Mt Kenya University

DEPARTMENT OF BUSINESS AND SOCIAL STUDIES

COURSE CODE: SPM 422

COURSE TITLE: TOTAL QUALITY MANAGEMENT

Instructional Materials for Distance Learning

 COURSE OUTLINE
COURSE CODE: SPM 422
Pre-requisites: BBM 122
Purpose: To introduce concepts of total quality management (TQM) and their implications to performance
and effectiveness of business management

COURSE OBJECTIVES: By the end of the course the student should be able to:
 Discuss the total quality management philosophy of business management
 Describe the tools and techniques for introduction and sustaining total quality management programs
in business management.
 Describe the TQM preparation and implementation plan.

COURSE CONTENT
WEEK 1-2: CHAPTER 1: INTRODUCTION TO QUALITY:
Introduction of Quality Management
Historical Background
Defining Quality
Dimensions of Quality
The importance of Quality
The Cost of Quality
Prevention Costs
Quality and other functional areas of Management
WEEK 3-4: CHAPTER 2: CUSTOMER SATISFACTION
The Concept of Customer Satisfaction
Identifying Customer Satisfaction
Measures of customers Satisfaction
Determinants of Customer Satisfaction
Strategies to Enhance Customer Satisfaction

WEEK 5-7: CHAPTER 3: TOTAL QUALITY MANAGEMENT

Introduction
Definition of TQM
Principles of TQM
TQM models and framework
The TQM approach
Benefits of TQM
Criticism of TQM

AFTER THE 7TH WEEK YOU ARE REQUIRED TO A CAT ONE

WEEK 7-8: CHAPTER 4: BENCHMARKING

Benchmarking
Definition
Reasons for benchmarking
Types of Benchmarking
 The Pre-Requisites of Benchmarking
The Benchmarking Process
Drawbacks of Benchmarking

WEEK 9-10: CHAPTER 5: Business Process Re-Engineering (BPR)

Introduction to Business Process Re-Engineering (BPR)
Definition of BPR
The Process of Implementing BPR
The principles of BPR
Benefits of BPR
Drawback of BPR
BPR and Quality

WEEK 11-12: CHAPTER 6: THE SIX SIGMA

Introduction
Six – Sigma as a Statistical Measure
Six – Sigma as a Goal
Six-Sigma as a System of Management
Core elements of Six-sigma
Six – Sigma problem – Solving Approaches

WEEK 13-14: CHAPTER 7: QUALITY TOOLS AND MEASUREMENTS

Pareto charts
Check sheets
Cause and effect diagram
Scatter diagrams
Histogram
Graphs or flow charts
Control charts

AFTER THE 14 TH WEEK YOU ARE REQUIRED TO DO CAT TWO

A SAMPLE OF MAIN EXAMINATION AND SUPLLIIMENTARY/SPECIAL EXAM
 WEEK ONE AND TWO
CHAPTER ONE
Introduction of Quality Management
OBJECTIVES:

 To learn the history of quality

 Introduction to quality and definition.
 The learner should be able to describe different dimensions of quality.
 The fundamental factors which affect quality.

1.0 Introduction
Today’s world of business imposes an intimidating array of pressures on the organizations and
their performance. The demands of the stakeholders and more so the customers are for ever
increasing as they require improved quality of products and services. The customer has come of
age and no longer accepts inferior quality, limited choice and monopolistic margins. Today’s
customer is strongly demanding quality in products and services. Hence, continuous
improvement in business activities with a focus on the customer throughout the entire
organization and an emphasis on quality is one of the main means by which organizations face
up to the global competitive threats. This is why quality is looked upon by many organizations
as the means by which they can survive in n increasingly aggressive market and maintain a
competitive edge over their competitors.
Quality is a major factor in business revolution, as it enhances sales and revenue growth, creates
jobs and provides an avenue for sustainable business expansion. Therefore it is only those
organization which are quality conscious that will survive in these interesting times of
intensive competition and customer awareness. Quality is the need of the hour, and top
management should increasingly pay attention to this critical and interesting subject. Good
quality products and services mean customer satisfaction and long-term loyalty.

