Total Quality Management (TQM)

A. Total Quality Management.

I.
Quality Management Concept
1. What is quality?
The mean of quality has evolved over a period of time. It has been defined as:
conformance to specifications; fitness for use and the total features and
characteristics of a product or services that bear on its ability to meet stated or
implied needs. It include two dimension:
MUST BE QUALITY:
Must be quality is that aspect of a product or service that a customer expects.
This is the minimum acceptable standard which if not available in the product
the customer will be extremely dissatisfied.
ATTRACTIVE QUALITY:
Attractive quality is that aspect of a product of service that goes beyond current
needs. The special features which will thrill the customer are examples of
attractive quality.
A well designed product or service should have both dimensions of quality.
These can strongly influence the customers buying decision. The ultimately goal
of quality is customer satisfaction. We have another quantified definition of
quality Q = P / E. If Q is greater than 1, then the customer has a good feeling
about the quality of product or service.
Q: Quality
P: Performance
E: Expectation
2. TQM definitions
TQM is an integrated organizational approach in delighting customers (both
internal and external) by meeting their expectations on a continuous basis
through everyone involved with the Organization working on continuous

improvement in all products/processes along with a proper problem solving

methodology.
TQM is more than a concept; it is a philosophy by itself. It is defined as a
management strategy for an organization, centered on awareness of quality in
all organizational processes. The TQM management strategy is based on the
participation of all members and aiming at long-term success through customer
satisfaction and benefits to all members of the organization and society. TQM
relies on all necessary quality management tools to achieve and maintain the
desired level of quality in everyday operations, allowing for continual
improvement of operations and meeting changing customer expectations.
Objectives of TQM:

Process improvement
Defect prevention
Priority of effort
Developing cause-effect relationships
Measuring system capacity
Developing improvement checklist and check forms
Helping teams make better decisions
Developing operational definitions
Separating trivial from significant needs
Observing behavior changes over a period of time

These have resulted in several benefits, such as:

Improves competitive position

Increase adaptability to global markets
Elevated productivity
Eliminates defects
Significantly reduces waste.
Reduces quality costs
Improves management communication
Raises profits
Customer loyalty

II.

Process of TQM: Quality assurance -> Quality management -> Total

quality management.
QUALITY ASSURANCE SYSTEM:
The organizational structure, the processes and procedures necessary to ensure
that the overall intentions and direction of an organization as regards quality are
met and that the quality of the product or service is assured.
The quality assurance standards: The 2 most commonly used standards in the
ISO 9000 series are ISO 9001 and ISO 9002
ISO 9001 sets out the requirements to be met by the Quality System when a
business is involved in design, development, production, installation and/or
servicing.
ISO 9002 sets out the requirements of the QA system when a business is
involved in development, production, installation and/or servicing.
The only difference between the 2 standards is the "Design" element.
REASONS FOR SETTING UP A QUALITY SYSTEM:
A well developed and implemented QA system should:
Improve your product and service quality
Give your customers confidence that their needs will be met.
Standardize your business by giving it a consistent approach to its
operations.
Improve work processes, efficiencies, morale and reduce waste

QUALITY MANAGEMENT
QM comprises all activities of the overall management function that determines
the quality policy, objectives and responsibilities & implement them by means
such as quality planning, quality control, quality assurance and quality
improvement with in the quality system.
Quality management requires the following components:
Planning the processes and inputs
Providing inputs
Operating the processes

 Evaluating the outputs

Examining the performances of the processes
Modifying the processes and their inputs.
TQM Tools
Quality Improvement Teams
These are small groups of employees who work on solving specific problems
related to quality and productivity, often with stated targets for improvement.
Quality improvement teams are proving to be highly successful at tracking
down the causes of poor quality as well as taking remedial action.
Benchmarking
This is the process of identifying the best practices and approaches by
comparing productivity in specific areas within ones' own company to other
organisations both within and outside the industry.
Statistical process control (SPC)
This is a statistical technique that uses periodic random samples taken during
actual production to determine whether acceptable quality levels are being met
or whether production should be stopped in order to take remedial action.
Because most processes produce some variation, statistical process control uses
statistical tests to determine when variations fall outside a narrow range around
the acceptable quality level. The emphasis when using SPC is on defect
prevention rather than trying to inspect the quality into the product.
III.

