CHAPTER 9:

Management of Quality

Teaching Notes

This chapter is devoted to quality management. It presents a definition of quality, discusses the importance of quality and the determinations of quality, highlights the views of leading experts on modern quality management, and describes the total quality management approach. A later chapter is devoted to quality control procedures and quality improvement.

Total Quality Management (TQM) is a popular approach that:

1.Promotes understanding and fulfilling the needs of customers.

2.Defines quality in terms of customer requirements.

3.Views quality improvement as a never ending quest to improve the process.

4.Uses statistical reasoning with data to solve problems and to improve the process.

5.Emphasizes the role of leadership systems in improving quality.

6.Utilizes appropriate education and training to everyone in the organization in a continuous fashion.

7.Views quality not only as a technical operational issue but also views it from a strategic orientation that leads to enhanced long term planning.

8.Encourages empowerment of the employees in the work place in order to improve job design, job performance and continuous improvement in all aspects of the organization.

TQM is an approach that views quality improvement as a never-ending quest to improve the conversion process so that the level of customer satisfaction continually rises. Since the Japanese have been so successful in continuously improving the quality of their products and services, Kaizen, or continuous improvement, has become an extremely popular and widely accepted managerial approach to improve quality on a daily basis. The old adage, “if it ain’t broke, don’t fix it,” has a rather hollow ring to it these days. A more appropriate transformation today would be “just because it ain’t broke doesn’t mean it can’t be improved.”

The material in this chapter is divided into the following major topics

1.Overview of TQM

2.Problem Solving

3.Continuous Process Improvement

a.Process Mapping

b.Process Analysis

c.Process Redesign

4.Seven Quality Tools

a.Check Sheets

b.Flowcharts

c.Scatter Diagrams

d.Histograms

e.Pareto Charts

f.Control Charts

g.Cause and Effect Diagrams

5.Strategic Issues in implementing TQM

6.Plan-Do-Study-Act Cycle

7.Methods for Generating Ideas

  1. Run Charts
  2. Brainstorming
  3. Quality Circles
  4. Interviewing

e. Benchmarking

Answers to Discussion and Review Questions

1. a. Convenience: the availability and accessibility of the service.

Reliability: the ability to perform a service dependably, consistently, and accurately.

Responsiveness: the willingness of service providers to help customers in unusual situations and to deal with problems.

Time: the speed with which service is delivered.

Assurance: the knowledge exhibited by personnel who come into contact with a customer and their ability to convey trust and confidence.

Courtesy: the way customers are treated by employees who come into contact with them.

Tangibles: the physical appearance of equipment, facilities, personnel, and communication materials.

b. The primary determinants of quality are design, conformance to design (materials and workmanship), ease of use (partly related to design, but also a functionof user instructions and sometimes training), and service after delivery.

2.Design quality refers to the degree to which a product or service would ideally be fit for use. Quality of conformance refers to how well a product or service matches design specifications.

3.a. The reputation and image of an organization will suffer from poor quality products or services.

b. Organizations must pay special attention to their potential liability due to damages or injuries resulting from either faulty design or poor workmanship.

c. Poor quality can adversely affect productivity if rework is necessary or if the process slowed down to accommodate an assembler trying to find a part that fits properly or by having defects and scrap that reduce output.

d. Poor quality increases costs because of rework, scrap, repair and replacement, warranty claims, discounts, customer field work such as travel and inspection, lost time, and legal expenses.

4. / Dimension / Television Set
Performance / On, off, sound, color, picture
Special features / Remote control, inset picture, stereo sound
Reliability / Infrequency of breakdowns and repair work
Durability / Useful life in terms of time and use
Service after sale / Handling of complaints, requests for information, repair work (cost, time, reliability, courtesy and trust)
Conformance / Meets or exceeds our expectations
Safety / UL approved
Aesthetics / Shiny black cabinet
Dimension / Restaurant Meal (Product)
Performance / Taste, smell, color, arrangement of food, cleanliness, tableware
Special features / Specialties of the house, wines, cocktails, desserts, atmosphere, music
Reliability / Consistently excellent day after day
Conformance / Meets or exceeds our expectations
Service after sale / Friendly, courteous, appreciative
Safety / Sanitary handling
Aesthetics / Looks appetizing
Dimension / Restaurant Meal (Service)
Performance / Friendly, courteous, appreciative, timely, manners, poise, nimbleness, knowledge of food and wines
Special features / Extra service, special favors, knowledge of customer—likes, dislikes, special dates, makes customer feel special
Reliability / Consistently excellent day after day in every way
Conformance / Meets or exceeds our expectations
Service after sale / Friendly, courteous, appreciative
Safety / Careful with hot beverages, carrying loads of dishes
Aesthetics / Clean uniforms
Dimension / Painting a House
Performance / Neatness, cleanliness, appearance, thoroughness, reasonable speed
Special features / Knowledge of colors, minor repairs, suggestions, knowledge of paint
Reliability / Consistently excellent job after job
Durability / Length of time it lasts and looks good
Conformance / Meets or exceeds our expectations
Service after sale / Cleans up mess, friendly, courteous, appreciative
Safety / Careful with ladders, tools and paint not in walkways
Aesthetics / Appearance of completed work

5.a. (Various responses.)

b. Among the possible reasons:Often these are the extremes - A customer is either very satisfied or very dissatisfied, a customer receives something in return for a review, such as discountcoupons or a small monetary reward.

