Total quality management

Unit-1
Introduction to TQM

DEFINITION FOR QUALITY

TQM is defined as both a philosophy and a set of guiding principles that represent the foundation
of a continuously improving organization. It is the application of quantitative methods and
human resources to improve all the processes within an organization and exceed customer needs
now and in the future. TQM integrates fundamental management techniques, existing
improvement efforts, and technical tools under a disciplined approach.

TQM

Total Made up of the whole

Quality Degree of excellence a product or service provides.

Management Act, art, or manner of handling, controlling, directing etc.

BASIC CONCEPTS OF TQM

Top management commitment

Focus on the customer

Effective involvement and utilization of the entire work force

Continuous improvement

Treating suppliers as partners

Establishing performance measures for the processes

Top management commitment

Management must participate in the quality program. A quality council must be

established to develop a clear vision, set long-term goals, and direct the program. Quality goals
are included in then business plan. An annual quality program is involves input from the entire
work force. Managers participate on quality improvement teams and also act as coaches to other
teams. TQM must be communicated to all people.

Focus on the customer

The key to an effective TQM program is its focus on the customer. An excellent place to
start is by satisfying internal customers. We must listen to the voice of the customer and
emphasize design quality and defect prevention. Do it right for the first time and every time, for
customer satisfaction is the most important consideration.

Effective involvement and utilization of the entire work force

TQM is an organization-wide challenge that is everyones responsibility. All personnel

must be trained in TQM.

People must come to work not only to do their jobs, but also to think about how to
improve their jobs. People must be empowered at the lowest possible level to perform
processes in an optimum manner.

Continuous improvement

TQM is based on the quest for progress and improvement. TQM believes that there is
always a better way of doing things, way to make better use of the companys total
quality resources, a way to be more productive. For this purpose various quality tools
and techniques may be used.
Treating suppliers as partners

Since the suppliers influence the companys quality, therefore a partnership relationship
should be developed between the management and the suppliers.

Establishing performance measures for the processes

As we know, quantitative data are necessary to measure the continuous quality

improvement activity. Therefore performance measures such as productivity, sales
turnover, absenteeism, customer satisfaction, etc., should be determined for each
functional area. These results can be used for further improvement activities.

CHARACTERISTICS OF TQM

TQM is customer oriented

TQM required a long term commitment for continuous improvement of all processes

TQM is a teamwork

TQM requires the leadership of top management and continuous involvement

TQM is a strategy for continuous improving performance at all levels and in all areas of
responsibility.

HISTORY AND EVOLUTION OF TQM

Stage 1: Artisans

Stage 2: Mass production system

Stage 3: Inspection

Stage 4: Quality Control

Stage 5: Statistical Quality Control

Stage 6: Statistical process control

Stage 7: Total quality management

Stage 1: Artisans:

During the initial period quality control, as we understand it today, did not exist. Most
manufacturing work was performed by artisans and skilled craftsmen or by journeymen and
apprentices who were supervised by masters at the trade. They used to produce goods and
inspect the quality of their goods as well as that of their apprentices for supplying them to the
customer. The artisan directly dealt the customers complaint / dissatisfaction with the product.
A well-performing product was viewed as the natural outgrowth of reliance or skilled tradesman
for all aspects of design, manufacturing and service

Stage 2: Mass production system:

The upsurging of mass production amplified the need for the use of interchangeable parts. In
1798 Ell Whitney started designing and manufacturing muskets with interchangeable parts.
Earlier to that, firearms were created individually. If part of the musket broke, a new product
was scrupulously put in order for that particular firearm or else that piece was discarded.
Nevertheless, with the manufacturing of interchangeable parts by Whitney, firing mechanisms,
barrels, or other parts could be used on any musket of the same design. Thus, by making parts
interchangeable, Whitney created the need for Quality Control

In a mass production setting, tasks essential to create a finished product were divided among
many individuals and each individual was performing a specific task. Proper assembling of parts
required two important conditions:

(i) With the purpose of being interchangeable, the parts must be identical
(ii) Production is to be made with minimal variation and within specifications. These
conditions trounced the idea of interchangeable parts and so as to meet those two
prerequisites, Quality principles were evolved.

Stage 3: Insepction:

Inspection refers to those activities designed to uncover or find non-conformances existing in

already completed products / services. The need for formal inspection arose only with the rise of
mass production and the need for interchangeable parts. As volumes increased, parts could no
longer be fitted to one another by hand. The process required a large pool of skilled labor and
was both, costly and time-consuming. This pressure gave rise to what has been called the
American system of manufacturing, which means the use of special-purpose machinery to
produce interchangeable parts by following a pre-established sequence of operations

Most initial efforts were connected with the military demand for armaments. However, the
major breakthrough was made with the development of rational jig, fixture, and gauging system
in the early 1800s. Inspection acquired a new respectability when activities that were previously
conducted by eye were replaced by a more objective and verifiable process
Inspection became even more important in course of time. In the early 1900s, F.W.Taylor, Father
of scientific management invigorate it. In 1922, it was linked more formally to quality control,
with the publication of G.S. Radfords The control of quality manufacturing. For the first time
quality was viewed as a distinct management responsibility and as an independent function. For
several years, quality control was restricted to inspection and to such narrow activities as
counting, grading, and repair etc were considered outside the reach of available inspection
department.

Stage 4: Quality control:

Quality Control (QC) refers to the use of specifications and inspection of completed parts,
subassemblies, and products to design, produce, review, sustain, and improve the quality of a
product or service. QC goes beyond inspection by:

(i) Establishing standards for the product or service, based on the customer needs,
requirements and expectations
(ii) Ensuring conformance to these standards, poor quality is evaluated to determine the
reasons why the parts or services provided are incorrect
(iii) Taking action in case there is a lack of conformance to the standards. These actions
may include sorting the product to find the defectives. In service industries, action
may involve contacting the customer and correcting the situation; and
(iv) Implementing plans to prevent future non-conformance. These plans may include
design or manufacturing changes and in a service industry, they may include
procedural changes.

These four activities work together to improve the production of a product / service. QC efforts
can be enhanced by the use of statistics.

Stage 5: Statistical quality control:

Edifying on these four tenets of QC, statistics were added to map the results of inspection of
parts. In the 1920s, statistical charts to check and control product variables were developed by
Walter A. Shewhart of Bell Telephone Laboratories. At the same time, Harold Dodge and Harry
G.Roming of Bell Telephone Laboratories developed the area of sampling as a substitute for 100
per cent inspection. The use of statistical methods of production monitoring and parts inspection
was known as statistical quality council (SQC) wherein statistical data are collected, analyzed,
and interpreted to solve quality problems.

Stage 6: Statistical process control:

With the development of quality area, the need to become more proactive while dealing with
quality problems was seriously felt. Thus, the emphasis was shifted from utilizing SQC methods
for the inspection or detection of poor quality to their use in the prevention of poor quality.
Prevention of defects by applying statistical methods to control the process is known as statistical
process control (SPC). Here prevention refers to those activities designed to prevent defects,
defectives and non-conformance in products / services. Four separate elements were involved in
defect prevention:

i) Quantifying the costs of quality

ii) Total quality control
iii) Reliability engineering
iv) Zero defects

Stage 7: Total Quality Management:

As the use of SPC got intensified in the 1980s, industry saw the need to monitor and improve the
entire system of providing a quality product or service. Sensing that meeting customer needs,
requirements and expectations involved more than providing a products or service, industry
began to integrate quality into all areas of operations from the receptionist to the sales and billing
departments and to the manufacturing to shipping and even to the service departments

Accordingly, methods of quality management were developed and utilized to encourage the
design, production, marketing, sales and service of quality products / services. This integrated
approach involves all departments in a company in a management approach that places emphasis
on system improvement as a means of achieving customer satisfaction to ensure long-term
success of a company.

However, Garvin organized the quality movement into four distinct Quality Eras: inspection,
statistical quality control (SPC), quality assurance (QA) and strategic quality management.
According to him, the evolution pattern was strategic in nature with continuous improvement as
the driving force in quality planning and employee involvement as the key objectives

FEATURES OF TQM

TQM is useful for small and large companies alike, in order to improve their competitive
position in both the domestic and world marketplace. Adopting TQM as a method for
conducting company business will have a positive impact on key areas of corporate performance.
Important features of TQM that are common to many world-class quality organizations include:

1) customer satisfaction
2) leadership
3) integrated activities
4) corporate culture
5) strengthen employee commitment
6) totality
7) documentation
8) improvements
9) foundation

1) Customer satisfaction
Customer satisfaction is critical in order to remain competitive in the marketplace.
Ultimately, customer satisfaction, both internal and external, drives quality efforts.
Organizations, therefore, need to determine what customers want, and must have
processes in place to meet those customer needs.

2) Leadership
Top executives must provide active leadership to establish quality as a fundamental value
to be incorporated into the companys management philosophy

3) Integrated activities
Quality concepts need to be clearly articulated and thoroughly integrated throughout all
activities of the company

4) Corporate culture
Top executives need to establish a corporate culture that involves all employees in
contributing to quality improvements

5) Strengthen Employee Commitment

Companies need to focus on employee involvement, teamwork and training at all levels.
The focus should strengthen employee commitment to continuous quality improvement

6) Totality
It implies that all areas, functions, activities, and employees are striving for optimum
quality all the time

7) Documentation
It is integrated people-machine-information relations that make TQM effort happen.
Documentation helps in dissemination of information to all persons. The information
will help persons in visualizing their work assignments and responsibilities in quality
activity.