1.1. Historical Background

The history of quality can be traced back to 221BC when in China the Chaou dynasty required
that physicians pass an examination before entering practice. This was also practiced by the
ancient Egyptians who demonstrated a commitment to quality in the construction of their
pyramids. The quality of Greek architecture in the 5th century B.C was so envied that it affected
the subsequent architectural constructions of Rome. In fact Roman- built cities, churches, roads,
and bridges still inspire even today.

A major need for more quality control comes with industrial revolution. The revolution brought
the concept of division of labor as a method of enhancing quality. The workers became
specialists who were responsible for only a small part of the process. Individuals who performed
similar operation were grouped together and a supervisor assigned to ensure quality was
achieved. This phase was referred by Feigenbaum (1983) as Foreman quality control.

The period between 1920 and 1940 saw the next phase in evolution of quality control period
which Feigenbaum (1983) calls inspection quality control period. During this period products
and processes became complicated, and production volume also increased. As the number of
workers reporting to a supervisor increased, it became difficult to keep close watch over workers
operations, hence standards were set and inspectors compared the quality of the product or
service with the set standards in the event that the product or service failed to meet the standards,
the items were set aside from other items and where reworked or discarded. It was also during
this period that a couple of developments were made, for instance Walter A. Shewhart
developed control charts in 1924 which eventually set the stage for statistical Quality Control
(SQC). Similarly, around 1930 Dodge and Roming from Bell Telephone Laboratories
developed lot –by-lot inspection of work in progress and finished goods i.e acceptance
sampling statistical quality control called economic Control of Quality of a Manufactured
Product’ The book set the stone for the subsequent application of statistical methods to the
process of quality control.

During the World War II, sampling inspection gained popularity and even after the war,
acceptance sampling became the norm. This is not to imply that Shewahart’s control charts were
not being used, but that they did not achieve popularity because top management may not have
understood the concept behind shewhart’s approach. Shewhart, however, continued his efforts to
popularize the fundamentals of statistical quality control to industry. To achieve this objective,
he obtained sponsorship of the American Society for Testing Materials (ASTM), (ASA) and the
Institute Mathematical Statistics (IMS) in creating the joint committee for the development of
statistical applications in engineering and manufacturing.

The next phase of quality evolution occurred between 1940 and 1960 which Feigenbaum (1983)
termed Statistical Quality Control phase. This period was characterized by increased production
requirements during the war making 100 per cent inspection unfeasible, hence increasing the
acceptance of sampling plans. The American Society for Quality control (ASQC) was formed in
1946 and a set of sampling inspection plans for attributes called MIL-STD -105A was developed
by the military in 1950. During this period, a number of pioneers began to create quality control
in Japan in the 1950’s by delivering a series of lecturers and holding seminars on quality control
methods. Deming became active in quality movement in Japan and even established a national
quality price in Japan. Japanes engineers and top management were convinced of the importance
of statistical quality control as a means of competitive edge in the market.
Later in 1954, Joseph Juran, also a pioneer in quality control, visited Japan in 1954 And even
stressed the strategic role that management play in the achievement of quality. He introduced
managerial topics such as planning, organizing, and controlling and the need for setting goals.
The Japanese were quick to realize the important role of quality on the future of business and
embarked on a massive program of training and education.

The total Quality Control phase took place during the 1960’s (Feigenbaum, 1983) which
emphasized on greater involvement of all department s and managerial personnel in the quality
management. The notion that quality is the preserve of the people on the shop floor, the
production foreman, or by the people from the inspection and quality control department was
discarded. During this period, people started to realize that each department had an important
role in the production of a quality product. The concept of zero defects championed by Phili
Crosby which centered on achieving productivity through worker involvement gained favor.
The approach focused on employee motivation and awareness and the expectation of perfection
for each employee. The use of quality circles, which is based on the participative style of
management, also emerged in Japan.
The 1970’s through 1990’s brought about Total Quality Management which advocated the
involvement of everyone in the organization. Quality was associated with every individual and
Fegeinbaum (1983) termed it a quality system. During this period, the Japanese enhanced the use
of graphical tools commonly known as cause-effect diagram or Ishakawa diagram which
sometimes is also known as fishbone diagram.
The computer explosion of 1980’s saw the emergence of quality control software programs in
the market. It was during this period that evolution of quality took a dramatic shift from quality
assurance to a strategic approach to quality. The emphasis changed from a reactive approach of
finding and correcting defectives before reaching the market to a proactive of focusing on
preventing mistakes from occurring altogether. It extended to suppliers, design, quality audit,
among other areas.

