Qmintro

QUALITY MANAGEMENT

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INTRODUCTION TO QUALITY MANAGEMENT Definitions of Quality: 1. Fitness for intended use. (Joseph Juran) 2. Conformance to specifications. (Philip Crosby) 3. Meeting or exceeding customer expectations. 4. Superiority or excellence.

• 5. Lack of manufacturing or service defects. • 6. The totality of features of a product or service that bears on its ability to satisfy a stated or implied need. (American Society of Quality) • 7. ISO 9000 definition: The degree to which a set of inherent characteristics fulfills requirements.

• (‘Degree’ implies quality can be used with adjectives such as poor, good, excellent; ‘Inherent’ implies a permanent characteristic; ‘Characteristics’ can be qualitative or quantitative; ‘Requirement’ is a need or expectation that is implied, stated or obligatory.)

• * Quality can be quantified as follows: • Q=P/E where Q=quality, P=performance, and E=expectations. If P is greater than E, customer feels good, and if P is less than E, he feels cheated. P and E are based on perceptions, with the organization determining performance and the customer determining expectations. • * Stages of customer experience in terms of quality: • Customer satisfaction  Customer delight  Customer enchantment.

Definitions of Total Quality Management (TQM): • 1. The art of managing the total organization to achieve excellence in all spheres of activity.(Besterfield) • 2. The integration of all functions and processes within an organization in order to achieve the continuous improvement of the quality of goods and services. (Omachonu) • 3. A total organization working as a team to meet or exceed customer needs and expectations by using a systematic approach to continuous improvement.

• *It was Feigenbaum who coined the phrase ‘Total Quality Control’. The concept is known in Japan as ‘Company Wide Quality Control’. In 1985, the Americans came up with the term TQM to represent essentially the Japanese way of quality management.

• Other terms connected with quality: • Quality Control (QC): The operational techniques and activities that are used to fulfill the requirements of quality. • Quality Assurance (QA): All the planned and systematic activities implemented within the quality system to provide adequate confidence that an entity (product/service) will fulfill the requirements for quality. It encompasses quality of design, quality of conformance, and quality of service.

ISO9000 definition of Quality Management(QM): • All activities of the overall management function that determine the quality policy, objectives and responsibilities and implement them by means such as quality planning, quality control, quality assurance and quality improvement within the quality system.

• TOTAL – Made up of the Hole • QUALITY – Degree of Excellence a product or service provides • MANAGEMENT – ACT, OR Manner of handling , controlling , directing etc.

CHARACTERISTICS • CUSTOMER ORIENTED • TEAM WORK • LONG TERM COMMITMENT FOR CONTINOUS IMPROVEMENT • LEADERSHIP OF TOP MANAGEMENT AND CONTINOUS INVOLVEMENT • CONTINOUS IMPROVING PERFORMANCE

BASIC CONCEPTS • 1. Management commitment, • 2. Focus on customer (both external and internal), • 3. Employee involvement, empowerment, 4. Continuous improvement, • 5. Treating suppliers as partners, and • 6. Establish performance measures for processes.

• Cause-and-effect cycle of TQM: • TQM  High quality product/service  High productivity, lower cost  Lower price  More competitive position  High profit, growth  Job security  Satisfying place to work.

• Stages in the evolution of quality: • Inspection  Quality Control (QC)  Quality Assurance (QA)  Quality Mgmt. (QM)  TQM • Benefits of quality systems: • Increase in – system efficiency, worker morale, customer satisfaction. • Decrease in – complaints, costs, production time.

TQM Awareness • An organization will not begin the transformation to TQM until it is aware that the quality of the product or service must be improved. • Awareness comes about when (a) the organization loses market share or (b) TQM is mandated by the customer, or (c) management realizes that TQM is a better way to run a business and compete in domestic and world markets. • Automation and other productivity improvements will not help a company if quality is poor. The Japanese learned this from experience before World War II. Now a new attitude has emerged – quality first among the equals of cost and service. The customer wants value.

