Tqm-unit-2

GE-406 TOTAL QUALITY MANAGEMENT UNIT –II Syllabus Customer satisfaction, Customer perception of quality, Customer complaints, Service quality , Customer retention, Employee involvement, Motivation, Empowerment, Teams, Recognition and Reward ,Performance Appraisal ,Benefits ,Continuous Process Improvement, Juran Trilogy ,PDSA cycle, 5S, Kaizen, Supplier Partnership, Partnering, Sourcing , Supplier selection, Supplier rating ,Relation ship development, Performance Measures ,Basic concepts, Strategy, Customer satisfaction The most important asset of any organization is its customers. An organization’s success depends on how many customers it has, how much they buy, and how often they buy. Customers that are satisfied will increase in number, buy more, and buy more frequently. v Satisfied customers also pay their bills promptly, which greatly improves cash flow the lifeblood of any organization. v Increasingly, manufacturing and service organizations are using customer satisfaction as the measure of quality. The importance of customer satisfaction is not only due to national competition but also due to worldwide competition. . Total Quality Management (TQM) implies an organizational obsession with meeting .the customer expectations, so that customers are delighted. Understanding the, customer’s needs and expectations is essential to winning new business and keeping existing business. • An organization must give its customers a quality product or service that meets their needs at a reasonable price, which includes on-time delivery and outstanding service • His will allow them to signal their major concerns about the other side’s position. The answers often lead to compromise. • Convince team members they sometimes may have to admit they are wrong. Help them save face by convincing them that changing a position shows strength. • Respect the experts on the team. Give their opinions more weight when the conflict involves their expertise, but don’t rule out conflicting opinions. • If managed properly, functional conflict leads to positive movement toward goals, innovation and creativity, and solutions to problems. • Norming is the stage where members begin to work together. • Emotional conflict is reduced as cooperation, cohesion, and constructive criticism start to become the normal behavior. • Because there is more time and energy to focus on the objectives, significant progress begins to occur. • Performing is the stage where the team members have settled their relationships and expectations. • Adjourning is a stage that is reserved for temporary teams. The team needs to evaluate its performance and determine lessons learned. • This information can be transferred by members when they participate on future teams. There also needs to be a celebration to recognize the team’s contribution to the organization. 1

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As a result of proper training and effective leadership, some teams arrive at the per forming stage so quickly that it may be difficult for an organization to observe the first three stages. • Ten Common People Problems and their Solutions Total satisfaction is achieved when the offer matches the need, or the circle is superimposed on the square. The goal is to cover the expected performance level better than the competitors. v That part of the square that lies within the circle is perceived by the customer as satisfying, and the part of the square outside the circle is perceived as unnecessary. It is important that the organization listen to the “voice of the customer” and ensure that its marketing, design, production, and distribution processes truly meet the expectations of the customer. v Customer satisfaction seems simple enough, and yet it is far from simple. Customer satisfaction is not an objective statistic but more of a feeling or attitude. v Although certain statistical patterns can be developed to represent customer satisfaction, it is best to remember that people’s opinions and attitudes are subjective by nature. v Because customer satisfaction is subjective, it is hard to measure v There are so many facets to a customer’s experience with a product or service that need to be measured individually to get an accurate total picture of customer satisfaction. v Whether or not a customer is satisfied cannot be classed as a yes or no answer v Errors can occur when customer satisfaction is simplified too much expectations. v Since customer satisfaction is hard to measure, the measurement often is not precise. v As with most attitudes, there is variability among people, and often within the same per son at different times. v Often, due to the difficulty of measuring feelings, customer satisfaction strategies are developed around clearly stated, logical customer opinions, and the emotional issues of a purchase are disregarded.

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Customer satisfaction should not be viewed in a vacuum v The value customers place on one product compared to another may be a better indicator of customer loyalty. Customer loyalty can be sustained only by maintaining a favorable comparison when compared with competitors. As mentioned before customer satisfaction is not a simple concept to understand or to measure. v Who is the Customer? v There are two distinct types of customers-external and internal. An external customer can be defined in many ways, such as those uses the product or service, the one who purchases the product or service, or the one who influences the sale of the product or service. customer to be the child An external customer exists outside the organization and generally falls into three categories • Current, • Prospective, • Lost customers. • Each category provides valuable customer satisfaction information for the organization. • Every employee in the organization must know how their job enhances the total satisfaction of the external customer. • An internal customer is just as important. Every function, whether it is engineering, order processing, or production, has an internal customer each receives a product or service and, in exchange, provides a product or service. • Every person in a process is considered a customer of the preceding operation • . Each worker’s goal is to make sure that the quality meets the expectations of the next person. • When that happens throughout the manufacturing, sales, and distribution chain, the satisfaction of the external customer should be assured. One basic concept of TQM is an unwavering focus on customers, both internal and external. Most employees know about the external customer. The formula for successful internal customer/supplier relationships varies. But it al ways begins with people asking their internal customers three basic questions: v What do you need from me? v What do you do with my output? v Are there any gaps between what you need and what you get? The leader’s role is to process work through the internal customer-supplier chain by helping workers guarantee that the end product or service fully satisfies the end user. • All quality management systems start with the basic need of ensuring that the external customer’s requirements are adequately documented. • The organization must document explicitly what each internal customer expects. • In addition, clear criteria must be pro vided for measuring the success in meeting the expectations of both internal and external customers. Customer Perception of Quality One of the basic concepts of the TQM philosophy is continuous process improvement. This concept implies that there is no acceptable quality level because the customer’s needs, values, and expectations are constantly changing and becoming more demanding An American Society for Quality (ASQ) survey on end user perceptions of important factors that influenced purchases showed the following ranking: 3

