor quality is the system, not the employees. Deming felt that it was management's responsibility to correct the system to achieve the desired results.
JOSEPH M. JURAN
Juran, like Deming, taught Japanese manufactures how to improve the quality of their goods, and he, too, can be regarded as a major force in Japan’s success in quality. Juran’s approach to quality may be the closest to Deming’s although his approach differs on the importance of statistical methods and what an organization must do to achieve quality. Whereas Deming’s work envisioned a “transformation,” Juran believes that an organization can manage for quality.
Juran describes quality management in terms of a trilogy consisting of quality planning, quality control, and quality improvement. He also credited as one of the first to measure the cost of quality, and he demonstrated the potential for increased profits that would result if the cost of poor quality could be reduced.
PHILIP B. CROSBY
Crosby developed the concept of Zero defects and popularized the phrase “Do it right the first time.” He stressed prevention, and he refused the idea that “there will always be some level of defectives.”
According to Crosby, the costs of poor quality are so great that rather than viewing quality efforts as costs, organizations should view them as a way to reduce costs, because the improvements generated by quality efforts will more than pay for themselves.
KAORU ISHIKAWA
The Japanese expert on quality was strongly influenced by both Deming and Juran, although he made significant contribution of his own to quality management. Among his key contributions were the development of the cause-and-effect diagram (also known as a fishbone diagram) for problem solving and the implantation of quality circles, which involve workers in quality improvement.
He was a strong supporter of the need for companies to have a shared vision in order to unite everyone in the organization in a common goal, and he is widely recognized for his efforts to make quality control “user friendly” for workers.
III. TOTAL QUALITY MANAGEMENT: THE BASICS,
· The dimension of quality:
Quality experts argue that quality can be used in a strategic way to compete effectively. Choosing an appropriate quality strategy depends on understanding the important dimensions of quality. Although they may vary somewhat from product to product, or between a product and a service, generally speaking, the dimensions of quality include:
1. Performance:
Involves a product’s primary operating characteristics
2. Aesthetics:
Refers to how a product looks, feels, sounds, tastes, or smells
3. Special features:
Are supplements to the basic functioning characteristics of the product or service
4. Safety:
Refers to the degree to which a product’s design or operating characteristics conform to pre-established safety standards.
5. Reliability:
Addresses the probability of a product is not working properly or breaking down altogether within a specific period
6. Durability:
Is a measure of how much use a person gets from a product before it deteriorates or breaks down to such a point that replacement makes more sense than continual repair.
7. Perceived quality:
Refers to individuals’ subjective assessments of products or service quality
8. Service after sale:
Handling of complaints or checking on customer satisfaction
These dimensions are further described by the examples presented below:
Dimension
(Product)
Automobile
(Service)
Automobile Repair
1. Performance
Everything works, fit and finish
All work done, at agreed price
2. Aesthetics
Interior design, soft touch
Clean work/ waiting areas
3. Special features
Convenience
Placement of measures and controls
Location, call when ready
High tech
Cellular phone, DVD player
Computer diagnostics
4. Safety
Antilock brakes, airbags
Separate waiting area
5. Reliability
Infrequence of breakdowns
Work done correctly
6. Durability
Useful life in miles, resistance to rust
Work holds up over time
7. Perceived quality
Top-rated car
Award-winning service department
8. Service after sale
Handling of complaints
Handling of complaints
· Approach of TQM:
We can describe the TQM approach as follows:
1. Find out what customers want. This might involve the use of surveys, focus groups, interviews, or some other technique that integrates the customer's voice in the decision- making process. Be sure to include the internal customer (the next person in the process) as well as the external customer (the final customer).
2. Design a product or service that will meet (or exceed) what customers want. Make it easy to use and easy to produce.
3. Design processes that facilitate doing the job right the first time. Determine where mistakes are likely to occur and try to prevent them. When mistakes do occur, find out why so that they are less likely to occur again.