8) Improvements
There should be an endeavor to improve quality activities of the business. This will help
in achieving highest levels of quality competitiveness in operations, products and
services.

9) Foundation
 The solid foundation to whole organizational structure is imperative. If the company is
well organized then it enables the broad scope of quality activities to be properly
managed. Good organizational systems equip management and employees of the
company to come to grips to customer requirements and satisfaction.

ELEMENTS OF TQM

TQM fosters openness, fairness and sincerity and allows involvement by everyone. This is the
key to unlocking the ultimate potential of TQM. The elements of TQM move together, however,
each element offers something different to the TQM concept.

1) Ethics
2) Integrity
3) Trust
4) Communication
5) Teamwork
6) Leadership
7) Training

1) Ethics
Ethics is the discipline concerned with good and bad in any situation. It is a two-faceted
subject represented by organizational and individual ethics. Organizational ethics
establish a business code of ethics that outlines guidelines that all employees are to
adhere to, in the performance of their work. Individual ethics include personal rights or
wrongs.

2) Integrity
Integrity implies honesty, morals, values, fairness, and adherence to the facts and
sincerity. The characteristic is what customers (internal or external) expect and deserve
to receive. People see the opposite of integrity as duplicity. TQM will not work in an
atmosphere of duplicity.

3) Trust
Trust is a by-product of integrity and ethical conduct. Without trust, the framework of
TQM cannot be built. Trust fosters full participation of all members. It allows
empowerment that encourages pride ownership and it encourages commitment. It allows
decision-making at appropriate levels in the organization, fosters individual risk-taking
for continuous improvement and helps to ensure that measurements focus on
improvement of process and are not used to contend people. Trust is essential to ensure
customer satisfaction. So, trust builds the cooperative environment essential for TQM.
 4) Communication
Communication is a core element of success. It is necessary to ensure that all levels of
communication are kept open and that includes the customers

5) Teamwork
Teamwork means implying to the employees that by working together as a single unit,
and making good use of everyones talents in one pool can lead to many different benefits
in the business

6) Leadership
Leadership must be effective, positive and constructive

7) Training
Training must be offered to employees in order to ensure that the individuals can provide
the best customer service possible on products and services offered by the business.

The purpose of quality management is to set up a system and a management discipline that
prevents defects from happening in the companys performance cycle.

PRINCIPLES OF TOTAL QUALITY MANAGEMENT

1) Satisfy the customer

Users
Company philosophy
Internal customers
Chain of customers
2) Satisfy the supplier
External suppliers
Internal suppliers
Get better work
Empower workers
3) Continuous improvement
Working smarter, not harder
Worker suggestions
Quality methods

1) Satisfy the customer

The first and major TQM principle is to satisfy the customer-the person who pays for the
product or service. Customers want to get their moneys worth from a product or service
they purchase.

(i) Users
 If the user of the product is different than the purchaser, then both the user and
customer must be satisfied, although the person who pays gets priority
(ii) Company philosophy
A company that seeks to satisfy the customer by providing them value for what
they buy and the quality they expect will get more repeat business, referral
business, and reduced complaints and service expenses
(iii) Internal customers
Within a company, a worker provides a product or service to his or her
supervisors. If the person has any influence on the wages the worker receives,
that person can be thought of as an internal customer. A worker should have the
mind-set of satisfying internal customers in order to keep his or her job and to get
a raise or promotion
(iv) Chain of customers
Often in a company, there is a chain of customers, each improving a product and
passing it along until it is finally sold to the external customer. Each worker must
not only seek to satisfy the immediate internal customer, but he or she must look
up the chain to try to satisfy the ultimate customer

2) Satisfy the supplier

A second TQM principle is to satisfy the supplier, which is the person / organization from
whom / which one are (is) purchasing good or services

(i) External suppliers

A company must look to satisfy their external suppliers by providing them with
clear instructions and requirements, and then paying them fairly and on time
It is only in the companys best interest that its suppliers provide it with quality
goods or services, if the company hopes to provide quality goods or services to its
external customers.

(ii) Internal suppliers

A supervisor must try to keep his or her workers happy and productive, by
providing good task instructions, the tools they need to do their job and good
working conditions. The supervisor must also reward the workers with praise and
good pay
(iii) Get better work
The reason to do this is to get more productivity out of the workers, as well as to
keep the good workers. An effective supervisor with a good team or workers will
certainly satisfy his or her internal customers
(iv) Empower workers
One area of satisfying the internal supplier is by empowering the workers. This
means to allow them to make decisions on things that they can control. This not
only takes the burden off the supervisor, but it also motivates these internal
suppliers to do better work
 3) Continuous improvement
The third principle of TQM is continuous improvement. One can never be satisfied with
the method used, because there always can be improvements. Certainly, the competition
is increase worker output on a defective machine may result in more defective parts

(i) Working smarter, not harder

Some companies have tried to improve by making employees work harder. This
may be counter-productive, especially if the process itself is flawed. For example,
trying to increase worker output on a defective machine may result in more
defective parts
(ii) Worker suggestions
Workers are often a source of continuous improvements. They can provide
suggestions on how to improve a process and eliminate waste or unnecessary
work
(iii) Quality methods
There are also many quality methods, such as just-in-time production, variability
reduction, and poka-yoke that can improve processes and reduce waste.

The principles of Total Quality Management are to seek to satisfy the external customer with
quality goods and services, as well as the company internal customers; to satisfy the external and
internal suppliers; and to continuously improve processes by working smarter and using special
quality methods.

Tqm Framework

GURUS

o Shewhart
o Deming
o Juran
o Figenbaum
o Ishikawa
o Crosby
o Taguchi
TOOLS AND TECHNIQUES

Benchmarking

Information technology

Quality management systems

Environmental management system

Quality function deployment

Quality by design

Failure mode and effect analysis

Products and service liability

Total productive maintenance

Management tools

Statistical process control

Experimental design

Taguchis quality engineering

Benchmarking

American productivity and quality centre has defined the benchmarking as the process
of identifying, understanding, and adapting outstanding practices and processes from
organisations anywhere in the world to an organization to improve its performance.

Benchmarking is the systematic comparison of elements of an organisation against those

of other organisations, usually with the aim of mutual improvement.

Benchmarking is the process of determining who is the very best.

It is the continuous process of measuring products, services and practices against the
toughest competitors or those companies recognised as industry leaders.
Information technology

Information technology is defined as computer technology (either hardware or software)

for processing and storing information, as well as communications technology for
transmitting information.

Computers play an essential role in the quality function. They perform very simple
operations at fast speeds with an exceptionally high degree of accuracy. A computer can
be programmed to execute these simple operations in the correct sequence in order to
accomplish a given task.

Computers can be programmed to perform complex calculations, to control a process a

test, to analyze data, to write reports, and to recall information on command.

The quality function needs served by the computer are: 1.data collection, 2.data analysis
and reporting, 3.statistical analysis, 4.process control, 5.test and inspection, 6.system
design.

Quality management systems

The quality systems are the organisational structures, responsibilities, procedures,

processes, and resources for implementing quality management.

The quality should function in such a manner as to provide proper confidence that:

The system is well understood and effective

The products or services actually do satisfy customer expectations

The emphasis is placed on problem prevention rather than dependence on detection, after
occurrence.

Environmental management system

Environment is defined as the global surroundings in which an organization operates and

includes air, water, land, natural resources, humans and their interactions.
 Environmental aspect is defined as an element of an organizations activities, products, or
services that can interact with the environment.

Examples are waste water discharge, air emissions.

Quality function deployment

Quality function deployment may be defined as a system for translating consumer

requirements into appropriate requirements at every stage, from research through product
design and development, to manufacture, distribution, installation, marketing, sales and
service

QFD is a systematic & organised appraoch of taking customer needs & demands into
consideration while designing new products & services.

QFD translates the voice of the customer into technical and functional requirements at
every stage of design and manufacture.

Quality by design (or) concurrent engineering

Concurrent Engineering (CE), also known as Design for Manufacturing (DFM), intends
to integrate and combine product development and production in the early stages
of product development. This management approach is focusing on a simultaneous
development of products and production processes, so that products can be effectively
produced, and so that product development takes the strengths and limitations of the
company's production processes into account during the design of the product.

Concurrent Engineering approach therefore tries to clarify and resolve any problems
within the relationship between product design and manufacturing processes. New
products will thus potentially arrive faster to the market, because the product has been
designed to be effectively produced by the resources and technologies available in the
company.

Failure mode and effect analysis

Failure is an engineering technique used to define, identify and eliminate known or

potential failures, problems, errors which occur in the system, design, process and service
before they reach the customer.
 The objective of FMEA is to anticipate failures and prevent them from occurring. FMEA
priorities failures and attempts to eliminate their causes.

FMEA also known as risk analysis, is a preventive measure to systematically display the
causes, effects and possible actions regarding observed failures.

Product and service liability

Every manufacturer has a responsibility for damage and injuries that a product causes to
people and property.

The reasons for product injuries fall generally into three areas the behavior or
knowledge of a product user, the environment where the product is used, and whether the
factory has designed and constructed the product carefully using safety analysis and
quality control.

Due to the varying environments and product users capacities and habits, it is difficult to
devise an adequate safety program to reduce injury. Changing human behavior and
environments, although not impossible, is more difficult than changing manufacturing
design and improving quality control.

Reducing the risk of injury is best so the manufacturers are in the best position to know
what are the safest designs, materials, construction methods, and modes of use.