Ø Performance Ø Features Ø Service Ø Warranty Ø Price Ø Reputation The factors of performance, features, service, and warranty are part of the product c service quality; therefore, it is evident that product quality and service are more important than price. Performance Performance involves “fitness for use” a phrase that indicates that the product and ser vice is ready for the customer’s use at the time of sale. Other considerations are • Availability, which is the probability that a product will operate when needed • Reliability, which is freedom from failure over time; and • Maintainability is the ease of keeping the product in operating condition Features § Identifiable features or attributes of a product or service are psychological, time oriented, contractual, ethical, and technological. § Features are secondary characteristics of the product or service. Service Ø Customer service is emerging as a method for organizations to give the customeradded value. Ø Customer service is an intangible it is made up of many small things, all geared to changing the customer’s perception. Intangible characteristics are those traits that are not quantifiable, yet contribute greatly to customer satisfaction. Ø Providing excellent customer service is different from and more difficult to achieve than excellent product quality. Warranty • The product warranty represents an organization’s public promise of a quality product backed up by a guarantee of customer satisfaction. • A warranty generates feedback by providing information on the product and service quality. • It also forces the organization to develop a corrective action system. • Finally, a warranty builds marketing muscle. • The warranty encourages customers to buy a service by reducing the risk of the purchase decision, and it generates more sales from existing customers by enhancing loyalty. Price • Today’s customer is willing to pay a higher price to obtain value. • Customers are constantly evaluating one organization’s products and services against those of its competitors to determine who provides the greatest value. • However, in our highly-competitive environment, each customer’s concept of value is continually changing. Ongoing efforts must be made by everyone having contact with customers to identify, verify, and update each customer’s perception of value in relation to each product and service.

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Reputation v Most of us find ourselves rating organizations by our overall experience with them. v Total customer satisfaction is based on the entire experience with the organization, not just the product. v Customers are willing to pay a premium for a known or trusted brand name and often become customers for life. Because it costs five times as much to win a new customer as it does to keep an existing one, customer retention is an important economic strategy for any organization. v Investment in customer retention can be a more effective bottom-line approach than concentrating on lowering operational costs. v An effective marketing retention strategy is achieved through using feedback from information collecting tools. v Feedback Customer Questionnaire • A customer questionnaire is a popular tool for obtaining opinions and perceptions • About an organization and its products and services. • However, they can be costly and time-consuming. Surveys may be administered by mail or telephone in the form of questionnaires, the customer is asked to furnish answers relating to the quality of products and services. • Most surveys ask the customer to grade the question on a one-to-five scale or a one-to-ten scale, where the highest number typically has a description like “highly satisfied.” Although the most detailed and most useful information may come from a mail survey, the results are usually not representative of a normal population. This result occurs because the only people who will take the time to fill out a survey are those who feel very strongly about a subject arid, therefore, tend to be biased. To make surveys more useful, it is best to remember eight points. v Clients and customers are not the same. v Surveys raise customers’ expectations. v How you ask a question will determine how the question is answered. v The more specific the question, the better the answer. v You have only one chance and only 15 minutes. v The more time you spend in survey development, the less time you will spend in data analysis and interpretation. v Who you ask is as important as what you ask. v Before the data are collected, you should know how you want to analyze and use the data. Clients are the people for whom you are doing the survey, and customers are the ones who use the product or service. The customers must be surveyed to provide information for the clients to take action. It is important to note that customer satisfaction surveys are different from traditional public-opinion polls. Customer satisfaction surveys need to be sensitive to the management of customer relationships, which is not necessary when doing traditional public-opinion polls.

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Toll-Free Telephone Numbers Toll-free telephone numbers are an effective technique for receiving corn plaint feedback. Organizations can respond faster and more cheaply to the complaint, such a number does not, however, reach those who decided not to buy the product or those who discovered some likable feature on a competitor’s product. Toll-free numbers are in use by at least 50% of all organizations with sales of at least ten billion crores. Customer Visits • Services should be held at least annually Visits to a customer’s place of business provide another way to gather information. • An organization can proactively monitor its product’s performance while it is in use and thereby identify any specific or recurring problems. Senior managers should be involved in these visits and not delegate them to someone else • However, it is a good idea to take along operating personnel so they can see first hand how the product is performing. Report Card Another very effective information-gathering tool is the report card, We are continually striving to improve. To assist us in this end v v v v v

A = Excellent B = Very Good C = Average D = Poor F = Failing

I. Product quality. Grade Comments: -II. On-time delivery Grade Comments: III. Service Grade Comments: IV. Overall Grade Comments: Mass Customization v The ultimate in customer satisfaction is giving customers exactly what they want. v In the past, the price tag for this was prohibitive, but mass customization is a way to pro vide variety at an affordable cost. v Mass customization is a direct result of advances made in manufacturing, such as flexible manufacturing technologies, just-in-time systems, and cycle time reduction Customers get the computer they want at a reasonable price. The customer satisfaction information obtained from mass customization can be used to provide more standardized products. Customer complaints Some actions organizations can take to handle complaints are as follows: v Investigate customers’ experiences by actively soliciting feedback, both positive and negative, and then acting on it promptly. v Develop procedures for complaint resolution that include empowering front-line personnel. 6