4. Keep track of results, and use them to guide improvement in the system. Never stop trying to improve.
5. Extend these concepts to suppliers and to distribution.
Many companies have successfully implemented TQM programs. Among them are General Electric and Motorola. In fact, competitive pressures and shorter product life cycles are leading a wide variety of companies to undertake TQM-type initiatives. General Electric puts selected employees through a high-level statistical training program. These employees then train others and also serve as consultants.
Successful TQM programs are built through the dedication and combined efforts of everyone in the organization. Top management must be committed and involved. If it isn't, TQM will become just another fad that quickly dies and fades away.
· Elements of TQM:
1. Continuous improvement.
The philosophy that seeks to improve all factors related to the process of converting inputs into outputs on an ongoing basis is called continuous improvement. It covers equipment, methods, materials, and people. Under continuous improvement, the old adage "If it isn’t broken, don't fix it" gets transformed into "Just because it isn't broken doesn't mean it can't be improved."
The concept of continuous improvement was not new, but it did not receive much interest in the United States for a while, even though it originated there. However, many Japanese companies used it for years, and it became a cornerstone of the Japanese approach to production. The Japanese use the term kaizen to refer to continuous improvement. The successes of Japanese companies caused other companies to reexamine many of their approaches. This resulted in a strong interest in the continuous improvement approach.
2. Competitive benchmarking.
This involves identifying other organizations that are the best at something and studying how they do it to learn how to improve your operation. The company need not be in the same line of business. For example, Xerox used the mail- order company L.L. Bean to benchmark order filling.
3. Employee empowerment.
Giving workers the responsibility for improvements and the authority to make changes to accomplish them, provides strong motivation for employees. This puts decision making into the hands of those who are closest to the job and have considerable insight into problems and solutions.
4. Team approach.
The use of teams for problem solving and to achieve consensus takes advantage of group synergy, gets people involved, and promotes a spirit of cooperation and shared values among employees.
5. Decisions based on facts rather than opinions.
Management gathers and analyzes data as a basis for decision making.
6. Knowledge of tools.
Employees and managers are trained in the use of quality tools.
7. Supplier quality.
Suppliers must be included in quality assurance and quality improvement efforts so that their processes are capable of delivering quality parts and materials in a timely manner.
8. Champion.
A TQM champion's job is to promote the value and importance of TQM principles throughout the company.
9. Quality at the source.
Quality at the source refers to the philosophy of making each worker responsible for the quality of his or her work. This incorporates the notions of "do it right" and "if it isn't right, fix it." Workers are expected to provide goods or service that meet specifications and to find and correct mistakes that occur. In effect, each worker becomes a quality inspector for his or her work. When the work is passed on to the next operation in the process (the internal customer) or, if that step is the last in the process, to the ultimate customer, the worker is "certifying" that it meets quality standards.
This accomplishes a number of things: (1) it places direct responsibility for quality on the person(s) who directly affect it; (2) it removes the adversarial relationship that often exists between quality control inspectors and production workers; and (3) it motivates workers by giving them control over their work as well as pride in it.
Sign on the wall of a company Cafeteria:
Sometimes they can be cranky, and it may sometimes seem like they expect too much, but they do provide our paychecks and our benefits, such as sick leave, maternity leave, health insurance, and three weeks of paid vacation time each year. And what about all the new equipment we've been getting lately? They pay for that, too. And a lot more. So the next time you see them, give them a great big smile to show how much you appreciate them-our customers!
It would be incorrect to think of TQM as merely a collection of techniques. Rather, TQM reflects a whole new attitude towards quality. It is about the culture of an organization. To truly reap the benefits of TQM, the culture of an organization must change.
Table below illustrates the differences between cultures of a TQM organization and a more traditional organization.