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Quality and productivity are not mutually exclusive. Improvements in quality can lead directly to increased productivity and other benefits. • Quality improvement is not limited to conformance of the product/service to specifications; it also involves the inherent quality in the design of the system. • TQM does not occur overnight; there are no quick remedies. It takes a long time to build the appropriate emphasis and techniques into the culture. Overemphasis on short-term results and profits must be set aside so that long-term planning and constancy of purpose will prevail.

Benefits of TQM • Improved quality, higher productivity, employee participation, teamwork, working relationships, customer satisfaction, employee satisfaction, communication, profitability, market share, and stock price performance. • There is a strong link between TQM and financial performance. • Studies show that small organizations outperform larger organizations in successful implementation of TQM.

TQM – Obstacles • 1. Lack of management commitment: Management does not allocate sufficient time and resources for TQM implementation. • 2. Inability to change organizational culture: Even individuals resist change; changing an organization’s culture is much more difficult and may require as much as 5 years or more. Exhortations, speeches, slogans are effective only in the short run. • 3. Improper planning: Absence of two-way communication of ideas during the development of the plan and its implementation.

• 5. Incompatible organizational structure and differences between individuals/departments. • 6. Ineffective measurement techniques for key characteristics of the organization. Lack of access to data and results. • 7. Paying inadequate attention to internal and external customers. Inability to understand the changing needs and expectations of customers. Absence of effective feedback mechanisms. • 8. Inadequate use of empowerment and teamwork. • 9. Lack of employee involvement. • 10. Non-cooperation of first-line managers and middle management.

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11. Lack of clarity in vision. 12. Emphasis on short-term results. 13. Setting of unmanageable, unrealistic goals. 14. Bureaucratic system. 15. TQM is considered as a quick-fix solution to current problems. 16. Treating suppliers as adversaries to be manipulated, taken advantage of. • 17. Adversarial relationship between workers/unions and management. • 18. Motivating employees through fear of punishment. • 19. Failure to continually improve. Tendency to sit back and rest on one’s laurels. Rigidly sticking to one ‘success formula’.

Quality – Vision, Mission and Policy Statements

• Besterfield# The quality statements include the vision statement, mission statement, and quality policy statement. • # Once developed, they are only occasionally reviewed and updated. They are part of the strategic planning process. • # There may be considerable overlap among the three statements.

Vision statement: •

# A short declaration of what an organization aspires to be in the future. It is an ideal state that an organization continually strives to achieve. It is timeless, inspirational, and becomes deeply shared within the organization. • # Successful vision – a concise statement of the desired end – provides a succinct guideline for sound decision making. • # Although mission and vision are often used as synonymous, sometimes a distinction is made in which case mission evolves from the vision. •

Example: “We will be the provider of safe, reliable, cost-effective products and services that satisfy the electric-related needs of all customer segments.” [Florida Power & Light Company].

Mission statement: • # The mission statement answers the following questions: who we are, who are our customers, what we do, and how we do it. • # This statement is usually one paragraph or less in length, is easy to understand, and describes the function of the organization. It provides a clear statement of purpose for employees, customers, and suppliers. • Example: “Our mission is to improve continually our products and services to meet our customers’ needs, allowing us to prosper as a business and provide a reasonable return to our shareholders.” [Ford Motor Company].

• # If the vision deals with ‘what’, the mission deals with ‘why’ and ‘how’. It identifies the roles or activities to which an organization is committed and provides overall direction for achieving the mission. • # The mission provides the guide map, milestones for achieving the vision. • # Example: “To be the leading manufacturer and supplier of measurement and computing solutions whilst achieving the highest levels of customer satisfaction, quality, and business ethics and contributing to India’s technological, economic and social needs.” [Hewlett-Packard

• Quality policy statement: • Besterfield# The quality policy is a guide for everyone in the organization as to how they should provide products/service to the customers. It is written after obtaining feedback from the workforce and is approved by the quality council. • # A quality policy is a requirement of ISO9000. • # Some common characteristics are: ‘Quality is first priority’;

• ‘Continually improve the quality’; ‘Equal or exceed the competition’; ‘Meet the needs of internal and external customers’, etc. • # Example: “Xerox is a quality company. Quality is the basic business principle of Xerox. Quality means providing our external and internal customers with innovative products and services that fully satisfy their requirements. Quality is the job of every employee.” [Xerox Corporation].