v Analyze complaints, but understand that complaints do not always fit into neat categories. v Work to identify process and material variations and then eliminate the root cause. “More inspection” is not corrective action. v When a survey response is received, a senior manager should contact the customer and strive to resolve the concern. v Establish customer satisfaction measures and constantly monitor them. v Communicate complaint information, as well as the results of all investigations and solutions, to all people in the organization. v Provide a monthly complaint report to the quality council for their evaluation and, if needed, the assignment of process improvement teams. v Identify customers’ expectations beforehand rather than afterward through com plaint analysis. Customer Care An organization should revolve around the customer, because customers are the key to any business. A customer, any customer, should be valued and treated like a Mend. Responses to customer complaints should be immediate and should be more than the customer expected to receive. If they are treated with respect customers will simply forgive errors and positively promote the organization. • Keep promises to customers. • Return calls to customers in an expedient manner. • Give customers assistance with their concerns, referring an appropriate staff member for problem-solving action when necessary. • Treat our customers with respect, courtesy and professionalism at all times. • Remain aware and evaluate customer satisfaction regularly. • Continually search for customer-related improvements. • Deliver service and products quickly and efficiently. • Give every customer involved and personal attention. • Maintain a clean and neat appearance, including the workplace, at all times. • Review and implement customer feedback and suggestions into current procedure when appropriate. • Engage in any training or education that will enhance our job performance and our commitment to customer care. • Treat every customer just as we would want to be treated ourselves. • Communication Service quality Front-Line People Customers are the most valuable asset of any company and should not be referred to employees who have not been properly trained to handle their complaints. Only the best employee is worthy of a company’s customers. It is best to remember three things about front-line employees: Ø Hire the best. Ø Develop the best employees into professionals. Ø Motivate the professionals to stay and excel. Ø To get that “best employee” on the front line, Ø In front-line employees, the most important aspect is personality, personality, personality. Ø If employees are not happy, this will be reflected to the customers. 7

Leadership No quality improvement can succeed without management’s involvement and, more importantly, commitment. Managers can best show their commitment to service quality by example Additional Comments Gaining new customers can be a lengthy process involving research, targeting, advertising, promotion, and networking. Current customers provide organizations with established business relationships, knowledge and predictability in buying behaviors, and short-term opportunities for expanded sales. Thus, an organization’s most likely target for new business is its current customers. v Service quality is an activity; therefore, it can be controlled and improved. v Organizations with higher-quality service can charge up to 20% more and still retain customers. Satisfied customers not only continue to patronize the organization, they also add to profits by referring new customers. Referrals can be twice as effective as advertising. v An essential part of customer satisfaction occurs after the sale. Table 3-3 shows various characteristics and expectations. v Many organizations emphasize traditional or reactive service after the sale. Examples include: v Preventive maintenance (service provided according to a prescribed timetable). v Service contract (service provided as required). v No service contract (service requires labor and material billing). v Combinations of the above. Warranty Clearly stated with prompt service on claims, and education? Although publishing the standards was risky, service in many government offices improved. In 1996, Business Week reported that an independent survey of the country’s best telephone customer service ranked the Social Security Administration top in the nation. Translating Customer needs into Requirements The Kano model conceptualizes customer requirements. The model represents three major areas of customer satisfaction Customer dissatisfied Customer may indeed be unaware of their requirements, or they may assume that such requirements will be automatically, supplied. • Basic specifications often fail to take real-world manufacturing requirements into account; many merely are based on industry standards or past practice. • Transportation or status. Customers are loyal to whatever best helps them achieve their desired outcome. • Just meeting a customer’s needs is not enough; the organization must exceed the customer’s requirement. Customer Retention Customer retention is more powerful and effective than customer satisfaction. Customer retention represents the activities that produce the necessary customer satisfaction that creates customer loyalty, which actually improves the bottom line. v Customer satisfaction surveys, focus groups, interviews, and observations can help determine what customers think of a service or a product. 8

v However, what people say and think is often different from what they do v Customers may be delighted with the tropical oils and aromas in a high-priced, well-advertised hair-care product but still end up buying the generic equivalent. v Therefore customer satisfaction should also be measured by using the hard measures of cash register receipts, market share, the level of customer retention, and the number of referrals from customers. v The better companies have established a link between customer satisfaction and the bottom line. v Customer retention moves customer satisfaction to the next level by determining what is truly important to the customers and making sure that the customer satisfaction system focuses valuable resources on things that really matter to the customer. v Customer retention is the connection between customer satisfaction and the bottom line. v Likewise, high employee retention has a significant impact on high customer retention. v One way companies can manage customer retention is to pay attention to their present employees and to who they are hiring. Additional Comments • The organization must continually improve the methods of obtaining information concerning the customer’s needs and expectations. It is the quality council’s responsibility to periodically review the methods. • World-class competitors tend to continually fine-tune their operations to achieve incremental improvements. They know that continuous improvement and customer satisfaction go hand-in-hand. • Maximize customer satisfaction and retention, and the financial results will follow. Employee Involvement Introduction Employee involvement is one approach to improving quality and productivity. Its use is credited for contributing to the success enjoyed by the Japanese in the world market place. • Employee involvement is not a replacement for management nor is it the final word in quality improvement. • It is a means to better meet the organization’s goals for quality and productivity at all levels of an organization. Motivation Knowledge of motivation helps us to understand the utilization of employee involvement to achieve process improvement. Maslow’s Hierarchy of Needs One of the first and most popular motivational theories was developed by Abraham Maslow. He stated that motivation could best be explained in terms of a hierarchy of needs and that there were. five levels. These levels are v Survival, v Security v Community, v Esteem, v Self-actualization. 9