6.A major component of the quality-ethics interface involves firms knowingly allowing substandard products to be manufactured and sold or organizations knowingly providing substandard service to customers.

The substandard production can take place as a result of poor workmanship, improper or inadequate training of employees, poor product or process design, low quality parts, raw materials or components, poor maintenance policies and systems, equipment or machinery problems. Each of these reasons for substandard quality may involve possible unethical behavior.

The consequences of delivering substandard or poor quality products range from increased warranty and liability costs for companies to inconvenience or injuries to customers.

When the firm learns about the quality problem, the way in which it deals with it may be considered unethical if the response to the problem is unreasonably slow, and/or if the remedies are either nonexistent or considered to be inadequate.

7.Quality Gurus:

W. Edwards Deming:Deming is known as the senior quality guru.He was a statistics professor at New YorkUniversity.He went to Japan to assist the Japanese in improving quality and productivity.As a result of his successful accomplishments in Japan, the Japanese established the prestigious Deming prize, which is awarded annually to firms that distinguish themselves with successful quality management programs. His work in quality was not recognized in the U.S. until the 1980s.Finally, U.S. companies embraced his work. He assisted many American companies in designing quality programs until his death in 1993. Deming compiled a famous list of 14 points that he believed was the prescription needed to achieve quality in an organization.He strongly believed the cause of inefficiency and poor quality was due to the system and not to the employees.He also believed it was management’s responsibility to correct the system in order to achieve the desired improvements in quality and productivity.

The key elements of Deming’s 14 points are:constancy of purpose, continual improvement, and profound knowledge.Profound knowledge has four key components:

  1. An appreciation for a system.
  2. A theory of variation (develop a system to reduce the variation in output and distinguish between special and common causes of variation).
  3. A theory of knowledge (knowledge is derived from theory and learning cannot take place without theory of knowledge).
  4. Psychology (management must find a way to motivate workers).

8.a.ISO 9000 is a set of international standards on quality management.The International Organization for Standardization(ISO) promotes worldwide standards that will improve efficiency and productivity.The ISO 9000 standards are important for doing business internationally, especially in Europe.Over 40,000 companies are certified by ISO.In order to get certified, companies must go through a process documenting procedures involving process control, inspection, purchasing, and training.After the documentation is complete, there is an on-site visit to verify the procedures documented.After certification, registered companies go through a series of audits.They must be recertified every three years.

b.One is an award, the other certifies a level of competence. The Baldrige Award is designed to stimulate quality improvement efforts and recognize achievements, and to publicize successful programs.ISO certification implies a certain level of quality competence in products or services that is recognized internationally.If a U.S. companywanted to pursue both, the logical first choicewould be the Baldrige Award, because it would help the company focus on its processes, which is a key step for ISO certification.

  1. Quality management emphasizes preventing mistakes or correcting them after they occur.There is a direct trade-off between investment in quality programs and investment in failure costs.If the quality is poor, the failure costs will be high.The productivity can be significantly reduced, by reworking defective parts.Injuries can also occur because of neglected machinery and defective output (internal failure costs).Increase in warranty costs, service costs, repair costs, discount costs and payments to customers to offset the inferior quality are examples of external failure costs.The emphasis on quality can lead to a significant reduction of both internal and external failure costs, thereby reducing production costs for the company.

10. TQM is a quest for quality that involves everyone in the organization. The key elements of the TQM approach are continuous improvement and an emphasis on customer satisfaction.

11.Seven Quality tools are:

  1. Check sheet: A tool for organizing and collecting data. It is a tally of problems and other events by category.
  2. Flowchart: A diagram of steps in a process.
  3. Scatter diagram: A graph that shows the degree of relationship (correlation) between two variables.
  4. Histogram: A chart that shows the empirical frequency distribution. Histogram expresses the shape of the data set.
  5. Pareto chart: A chart that arranges categories from highest frequency of occurrence to lowest frequency of occurrence. Pareto chart distinguishes the few critical factors from the many trivial factors.
  6. Control chart: A statistical chart of time ordered values of a sample statistic. It involves setting upper and lower limits to determine potential causes of problems in a given process.
  7. Cause and effect diagram: A representation of the relationship between some measured effect and the set of possible causes that produce the effect. It may be used to correct the problems or understand the process itself.

12.a. Brainstorming is a technique in which a group of people share ideas and thoughts in a relaxed atmosphere on various problems in order to stimulate unrestrained collective thinking.

b.Benchmarking is a technique that measures a company’s performance against the best in industry. This technique can help in determining how the best companies achieve high performance and quality levels.

c.Run chart is a plot of series of values in the order of their occurrence. It is used to track the values of a variable over time to identify trends or patterns in the data set.