Six sigma:

Along with the total quality management, there is another quality management
method that many modern management use within a company called Six
sigma.
Definition: A statistical concept that measures a process in terms of defects at
the six sigma level, there 3.4 defects per million opportunities.

 A series of tools and methods used to improve or design products,

processes, and/or services.
A statistical measure indicating the number of standard deviations within
customer expectations.
A disciplined, fact-based approach to managing a business and its
processes.
It is a Quality Philosophy and the way of improving performance by
knowing where you are and where you could be.
Methodology to measure and improve companys performance, practices
and systems
Benefits:

Generates sustained success

Sets performance goal for everyone
Enhances value for customers
Accelerates rate of improvement
Promotes learning across boundaries
Executes strategic change

Core concept of six sigma which differ it with TQM is Six Sigma seeks to
improve the quality of process outputs by identifying and removing the causes
of defects (errors) and minimizing variability in manufacturing and business
processes. It used a set of quality management method, mainly empirical
statistical methods, and creates a special infrastructure of people within the
organization.
Five basics phase of six sigma:
Define: Define the problem and what is required to satisfy your customer.
Measure: Map the current process to collect data.
Analyze: Investigate and identify what causes the problem.
Improve: Implement a fix that will solve the problem.
Control: Sustain the improved results.

Simply put, Lean Six Sigma helps you identify the cause of a problem and
implement a fix based on facts, rather than assumptions. This produces
improved results and success that you and your team, managers and
organization can be proud
IV.

Cost of quality
A Cost of Quality (COQ) constructs a chart displaying prevention,

appraisal, and failure costs over time in order to demonstrate the cost of
poor quality. The Cost of Quality can be categorized into two divisions: The
Cost of Poor Quality (COPQ), and The Cost of Good Quality (COGQ). The cost
of poor quality looks over the entire internal as well as the external costs which
is the outcome of the product imperfection. Alternatively, the cost of good
quality is the prevention costs that are used in prevention and assessment such
as, quality planning, error proofing, quality education, Six Sigma training etc.
Cost of Quality can be defined as the cost which is allied with the quality of a
product. It is the sum total of costs which is incurred while maintaining quality
up to standard levels plus the cost of failure to maintain that level. Cost of

Quality will not incur if the quality is free from faults. Six sigma offers solution
to this problem and helps the companies to reduce their Cost of Quality to a
level of one to two percent only.
The computation system of quality cost has now become a trend of every
modern organization. This accounting and computing are playing a key role in
the quality improvement of organizations. In six sigma managementplan,
quality cost make out the way to get greatest return on the investment made
by companies. The Cost of Quality can be saved if the quality of a product is
perfect. Costs which arise for:
o

Investment made while preventing non- conformances to requirements,

Assessing a service or product for conformance to the necessary

requirements, and
Failing to meet the requirements.

Under the heading Cost of Quality, there are two divisions: Cost of Poor
Quality (COPQ), and Cost of Good Quality (COGQ). Cost of Poor Quality
is again sub- divided into:
o

Internal Failure Costs, and

External Failure Costs

Cost of Good Quality has the sub- division:
Appraisal Costs, and
Prevention Costs

o
o

Internal Failure Costs: It is caused by services or products not meeting the

requirements of the consumers or users and is found before the time of the
release of services and products to the external customers. They would probably
have dissatisfied the customer because of the dearth that is caused in
cooperation by erroneousness products and inaccuracy in processes. These
include the cost for:

Rework
Stoppage
Re-designing
Shortages
Failure analysis
Re-testing
Reduction
Downtime
Lack of suppleness and adaptability

o
o
o
o
o
o
o
o
o

External Failure Costs: When customers are dissatisfied due to deficiency

found at post delivery period of products can incur external failure costs.
Examples for these costs include:
Grievances
Patching up goods and redo services
Warranties
Customers bad will
Sales reductions causes heavy loss
Costs of environment.