Achieving a Motivated Work Force The building of a motivated work force is for the most part an indirect process. Managers at all levels cannot cause an employee to become motivated; they must create the environment for individuals to motivate themselves. Concepts to achieve a motivated work force are as follows: v Know yourself v Know your employees v Success Establish a positive attitude v Share the goals. v Monitor progress. v Develop interesting work v Communicate effectively. Employee Surveys A manager should take in initiating employee empowerment is to survey their employees to determine their current level of perceived empowerment. Employee surveys help managers assess the current state of the work measurement. Empowerment In order to create the empowered environment, three conditions are necessary. • Everyone must understand the need for change. • The system needs to change to the new paradigm. • The organization must enable its employees to help in their skill in all areas. Why Teams Work Teams work because many heads are more knowledgeable than one v Each member of the team has special abilities that can be used to solve problems. v Many processes are so complex that one person cannot be knowledgeable concerning the entire process and the whole is greater than the sum of its members. v The interaction within the team produces results that exceed the contributions of each member. v Third, team members develop a rapport with each other that allows them to do a better job. v Finally, teams provide the vehicle for improved communication, thereby increasing the likelihood of a successful solution. Types of Teams The early history suggests that work simplification efforts by management and labor were most likely the first production-oriented teams. • The development of quality control circles by the Japanese in 1961 is considered to be the beginning of the use of teams to improve quality. • Quality control circles are groups of people from one work unit who voluntarily meet together on a regular basis to identify, analyze, and solve quality and other problems within their area. • They choose their own problems and focus on quality-of-work-life and health/safety issues rather than on improving work processes. Outside Japan, the popularity of quality control circles has declined; however, this type of team is the progenitor of our present teams. The current types of teams can be divided into four main groups. They may be called by different names and have slightly different characteristics to accommodate a particular organization. Ø Process improvement team Ø Cross-functional team. Ø Natural work teams. 10

Characteristics of Successful Teams - _ In order for a team to be effective, it should have certain characteristics, listed below. v Sponsor v Team charter v Team composition v Training v Ground rules. v Clear objectives. v Accountability. v Well-defined decision procedures. v Resources. v Trust. v Effective problem solving v Open communication v Appropriate leadership v Balanced participation v Cohesiveness Team Member Roles Teams are usually selected or authorized by the quality council. A team will consist of a team leader, facilitator, recorder, timekeeper, and members. All team members have clearly defined roles and responsibilities. The team leader, who is selected by the quality council, sponsor, or the team itself, has the following roles. Ø Ensures the smooth and effective operation of the team, handling and assigning record keeping, orchestrating activities, and overseeing preparation of reports and presentations. Ø Facilitates the team process, ensures that all members participate during the meetings, prevents other members from dominating, actively participates when appropriate, guides without domineering, and uses positive interpersonal behavior. Ø Serves as a contact point between the team and the sponsor or quality council. Ø Orchestrates the implementation of the changes recommended by the team within organizational constraints and team boundaries. Ø Monitors the status and accomplishments of members, assuring timely completion of assignments. Ø Prepares the meeting agenda, including time, date, and location; sticks to the agenda or modifies it where appropriate; and ensures the necessary resources are available for the meeting. Ensures that team decisions are made by consensus where appropriate, rather than by unilateral decision, handclasp decision, majority-rule decision, or minority-rule decision. The facilitator is not a member of the team; he/she is a neutral assistant and may not be needed with a mature team. This person does not get involved in the meeting content or evaluation of the team’s ideas. Roles are as follows: v Supports the leader in facilitating the team during the initial stages of the team. v Focuses on the team process; is concerned more with how decisions are made rather than the decision itself. v Acts as resource to the team by intervening when necessary to keep the team on track. v Does not perform activities that the team can do. v Provides feedback to the team concerning the effectiveness of the team process. 11

v The team recorder, who is selected by the leader or by the team and may be rotated on a periodic basis, has the following roles: v Documents the main ideas of the team’s discussion, the issues raised, decisions made, action items, and future agenda items. v Presents the documents for the team to review during the meeting and disthbutes them as minutes after the meeting in a timely manner v Participates as a team member. v The timekeeper, who is selected by the leader or by the team and may be rotated on a periodic basis, has the following roles: v Monitors the time to ensure that the team maintains the schedule as determined by the agenda. v Participates as a team member. v The team member, who is selected by the leader, sponsor, or quality council or is a member of a natural work team, has the following responsibilities: v Contributes best, without reservation, by actively participating in meetings and sharing knowledge, expertise, ideas, and information. v Respects other people’s contributions don’t criticize, complain, or condemn. v Listens carefully and asks questions. v Is enthusiastic it’s contagious and helps galvanize the entire team. v Works for consensus on decisions and is prepared to negotiate important points. v Supports the decisions of the team bad mouthing a decision or a member reduce the effectiveness of the team. v Trusts, supports, and has genuine concern for other team members. v Understands and is committed to team objectives. v Respects and is tolerant of individual differences. v Encourages feed back on own behavior v Acknowledges and works through conflict openly. v Carries out assignments between meetings such as collecting data, observing processes, charting data, and writing reports. v Gives honest, sincere appreciation. Decision-Making Method Since the decision-making process is critical to the success of the team, it is essential to understand the different methods. Five types of decisions, as well as no decision, occur during the team process. • Non decision. • Unilateral decision. • Handclasp decision • Minority-rule • Majority-rule decision. • Consensus. Effective Team Meetings If the participants know their roles and utilize the characteristics of successful teams, the probability of effective team meetings is enhanced. There are, however, a few items that can help improve the process: v Meetings should be regularly scheduled; have a fixed time limit, and start on time. v Participants should be notified ahead of time with the location, time, and objective. Avoid unnecessary meetings through e-mail, voice mail and telephone calls; how ever, also avoid accumulated issues. 12