Aspect
Traditional
TQM
Overall mission
Maximize return on investment
Meet or exceed customer satisfaction
Objectives
Emphasis on short term
Balance of long term and short term
Management
Not always open; sometimes inconsistent objectives
Open; encourage employee input; consistent objectives
Role of manager
Issue orders; enforce
Coach, remove barriers, built trust
Customer requirements
Not highest priority; may be unclear
Highest priority; important to identify and understand
Problems
Assign blame; punish
Identify and resolve
Problem solving
Not systematic; individuals
Systematic; teams
Improvement
Irregular
Continuous
Suppliers
Adversarial
Partners
Jobs
Narrow, specialized; much individual effort
Broad, more general; much team effort
Focus
Product oriented
Process oriented
IV. THE INFLUENCE OF TQM:
· The consequences of poor quality
It is important for management to recognize the different ways that the quality of a firm's products or services can affect the organization and to take these into account in developing and maintaining a quality assurance program. Some of the major ways that quality affects an organization are:
1. Loss of business
2. Liability
3. Productivity
4. Costs
Poor designs or defective products or services can result in loss of business. Failure to devote adequate attention to quality can damage a profit-oriented organization's image and lead to a decreased share of the market.
Organizations must pay special attention to their potential liability due to damages or injuries resulting from either faulty design or poor workmanship. This applies to both products and services. Thus, a poorly designed steering arm on a car might cause the driver to lose control of the car, but so could improper assembly of the steering arm. However, the net result is the same. Liability for poor quality has been well established in the courts. An organization's liability costs can often be substantial, especially if large numbers of items are involved, as in the automobile industry, or if potentially widespread injury or damage is involved.
Productivity and quality are often closely related. Poor quality can adversely affect productivity during the manufacturing process if parts are defective and have to be reworked or if an assembler has to try a number of parts before finding one that fits properly. Also, poor quality in tools and equipment can lead to injuries and defective output, which must be reworked or scrapped, thereby reducing the amount of usable output for a given amount of input. Similarly, poor service can mean having to redo the service and reduce service productivity. Conversely, improving and maintaining good quality can have a positive effect on productivity.
· Benefit of good quality
Business organizations with good or excellent quality typically benefit in a variety of ways: an enhanced reputation for quality, an increased market share, greater customer loyalty, lower liability costs, fewer production or service problems, which yields higher productivity, fewer complaints from customers, lower production costs, and higher profits.
· Responsibility for quality
It is true that all members of an organization have some responsibility for quality, but certain areas of the organization are involved in activities that make them key areas of responsibility. They include top management, design, procurement, production/operations, quality assurance, packaging and shipping, marketing and sales, and customer service.
Top management. Top management has the ultimate responsibility for quality. While establishing strategies for quality, top management must institute programs to improve quality; guide, direct, and motivate managers and workers; and set an example by being involved in quality initiatives. Examples include taking training in quality, issuing periodic reports on quality, and attending meetings on quality.
Design. Quality products and services begin with design. This includes not only features of the product or service; it also includes attention to the processes that will be required to produce the products and/or the services that will be required to deliver the service to customers.
Procurement. The procurement department has responsibility for obtaining goods and services that will not detract from the quality of the organization's goods and services.
Production/operations. Production/operations has responsibility to ensure that processes yield products and services that conform to design specifications. Monitoring processes and finding and correcting root causes of problems are important aspects of this responsibility.
Quality assurance. Quality assurance is responsible for gathering and analyzing data on problems and working with operations to solve problems.
Packaging and shipping. This department must ensure that goods are not damaged in transit, that packages are clearly labeled, that instructions are included, that all parts are included, and shipping occurs in a timely manner.
Marketing and sales. This department has the responsibility to determine customer needs and to communicate them to appropriate areas of the organization. In addition, it has the responsibility to report any problems with products or services.
Customer service. Customer service is often the first department to learn of problems. It has the responsibility to communicate that information to appropriate departments, deal in a reasonable manner with customers, work to resolve problems, and follow up to confirm that the situation has been effectively remedied.