o
o
o
o
o
o

Appraisal Costs: The necessity to control services as well as the products to

make certain a high excellence level in all the stages causes the emergence of
prevention cost. These include the costs for:
Checking and testing services and goods that are purchased
Final inspection and in process
Field testing
Product, service audits and process

o
o
o
o

Prevention Costs: Costs that are designed to prevent poor quality from arising
in products or services are Prevention Costs. These are:

Quality scheduling
Error proofing
Capability assessments

Quality development projects

Quality education and training

o
o

Quality Processes: Six sigma is the perfect solution for reducing the cost of
quality to a minimal level. The way is made by building the quality as part of

the processes. Six sigma assures to do work perfectly right from the beginning.
A company can gain maximum benefit from six sigma processes by spending
less money in the faulty product or services. If there is a smooth functioning
ofmanagement then a company will produce zero defects. If processes are
improved, the appraisal and prevention costs will be concentrated.
Poor quality causes higher costs of products or services and at the same time
customer dissatisfaction. The sales running on loss may become critical if not
taken carefully and on time. Such situations can be controlled by thorough
measurement of quality.
Quality cost data if collected timely can help
support performance improvement. To make the process more effective, the cost
of quality has to be mutual with other quality information systems to guarantee
that such critical condition can be uprooted correctly. To achieve less cost of
quality, the organization should move to Six Sigma Quality Level.

B. Global adoption six sigma

I.

ISO 9000 series

Six Sigma was formed at Motorola Corporation in 1986 and was later
popularized by the success of General Electric (GE) in 90s. Organizations such
as Honeywell, Citigroup, Motorola, Starwood Hotels, DuPont , Dow Chemical,
American Standard, Kodak, Sony, IBM, Ford implemented Six Sigma programs
across diverse business activities from manufacturing to service and financial
activities. In a recent survey by the company DynCorp showed:
Around 22% total companies in the US is applying Six Sigma, 38.2% of
the company is applying Six Sigma is the company specializing in services,
49.3% of the company specializes in manufacturing and 12.5% are companies
in the others.

The success of some company.

Motorola (1987-1994)
Reduced in-process defect levels by a factor of 200.
Reduced manufacturing costs by $1.4 billion.
Increased employee production on a dollar basis by 126%.
Increased stockholders share value fourfold.
AlliedSignal (1992-1996)
$1.4 Billion cost reduction.
14% growth per quarter.
520% price/share growth.
Reduced new product introduction time by 16%.
24% bill/cycle reduction.
General Electric (1995-1998)
Company wide savings of over $1 Billion.
Estimated annual savings to be $6.6 Billion by the year 2000

C. Reality applying Six sigma in Vietnam

In 2000, Ford Vietnam has initiated 6-sigma. After nearly 7 years, Ford has
implemented process improvements in all areas of their business and production
with 200 6-sigma project. The result is that Ford has saved more than 1.2
million and achieved customer satisfaction at over 90% per year. Among these
projects, in 2005 Ford had done Sigma project to reduce the amount of
container cargo imported components. Ford found that the container
components in the two vehicles container imported into Vietnam was a lot of
space and Ford had reorganization of space for them. According to Ford, saving
space as well as a way to save costs and contribute to increase profits. From this
space saving Ford 150.00 USD savings in the first year of implementation.

Ford not only that many companies in Vietnam as the American standard,
Samsung, LG has brought six-sigma program implemented in some of their
businesses. Currently businesses in Vietnam remained at 3-sigma.
Limitations in adopting Six-sigma in Vietnam

In Vietnam 6-sigma is not commonly applied

6-sigma has high cost.
Requires teamwork spirit high
Human resources are not yet able to determine the cause of the error
Science and technology has not developed
The cost of higher education human resources
Most workers in the plant is incapable of absorbing the technology