v An agenda should be developed, either at the end of the previous meeting or prior to the beginning of the next meeting. v It should be sent to the participants prior to the meeting. Each agenda item includes a process, such as brainstorming, affinity diagram, discussion, and so forth; the presenters; and time guidelines. v Agendas usually list: opening focus, previous meeting feedback, agenda review agenda items, summary, and action items. v Periodically, the meetings should be evaluated by the participants. Recognition and Reward Recognition and reward Recognition is a form of employee motivation in which the organization publicly acknowledges the positive contributions an individual or team has made to the success of the organization. • Reward is something tangible such as theater tickets, dinner behavior. • Recognition and reward go together to form a system for letting people know they are valuable members of the organization. • Employees should be involved in the planning and implementation of the recognition and reward program • This activity should be performed by a cross-functional team that represents all areas of the organization. • Recognition should be valid, genuine, and meaningful for the giver and the recipient; it should not be used to manipulate people. • The organization should recognize effort as well as easy-to-measure results • Recognition should not be based primarily on chance, which frequently occurs in employee-of-the-month programs. • People like to be. recognized, either as a team or individually To summarize an effective recognition and reward system: v Serves as a continual reminder that the organization regards quality and productivity as important. v Offers the organization a visible technique to thank high achievers for outstanding performance. v Provides employees a specific goal to work toward. It motivates them to improve the process. v Boosts morale in the work environment by creating a healthy sense of competition among individuals and teams seeking recognitions. Performance Appraisal The purpose of performance appraisals is to let employees know how they are doing, and provide a basis for promotions, salary increases, counseling, and other purposes related to an employee’s future. v There should be a good relationship between the employee and the appraiser. v Employees should be made aware of the appraisal process, what is evaluated, and how often, v Employees should be told how they are doing on a continuous basis, not just at appraisal time. v The appraisal should point out strengths and weak nesses as well as how performance can be improved. v Performance appraisals may be for the team or individuals. 13

v Regardless of the system, a key factor in a successful performance appraisal is employee involvement. v An employee should always be given the opportunity to comment on the evaluation, to include protesting, if desired. The following methods are suggested to improve the appraisal system. • • • •

Use rating scales that have few rating categories Require work team or group evaluations that are at least equal in emphasis to individual-focused evaluations Require more frequent performance reviews where such reviews will have a dominant emphasis on future performance planning Promotion decisions should be made by an independent administrative process that draws on current-job information and potential for the new job.

Benefits of Employee Involvement v Involving employees, empowering them, and bringing them into the decision-making process provide the opportunity for continuous process improvement. v Employee involvement improves quality and increases productivity, because v Employees make better decisions using theft expert knowledge of the process. v Employees are more likely to implement and support decisions they had a part in making. v Employees are better able to spot and pinpoint areas for improvement. v Employees are better able to take immediate corrective action. v Employee involvement reduces labor/management friction by encouraging more effective communication and cooperation. v Employee involvement increases morale by creating a feeling of belonging to the organization. v Employees are better able to accept change because they control the work environment. v Employees have an increased commitment to unit goals because they are involved. Continuous Process Improvement Introduction Quality-based organizations should strive to achieve perfection by continuously improving the business and production processes. Perfection is impossible be cause the race is never over; however, we must continually strive for its attainment. Improvement is made by v Viewing all work as a process, whether it is associated with production or business activities. v Making all processes effective, efficient, and adaptable. v Anticipating changing customer needs. v Controlling in-process performance using measures such as scrap reduction, cycle time, control charts, and so forth. v Maintaining constructive dissatisfaction with the present level of performance. v Eliminating waste and rework wherever it occurs. 14

v Investigating activities that do not add value to the product or service, with the aim of eliminating those activities. v Eliminating nonconformities in all phases of everyone’s work, even if the increment of improvement is small. v Using benchmarking to improve competitive advantage. v Innovating to achieve breakthroughs. v Incorporating lessons learned into future activities. v Using technical tools such as statistical process control (SPC), experimental de sign, benchmarking, quality function deployment (QFD), and so forth. Process Process refers to business and production activities of an organization business processes such as purchasing, engineering, accounting, and marketing are areas where nonconformance can represent an opportunity for substantial improvement Ø Inputs may be materials, money, information, data, etc. Outputs may be information, data, products, service, etc. The output of one process also can be the input to another process. Ø Outputs usually require performance measures. Ø They are designed to achieve certain desirable outcomes such as customer satisfaction. Feedback is provided in order to improve the process. Ø The process is the interaction of some combination of people, materials, equipment, method, measurement, and the environment to produce an outcome such as a product, a service, or an input to another process. Ø In addition to having measurable input and out put, a process must have valueadded activities and repeatability. Ø It must be effective, efficient, under control, and adaptable Ø In addition, it must adhere to certain conditions imposed by policies and constraints or regulations There are five basic ways to improve the process: v Reduce resources, v Reduce errors, v Meet or exceed expectations of downstream customers, v Make the process safer, and v Make the process more satisfying to the person doing it. Control Control is used by operating forces to help meet the product, process, and service requirements. It uses the feedback loop and consists of the following steps: • Determine items/subjects to be controlled and (heir units of measure. • Set goals for the controls and determine what sensors need to be put in place to measure the product, process, or service. • Measure actual performance. • Compare actual performance to goals. • Act on the difference. Statistical process control is the primary technique for achieving control. The basic statistical process control (SPC) tools are Pareto diagrams, flow diagrams, cause-andeffect diagrams, check sheets, histograms; control charts, and scatter diagrams Improvement The third part of the trilogy aims to attain levels of performance that are significantly higher than current levels. Process improvements begin with the establishment of an 15