CUSTOMER FOCUS • CUSTOMER PERCEPTION OF QUALITY, TRANSLATING NEEDS INTO REQUIREMENTS, • CUSTOMER RETENTION

Customer perception of Quality • There are three key elements of quality: customer, process and employee. • Delighting Customers • Customers are the center. they define quality. They expect performance, reliability, competitive prices, on-time delivery, service, clear and correct transaction processing and more. In every attribute that influences customer perception, we know that just being good is not enough. Delighting our customers is a necessity. Because if we don't do it, someone else will!

• ...the Process • Outside-In Thinking • Quality requires us to look at our business from the customer's perspective, not ours. In other words, we must look at our processes from the outside-in. By understanding the transaction lifecycle from the customer's needs and processes, we can discover what they are seeing and feeling. With this knowledge, we can identify areas where we can add significant value or improvement from their perspective.

• ...the Employee • Leadership Commitment • People create results. Involving all employees is essential to GE's quality approach. GE is committed to providing opportunities and incentives for employees to focus their talents and energies on satisfying customers.

• + Total satisfaction is achieved when the offer matches the need, or the circle is superimposed on the square. • + That part of the square that lies within the circle is perceived by the customer as satisfying, and the part outside the circle is perceived as unnecessary.

• # Customer satisfaction should not be viewed in a vacuum. A customer may be satisfied with a product/service and thus rate it highly in a survey, and yet may buy another product/service. Customer loyalty can be sustained only by maintaining a favorable impression when compared with competitors. • # It is important that the organization listen to the ‘voice of the customer’ and ensure that its marketing, design, production, distribution processes truly meet the expectations of the customer.

• * Internal and external customers: • # There are two types of customers – external and internal. • # An external customer exists outside the organization and can be defined in many ways – user, buyer, influencer. He generally falls into one of three categories: current, prospective, or lost customer. • Every function within the organization – engineering, production, order processing, etc. – has an internal customer. Every person in a process is considered a customer of the preceding operation. For example, Manufacturing is a customer for Purchasing, and Dispatching is a customer for Packaging.

• # One basic concept of TQM is an unwavering focus on the customers, both internal and external. In reality, most employees are shielded from external customers by organizational layers. Yet employees who lack direct contact with the external customer must still contribute to his satisfaction.

Customer perception of quality • # An American Society for Quality (ASQ) survey on end user perceptions of important factors that influenced purchases showed the following ranking: 1. Performance, 2. Features, 3. Service, 4. Warranty, 5. Price, and 6. Reputation. The first four factors are part of product/service quality. Hence it is evident that product/service quality is considered more important than price.

• # Other factors felt important by customers are: Availability, Reliability, Maintainability, Care in handling (of products as well as customers), Response time. • # The way to assess customers’ perception of quality is by measuring customer satisfaction (by carrying out customer satisfaction surveys).