Total productive maintenance

Total productive maintenance is all about preserving the function of physical asset

Total productive maintenance is the systematic execution of maintenance by all

employees through small group activities

Total productive maintenance improves equipment efficiency rates and reduce cost. It
also minimises inventory costs associated with spare parts.

The implementation of total productive maintenance can generate considerable cost

savings through increased productivity of the machinery.
Management tools

Affinity diagram this tool is for collecting ideas

Relationship diagram this tool is for finding causes to the problem

Tree diagram the tree diagram shows the paths and tasks to achieve a goal

Matrix diagram the matrix diagram tool is used for comparison

Decision tree it is used for planning

Arrow diagram it is a planning tool for determine the critical path of a process or a
project

Matrix data analysis diagram it is for producing numerical results.

Statistical process control

Statistical process control (SPC) is the application of statistical methods to the

monitoring and control of a process to ensure that it operates at its full potential to
produce conforming product. Under SPC, a process behaves predictably to produce as
much conforming product as possible with the least possible waste.

While SPC has been applied most frequently to controlling manufacturing lines, it applies
equally well to any process with a measurable output. Key tools in SPC are control
charts, a focus on continuous improvement and designed experiments

Experimental design

Experimental design is one of the most powerful techniques for improving quality and
increasing productivity. Through experimentation changes are intentionally introduced
into the process or system in order to observe their effect on the performance
characteristic or response of the system or process.

Any experiment that has the flexibility to make desired changes in the input variables of a
process to observe the output response is known as experimental design.

Knowledge of the process is essential to obtain the required information and achieve the
objective.
 Resources in the form of money, people, equipment, materials and most important time
must be allocated.

Taguchis quality engineering

Taguchi has given the loss function

The essence of the loss function concept is that whenever a product deviates from its
target performance, it generates a loss to society. This loss is minimum when
performance is right on target, but it shows gradually as one deviates from the target.

The loss includes costs to operate, failure to function, maintenance and repair costs,
customer dissatisfaction, injuries caused by poor design, and similar costs.

PRINCIPLES AND PRACTICES

People and relationships:

Leadership

Customer satisfaction

Employee involvement

Supplier partnership

Leadership

Leadership is the process of influencing others towards the accomplishment of goals.

Leader triggers the will to do, show the direction and guide the group members towards
the accomplishment of the companys goal

In order to become successful, leadership requires an intuitive understanding of human

nature-the basic needs, wants and abilities of people.

To be effective a leader understands that:

People need security and independence at the same time

 People are sensitive to external rewards and punishments

People like to hear a kind word of praise.

Customer satisfaction

The key to an effective TQM program is its focus on the customer. An excellent place to
start is by satisfying internal customers. We must listen to the voice of the customer
and emphasize design quality and defect prevention. Do it right the first time and every
time, for customer satisfaction is the most important consideration.

Employee involvement

Employee involvement is the backbone of a TQM movement. An effective TQM effort

requires the total involvement from every person at all levels in the organisation.
Employee involvement leads to meet the organisation goals and objectives. It also
improves the quality and productivity at all levels of the organisation.

Some of the important aspects of employee involvement are:

Employee motivation

Employee empowerment

Teams and teamwork

Recognition and reward schemes

Performance appraisal

Supplier partnership

Since the supplier influence the companys qulaity therefore a partnering relationship
should be developed between the management and the suppliers.

CUSTOMER
Approach:

Continuous process improvement

Measure:

Performance measures

Continuous process improvement

(CPI) is a strategic approach for developing a culture of continuous improvement in the

areas of reliability, process cycle times, costs in terms of less total resource consumption,
quality, and productivity. Deployed effectively, it increases quality and productivity,
while reducing waste and cycle time.

Performance measures

Performance measures are measuring absenteeism, customer satisfaction should be

determined for each functional area.

These measures should be posted for everyone to see.

Benefits , awareness and obstacles of

TQM
BENEFITS OF TQM
Quality experts in private industry and government feel that there are four key
measurable areas of an organizations operations that could demonstrate the impact of
TQM practices on corporate performance. These benefits areas include:
 1) Better employee retentions
2) Improved operational performance
3) Greater customer satisfaction
4) Increased financial performance

1) Better employee retentions

One of the most important features in implementing a successful TQM system is attaining
a highly involved and motivated workforce. Leading companies are using several key
indicators to measure the extent to which their focus on quality leads to improvement in
employee job satisfaction, attitudes, and behavior. These key indicators include
employee satisfaction, employee attendance, employee turnover, safety and health, and
number of suggestions made to improve quality and / or lower costs.

2) Improved operational performance

Organizations operational performance indicators measure the quality and cost of their
products and services. Leading companies are using their measures to access the impact
of quality management on their operations. These measure include reliability, timeliness
of delivery, order processing time, production errors, inventory turnover, quality costs
and cost savings

3) Greater customer satisfaction:

Many leading companies have changed their traditional view that quality involves merely
meeting technical specifications. They now recognize that the customer defines quality
and that companies must focus on meeting customer needs and expectations. Customer
satisfaction is defined in terms of new customer referrals, fewer customer complaints, and
high customer retention.

4) Increased financial performance:

The impact on a companys bottom line or operating results was measured by several
ratios. One important measure used is market share. Companies that build market share
on the basis of improved product / service quality and value, believe it is the route to
increased profitability. Other measures include productivity and profitability expressed
as sales per employee, and sales per a comparable retail store; return on assets; and return
on sales

AWARENESS OF TQM

The TQM process cannot be implemented until it is aware that the product quality must
be improved. An awareness about quality loss may be recognized by a reduction in
market share or a decrease in productivity. It also occurs if the customers give
 indications towards TQM or the management itself realizes that implementing TQM is
the better way to run a business in a successful way in local as well as global markets

The Japanese learned from the practical experience that, it is a difficult factor to market a
product or service which possess poor quality, even though there is an automation and
productivity enhancement factor implemented in an organization.

Since the customers want value for the amount they are spending for a product or service,
the quality awareness attitude has emerged. Productivity and quality are not mutually
exclusive. Enhancement in quality can lead directly to increase productivity. Prevention
of product, service and process problems is a more desirable objective than taking
corrective action after the product is manufactured or a service is rendered.

People cannot expect the occurrence of TQM overnight. A long-term planning is needed
for the effective implementation of quality awareness inside the organization. More
concentration towards short-term objectives and profits should be reduced for better
implementation of TQM.

TQM upgrading is a continuously evolving process. The business problems and issues
involved are complex. Mere exposure of the top management to the tools and techniques,
though necessary, is not enough. In designing and conducting the awareness program,
several aspects have to be carefully considered. The main questions to be kept in
constant focus in working-out the package are as follows?

1. What is the ongoing status and state-of-the-art of quality management in the

company?
2. How and where precisely does TQM upgrading help the top in moving towards
company goals and mission?

Two techniques are frequently used in order to be aware about the TQM which are as
follows:
1) Status survey: This would be desirable before conducting the awareness
program. The results would form the basis for formulating specific issues and
chalking out a road map for follow-up exercises. This could provide the material
for a technical session in the awareness program
2) Opinion survey: Frequently a rapid and less taxing opinion survey of all persons
of the rank of managers and above in the company would bring out gut issues
and improvement projects of a short-term nature. The results would provide the
basis for short-term action plan

OBSTACLES OF TQM
The obstacles to implement TQM seem endless. They show themselves in all business sectors
manufacturing, services, government, and even education. The obstacles that plague
organizations most often are as follows:

1) Lack of top management commitment and vision:

When the senior officers of the firm / company are not committed TQM cannot be
implemented. The strength in the commitment is manifested during periods of trouble
2) Company culture and management style:
When TQM is to be introduced, it needs adjustments in work practices and culture of the
organization. Changing the company culture takes a long time. This can be achieved
easily by taking the departments and people into confidence
3) Flavor of the month attitude:
TQM is a continuous process. It is making quality improvement a habit. There is no
end-point to it, so TQM should not be considered as the flavor of the month or year, this
attitude should change.
4) Department based thinking and actions:
TQM implementation plan should cover all the departments. There should be enough
communication between departments. Companies should shed their department based
thinking style in order to implement TQM effectively.
5) Poor appreciation of the concepts and principles of TQM:
TQM has been effective in bringing about a good change in many companies. The
experiences of the senior managers from these companies can be shared, so that TQM
concepts and principles can be appreciated by all. Poor appreciation of the concepts and
principles of TQM stands as an impediment in the implementation of TQM

6) Lack of structure for TQM activities: Quality improvement techniques are not
generally taught as part of the curriculum-people learn it out of experience. Lack of an
organized training program, and not assessing the needs of various individuals and
departments are the main obstacles in implementing TQM

7) Deciding how to start:

TQM is a continuous process which has no starting point and no end point the only
objective is quality improvement, therefore, companies usually waste a lot of time in,
deciding how to start. This its one of the barriers to TQM implementation

8) Gaining the involvement of non-manufacturing departments:

TQM is a group activity. It involves changes in work practices and culture of the
organization. It is difficult and takes a long time. The best way to overcome this is to
anticipate this and take the concerned departments and people into confidence

9) Ineffective Leadership: TQM is a group activity. It needs an effective leadership. The

team members and leaders have to be adequately trained and given the responsibility to
do improvements in their work area. This is also known as empowerment. Ineffective
 leadership, inadequate empowerment, and lack of trust are barriers to TQM
implementation.
10) Inability to maintain momentum:
Inability to maintain momentum for the transportation (transformation)

11) Ignore external processes: The advantages with TQM are that it will require its
managers to concentrate immensely on internal processes of the company. But a major
drawback is that, if managers concentrate too much on internal processes, the external
processes like keeping in touch with shifting perceptions and preferences of customers
will be ignored and the company is bound to take beating.
12) Fail to understand relationship: In a lot of cases, managers fail to understand the angles
of relationship with suppliers and customers. Mutual trust and support are the keys to
success
13) Content with certifications or awards:
Achieving certifications like ISO 9001-2000 or ISO 14000 or QS 9000 or any other
awards is not the end to TQM but a beginning in the journey of quality. Managers often
feel they have achieved quality by certification or awards
14) Difficulty in implementation:
Quality should be understood in the same spirit and language both by the management
and employees, otherwise implementation becomes difficult

Quality

Introduction to quality
Definition of quality
Meaning of quality

Introduction to quality

Quality is an essential factor to be considered in every product or service. For survival of

any industry, quality is an essential requirement. Without adequate quality, it is not
possible by any industry to compete in the market.
 The customer needs and wants changes continuously. In order to satisfy the demands of
the customers, improvement in quality has become a must.