effective infrastructure such as the quality council Chapter. Two of the duties of the council are to identify the improvement projects and establish the project teams with a project owner. In addition, the quality council needs to provide the teams with the resources to determine the causes, create solutions, and establish controls to hold the gains (see Chapter 4). The problem-solving method described in a later section may be applied to improve the process, while the quality council is the driver that ensures

Input –Output Process Model

The Juran Trilogy Process improvement involves planning. One of the best approaches is the one developed by Dr. Joseph Juran. It has three components: planning, control, and improvement, and is referred to as the Juran Trilogy. It is based loosely on financial processes such as Ø Budgeting (planning), Ø Expense measurement (control), Ø Cost reduction (improvement). Planning The planning component begins with external customers. Once quality goals are established, marketing determines the external customers, and all organizational personnel (managers, members of multifunctional teams, or work groups) determine the internal customers. v External customers may be quite numerous, as is the case of a bank supply organization, where they include tellers, financial planners, loan officers, auditors, managers, and the bank’s customers. v Where there are numerous customers, a Pareto diagram might be useful to determine the vital few. v Once the customers are determined, their needs are discovered Internal customers may not wish to voice real needs out of fear of the consequences. One might discover these needs by • Being a user of the product or service, 16

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Communicating with customers through product or service satisfaction and dissatisfaction information • Simulation in the laboratory. Because customer needs are stated from their viewpoint, they should be translated to requirements that are understandable to the organization and its suppliers. The next step in the planning process is to develop product and service features that respond to customer needs, meet the needs of the organization and its suppliers, are competitive, and optimize the costs of all stakeholders Control Control is used by operating forces to help meet the product, process, and service requirements. It uses the feedback loop and consists of the following steps: Ø Determine items/subjects to be controlled and their units of measure. Ø .Set goals for the controls and determine what sensors need to be put in place to measure the product, process, or service. Ø Statistical process control is the primary technique for achieving control. The basic statistical process control (SPC) tools are Pareto diagrams, flow diagrams, causeand-effect diagrams, check sheets, histograms; control charts, and scatter diagrams. In addition, process capability information such as C and C are used to determine if the process is capable and is centered. Improvement The third part of the trilogy aims to attain levels of performance that are significantly higher than current levels. Process improvements begin with the establishment of an effective infrastructure such as the quality council. v Two of the duties of the council are to identify the improvement projects and establish the project teams with a project owner v . In addition, the quality council needs to provide the teams with the resources to determine the causes, create solutions, and establish controls to hold the gains v The problem-solving method described in a later section may be applied to improve the process, while the quality council is the driver that ensures

Juran Trilogy Diagram 17

The PDSA Cycle The basic Plan-Do-Study-Act (PDSA) cycle was first developed by Shewhart and then modified by Deming. It is an effective improvement technique. The four steps in the cycle are exactly as stated. v First, plan carefully what is to be done. v Next, carry out the plan (does it). v Third, study the results did the plan work as in tended, or were the results different? v Finally, act on the results by identifying what worked as planned and what didn’t. v Using the knowledge learned, develop an improved plan and repeat the cycle.

Kaizen Kaizen is a Japanese word for the philosophy that defines management’s role in continuously encouraging and implementing small improvements involving everyone. It is the process of continuous improvement in small increments that make the process more efficient, effective, under control, and adaptable. The Kaizen improvement focuses on the use of v Value-added and non-value-added work activities. v Muda, which refers to the seven classes of waste over-production, delay, transportation, processing, inventory, wasted motion, and defective parts. v Principles of motion study and the use of cell technology. v Principles of materials handling and use of one-piece flow. v Documentation of standard operating procedures. v The five S’s for workplace organization, which is five Japanese words that mean proper arrangement (Seiko), orderliness (seiton), personal cleanliness (seiketso), cleanup (seiso); and discipline (shitsuke). v Visual management by means of visual displays that everyone in the plant can use for better communications. v Just-in-time principles to produce only the units in the right quantities, at the right time, and with the right resources. v Pa/ca-yoke to prevent or detect errors. v Team dynamics, which include problem solving, communication skills, and conflict resolution. Kaizen relies heavily on a culture that encourages suggestions by operators who continually try to incrementally improve their job or process 18

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An example of a Kaizen-type improvement would be the change in color of a welding booth from black to white to improve operator visibility This change results in a small improvement in weld quality and a substantial improvement in operator satisfaction. The PDSA cycle described earlier may be used to help implement Kaizen concepts.