Translating needs into requirements The Kano model: • # In the late 1970’s, Dr. Noriaki Kano of Tokyo Rika University came out with a model for understanding customer satisfaction. • # He identified three levels of product quality: (i) Basic quality, (ii) Performance quality, and • (iii) Excitement quality. The products corresponding to these three quality levels were termed as ‘Dissatisfiers’, ‘Satisfiers’ and ‘Delighters/Exciters’ respectively. • # Dr. Kano’s model is based on Hertzberg’s Hygiene-Motivation (2factor) theory. • # Traditionally, we use a one-dimensional quality model to rate performance (good, bad) and customer satisfaction (good, bad). PERFORMANCE GOOD ---------- BAD

CUSTOMER SATISFACTION GOOD ----------------- BAD

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# Dr. Kano proposed a two-dimensional model for quality, in which the X-axis represents performance and the Y-axis represents customer satisfaction. High Customer satisfaction | | Poor performance--------------------------------------Good performance | | Low Customer satisfaction

• CUSTOMER RETENTION • # It is essential to achieve a balance between acquiring new customers and retaining existing customers. Often, existing customers do not receive sufficient attention. • # It costs a company six times more to sell a product to a new customer than it does to sell to an existing one. Hence the importance of customer retention, especially in this era of hyper-competition in most sectors.

• * Customer loyalty ladder: The relationship with a customer can be viewed as steps on a ladder as follows: • Partner AdvocateSupporterClientCustomerPro spect • Prospect: a potential customer • Customer: one who has had at least one direct dealing with the organization.

• Client: one who has had repeated dealings, but is neutral or negative towards the organization. • Supporter: one who has positive commitment to the relationship with the organization. • Advocate: one who actively promotes the company through positive word-of-mouth. • Partner: a customer who is linked to the supplier through mutually beneficial exchanges.

• # “Churn rate” is the rate at which new customers try a new product/service and then stop using it. A high churn rate indicates poor quality, and hence low loyalty. • # Customer loyalty facilitates cross-selling/up-selling of a company’s other products/services, and also acts as an effective barrier to the entry of competition. It also reduces expenditure on advertising and other promotional programs. • The concept of ‘customer lifetime value’ attempts to quantify the benefits accruing to a company in the long run due to customer retention.

Dimensions of quality • • • • • • •

Quality has different dimensions. These dimensions are somewhat independent and therefore, a product can be excellent in one dimension and average or poor in another. Dimensions of product quality: 1. Performance: primary product characteristics, e.g. picture brightness in TV. 2. Features: secondary characteristics, added features, e.g. remote control, picture-in-picture. 3. Usability: ease of use with minimum training. 4. Conformance: meeting specifications, industry standards, etc. 5. Reliability: consistency of perfor

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6. Durability: extent of useful life. 7. Maintainability/Serviceability: ease of attending to maintenance, repairs. 8. Service: efficiency, effectiveness in resolving problems, complaints. 9. Efficiency: ratio of output to input. E.g. mileage, braking distance. 10. Portability: in software, etc., ease of use in different environments. 11. Responsiveness: human aspects like courtesy, prompt response, etc. 12. Aesthetics: sensory characteristics, e.g. exterior finish, texture, colour, etc. 13. Reputation: subjective assessment based of past performance, brand image, industry ranking.

Dimensions of service quality: • 1. Time: how much time a customer must wait / undergo service. • 2. Timeliness: whether service will be performed when promised. • 3. Completeness: whether all items in the order are included. • 4. Consistency: consistent service every time, and for every customer. • 5. Accessibility/Convenience: ease of obtaining the service. • 6. Accuracy: absence of mistakes. • 7.Responsiveness: quick response, resolution of unexpected problems. • 8. Courtesy: cheerful, friendly service.

• Product quality has two dimensions • Physical dimension - A product's physical dimension measures the tangible product itself and includes such things as length, weight, and temperature. • Performance dimension - A product's performance dimension measures how well a product works and includes such things as speed and capacity.

COST OF QUALITY • Quality costs are defined as costs associated with non-achievement of product/service quality. In simple terms, quality cost is the cost of poor products/services. • # The cost of poor quality can add to other costs such as design, production, maintenance, inspection, sales, etc. Quality costs cross department boundaries by involving all activities of the organization – marketing, purchasing, design, manufacturing, service, etc.

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The price of nonconformance (Philip Crosby) or the cost of poor quality (Joseph Juran), the term 'Cost of Quality', refers to the costs associated with providing poor quality product or service.