· Example of success
CalComp: Disaster becomes success
Flashback to the early 1980s. The only thing world-class about CalComp was the mess it was in. The company that practically invented the computer plotter-a device engineers use to print oversized schematics-had become inattentive and lazy.
Every last plotter that rolled off the assembly line didn't work well enough to ship without some reenergizing. A team offield technicians was needed to make house calls on installed machines that malfunctioned every few weeks. Competitors such as Hewlett-Packard jumped into the breach, stealing dissatisfied customers.
Flash forward to the CalComp ofthe 1990s, recognized as a leader in world class manufacturing. No more mass assembly lines. No more field technicians.
The difference between the early 1980s and the 1990s?
Quality.
Specifically, a quality program leaded by CalComp President William Conlin that saturated every square inch ofthe company and the attitudes ofits 2,800 employees.
At CalComp, quality boils down to pleasing customers with gracefully built, innovative products that work from the start, rarely break down, competitively priced and are upgraded faster than the other competitors.
"We built a manufacturing system that improves every day," said Bernard Masson, senior vice president ofthe plotter division. "The product we build tomorrow will be better than the ones we build today."
In the early 1970s and 1980s, CalComp's manufacturing process was broken. Product design and manufacturing weren't coordinated. The company stockpiled parts and the plotter division alone had more than 650 suppliers. A plotter was only tested for imperfections after it was made.
Steps CalComp took to apply total quality management program:
1. CalComp embraced the teachings of quality experts such as W. Edwards Deming and Richard J. Schonberger, focusing first on the factory.
2. In the beginning, changes were simple, such as writing down the steps it took to assemble a plotter Next, assembly workers were taught quality principles, given a say in how things were done and encouraged to catch mistakes on the line.
3. Instead of stockpiling parts, CalComp cut inventories to the bare minimum and now takes delivery of just enough parts for the next week's work. Some suppliers even deliver parts on a daily basis.
4. CalComp put strict quality controls on suppliers and reduced its vendors in the plotter division to about 180. By keeping inventories down, CalComp cut its overhead costs. It also can avoid writing off obsolete parts should demand shift suddenly and can direct energies to new products more quickly.
5. Readjusting attitudes toward work was the most important part of the jump to quality. Today, front-line workers are treated with as much respect as executives.
V. QUALITY CONTROL AND COSTS OF QUALITY
· Quality control
The purpose of quality control is to assure that processes are performing in an acceptable manner. Companies accomplish this by monitoring process output using many techniques:
1. Inspection:
Is an appraisal activity that compares goods or services to a standard. Inspection can occur at three points: before production, during production, and after production. The logic of checking conformance before production is to make sure that inputs are acceptable. The logic of checking conformance during production is to make sure that the conversion of inputs into outputs is proceeding in an acceptable manner. The logic of checking conformance of output is to make a final verification of conformance before passing goods on to customers.
2. Statistical process control:
Managers use statistical process control to evaluate the output of a process to determine its acceptability. To do this, they take periodic samples from the process and compare them with a predetermined standard. If the sample results are not acceptable, they stop the process and take corrective action. If the sample results are acceptable, they allow the process to continue.
· Cost of quality:
A company may have a product with a high quality design that uses high quality components, but if the product is poorly assembled or has other defects, the company will have high warranty repair costs and dissatisfied customers. People who are dissatisfied with a product are unlikely to buy the product again. They are also likely to tell others about their bad experiences. This is the worst possible sort of advertising. To prevent such problems, companies have been expending a great effort to reduce defects. The objective is to have high quality of conformance. A product that meets or exceeds its design specifications and is free of defects that degrade its performance is said to have high quality of conformance.
Preventing, detecting, and dealing with defects causes costs that are called quality costs.The use of the term quality cost is confusing to some people. It does not refer to costs such as using a higher grade raw material to produce a product. Instead, the term quality cost refers to all of the costs that are incurred to prevent defects or that result from defects in products.