The days of a single manufacturer dominating the market is gone. Now there are a
number of manufacturers manufacturing the similar products and due to this product if
facing heavy competition. Unless the product has the qualities to satisfy the customers, it
cannot be sold in the competitive market.

Today the technological growth is unimaginable . Rapid changes are taking place
especially with respect to the technology used for production. With the help of these new
technologies, it is possible to produce of better quality at lesser production cost.

Hence it becomes necessary to produce products by adopting a technology that gives the
required quality to the products at a lesser cost.

Moreover, customer awareness has increased due to increase in the level of literacy and
due to the customer protection acts

There is every possibility that an unsatisfied customer will go to the court due to the
supply of a bad quality product by a manufacturer.

Definition of quality

The term quality is perceived differently by different people. There were instances when
a product that was perceived as good quality by one individual was perceived to be of bad
quality by another. In such cases it is difficult for industries to take up quality as a focus and
orient their actions. Quality has to be defined in clear terms for the industries to follow.

Quality is conforming to specifications

Fitness for use

Customer satisfaction

Delighting the customer

Enchanting the customer

Quality is conforming to specifications

The first definition gives was quality is conforming to specifications. Whenever a

product was manufactured or a service rendered, it will be done to suit the given
specifications.

Example: In the case of a pen it may be the dimensions, the colour, the smoothness with
which the pen writes etc.

In the case of service rendered in a bank, it may be the time involved, accuracy, etc.

There are problems in the above definition. Even though the given specifications are
fulfilled in a particular product, it was found that in a few cases the utility value of the
product was not up to the mark. This resulted in customers determining the product as
useless and waste.

A useless product can never be a quality product and a quality product will never be
useless. Hence there was need for redefining the term quality

Fitness for use

The second definition given for quality was fitness for use. This does not mean that the
first definition of conformance to specification is not required. It only stresses in addition
to conformance to specifications, fitness for use has to be insisted.

A product which is usuable and conforms to all the specifications given, will generally be
a good product. But a good product, which is not saleable will not be appreciated. To
sell a product it is necessary to incorporate customers, view point. A customer will buy a
product only if the cost, reliability etc suit his conditions. Hence customer focus has to
be given prime importance and even in defining the quality, customer focus has to be
stressed.

Customer satisfaction

The third definition given for quality was customer satisfaction. A product, which
satisfies the customer, will have a great market. The customer will also be happy that the
product of his choice is being given to him. A person will be satisfied if all his said/expressed
needs are fulfilled. In terms of product if all that what he expected and revealed are fulfilled then
he will be a satisfied customer. Such a product, which brings satisfaction to the customer is
termed as a quality product.

The following factors are the commonly expressed needs of the customer:

Utility value

Longer life

Performance

Product look

Ease of maintenance

Delighting the customer

Delightment is one step ahead of satisfaction. A delighted customer is definitely in a

different, better plane as compared to a satisfied customer.

It has to be understood that every individual will have plenty of needs in respect of every
product that he buys. But he dont express all his needs. Few are expressed and the
others are left out. The point to be noted is that the left out needs are many a times taken
for granted. That is, even though customers have not expressed it. They expect those
factors to be present in the products. These become the unexpressed needs of the
customers. When the product fulfils both the expressed and unexpressed needs of the
customers, he is delighted.

The industries decided that they should work towards delighting the customer by
providing them the products which will fulfil both their expressed and unexpressed
needs. Such a status will ensure good business and help in producing quality goods.

Example: imagine a person going to a teashop and orders for a cup of strong tea. If a cup
of strong tea, which was given to him is not hot, definitely the customer will be unhappy.
It is true that he never mentioned that he wanted a hot cup of tea. Still the customer
expects the tea to be hot. The customer unhappy even when all his expressed needs were
fulfilled. Here arises a situation, where there is a need for considering the unexpressed
needs.

Enchanting the customer

 The fifth definition given for quality is enchanting the customers. This indicates that the
manufacturers should have a thorough knowledge on what should be the requirements of
the customers with reference to a particular product, make the customers aware of this
fact and make them realise that those are their needs and ultimately fulfil them. The
manufacturer should have the knowledge base to identify what should be the need of the
customers. They should have the marketing strategy to make the customers aware of this
fact and feel that these are the ones they want.

Example: a refrigerator manufacturer needs to educate the customer on environment

friendly refrigerators and make them feel that what they want is an environment friendly
refrigerator, even though it may cost slightly higher. With the view of satisfying or
delighting the customer, it the manufacturer produces cheap refrigerators with ozone
depleting refrigerant and supplies the same at a lesser cost, the work cannot be accepted
as the quality work. Only environment friendly refrigerators are accepted as quality
products in the present era.

Meaning of quality

Quality of design

Quality of conformance

Quality of performance

Quality of design

Quality of design of a product is the tightness of the specifications for manufacturing the
product.

Quality of design also refers to the difference in the specification for products which have
the same use.

Example: cars of two different makes, though serving the same purpose differ with
respect to their design.

Quality of conformance
 Quality of conformance refers to the ability to maintain the specified quality of design.

Quality of performance

How well a manufactured product gives its performance is termed as quality of

performance. It depends on the quality of design and quality of conformance. If the
design is good and the conformance is poor, quality of performance will reduce. If the
design is bad and conformance is good, then also quality of performance will be reduced.

Vision, mission and quality policy

statement

Vision statement

Any organization should be able to spell out what it wants to be and look like after a
specific period of time in future. Putting this in writing is called a vision statement.

Hence a vision statement is an open declaration made by an organization stating what it

wants to be and look like after a specific period of time in future.
 It should noted that the vision statement is to be realistic and achievable, that is, it should
not be an out come of only a purely wishful thinking process

Vision statement is written by looking ahead into the future. It aims at higher achievable
things. It is based on what the organization should strive for and achieve in another five
to ten years. Through various activities are faculty are guided to attain the vision. This
acts as a powerful tool, a guiding star. When personalized and truly owned, vision
provides the incentive-the drive toward fulfillment.

It creates the commitment, the motivation and the drive for initiating the mission,
objectives, projects and tasks necessary to realize the vision. Developing a vision may take a
few weeks. Though this looks to be a long time, it should be understood that it is a portrayal
of what life could be five, ten years from now. Time is allowed for dreaming along with
categorizing random thoughts to ensure a comprehensive and realistic vision.

In todays competitive environment, it is not just sufficient if we are a step ahead of other
institutes. To achieve this every institute needs to have a vision. They should start
looking into the future, predicting it, planning for it and making it happen. Only this will
make the difference between dreaming things and making things happen. Thus, vision is
the result of dreams in action.

The gap between a dream and action is filled with plan. How well we succeed depends
on how well we plan. Planning sets the direction and the speed of the progress. Vision is
not a state of being but the process of becoming. Vision should be something which is far
fetching and not that which calls for a change everyday. It should be borne in mind that
the vision statement is organization specific. The vision statement could focus on the
following characteristics:

The focus of vision statement for

Educational institutions

Student point of view:

100% pass

100% placement

For industries

Management point of view:

High productivity

Employer point of view

 Excellent team work

Products point of view:

Longer life

Environment friendly

Creative design

The vision statement should be widely shared amongst all in an organization. Vision
statements are usually short, that it, they are put in a few sentences.

A vision statement is future oriented, setting the direction of an organization for some
time to come. It is a description of what an organization should took like as it
successfully implements its strategies and achieves its full potential.

Vision can lead the organization towards success and it can also demoralize the
organization.

Vision is considered to be the critical factor in Total quality management. Vision can lead
the organization towards success and it can also demoralize the organization. Hence it is
necessary that utmost importance is given and care is taken while formulating the vision
statement.

General guidelines for a vision statement

Involve as many employees as possible in the formulation of vision statement

The statement should project your growth and development

It should be short and realistic to the present situation.

Characteristics of vision

Future oriented

Creative
 Reflecting the uniqueness

Very clear and challenging

The organization need a vision statement to:

Provide a direction, a sense of purpose

Nurture individuals to grow and become creative

Plan ahead

Not just adjust and adapt but to win over the ever changing environment

Bring in commitment, involvement and sense of ownership among individuals

Steps in vision formulation and implementation

Proprietor dreaming about how the organization should be in the next 10 to 20 years.