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Why is it important? Quality processes cannot be justified simply because "everyone else is doing them" - but return on quality (ROQ) has dramatic impacts as companies mature. Research shows that the costs of poor quality can range from 15%-40% of business costs (e.g., rework, returns or complaints, reduced service levels, lost revenue). Most businesses do not know what their quality costs are because they do not keep reliable statistics. Finding and correcting mistakes consumes an inordinately large portion resources. Typically, the cost to eliminate a failure in the customer phase is five times greater than it is at the development or manufacturing phase. Effective quality management decreases production costs because the sooner an error is found and corrected, the less costly it will be.

• When to use it? • Cost of quality comprises of four parts: • External Failure Cost: cost associated with defects found after the customer receives the product or service • ex: processing customer complaints, customer returns, warranty claims, product recalls. • Internal Failure Cost : cost associated with defects found before the customer receives the product or service • ex: scrap, rework, re-inspection, re-testing, material review, material downgrades.

• Inspection (appraisal) Cost: cost incurred to determine the degree of conformance to quality requirements (measuring, evaluating or auditing) • ex: inspection, testing, process or service audits, calibration of measuring and test equipment. • Prevention Cost: Cost incurred to prevent (keep failure and appraisal cost to a minimum) poor quality • ex: new product review, quality planning, supplier surveys, process reviews, quality improvement teams, education and training.

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How to use it? The Cost of Quality has other version too. 1. Like all things there is a price to pay for quality. This total cost can be split into two fundamental areas: a. Non Conformance. This area covers the price paid by not having quality systems or a quality product. Examples of this are: (1) Rework. Doing the job over again because it wasn't right the first time. (2) Scrap. Throwing away the results of your work because it is not up to the required standard. (3) Waiting. Time wasted whilst waiting for other people. (4) Down Time. Not being able to do your job because a machine is broken.

• b. Conformance. Conformance is an aim of quality assurance. This aim is achieved at a price. Examples of this are: • (1) Documentation. Writing work instructions, technical instructions and producing paperwork. • (2) Training. On the job training, quality training, etc. • (3) Auditing. Internal, external and extrinsic. • (4) Planning. Prevention, do the right thing first time and poka yoke. • (5) Inspection. Vehicles, equipment, buildings and people.

2. These two main areas can be split further as shown below: FIGURE 1.3

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This shows the four segments of quality costs:

a. Prevention. This area covers avoiding defects (poka yoke), planning, preparation, training, preventative maintenance and evaluation. • b. Appraisal. This area covers finding defects by inspection (poka yoke), audit, calibration, test and measurement. • c. Internal Failure. This area covers the costs that are borne by the organisation itself such as scrap, rework, redesign, modifications, corrective action, down time, concessions and overtime. • d. External Failure. This area covers the costs that are borne by the customer such as equipment failure, down time, warranty, administrative cost in dealing with failure and the loss of goodwill.

• 3. Whilst aiming to reduce failure through appraisal and prevention it must be clear that these also cost as shown below:

Figure 1.4

• 4. The graph shows that there is a minimum Total Quality cost, which is a combination of prevention, appraisal and failure. Reducing any of these reduces the total. The key to minimum cost, is striking the correct balance between the three. • 5. Clearly prevention reduces both appraisal and failure costs, however eventually the cost of prevention itself starts to increase the total cost and so this must be controlled and set at an effective level. • 6. The next graph shows that when Total Quality is initially introduced into an organisation, there are huge savings that can be made:

• # Management must use Cost of Quality (COQ) data to identify and prioritize improvement opportunities. The first priority is to eliminate external failures and then internal failures. • The 1:10:100 rule: Re.1 spent on prevention will save Rs.10 spent on appraisal and Rs.100 on failure costs. This rule helps one to prioritize expenditure on prevention, which is sure to bring in greater returns.

• Unit –I finished -VIDHYARAJA