Quality costs can be broken down into four broad groups. Two of these groups- known as prevention costs and appraisal costs- are incurred in an effort to keep defective products from falling into the hands of customers. The other two groups of costs- known as internal failure costs and external failure costs- are incurred because defects are produced despite efforts to prevent them.
1. Costs of Prevention:
Generally, the most effective way to manage quality costs is to avoid having defects in the first place. It is much less costly to prevent a problem from ever happening than it is to find and correct the problem after it has occurred. Prevention costs support activities whose purpose is to reduce the number of defects. Companies employ many techniques to prevent defects including statistical process control, quality engineering, training, and a variety of tools from TQM.
2. Costs of Appraisal:
Any defective parts and products should be caught as early as sometimes called inspection costs, are incurred to identify defective products before the products are shipped to customers. Unfortunately, performing appraisal activities does not keep defects from happening again, and most managers now realize that maintaining an army of inspectors is a costly approach to quality control. Therefore, each employee should his or her own quality control person rather than relying on inspectors to get defects out.
3. Costs of Internal Failure:
Failure costs are incurred when a product fails to conform to its design specifications. Failure costs can be either internal or external. Internal failure costs result from identifying defects before they are shipped to customers. Theses costs include scrap, rejected products, reworking of defective units, and downtime caused by quality problems. The more effective a company’s appraisal activities, the greater the chance of catching defects internally and the greater the level of internal failure costs. This is the price that is paid to avoid incurring external failure costs, which can be devastating.
4. Costs of External Failure:
These costs result when a defective product is delivered to a customer. Such costs include warranty repairs and replacements, product recalls, liability arising from a reputation for poor quality. Such costs can decimate profits.
How A Company Reduces Its Total Quality Cost?
The answer lies in how the quality costs are distributed. Refer to the following graph, which shows total quality costs as a function of the quality of conformance.
The graph shows that when the quality of conformance is low, total quality cost is high and that most of this cost consists of cost of internal and external failure. A low quality of conformance means that a high percentage of units are defective and hence the company must incur high failure costs. However, as a company spends more and more on prevention and appraisal, the percentage of defective units drops. This results in lower internal and external failure costs. Ordinarily, total quality cost drops rapidly as the quality of conformance increases. Thus, a company can reduce its total quality cost by focusing its efforts on prevention and appraisal.
As a company’s quality program becomes more refined and as its failure costs begin to fall, prevention activities usually become more effective than appraisal activities. Appraisal can only find defects, whereas prevention can eliminate them. The best way to prevent defects from happening is to design processes that reduce the likelihood of defects and to continually monitor processes using statistical process control methods.
As an initial step in quality improvement programs, companies often construct a quality cost report that provides an estimate of the financial consequences of the company’s current level of defects.
A typical quality cost report is shown as follows:
Several things should be noted from the data in the report:
Ø First, Ventura Company’s quality costs are poorly distributed in both years, with most of the costs being traceable to either internal failure or external failure. The external failure costs are particularly high in year 1 in comparison to other costs.
Ø Second, note that the company increased its spending on prevention and appraisal activities in year 2. As a result, internal failure costs went up in that year, but external failure costs dropped sharply. Because of the increase in the appraisal activity in year 2, more defects were caught inside the company before they were shipped to customers. This resulted in more cost for scrap, rework, and so forth, but saved huge amounts in warranty repairs, warranty replacements, and other external failure costs.
Ø Third, note that as a result of greater emphasis on prevention and appraisal, total quality cost decreased in year 2. As continued emphasis is placed on prevention and appraisal in future years, total quality cost should continue to decrease. That is, future increases in prevention and appraisal costs should be more than offset by decreases in failure costs. Moreover, appraisal costs should also decrease as more effort is placed in prevention.
As a supplement to the quality cost report, companies frequently prepare quality cost information in graphic form as follows:
Data in graphic form help managers to see trends more clearly and to see the magnitude of the various costs in relation to each other. Such graphs are easily prepared using computer graphics and spreadsheet applications.