Meeting with employees and motivating them to have visions giving them directions on
the vision of the CEO

The vision statement should be checked for its simple, easy to understand language and
style

This vision should be popularized among everyone in the organization by:

Having them displayed in all prominent places in the organization

Having them printed on person items such as ID cards, diary, paper weight etc.

Top officials pronouncing the vision statement frequently in personal and public talks

Develop a monitoring system to check whether day to day activity is focused towards
fulfilling the vision
 Have a six month review meeting to take stock of the situation. Make corrections
wherever necessary.

Keep a watch on the developments taking place around your organizations. Check at
regular intervals whether the vision statement is relevant or not.

Dont hesitate to make changes in vision if it is necessary for the proper growth of the
organization

Mission statements

The next step is to prepare mission statements. If the vision is what of life, the mission is
why and how.

Mission identifies the roles or activities to which an individual is committed and provides
the overall direction for achieving the vision.

Mission focus what you want to be and what to do-contributions and achievements, and
on the values and principles upon which being and doing are based.

A personal vision needs to be clearly developed for the organization so that the mission
statement can be based on it.

General guidelines for mission statements:

These statements should clearly indicate the important roles and the methods followed for
fulfilling the vision

Techniques and tools used for achieving it

Mission statements should actualize the vision

These statements will carry information which need to be fulfilled in the near future.

Example:

Mission statement of an educational institutions is given as follows:

Impart knowledge to students on the relevant subjects with focus on practical applications
to students

Provide opportunities for personality development of students

Update the students with the latest in technology

 Equip the students with professional ethics by being role models.

Have closer interaction with industries

Motivate the students to gain computer working knowledge

Involve the students in applied research

Mission statements are prepared to make the employees, understand in clear terms, how to
achieve the vision.

Mission statements should clearly indicate to the methods to be followed for fulfilling the vision.
It can be said to be a road map for achieving the vision.

Quality policy statement

Quality policy statement is a guide for all working in an organization with respect to how
they should provide products and services to the customers

Quality policy statement is prepared as follows:

The CEO of the organization gets information and feedback related to quality from the
workforce

Then the CEO prepares the quality policy statement

The quality council of the organization goes through the quality policy statements and
approves it after suggesting it to be modified, if required

Customer Focus
Customer focus

The individual who buys the products of any manufacturing organization is the most
important person. Without the buyer the whole manufacturing process becomes
meaningless. Hence every organization should focus on

Attracting more customers

 Making them happy

Retaining them

All the three factors are equally important. Even if one is neglected, the organizations stand to
loose heavily

It is said that in an organization quality begins and ends with customers

Customer is said to be the king in any business transactions. He needs to be treated with dignity.
Satisfying or delighting the customer is a hard task, when there are many types of customers in
the market. However tough it may be, quality warrants customer focus. How to deal with
different types of customers may be a nightmare for many. But simple solutions are available.

Types of customers

There are different types of customers:

Type I

Type II

Type III

Type IV

Type I

A customer who knows not what he wants and knows not that he knows not what he
wants.

They are significant customers. Be gentle with him. It is relatively easy to satisfy him.

Type II

A customer who knows not what he wants and knows that he knows not what he wants.

They are humble customers. Teaching and training will make them knowledgeable.
Then satisfying will be easy.
Type III

A customer who knows what he wants and knows not that he knows what he wants

They are sleeping customers. There may be only a few customers of this type. However,
to awake them, attractive, stunning advertisements will make them understand the reality.
Satisfying them will be tough.

Type IV

A customer who knows what he wants and knows that he knows what he wants.

They are masters of themselves. They will be the demanding types. Large percentage of
customers fall in this category. The success of quality mainly depends on making this
category of people satisfied. They will even assume the position of the king

Customer focus

Focus

Focus gives the organisation the power to not only perform well but also to excel.

Customer focus orientation

A customer is the most important visitor in our premises. He is not dependent on us.
We are dependent on him. he is not interruption in our work. he is the purpose of it.
He is not outsider on our business. He is part of it. We are not doing him a favour by
serving him. He is doing us a favour by giving us an opportunity to do
so..Mahatma Gandhi.

Customer focus

The iso 2000 version also embraced customer focus & which is achieved by ensuring the
following:

Meeting customer & regulatory requirements.

Assuring conformance of product quality consistently.

Exceeding customer expectations by constantly enhancing quality levels.

Organisational aspects

To identify and understand the customers.

To determine their requirements and expectations.

To establish the means of meeting and exceeding these requirements and expectations.

A rule for all organization

Little things that make you know customer better are significant, not trivial,

So attention to these make all the difference

Key to customer focus

The ability to anticipate the needs of:

Existing loyal customer.

Potential customer

Dissatisfied customer

Competitor loyal customer.

Our Customer

External customer.

The customer is any one on whom our product has an effect

Internal customer are user of our In- process Out puts". They add value to the inputs
received and after value addition, passes it on to the next stage, which becomes their
internal customers.
Understanding the customer

Our customer is the reason for the existence of our organisation.

It is for us as a supplier to understand :

Who are our customers.

What are their needs and expectation.

How do we meet these needs & expectation.

How do we exceed these needs & expectations.

Answers to the above should be determined on a continuous basis.

To meet the requirements ,organisation should ensure that:

We never break the promise.

We never promise more than what we can do.

We give them a little more than they require or expect.

We never under estimate competition

A customer has certain rights which every organisation must essentially accept and
honour. They are right to:

Proper & adequate education.

Complete ,correct & honest information.

Health and safety

Select products as per choice

Enjoy the products purchased.

Re- dressal in case of dissatisfaction.

Customer requirements-needs & expectations

Determination of these attributes is extremely important, as they are the goals that the
organisation is to meet and exceed.

Stated needs: customer stated needs are vital & require to be met the products.

They are required for design and development, production &assessment for basic
functioning of the product.

Implied needs: Corresponds to known and required needs of the product .Essential &
require to be met.

It is require for the safe and satisfactory performance of the product.

Expectation: additional attributes wished to be built, desired never stated.

They are adds on ,required to pull new customer

Delight: absolutely unexpected, pleasing tangible or untangible,free accompaniments

They are surprises for delighting customers.

Determining the needs

Complete and detailed information.

Adequate for the purpose.

Clear .

Measurable.

Tolerance of acceptable & achievable levels.

Specify methods of measurement & test.

Determining the expectation

Make sure they are understood from customers view point. May be based on the
following attributes:

PERFORMANCE
 FEATURES

CONFORMANCE

RELIABILITY

DURABILITY

SERVICEABILITY

PERCEPTION

Meeting Customer needs and expectation

Keep your customer coming back and not your products.

The entire purpose of focusing on the customer is to ensure that to meet & exceed
customer need & expectation

Develop customer & goals approach :to achieve customer satisfaction & customer driven
organisation.

Meeting Regulatory requirements

An organisation that does not follow regulatory requirements cannot be expected to follow
voluntary requirements in the true spirit.

Organisation should determine, follow, monitor and endeavor to improve all regulatory
requirements in letter and spirit.

Meeting society requirements

Protecting the environment.

Conserving the resources

Avoiding wastage in any form.

CUSTOMER Delight
 Exceeding customer expectationfor competitive edge.

WOW factor.

OUCH factor: undesirable occurrence.

Recovery of ouch situation

Customer perception of quality

A customers perception of quality is a judgment made by the customer about the overall
excellence, or otherwise of the delivered product or service. Customers perception is the main
criterion by which a service provider can assess and measure the value of the quality it delivers.
Indeed, the service providers decision making process would be incomplete without this
information. However, the information contained within customer perception surveys is usually
subjective and also likely to change over time with change in the industry structure, environment,
technology, competitive activity and good or bad media commentary.

Factors affecting consumers purchasing behavior

Factors affecting customer perception

Management of customers perception of quality

Factors affecting consumers purchasing behavior

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 customers 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
influence purchases showed the following ranking:

Performance

Performance involves fitness for use. It indicates that the product and service is ready
for the customers use at the time of sale.

Availability: it is the probability that a product will operate when needed

Reliability: it is freedom from failure over time, and

Maintainability: it is the ease of keeping the product operable

Features

Features are secondary characteristics of the product or service

For example:

The primary function of a cell phone is for communication, whereas other facilities such
as calculator and alarm are features of the cell phone

Service
 Customer service is an intangible in nature. Intangible characteristics are those traits that
are not quantifiable, but it contributes greatly to customer satisfaction.

Organizations objective is to provide good quality of the product to the customer at the
right time, even though the customers are not complaining about their service.

Warranty

The product warranty represents an organization's public commitment to guarantee a

level of service sufficient to satisfy the customer

A warranty forces the organization to focus on the customers definition of product and
service quality. An organization has to identify the characteristics of product and service
quality and the importance the customer attaches to each of those characteristics.

A warranty generates feedback by providing information on the product and service

quality. It also forces the organization to develop a corrective action system.

In present scenario, the warranty attracts and builds the market. It encourages customers
to buy a service by reducing the risk of the purchase decision. Hence it generates more
sales from existing customers by enhancing loyalty.

Price

Nowadays customer is willing to pay a higher price to obtain value. Also customers
expect high quality products at the lower price.

Customers are preferring the organizations who are providing the greatest value for their
money. For this purpose, customers are constantly evaluating all the organizations.

In our highly competitive environment, each customers concept of value is continually

changing. In order to overcome this challenge, the organizations should identify, verify
and update each customers perception of value in relation to each product and service
regularly.