Supplier Partnership All the industries spend a substantial portion of every sale on the purchase of raw materials, components and services to obtain high quality products and services for the customer the industries must work with the suppliers in a partnering atmosphere to attain the same quality level as attained within the organization. Principles of Customer/Supplier Relations Dr. Kaoru Ishikawa has suggested ten principles to ensure quality products and services and eliminate unsatisfactory conditions between the customer and the supplier: v Both the customer and the supplier are fully responsible for the control of quality. v Both the customer and the supplier should be independent of each other and respect each other’s independence. v The customer is responsible for providing the supplier with clear and sufficient requirements so that the supplier can know precisely what to produce. v Both the customer and the supplier should enter into a nonadversaxial contract with respect to quality, quantity, price, delivery method, and terms of payments. v The supplier is responsible for providing the quality that will satisfy the customer and submitting necessary data upon the customer’s request. v Both the customer and the supplier should decide the method to evaluate the quality of the product or service to the satisfaction of both parties. v Both the customer and the supplier should establish in the contract the method by which they can reach an amicable settlement of any disputes that may arise. v Both the customer and the supplier should continually exchange information, some times using multifunctional teams, in order to improve the product or service quality. v Both the customer and the supplier should perform business activities such as procurement, production and inventory planning, clerical work, and systems so that an amicable and satisfactory relationship is maintained. v When dealing with business transactions, both the customer and the supplier should always have the best interest of the end user in mind Although most of these principles are common sense, a close scrutiny shows that a true partnering relationship exists with long-term commitment, trust, and shared vision Partnering Partnering is a long-term commitment between two or more organizations for the purpose of achieving specific business goals and objectives by maximizing the effective ness of each participant’s resources Benefits include improved quality, increased efficiency, lower cost, in creased opportunity for innovation, and the continuous improvement of products and services. Partnering is a multifaceted relationship requiring constant nurturing to achieve continuous improvement and maximum benefit. There are three key elements to a partnering relationship: long-term commitment, trust, and shared vision. 19

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Long-Tern Commitment. Trust. Trust enables the resources and knowledge of each partner to be combined to eliminate an adversarial relationship. Shared Vision. Each of the partnering organizations must understand the need to satisfy the final customer. Planning.

Sourcing There are three types of sourcing: sole, multiple, and single. A sole source of supply implies that the organization is forced to use only one supplier this situation is due to factors such as patents, technical specifications, raw material. Location, only one organization producing the item, or the item being produced by another plant or division of the organization. v Partnering is a natural consequence of this type of sourcing, pro vided the supplier is willing to work together to satisfy the end user. v Multiple sourcing is the use of two or more suppliers for an item. v Usually three suppliers are chosen, and their portion of the business is a function of their performance in terms of price, quality, and delivery. v The theory of multiple sourcing is that competition will result in better quality, lower costs, and better service. v However, in practice, an adversarial relationship may result without the claimed advantages. v Multiple sourcing also eliminates disruption of supply due to strikes and other problems. Supplier Selection Before discussing supplier activities, it must be decided whether to produce or outsource a particular item. This decision is a strategic one that must be made during the design stage. The following three questions need to be answered: • How critical is the item to the design of the product or service? • Does the organization have the technical knowledge to produce the items internally if not, should that knowledge be developed? • Are there suppliers who specialize in producing the item? If not, is the organization willing to develop such a specialized supplier? These questions must be answered in terms of cost, delivery, quality, safety, and the acquisition of technical knowledge One organization outsourced their trucking operation, warehousing, and accounts payable because it could be done better and cheaper. Once the decision has been made to outsource, then the supplier must be selected. Following are ten conditions for selection and evaluation of suppliers.’ v The supplier maintains high technical standards and has the capability of dealing with future technological innovations. v The supplier can provide those raw materials and parts required by the purchaser, and those supplied meet the quality specifications. v The supplier has the capability to produce the amount of production needed or can attain that capability. v There is no danger of the supplier breaching corporate secrets. v The price is right and the delivery dates can be met. In addition, the supplier is easily accessible in terms of transportation and communication. There must also be a system to trace the product or lot from receipt and all changes of production delivery. v The supplier is sincere in implementing the contract provisions. Does the supplier have a system for contract review, and does that system include a contract review 20

of requirements and how differences between the contract and accepted order requirements should be resolved? v The supplier has an effective quality system and improvement program such as v ISO/QS 9000. v The supplier has a track record of customer satisfaction and organization credibility. Supplier Rating The customer rates suppliers to: • Obtain an overall rating of supplier performance. • Ensure complete communications with suppliers concerning theft performance in the areas of quality, service, delivery, and any other measure the customer desires. • Provide each supplier with a detailed and factual record of problems for corrective action. • Enhance the relationship between the customer and the supplier v A successful supplier rating system requires three key factors: v An internal structure to implement and sustain the rating program v A regular and formal review process, and v A standard measurement system for all the suppliers.’ A supplier rating system (often referred to as a scorecard system) is usually based on quality, delivery, and service: how ever some customers have added other categories, such as mach inability. These categories may also have subcategories. These basic categories are weighted, with quality usually given the greatest weight • • • •

Reports are prepared and issued quarterly, and grades should be provided to each supplier To make reading the scorecards more effective, GM has initiated the use of a traffic light standard for its supplier quality scorecard. Supplier quality performance metric and ratings are categorized into one of the three colors of the traffic light. Red, yellow, and green colors are used to report performance metrics. Problem (red) and potential problem (yellow) metrics can be identified at a quick glance.