A quality cost report has several uses:
1. Quality cost information helps managers see the financial significance of defects.
2. Quality cost information helps managers identify the relative importance of the quality problems faced by their companies. And thus, managers will have better idea of where to focus their efforts.
3. Quality cost information helps managers see whether their quality costs are poorly distributed.
VI. OBSTACLES TO IMPLEMENTING TQM:
Companies have had varying success in implementing TQM. Some have been quite successful, but others have struggled. Part of the difficulty may be with the process by which it is implemented rather than with the principles of TQM. Among the factors are:
1. Lack of a companywide definition of quality: Efforts aren't coordinated; people are working at cross-purposes, addressing different issues, using different measures of success.
2. Lack of a strategic plan for change: Lessens the chance of success; ignores need to address strategic implications of change.
3. Lack of a customer focus: Without this, there is a risk of customer dissatisfaction.
4. Poor interorganizational communication: The left hand doesn't know what the right hand is doing; frustration, waste, and confusion results.
5. Lack of employee empowerment: Gives the impression of not trusting employees to fix problems; adds "red tape" and delays solutions.
6. View of quality as a "quick fix": Needs to be a long-term, continuing effort.
7. Emphasis on short-term financial results: "Duct-tape" solutions often treat symptoms; spend a little now-a lot more later.
8. Lack of strong motivation: Managers need to make sure employees are motivated.
9. Don't add more work without adding additional resources.
10. Lack of leadership, Managers need to be leaders.
This list of potential problems can serve as a guideline for organizations helping in the implementation of TQM or as a checklist for those having trouble in implementing it.
VII. QUALITY AWARDS
Quality awards have been established to generate awareness and interest in quality. The Malcolm Baldrige Award and the Deming Prize are two well-known awards given annually to firms that have integrated quality management in their operations.
· The Baldrige award:
In 1987, Congress passed the Malcolm Baldrige National Quality Improvement Act. This legislation was designed to inspire increased efforts on the part of businesses located in the United States to improve the quality of their products and services. Named after the late Malcolm Baldrige, an industrialist and former secretary of commerce, the annual Baldrige Award is administered by the National Institute of Standards and Technology.
The purpose of the award competition is to stimulate efforts to improve quality, to recognize quality achievements of U.S. companies, and to publicize successful programs. A maximum of two awards are given annually in each of three categories: large manufacturer, large service organization, and small business (500 or fewer employees).
Businesses that compete for the award are required to submit an application of no more than 75 pages documenting their quality systems. Those who pass an initial screening must undergo a more intense evaluation by examiners from government and. industry, and consultants. The examination includes an on-site visit. Applicants are evaluated in seven main areas: leadership, information and analysis, strategic planning, human resource management, quality assurance of products and services, quality results, and customer satisfaction.
Examiners check the extent to which top management incorporates quality values in daily management; whether products or services are at least as good as those of competitors; whether employees receive training in quality techniques; if the business works with suppliers to improve quality; and if customers are satisfied. All applicants receive a written summary of the strengths and weaknesses of their quality management and suggestions for improvement.
The Baldrige Award has been both praised and criticized. Among the praises are: It has raised the quality-consciousness of U.S. businesses, those who compete find the process motivating, and some contenders have made giant strides in quality and competitiveness. Among the criticisms: The award process involves tremendous amounts of time and effort for both employees and top management at substantial cost (sometimes millions of dollars); applicants nominate themselves (as opposed to being nominated by satisfied customers): winning does not mean that a business has top-quality products or has solved all of its quality problems; and winning may be followed by relaxation under the belief that "we have it made." Some critics say that the number of awards (a maximum of six per year) is too few, considering the large number of organizations that are potential candidates.
· The Deming prize:
The Deming Prize, named in honor of the late W. Edwards Deming, is Japan's highly popular award recognizing successful quality efforts. It is given annually to any company that meets the award's standards. Although typically given to Japanese firms, in 1989, Florida Power and Light became the first U.S. company to win the award.