Reputation
 It is obvious that customers are willing to buy products or services from a known, trusted
and reputed organization. The total customer satisfaction is based on, not only with the
product, the entire experience with the organization.

This reputation of a firm brings the market to them. So organization should strive for
customers for life.

Factors affecting customer perception

1) Perceived service quality

The customers perception about the quality of service provided by the service provider
has a crucial impact on his behavior. These four dimensions of customer-perceived
service quality are:

(i) Customer-orientation: The first factor, customer-orientation, is primarily related to

the attitude and skills of the employees providing the service
(ii) Competence: The second factor, competence, is primarily associated with the
concept of providing reliable services to customers
(iii) Tangibility: The third factor, tangibles / tangibility, is primarily associated with
the visual appeal of organizations physical facilities and communication materials
to the customers.
(iv) Convenience: Finally, the fourth factor, convenience, encompasses items related
to the convenience of the organizations branch locations and the spread of its
service networks

2) Perceived product quality

Perceived product quality is the consumers judgment about a products overall
excellence or superiority. The importance of perceived quality derives from its beneficial
impact on purchase intentions. Consumers perceiving a product being of high quality
have higher intentions to purchase the product than consumers perceiving a product being
of low quality. Also, consumers perceiving a product being of high quality are more
satisfied with the product than consumers perceiving a product being of low quality.
Finally, consumers perceiving a product being of high quality are more involved with the
product than consumers perceiving a product being of low quality.
3) Brand image
It is the perception of the product or the brand by the consumer. It is the impression in
the consumers mind of a brands total personality. Brand image is developed over time
through advertising campaigns with a consistent theme, and is authenticated through the
consumers direct experience. A positive brand image has a favorable impact on customer
perception and buying behavior
Management of customers perception of quality

The key issues to be addressed in the management of perceived quality are explained below:

1) Measurement of customer perception:

The principal activities in the measurement of the customer perception may be grouped
as follows:
(i) Selection of service or group of services to be surveyed
(ii) Choice of performance criteria to be surveyed
(iii) Survey samples and size
(iv) Questionnaire design and implementation
(v) Publication of results

2) Analysis of the perception gap:

perception gap is the gap variation between customers perception ratings and what one
would expect from the level of delivered quality. One of the main activities in the
management of customers perception of quality is the analysis correlation of customers
ratings of delivered quality and perceived quality.

3) Modification of the quality programme:

In quality management, any modifications to the activities influencing quality must be
evaluated before implementation.

Translating customer needs into

requirements
Translating needs into requirements is another vital part of the quality management.
Requirements management is concerned with meeting the needs of end users through
identifying and specifying what they need. Requirements may be focused on where the
main concern is to describe what is wanted rather than how it should be delivered. The
important issue is that those specifying the requirement have an adequate understanding
 of what the users need and how the market is likely to meet that need; they also need to
be able to keep any changes to the requirement to an appropriate minimum and to
document the requirement in such a way that the market will be able to understand what
is required

Requirements are capabilities and objectives to which any product or service must
conform and are common to all development and other engineering activities. In reality
customer doesnt buy a specification; the customer buys the product or service to fulfill a
need. Customers are loyal to whatever best helps them achieve their desired outcome.
Just meeting the customers needs are not enough; the organization must exceed the
customers needs.

Customer Retention

Customer retention

Repeat customers or people who buy from you again and again.

Customer Retention is the activity that a selling organization undertakes in order to

reduce customer defections. Successful customer retention starts with the first contact an
organisation has with a customer and continues throughout the entire lifetime of a
relationship. A companys ability to attract and retain new customers, is not only related
 to its product or services, but strongly related to the way it services its existing customers
and the reputation it creates within and across the marketplace.

Importance of customer retention

Why are customers more profitable for service firms over a period of time? There are a
number of reasons for this. To begin with, to acquire a customer a company spends
promotional costs like advertising, sales promotion etc. It is said that it costs five times
more to attract a new customer than retaining one.

Services being rich in experience and credence qualities, it takes some time for customers
to get accustomed to it and once they are used to the service and are satisfied with the
service provider ,they tend to purchase more over a period of time.

As they remain satisfied with a service provider, they spread a positive word of mouth,
which is very effective in case of services for attracting new customers. Longer the
customer stays with an organization, more the organization knows about him, which
enables it to offer customized services which make it difficult for the customer to defect.

Transactional buyers

Transactional buyers are concerned about todays purchase. They do a lot of research
investigating the product they are considering buying and consider himself or herself a
product expert. They are not concerned about service, trust or relationship. They are
concerned primarily about price and terms. They enjoy negotiating and trying to extract
as many concessions out of the salesperson as possible. They see what they are doing as a
game. A game where they win and the salesperson loses. They will milk the
salesperson for free information, technical data, etc. Because of their I win you lose
approach they have no loyalty.

Relationship buyers

Relationship Buyers consider todays transaction as one in a series of many. They do not
enjoy playing the shopping game. They dont enjoy comparison shopping or
negotiating. They are looking for a Business Partner or Trusted Advisory who is an expert
that they can trust. Once they find someone they trust they are loyal and tend to be the
best repeat customers.

How to find relationship buyers

Lowprice offers will attract transaction buyers

 You cannot make a profit from them

Relationship buyers are interested in good service, high value and two way loyalty

They will stick with you and provide a profitable bottom line

Privilege card

She may receive a plastic card with her name on it.

The card is used whenever she shops in a retail store, on the phone or on the web.

The card provides her with some benefit she could not get without the card.

It provides you with valuable information that you can use to understand the customer
and build her loyalty.

How do privilege card boost retention?

This helps you to keep track of customer behavior

You can see if valuable customers are reducing their orders or spending

You can proactively call them, write them, or make them offers

Cross sales build retention

Customers who have more than one product have a higher retention rate.

Two reasons for second product:

Profit from the new product

Retain customers for the existing one.

An insurance company with independent agents used a model to predict the Next Best
Product for each customer

Offered a 10% discount on first product if second is purchased

Creating a club on the internet

A company selling sporting goods created an internet member club.

When it was built they learned that:

Club members bought 11 times more than non club members.

In two years, 81% of club members became multi-buyers.

The club boosted retention

Cataloger Customer Retention

Miles Kimball sent 20,000 emails with three different catalogs, and 20,000 with the three
catalogs alone.

Those who got the emails bought 18% more than those who got the catalogs alone.

Retailer Customer Retention

Video retailer sent email newsletters to 170,000 customers for 6 months.

Control group of 14,000 got no emails

Retail sales to test group was 28% more than to those without emails.

Every marketing promotion should always be a test

Test those who get the promotion against the performance of those who do not get the
promotion

If you are sending birthday cards or a newsletter, select 50,000 who do not get birthday
cards or the newsletter.

Look at the controls spending rate, and retention rate.

If there is no difference, your cards or newsletters are a waste of money.

What should you do to increase retention?

right customers to start with

Communicate with them & reward them

Determine their lifetime value

Create customer segments with a marketing strategy for each segment

Sell them a second product

Get them to become multi-channel buyers

Use Tests and Controls

Calculate return on investment

Dimensions of product and service

quality

Product quality
The important characteristics of a product are specified when it is designed, prior to its
manufacture. These characteristics are called the design specifications. After the product has
been produced, one can observe the extent to which it conforms to or deviates from the design
specification. Quality, or product quality, is the degree to which the design specifications for a
product are appropriate to its function and use, and the degree to which the product conforms to
its design specifications. Service quality is similarly defined, and one often generalize and use
the term output quality to apply to either products or services

When output closely conforms to design specifications, output quality is high. When output
deviates in an important way from design specifications, output quality is low. Output quality
can be seen to fall on a ranging from very low to very high

The popular alternatives concepts of quality are

Quality is fitness for use

Quality is doing it right the first time-and every time
Quality is the customers perception
Quality provides a product or service at a price the customer can afford
Quality is the most expensive feature of product or service

The first key to managing for quality is being aware of the need to improve; the second is
selecting improvement techniques with the best chance for success. An understanding of product
characteristics, product design and process capability helps in awareness of quality issues in
operations.

Product characteristics:

All characteristics of the product are not equally important to the customers. Usually, only some
characteristics need to be considered when assessing quality. But which ones? Weight? Size?
Shape? Color? Functional performance? The important product characteristics are determined by
the specific market goals of the organization and by the technical requirements of the important
stages of the conversion process. Often, one must compromise between these two sources of
quality requirements

Design:

Design of two firms producing the same product, one may have to pay high costs to maintain an
acceptable quality, while its competitor can maintain the same quality at a much lower cost. The
difference is often a result of the emphasis placed on quality in the design phase of product
development, prior to full-scale production. The old adage, quality is designed into the
product, holds true. The number of stages in the conversion process the types of input resources
needed, and the types of technical processes required to produce the output are all largely
determined in the product design phase.

Process capability:

Process capability is the ability of a conversion process to produce a product that conforms to
design specifications. Since the performance of machines and people used in a conversion
process varies from day to day, process capability is described by a range of variation form the
design specification-the variation expected under normal working conditions. A statement about
process capability is thus, a statement about product uniformity: instead of various parameters of
the process-parameters of machines, workers and so on-process capability relates to various
parameters of the product.

Dimensions of product quality

Performance

Performance is often a source of argument between customers and suppliers, particularly when
deliverables are not adequately defined within specifications.