During the period 1990’s – 2000 emphasis was on establishing the culture of continuous
improvement, while from 2000 to the present day the focus in on organization – wide quality
management.

The chronology of quality development can be summarized as follows:-

Pre – 1900 Quality as an integral element of craftsmanship
1900- 1920 Quality control by foremen
1920 – 1940 Inspection – based quality control
1940- 1960 Statistical process control
1960 – 1980 Quality assurance / the quality department
1980 – 1990 Total quality management
1990- 2000 TQM and the culture of continous improvement
2000 – Present Organization – wide quality management.

Basu (2004) summarized the developments in quality management into four major phases as
follows;
 Inspection Quality Control Quality Assurance TQM
- check work after - Self inspection - Developed - Teamwork
the event - Quality Planning quality systems - Employee
- Identifying sources and procedures - Use f quality involvement
cost data - Process
of non- - Use of Basic
- Quality planning management
conformance statistics
- Use of statistical - Performance
- Take corrective - Quality manual process control management
action - Us of process - Involve non - Involvement of
performance data sperations all functions

1.2 Defining Quality

Quality is one of the most important issues facing organizations today. We all know quality
when we experience it, but describing and explaining it may be rather difficult. In our everyday
life, we usually take quality for granted, especially when it is regularly provided; however, we
become acutely aware when it is lacking. People often recognize the importance of quality when
we experience the frustration associated with its absence. Given the difficulty associated with its
definition, Pfeilr and Cooke(1991) described it as a slippery concept because it has a variety of
meaning and that it means different things to different people.

In simple terms quality can be defined through the voice of the customer. It can be said that a
product is of satisfactory quality if it satisfies the customer’s needs. A customer will buy a
product if it meets he minimum expectation; therefore, quality refers to ability of a product or
service to constituently meet or even exceed customer needs and expectations. Quality means
getting value for your money; getting what you pay for. Thus customers’ satisfaction is the main
criteria for determining whether a product possesses the required quality or not

Many authors have attempted to define quality, a sample for which is given below:
 Meeting the needs of the customer, both present and future (E. Deming, 1986)
 Quality is conformance to requirements. (Crosby, 1979)
 Quality is fitness for use. (Juran, 1988)
 The totality of features and characteristics of a product or a service that bear on its ability to
satisfy stated or implied needs. (ISO 9000, 1988).
 The quality of product or service is the fitness of the product or service for meeting or
exceeding its intended use as required by the customer (Mitra, 2000).
 The quality of a product is the minimum loss imparted by the production society from the
time the product is shipped (Taguchi, 1986)
 The American Society for Quality and Control defines quality as a subjective term for which
each person has his or her own definition. In technical usage, quality can have two meanings;
1) The characteristic of a product or service that bear on its ability to satisfy stated or implied
needs and 2) a product or service free of deficiencies.
 According to Guasspari (1988) Quality = S+E=e; where ‘S’ stands for Specifications, ‘E’
concerns macro Expectations and ‘e’ relates to micro expectations. According to him,
specifications relate to the closeness with the product or service matches him,
specifications; macro expectations are the general expectation that customers expect i.e the
minimum standard of customer expectation; while micro expectations arise out of the
organizations communications and advertisement to potential customers or simply the
promises made to customers. Gauspari noted that a quality product or service is that which
provides a maximum overlap between ‘S’, ‘E’ and ‘e’. this means that a product or a service
must conform to, or exceed specifications, meet industry standards and exceed internally
generated specifications and communications.
 Feigenebaum (1983) states that quality is a customer determination which is based on
customers’ actual experience with the product or service, measured against his/her
requirements stated or unstated, conscious or merely sensed, technically operational or
entirely subjective and always representing a moving target in a competitive market.