Relationship Development The previous information on partnering, supplier selection, principles of customer/supplier relations, certification, and periodic rating contribute to the establishment of the relationship Additional topics of inspection, training, teams, and recognition and reward contribute to the maintainability and growth of the relationship. Inspection The goal of inspection is to eliminate, substantially reduce, or automate the inspection activity. There are four phases of inspection: v 100% inspection, v Sampling, v Audit v Identity check. In the initial phase. 100% inspection of the critical quality characteristics by both the customer and the supplier is recommended. 21

As the customer gains confidence in the supplier’s quality performance, a change to sampling is initiated. As the supplier gains confidence in its quality performance, a change to sampling is recommended, provided there is statistical control of the process using control charts and process capability At this point, the customer changes to auditing the supplier’s performance using a ship-lot scheme or some type of random sampling of the submitted lots. Training v In small organizations, the senior managers perform many different functions. v Frequently no one has expertise in quality or the ability to train the work force v Therefore, the customer or a consultant must start the training process. v Larger organizations may invite the supplier to attend their courses or present the course at the supplier’s plant v Such training and the types of courses may be a requirement for partnership. v Training should be viewed as an investment, not an expense. Team Approach • Customer/supplier teams are established in a number of areas, such as product design, process design, and the quality system. It is a good idea to involve suppliers when the team is first assembled rather than at the end of its activities. • Team meetings should occur at both parties’ plants so they obtain a greater understanding of the processes. • Recognition • Creating incentives for suppliers is one way to ensure that they remain committed to a quality improvement strategy • Incentives may be in the form of a preferred supplier category with its rewards Recognition Ø Creating incentives for suppliers is one way to ensure that they remain committed to a quality improvement strategy. Ø Incentives may be in the form of a preferred supplier category with its rewards. Performance Measures The final concept of Total Quality Measurement (TQM) is performance measures. One of the Malcolm Baldrige National Quality Award core values is managing by fact rather than by gut feeling. v Basic concepts and objectives v Performance measures are used to achieve one or more of the following seven objectives: v Establish baseline measures and reveal trends. v Determine which processes need to be improved. v Indicate process gains and losses. v Compare goals with actual performance. v Provide information for individual and team evaluation. v Provide information to make informed decisions. v Determine the overall performance of the organization. Typical Measurements • What should be measured is frequently asked by managers and teams. • The information below suggests some items that can be measured 22

Human Resources Lost time due to accidents, absenteeism, turnover, employee satisfaction index, number of suggestions for improvement, number of suggestions implemented, number of training hours per employee, training cost per employee, number of active teams, and number of grievances. Customers: Number of complaints, number of on-time deliveries, warranty data such as parts replacement, customer satisfaction index, time to resolve complaints, telephone data such as response time, mean time to repair, dealer satisfaction, report cards. Production: Inventory turns, SPC charts, C amount of scrap/rework, nonconformities per million units, software errors per 1000 lines of code, percent of flights that arrive on time, process yield, machine downtime, actual performance to goal, number of products retuned, cost per unit. Research and Development New product time to market, design change orders, R & D spending to sales, average time, to process proposal, recall data, cost estimating errors. Suppliers: SPC charts, Cp/Cpk, on-time delivery, service rating, quality performance, billing accuracy, average lead time, percent of suppliers that are error free, just-in-time delivery target. Marketing/Sales Sales expense to revenue, order accuracy, introduction cost to development cost, new product sales to total sales, new customers, gained or lost accounts, sales income to number of salespeople, number of successful calls per week Administration: Revenue per employee, expense to revenue, cost of poor quality, percent of payroll distributed on time, number of days accounts receivable past due, number of accounts payable past due, office equipment up-time, purchase order errors, vehicle fleet data, and order entry/billing accuracy. A good metric compares the measurement of interest to the total possible outcomes, such as rework hours to total hours. Criteria All organizations have some measurements in place that can be adapted for TQM. How ever, some measurements may need to be added. In order to evaluate the existing measures or add new ones, the following ten criteria are recommended: Simple: Measures should be understandable by those who will use them. v Few in number v Developed by users: v Relevance to customer: v Improvement. v Cost v Timely Visible v Aligned 23

v Result Strategy The quality council has the overall responsibility for the performance measures. It ensures that all the measures are integrated into a total system of measures. To develop the system, the quality council will obtain appropriate information from all of the stakeholders. They will utilize the core values, goals, mission, and vision statements (see Chapter 2) as well as the objectives and criteria given above. With this information, the strategic measurement system is created. An example of a system that emphasizes percent improvement might contain the functions and metrics as given below: Quality • Percent reduction in cost of poor quality • Percent reduction in nonconformities • Percent of certified suppliers • Percent reduction in supplier base • Percent reduction in corrective action cycle time Cost • Percent increase in inventory turnover • Percent reduction in data transactions • Percent increase in materials shipped direct to work-in-process by the supplier • Percent increase in output dollars per employee • Percent reduction in floor space utilization Flexibility • Percent reduction in cycle time • Percent reduction in setup time • Percent reduction in lot/batch size • Percent increase in number of jobs mastered per employee • Percent increase in common materials used per product Reliability v Percent of processes capable of C = 2.0 v Percent reduction in down time v Percent reduction in warranty costs v Percent reduction in design changes v Percent increase in on-time delivery Innovation • Percent reduction in new product introduction time • Percent increase in new product sales revenue as a percent of total sales revenue • Percent increase in new patents granted • Customer perception as a leader in innovation • Percent of management time spent on or leading innovation The above are tracked monthly to show trends, identify, problem areas, and allocate resources Performance Measure Presentation There are six basic techniques for presenting performance measures. Time as measured by days, weeks, months, and so forth, is shown on the horizontal axis, and the performance mea sure is shown on the vertical axis. This type of graph benchmarks the process and shows favorable and unfavorable trends in the measure. 24

A third presentation technique is the capability index, which is the ratio of the tolerance to the capability.

Another way of measuring quality is Taguchi’s loss function. This technique combines target, cost, and specifications into one measurement.

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