The performance of a product often influences profitability or reputation of the end-user. As

such, many contracts or specifications include damages related to inadequate performance

Features:

This dimension may seem clear, performance specifications rarely define the features required in
a product. Thus, it is important that suppliers designing product or services from performance
specifications are familiar with its intended uses, and maintain close relationships with the end-
users

Reliability:

Reliability may be closely related to performance. For example, a product specification may
define limit for up-time, or acceptable failure rates
Reliability is a major contributor to brand or company image, and is considered a fundamental
dimension of quality by most-end users

Conformance:

Conformance answers several questions like if a product development is based on a performance

specification, does it perform as specified? If its development is based on design specification,
does it possess all of the features defined?

Durability:

Durability is closely related to warranty. Requirements for product durability are often included
within contracts and specification

Serviceability:

As end users become more focused on total cost of ownership than simple costs, serviceability is
becoming an increasingly important dimension of quality.

Aesthetics:

The way a product looks is important to end-users. The aesthetic properties of a product
contribute to a companys or brands identity. Faults or defects in a product that diminish its
aesthetic properties, even those that do not reduce or alter other dimensions of quality, are often
cause for rejection.

Perception:

Perception is reality. The product or service may possess adequate or even superior dimensions
of quality, but still fall victim to negative customer or public perceptions.

Service quality
Service quality characteristics are more difficult to define than those for physical products. This
is because they include many important subjective elements. The causes of poor quality and
quality failure are materially different for services and products. Products often fail because of
faults in raw materials and components. Their design may be faulty or they may not be
manufactured to specification. Poor quality services, on the other hand, are usually directly
related to an organizations behaviors or attitudes. They often result from lack of leadership, care
or courtesy, indifference, lack of training or concern are the principal reasons for a breakdown of
service.

Service differs from production in a number of important ways. There are major differences
between delivering a service and manufacturing goods.

The first difference between the two is that services usually involve direct contact between the
provider and the end-users. Services are delivered directly by people to people. There is a close
relationship between the customer and the person who delivers the service. The service cannot
be separated from the person delivering it or from the person receiving it. Every interaction is
different, and the customer in part determines the quality of the interaction. The quality of the
service is determined both by the person delivering and the person receiving the service.

Time is the second important element of service quality. Services have to be delivered on time,
and this is as important as their physical specification. Additionally, as a service is consumed at
the moment of delivery, the control of its quality by inspection is always too late. The close
personal interactions found in services allow multiple opportunities for feedback and evaluation
and these provide the main, but not the only, means of judging whether customers are satisfied
with it.

The third difference is that, unlike a product, a service cannot be serviced. A poor meal is a poor
meal. It cannot be repaired. For this reason, it is important that the standard for services should
be right first time, every time. It is the high possibility of human error and failing that makes it
difficult if not impossible to achieve the right first time standard. Nevertheless, this should
always be the aim.

Services face the problem of intangibility. It is often difficult to describe to potential customers
exactly what is being offered. It is equally difficult on occasions for customers to describe what
they want from the service. Services are largely about process rather than product. It is usually
more important how an outcome is arrived at than what the outcome is.

The fact that services are usually rendered directly to customers by junior employees is the fifth
distinguishing feature of a service. Senior staff is generally remote from customers. Most
customers never have access to senior managers. The quality of the initial interactions colors the
view customers have of the whole organization, and so the organization has to find ways of
motivating frontline employees always to deliver of their best. This is why training and staff
development are of crucial importance. While senior managers may not serve at the front in
service organizations they must lead from the front and convey to their staff their vision of the
service and the standards they want set for it.

Lastly, it is very difficult to measure successful output and productivity in services. The only
meaningful performance indicators are those of customer satisfaction. Intangibles or soft
measures are often as important to success and to the customer as are hard and objective
performance indicators. Soft indicators such as card, courtesy, concern, friendliness and
helpfulness are often uppermost in customers minds. Intangibility makes it very difficult to turn
round poor service, because it is sometimes impossible to convince dissatisfied customers that a
service has changed for the better.

For a long time it was felt that quality and reliability is for product, and hence, production
personnel are accountable for this. There are some products where both product and service is
involved (like hotels) and in some areas only service is involved (like travel). Gradually, service
part in business has gained equal importance and hence, the quality aspect is very important.

Dimensions of service quality

Responsiveness

Responsiveness is the willingness to help customers and to provide prompt service. This
dimension emphasizes alternatives and promptness in dealing with customer requests,
questions, complaints and problems. Responsiveness is communicated to customers by
length of time they have to wait for assistance, answers to questions or attention to
problems. Responsiveness also captures the flexibility and ability to customize the
service to customer needs. To excel on the dimension of responsiveness, a company must
be certain to view the process of service delivery and the handling of requests from the
customers point of view rather than from the companys point of view. For example
helping a customer who fall sick when staying in the hotel. Responsiveness

Assurance

The extent to which the service provider and the staff is able to inspire trust and
confidence. For example the customer dining in a restaurant may not be able to directly
judge the level of hygiene maintained by the restaurants. Here it is not only important to
actually provide hygienic food but also to inspire confidence that the food is hygienic.
 The assurance is regarding giving the customer peace of mind that everything will be
taken care of as required, rather than just actually taking care when the need arises. For
example a doctor with MD degree may inspire more assurance than a doctor with just an
MBBS degree, although the basic treatment provided by them may be of same quality.

Tangibles

This is the parallel of physical characteristics of quality of goods. This refers to the
physical characteristics of facilities, equipments, consumable goods and personnel used
in or associated with the service provided. However here also the quality is judged not by
some uniform specifications in terms of physical characteristic, but by the impact these
physical characteristics have on customer assessment of the service quality

Empathy

This is being able to understand the needs of the customer as an individual and meet the
special requirements of the customer. This is more about customizing the service and the
general service provider behavior for each customer, rather than providing a uniform high
quality treatment to all.

Many companies try to create this sense of empathy by employing tactics like addressing
each customer by name. However, true empathy means understanding the special
characterizes and needs of individual customer, and modifying service to them
accordingly.

Reliability

The extent to which the service performed matches implicit or explicit promises made by
the service provider regarding the nature of service. For example, the basic quality of
room decoration, food, and facilities provided in a hotel.
 Cost of quality
A quality cost is defined as The expenditure incurred by the producer, by the user and by
the community, associated with the product or service quality.

And a quality related cost is defined as The expenditure incurred in defect prevention
and appraisal activities plus the losses due to internal and external failure.

Quality cost measurement focuses attention on areas of high expenditure and wastage and
identifies potential problem areas and cost-reduction opportunities.
 This is leads to improved quality that increases customer satisfaction, reduce process
time, reduce wastages, improve profit margin, and reduce operating costs, resulting in
higher profits.

Cost of quality is the amount of money a business loses because its product or service was not
done right in the first place. From fixing a warped piece on the assembly line to having to deal
with a lawsuit because of a malfunctioning machine or a badly performed service, businesses
lose money every day due to poor quality. For most businesses, this can run from 15 to 30 per
cent of their total costs. A quality cost is considered to be any cost that the company would not
have incurred if the quality of the product or service were perfect.

As defined by Philip Crosby, cost of quality (COQ) has two main components:

1) Cost of conformance
2) Cost of non-conformance

Quality costs are defined as those costs associated with the non-achievement of product
or service quality as defined by requirements established by the organization and its
contracts with customers and society. In simple terms, quality cost is the cost of poor
products or services. Total quality costs are the sum of prevention costs, appraisal costs,
failure costs, and intangible costs

The value of quality must be based on its ability to contribute to profits. The goal of most
organizations is to make money; therefore, decisions are based on evaluating alternatives
and the effect each alternative will have on the expense and income of the entity.

The efficiency of the business is measured in terms of rupees. The cost of poor quality
can add to the other costs used in decision-making, such as maintenance, production,
design, inspection, sales and other activities. The cost of quality is no different than other
costs. It can be programmed, budgeted, measured and analyzed to help in attaining the
objectives for better quality and customer satisfaction at less cost. A reduction in quality
cost leads to increased profit.

The cost of quality influences all activities of the organization like marketing, purchasing,
design, manufacturing, and service. There are failures costs associated with lost sales and
customer goodwill, which may be impossible to measure and must be estimated.

Quality cost increased over time

All organizations make use of the concept of identifying the costs needed to carry-out the various
functions-product development, marketing, personnel, production etc
Until the 1950s this cost concept had not been extended to quality function, except for the
departmental activities of inspection and testing

During the 1950s the concept of quality cost emerged. Different people assigned different
meanings to the term. Some people equated quality cost with the cost of attaining quality; some
people equated the term with the extra incurred due to poor quality. But, the widely accepted
thing is quality cost is the extra cost incurred due to poor or bad quality of the product or
service.

Categories of Quality cost

Any serious attempt to deal with quality issues must take into account the costs associated with
quality. Those costs can be classified into two categories

Cost of conformance

Cost of non-conformance

Cost of lost opportunitieis

Cost of conformance

Any product produced or serviced is done according to some specified norms. It needs to
be checked whether the finished goods and the completed services conform to the
specifications. Different methodologies are adopted to do the checking. The costs
involved for this are classified as costs of conformance.
It includes

Appraisal costs.

Prevention costs

Appraisal costs:

Appraisal costs relate to inspection, testing, and other activities intended to uncover defective
products or services, or to assure that there are none. They include the cost of inspectors, testing,
test equipment, labs, quality audits, and field testing. Thus, they include the costs of the
implementation of quality, and also the costs of monitoring and control

Any defective parts and products should be caught as early as possible in the production
process. Appraisal costs, which are sometimes called inspection costs, are incurred to
identify defective products before the products are shipped to customers. Unfortunately
performing appraisal activates doesn't keep defects from happening again and most
managers realize now that maintaining an army of inspectors is a costly and ineffective
approach to quality control.