Several aspects clearly stand out in this definition

a) Customer determination – It is only customers who can decide if and how well a product
or service meets his other needs, requirement and needs.
b) Actual experience – The customer will judge the quality of a product or a service based
on actual experience either during purchase or after.
c) Requirements – Aspects of the product or service required by the customer may be stated
or unstated, conscious or merely sensed. The product or service must fit the requirements;
 hence, quality is about measuring up to predetermined standards and meeting hose
standards time and time again
d) Technically Operational – Aspects of the product or service may be clearly identified in
words by the customer.
e) Entirely Subjective – Aspects of the product or service may be interpreted in the
customer’s personal feeling.
Therefore, organizations producing goods and services must define and meet the customers’
reasonable explicit anticipated needs, requirements and expectations even as they change over
time, hence quality refers to the degree to which a specific product satisfies a particular customer
or the degree to which it conforms to a design specifications or the distinguishing feature of a
product’s taste, color, appearance, etc it means getting value for your money; getting what you
pay for.

The driving force behind any quality program is the customer. The customer is the judge to
determine the level of quality and hence, as the needs of customers change, so should the level of
quality. Thus customers satisfaction is the main criteria for determining whether a product
possess the required or not.

According to feigenbaum defining quality for a particular product or service is extremely

difficult because people attach different values to different quality dimensions. It is difficult to
have two customers sharing similar expectations for the same product or service. Similarly,
customers’ needs, requirements and expectations are like a moving satellite, which keeps
changing over time and with different situations. Garvin (1984) develop a conceptual framework
for categorizing the approaches used to define quality. His classification is based on the
following perspectives:

1. Transcendent Perspective – The Transcendent perspective of quality seeks to define quality

in terms of some philosophical, perceptual, moral or religious connotation. The transcend
appears to be the foundation from which all other quality perspectives are derived.
Philosophical approach is grounded on the cultural context and myths of the quality
 construct, for example Germany’s obsession with quality is a core cultural value and hence
is a measure of personal and societal worth.

2. Product – Based Perspective – A product – based perspective of quality supports Kotler’s

definition that the product is a bundle of need – satisfying attributes. This product – based
approach is also supported in the ISO-9004 standard, where quality is defined as fitness for
use, performance, safety and dependability.

3. User-Based Perspective – User – based perspective’s definition of quality suggests that

quality is the ability of a product to satisfy human needs. A cornerstone of the Deming’s
definition focused on the customer and suggested that product cannot be a quality product it
it does not meet both explicit and latent needs.

4. Manufacturing - Based Perspective – Manufacturing perspective of quality pertains to a

products’ degree of conformance to engineering and design specifications. These perspective
of the definition hinge on two factors; one is benchmarking and secondly, ISO-9000
standards. The ISO-9000 standards

5. Value – Based Perspective – Value –based definition of quality account for the relationship
of a product quality and relative product cost. . Simply put, a product exhibiting high level of
conformance and relatively low monetary costs would be classified as a higrspective – Value
–based definition of quality account for the relationship of a product quality and relative
product cost. . Simply put, a product exhibiting high level of conformance and relatively low
monetary costs would be classified as a high value product. Kotler suggests that value to the
customer is a function of product related benefits discounted by all product related costs.
Product related costs typically encompass the monetary price of the product. The total from a
value based perspective would include both monetary and non-monetary costs such as time,
energy and opportunity costs.

6. Social-Loss Perspective:- This perspective was developed by Genichi Taguchi which

suggests that quality is the loss a product causes to society after being shipped other than
 losses caused by he product functionality. Losses may be incurred from either variability in
product functions or harmful side effects. Losses due to harmful side effects occur when
producer’s actions result in uncompensated loss to others, for instance, a textile mill pollutes
a commercial fishery. Similarly, a customer’s actions may result in uncompensated loss to
others, for example cigarette smoking. Therefore, according to Taguchi’s social loss function
approach to quality, cigarettes would typically be classified as low quality products because
of negative externalities associated with their consumption, even though a specific brand has
both conformance and customer demand.

7. The Slogan Approach – This approach was proposed by Kelemen (2005) to add to the
Garvin’s framework. According to kelemen, organizations’ obsession with quality and the
consequent abuse of the term has led to a situation where quality has become a mere slogan.
A slogan is meaningless platitude with which nobody disagrees as to who could be could be
against quality. As a slogan, quality gives the illusion of a unitary meaning that is endorsed
by everyone in the organization; in so doing, it aims to construct a sense of normality and
taken for granted commonsense among employees. Therefore, it is important to be wary of
slogan that urge us to view quality as an inherently morally good project. Slogans of quality
hide the contentious, political nature of the production and consumption practices in which
quality is necessarily embedded. It is these practices that we need to understand and
challenges in order to arrive at a notion of quality that is meaningful. More talk about quality
is not bad in itself but it could have disastrous effects when people do not what they say do,
for example, when organizations pledge quality in their advertising campaigns but do not
deliver it.