The major focus of the judging is on statistical quality control, making it much narrower in scope than the Baldrige Award, which focuses more on customer satisfaction. Companies that win the Deming Prize tend to have quality programs that are detailed and well-communicated throughout the company. Their quality improvement programs also reflect the involvement of senior management and employees, customer satisfaction, and training.
Japan also has an additional award, the Japan Prize, fashioned roughly after the Baldrige Award.
IX. QUALITY CERTIFICATIONS:
Many firms that do business internationally recognize the importance of quality certification.
· ISO 9000
The purpose of the International Organization for Standardization (ISO) is to promote worldwide standards that will improve operating efficiency, improve productivity, and reduce costs.
The ISO 9000 series is a set of international standards on quality management and quality assurance. These standards are critical for companies doing business internationally, particularly in Europe. They must go through a process that involves documenting quality procedures and on-site assessment. The process often takes 12 to 18 months. With certification comes registration in an ISO directory that companies seeking suppliers can refer to for a list of certified companies. They are generally given preference over unregistered companies. More than 40,000 companies are registered worldwide; three-fourths of them are located in Europe.
A key requirement for registration is that a company review, refine, map functions such as process control, inspection, purchasing, training, packaging, and delivery. Similar to the Baldrige Award, the review process involves considerable self-appraisal, resulting in problem identification and improvement. Unlike the Baldrige Award, registered companies face an ongoing series of audits, and they must be reregistered every three years.
There are essentially seven standards associated with the ISO 9000 series are:
ISO 9000
Helps companies determine which standard of ISO 9001, 9002, and 9003 applies.
ISO 9001
Outlines guidelines for companies that engage in design, development, production, installation, and servicing of products or service.
ISO 9002
Similar to ISO 9001, but excludes companies engaged in design and development.
ISO 9003
Covers companies engaged in final inspection and testing.
ISO 9004
The guidelines for applying the elements of the Quality Management System.
ISO 10011
Quality system auditing guide.
ISO 10013
Quality manual development guide.
In addition to the obvious benefits of certification for companies who want to deal with the European Union, the ISO 9000 certification and registration process is particularly helpful for companies that do not currently have a quality management system; it provides guidelines for establishing the system and making it effective.
Critics complain that the emphasis is on documentation and procedures rather than quality of output.
Eight quality management principles formed the basis of the new standards
Documentation requirements reduced
Measuring and monitoring of customer satisfaction required
Emphasis on continual improvement
The quality management principles are:
1. A systems approach to management.
2. Continual improvement.
3. Factual approach to decision making.
4. Mutually beneficial supplier relationships.
5. Customer focus.
6. Leadership.
7. People involvement.
8. Process approach.
· ISO 14000
The International Organization for Standardization introduced a set of environmental standards in 1996: ISO 14000 is intended to assess a company's performance in terms of environmental responsibility. Initially, ISO 14000 began as a program of voluntary guidelines and certification. The standards for certification bear upon three major areas:
Management systems: Systemsdevelopment and integration of environmental responsibilities into business planning.
Operations: Consumptionof natural resources and energy.
Environmental systems: Measuring, assessing, and managing emissions, effluents, and other waste streams.
Proponents hope that the ISO 14000 will receive the same high interest that the ISO 9000 standards have in the international business community, and will result in businesses giving more attention to environmental responsibilities.
X. CONCLUSION:
A business organisation is no more alone in the market! Infact, for an organisation to survive in the market, it must stand the strong competition faced from similar organisations. And thus, each organisation must be able to understand, learn, use, and implement quality programs effectively; inorder to be able to enhance and improve the organisation as a whole to be competitive. Finally, for an organisation to implement a successful quality program, it must conform to the three main quality approach philosiphies; continuous improvement, involvement of everyone, and a goal of customer satisfaction.