Employees are increasingly being asked to be responsible for their own quality control. This
approach along with designing products to be easy to manufacture properly, allows quality to
be built into products rather than relying on inspections to get the defects out.

Costs incurred in preproduction verification

cost of testing and measurement during preproduction stage
cost of verifying conformance of the design features
Costs incurred in receiving inspection
cost of inspection and testing of incoming parts
cost of inspection and testing of incoming materials
cost of inspection at the suppliers premises
Costs incurred in laboratory acceptance testing
costs of testing and evaluating the quality of purchased materials in the laboratory
Costs incurred in inspection and testing
cost of inspection and testing during the process of manufacture
cost of inspection and testing at the delivery point
cost of conducting product quality audits
cost of man-hours spent in supervision, clerical assistance, production operation
etc.
Costs incurred for inspection and test equipments
costs of depreciation of the equipment and associated facilities
cost of setting up of equipment
 cost of maintenance of such equipments
Costs incurred for materials consumed during inspection and testing
cost of materials destroyed during the course of destruction tests
Costs incurred in analysis and reporting of test and inspection results
cost of the activity conducted prior to the release of the ownership in order to
establish whether the quality requirement has been met.
Costs incurred in performance testing
cost of testing performed in the user environment
Costs incurred for approval and endorsements
cost of fees levied for mandatory approvals and endorsements by the concerned
authorities
Costs incurred for stock evaluation and storage
cost of inspecting and testing the stocks of products and spares which have
limited shelf life
Cost of storage of quality control results
Cost of storage of reference standards

Prevention costs:

prevention costs related to attempts to prevent defects from occurring. They include
costs such as planning and administration systems, working with vendors, training,
quality control procedures, and extra attention in both the design and production phases
to decrease the probability of defective workmanship. These are the costs of prevention
of the production of bad quality output. Thus, these include costs of activity such as
quality planning which tries to ensure that proper precautions have been taken to avoid
wrong sampling plans being made or bad quality or raw material entering into plant or
improper methods and processes being followed in the plant.

Generally the most effective way to manage quality costs is to avoid having defects in the
first place. It is much less costly to prevent a problem from ever happening than it is to
find and correct the problem after it has occurred. Prevention costs support activities
whose purpose is to reduce the number of defects. Companies employ many techniques
to prevent defects.

Prevention costs include activities relating to quality circles and statistical process
control.

Quality circles consist of small groups of employees that meet on a regular basis to
discuss ways to improve quality. Both management and workers are included in these
circles.
 Statistical process control is a technique that is used to detect whether a process is in or
out of control. An out of control process results in defective units and may be caused by a
miscalibrated machine or some other factor. In statistical process control, workers use
charts to monitor the quality of units that pass through their workstations. With these
charts, workers can quickly spot processes that are out of control and that are creating
defects. Problems can be immediately corrected and further defects prevented rather than
waiting for an inspector to catch the defect later.

Prevention costs:

Costs incurred in quality planning

o for the overall quality plan
o for the inspection plan
o for the reliability plan
Costs incurred in design and development
o cost of designing and developing
o cost of documenting
o cost of design inspection
Costs incurred for quality review
o cost of design review
o cost of verification activities
o cost of design approval tests
o cost of tests to demonstrate reliability and maintainability
Costs incurred for calibration of test equipments
o cost of calibration and maintenance of templates, fixtures etc
o cost of calibration of other test equipments / instruments
Costs incurred for the calibration and maintenance of product equipments used to
evaluate quality
o cost of calibration of measurement and evaluating devices
Costs incurred for supplier assurance
o cost of audit of suppliers
o cost of surveillance audit of suppliers
Costs incurred in providing quality training
o cost of attending training programme
o cost of developing and conducting training programmes
Costs incurred in quality auditing
o cost of appraisal of entire systems of quality
Costs incurred for acquisition analysis and reporting of quality data
o cost of data collection and analysis
o cost of processing and storing data
Costs incurred for the conduct of quality improvement programmes
o cost of developing and organizing programmes, such as
o defect prevention programmes and quality motivation programmes, etc.
Costs of non-conformance

When a product or service does not conform to norms or specifications, they are
defective. They have to be either thrown away and considered to be waster or rework has
to be done and make it conform to norms. In either cases it involves cost. These are
classified as costs of conformance

It includes

Internal failure cost (IFC)

External failure cost (EFC)

Cost of exceeding requirements (CER)

Internal failure cost (IFC)

Internal failure costs result from identification of defects before they are shipped to
customers. These costs include scrap, rejected products, reworking of defective units. The
more effective a company's appraisal activities the greater the chance of catching defects
internally and the greater the level of internal failure costs. This is the price that is paid to
avoid incurring external failure costs, which can be devastating.

Internal failure are those discovered during the production process; internal failures occur
for a variety of reasons, including defective material from vendors, incorrect machine
settings, faulty equipment, incorrect methods, incorrect processing, carelessness and
faulty or improper material handling procedures. The costs of internal failures include
lost production lost production time, scrap and rework investigations costs, possible
equipment damage, and possible employee injury. Rework costs involve the salaries of
workers and the additional resources needed to perform the rework. Beyond those costs
are items such as inspection of reworked parts, disruption of schedules, the added costs of
parts and materials in inventory waiting for reworked parts, and the paperwork needed to
keep track of the items until they can be reintegrated into the process

The internal failure costs include the following

Costs incurred due to scarp

o cost of materials, parts, components which failed to conform to quality
requirements
 o cost of labour and other overheads due to the scraped items
Costs incurred due to replacement of product
o cost of replacing the product because of the non-conformity
Cost incurred due to rework and repair
o cost of correcting the defective items
o cost of planning and scheduling the corrective process
o cost of materials procured for rework etc.
Costs incurred in troubleshooting and failure analysis
o cost of analyzing non-conforming materials
o cost of determining causes and taking remedial actions
Costs incurred due to the fault of subcontractor
o cost of failure of purchased material to meet the quality requirements

External failure cost

When a defective product is delivered to customer, external failure cost is the result.
External failure costs include warranty, repairs and replacements, product recalls,
liability arising from legal actions against a company, and lost sales arising from a
reputation for poor quality. Such costs can decimate profits.

In the past, some managers have taken the attitude, "Let's go ahead and ship everything to
customers, and we'll take care of any problems under the warranty." This attitude
generally results in high external failure costs, declining market share and profits.

External failure costs usually give rise to another intangible cost. These intangible costs
are hidden costs that involve the company's image. They can be three or four times
greater than tangible costs. Missing a deadline or other quality problems can be intangible
costs of quality.

External failure are those discovered after delivery to the customer. External failures are
defective products or poor services that go undetected by the producer. Resulting costs
include warranty work, handling of complaints, replacements, liability, payments to
customers or discounts used to offset the inferior quality, loss of customer goodwill, and
opportunity costs related to lost sales. External failure costs are typically much greater
than internal failure costs on a per unit basis

The external failure costs include the following

Costs incurred due to customer complaints
o cost of investigation carried out by the company
o cost of compensation provided by the company
o cost of reinstallation
Costs incurred due to warranty claims
 o cost of repair of defective items
o cost of replacement of defective items
Costs incurred due to rejected and returned products
o cost of repair/replacement of components/products
o cost of handling components / products
Costs incurred due to concessions
o cost of concessions, such as discounts given to the products
Costs incurred due to recalling of products
o cost associated due to recalling of products
o cost of premiums paid for insurance to minimize liability litigation damages

Cost of exceeding requirements (CER)

Unnecessary or unimportant services or information (i.e) redundant copies of documents,

reports that are not read, giving details when not necessary, conducting huge analytical
study.

Costs of lost opportunity

Costs due to the loss of customers (both existing and potential)

Category Description Examples

Appraisal costs Cost related to measuring, Inspection equipment,
evaluating and auditing testing, labs inspectors and
materials, parts, products the interruption of
and services to assess production to take samples
conformance with quality
standards
Prevention costs Costs related to reducting Quality improvement
the potential for quality programs, training,
problems monitoring, data collection
and analysis, and design
costs
Internal failure costs
External failure costs
Costs related to defective
products or services before
they are delivered to
customers
Costs related to delivering
sub-standard products or
services to customers
Rework costs, problem
solving, material and
product losses, scrap.
Returned goods, reworking
costs, warranty costs, loss of
goodwill, liability claims
and penalties

Cost of quality, poor quality cost and cost of poor quality are all terms used to describe
the costs associated with providing a quality product or service. A quality cost is
considered to be any cost that a company incurs to ensure that the quality of the product
or service is perfect. Quality costs are the portion of the operating costs brought about by
providing a product or service that does not conform to performance standards. Quality
costs are also costs associated with the prevention of poor quality

The most commonly listed costs of quality include scrap, re-work and warranty costs.
Quality costs can be measured and tracked and then used to guide improvement efforts

It is important for management to recognize the different ways in which the quality of a
firms products or services can affect the organization and to take these into account in
developing and maintaining a quality assurance program

Cost to remedy a problem is a major consideration in quality management. The earlier a

problem is identified in the process, the cheaper the cost to fix it. It has been estimated
that the cost to fix a problem at the customer end. Poor quality increases certain costs
incurred by the organization.