The social-loss function approach to quality appears to be most comprehensive of all the
definitions because it recognizes the impact of quality on all other aspects of the society.
Similarly, it is all inclusive of other dimensions; product perspective (losses occur when the
product fails to meet customer expectations), the user perspective (losses occur when customer
explicit and latent needs are not met) and the value perspective (product related benefits are
greater than product –related costs). Taguchi’s typology addresses transcendent perspective by
implicitly making the value judgment that typology addresses the transcendent perspective by
implicitly making the value judgment that losses to society due to poor quality are bad outcomes
and social gains are good outcomes. Therefore, looking at the Garvin’s classification framework,
most of the quality definitions are limiting, covering typically one or two of the six perspectives;
for instance, Deming’s definition n only covered transcendent and user perspectives.

1.3 Dimensions of Quality

Any serious effort to address quality must begin with a clear understanding of the various
dimensions of quality. From the definitions given it is clear that quality is a broad concept and
does not pertain to a single set of product or service attributes, but to a number of different
dimensions. Customer expectation can therefore be broken down to a number dimensions that
customers use to judge the quality of a product or a service.

Garvin (1984) identified eight dimensions of quality which he maintaining cover various
meanings of quality held by the management and customers appropriate in the product area as
follows;-
 Performance – The most essential aspect of quality is whether the product does what it is
supposed to do. Where a customer provides product specifications such as weight, designs
etc, adherence to these specifications is an important dimensions of quality; for example
when buying a car, performance would mean acceleration, speed, consumption levels, and
comfort, among others

 Aesthetic – Features such as appearance, feel, smell, taste or sound may form important
aspects of quality. Food that is healthy but not tasty may not be considered to be of high
quality. Motor vehicles currently being manufactured have good appearance and excellent
interior designs which may include facilities such as Television, CD changer, among others.
The saying goes that the best goods are not the most sophisticated, rather the most appealing
and that the market belongs not to the highly sophisticated goods but rather to the most
appealing goods.

 Reliability – Is the ability of a product to continue to be fit for the intended purpose or
function. Reliability measures how consistently the product performs at acceptable level
 under normal maintenance. It is the probability that a product or part of the equipment will
perform satisfactorily for a given time under normal conditions of use. Reliability is related
to the continuation of performance over a period of time. A product with initial performance
may fail to give the same performance afterwards. In such a case a product is not considered
reliable. Therefore a product should not only be of good quality but also reliable. Failure of a
product may at times cause great harm to the user, for instance, failure of a car to brake may
result in fatal accident, similarly, failure of an important part in a power generating machine
in a thermal power station, which is not available within the country, is considered very
serious, because it results in the closure of power generating plant for a long period of time.

 Durability – Durability measures how long the product performs until repair is needed and
the overall usage and life span of the product. For products such as bulbs durability relates to
the longer it stays in use.

 Maintainability and Serviceability: - It measures the frequency, cost and difficulty of actions
required to keep the product operating at a desired level of performance. It entails the ease of
repair of the product, for example to remove a plug from a Chevrolet of 1970’s required a
whole engine to be pulled down. Other important aspects include the training offered to
customers in order to use the product, the assistance available, the availability of replacement
parts and the ease of replacement.

 Special Features:- Customers are normally interested in extra features in the product, for
example remote control for television, similarly, in the automobile industry customers may
not only be interested in product performance but also other addition al features such as air
conditioning, radio systems, automatic lock system, among others.

 Conformance – This deals with how well a product corresponds to design specifications. It
applies to products that have specifications, and that a quality product depends on whether it
matches the manufacturer’s specifications. For instance, stitched suit will be of high quality
if it corresponds to the measurements taken.
 Perceived Quality: - Quality is largely a matter of customer perception; hence customer
perception of the product is very important. Customers rely heavily on the past performance
and the reputation of the firm producing the product, hence attaching a perceived value on
the previous performance of the companies’ other products

The dimension of product quality may not adequately describe the service quality, however,
specific dimensions of service quality have been identified through pioneering research by
Parasuraman. Zeithaml and Berry (1998) using the following dimensions.