  1. a.There are four basic steps in the plan-do-study-act cycle:

Plan. Begin by studying the current process. Standardize that process. Then collect data in order to identify problems. Next, analyze data and develop a plan for improvement. Specify measures to be used for evaluating the plan.

Do. Implement the plan, on a small scale if possible. Document any changes that are made during this phase. Collect data systematically for evaluation.

Study. Evaluate the data collection during the do phase. Check to see how closely the results match the original goals of the plan phase.

Act. If the results are successful, standardize the new methods and communicate the new method to all people associated with the process. Implement training for the new method. Consider opportunities for replicating the same changes in other similar processes. If the results are not successful, either revise the plan and repeat the process, or cease this project.

  1. 5W2Happroach is a method of asking questions about the process where five of the questions begin with the letter “w” (what, why, where, when, who) and two of the questions begin with the letter “h” (how, and how much)

14.Steps of Problem Solving:

  1. Define the problem and establish an improvement goal
  2. Collect data
  3. Analyze the problem
  4. Generate potential solutions
  5. Choose a solution
  6. Implement the solution
  7. Monitor the solution to see if it accomplishes the goal.

15.a.Pareto Analysis:Assume that a company has just been bought by another company. Based on an initial study, it has been established that the organization is suffering from numerous quality problems. A committee is formed to study the quality related problems. One of the first tasks of the committee is to enumerate the various problems experienced by this company and identify the more important problems so that we can take corrective action. In this context, the company is considering to use Pareto analysis to differentiate the few important problems from many trivial problems.

b.Histogram: A company is having problems controlling the quality of the average diameter of the radial tires. The quality control manager of a tire manufacturing company wants to determine the shape of the tire diameter distribution so that he can determine whether excessively large diameters or excessively small diameters are problematic. A histogram is drawn to shed light on this problem.

c.Flow chart:The company has moved one of its plants to a new location. In the process of moving, the layout of the plant was altered. As a result of the alteration the company is having difficulty locating material and controlling its operations. The plant manager thinks there is a more effective way to determine the organization of the plant. He proceeds by assigning the Production and Inventory Control manager to determine where in the process problems occur. The Production and Inventory Control manager utilizes a flow chart to diagram the steps of the manufacturing process through the plant. After analyzing the results from the flow chart, the company will consider other options for the plant layout.

d.Scatter diagram: A drug manufacturer wants to determine if there is a significant relationship between the dosage of its new drug and a patient’s body temperature. It collects information from 12 patients that were administered several different drug dosages. Plotting the scatter diagram will show the degree and the direction of the relationship between the two variables.

16. Steps of process improvement:

  1. Process Mapping.
  2. Process Analysis
  3. Process Redesign
  1. See textbook pages428–442.

Taking Stock

  1. The more a company spends on quality improvement, the higher the potential quality of the product. In some cases, while improving quality, we can simultaneously reduce our cost because of elimination of waste and duplicate effort. However, spending more money on quality does not always translate into significant improvement of quality. If a company spends too much money in trying to improve its quality without results, the cost of quality may become unusually high. We also need to remember that the customer ultimately defines quality. If we spend money to improve quality beyond the customers’ need, then it will not be noticed and the money spent to achieve this level of quality could have been used for other purposes.
  2. Setting priorities for quality improvement need to vertically transcend the entire organization. Therefore, at the macro level, upper management needs to be heavily involved in determining the desired level of quality. Obviously, marketing department, due to its close contact with the customers, can provide invaluable information when defining quality. Someone or some people involved in strategic planning, due to his/her/their knowledge of competition should be involved. Of course engineering, production, quality control departments/areas will not only be able to answer technical questions about quality improvement but also will be in a position to evaluate whether quality goal setting done at the macro level was reasonable. Finally, accounting and financial personnel can provide valuable information about the cost of quality.
  3. The technology had a profound impact on quality. Improvement in measurement systems drastically improved the measurement of quality. Computer technology has enabled many companies to perform on-line, real-time statistical process control, which enabled companies to respond to quality problems faster. Due to technological improvements in computerized design, the products are designed better, thus have significantly fewer quality problems. The artificial intelligence systems forewarn potential problems before they occur.

Critical Thinking Exercise

1.Possibly, the cost of the wages of the additional repair personnel was being observed by the average cost of the repair. The manager may be able to provide the repair department with additional funding provided that department is able to reduce the average cost per repair.

2.Customer retention is important because it typically costs a lot less to retain current customers than it does to attract new customers.One possible reason that “satisfied customers” leave is that “customer satisfaction” is not enough.Retention may require exceeding customer expectations.Another possibility is that no matter what you do, you won’t be able to retain some customers.

In some businesses, developing a breakdown of profits generated by each type of customer (e.g., loyal versus tendency to leave) can be a good starting point.It may turn out that it is not worthwhile to try to retain those customers.If it is worthwhile, try to find out why you can’t retain them (i.e., what it would take to retain them), and respond accordingly.