 Reliability: - This entails the ability to perform the promise service dependably consistently
and accurately. It means that the company delivers on its promise about delivery, service
provision and problem solving. Customers value companies that keep their promise about
service outcomes and core services.
 Responsiveness: - The willingness of service providers to help customers and to provide
prompt services including helping customers in unusual situations and dealing with their
problems. This dimension emphases attentiveness and promptness in dealing with customers
requests, questions, complaints and problems. Responsiveness is communicated to customers
based on the length of time they have to wait for assistance or attention to their problems.
Responsiveness also involves the service to customer needs. To excel on this dimension,
companies need to view the process of service delivery from the customers point of view
rather than from the company’s.
 Assurance: - The knowledge and courtesy exhibited by personnel who come into contact
with customers and their ability to inspire trust and confidence. This dimension is particularly
important for services that the customer perceives as involving high risk or feel uncertain
about their outcomes, for example medical service.
 Empathy:- Relates to the way customers are treated by employees who come into contact
with them. Providing caring, individualized attention to the customers. Empathy entails
conveying through customized services, that customers want to feel understood by the firm
that provides the service; for example personnel may strive to know customers by name and
build relationships that reflect their personal knowledge of customer.
 Tangibility:- Appearance of physical facilities, equipment , personnel and communication
materials. This provides images of the service that customers, particularly new ones will use
to evaluate quality. They are normally used to enhance their image and signal quality to
customers .

Other dimensions not included in Parasuraman, zeithalm and Berry’s service quality and
Garvin’s product quality classification but are important in defining quality include
 Time: - The speed with which the service is provided or delivered.
 Convenience: The availability and accessibility of the service
 Price: The selling price of the product or service
Quality is therefore determined by balancing technical considerations such as fitness for use,
performance, safety and reliability, with economic factors, which include price and availability.

1.4 The importance of Quality

Quality is strategic factor that works through virtuous cycle to enhance a company’s sustainable
competitiveness as illustrated in figure 1.1 in the present time, every company is interested in
product’s quality because of the following reasons:-
 It increases customer satisfaction
 It enhances profitability – improved quality increases demand for the products or services
which enables the firm to charge high prices for the value differentiation that it offers.
 It lowers costs – process improvements have a direct bearing on costs because defects are
not free, rather someone is pad to make them, resources are used and opportunities for
making saleable product are lost.
 It increases productivity: - Quality improvement results in fewer delays, mistakes and
reworks which may result in increase in net output.
 It enhances competitiveness
 It enhances staff morale- Poor quality is demoralizing for staff because they spend time
coping with complaints and are frustrated when nothing seems to be done to relieve them.
 It increases flexibility in meeting the changing needs of the market.
  It improves customer service and delivery times.
It is therefore important for management to recognize the different way that the quality of the
firm’s product and services can affect the organization. Some of the ways in which poor quality
affects organizations include.

 Loss of business which may be occasioned by increased critics, or controls by the

government or pressure from activist groups. Studies have shown that while a satisfied
customer is likely to tell a few people about their experiences, a dissatisfied customer will
tell an average of nine others. It is also important to note that people rarely company
directly to the company for poor quality but more often switch to a competing product
causing loss of business.
 Liability ;- Organizations incur heavy liabilities occasioned by damages or injuries due to
faulty designs or poor workmanships, for instance, a surgeon may be held liable for
negligence during a patient’s operation. Liability for poor quality has been well
established in the courts of law.
 Reduced productivity – Productivity and quality are closely related. Poor quality affects
productivity because defective products have to be reworked, similarly, poor quality in
tools and machines may lead to injures and defective output, which must be reworked or
scraped thereby reducing the amount of usable output.

Improved
Performance Increased Improved
Features production Performance

Low Lower
Improved manufacturing Scrap
Reputation Higher Price

Increased Low Service Low Warranty

market share Increased profit Cost costs

Economic of
scale
Figure 1.1: Importance of quality

1.5 The Cost of Quality

The cost of quality is the amount of money that has to be spent as a result of quality problems
within the organization. It aims at quantifying in financial terms all activities involved in the
prevention and rectification of defects. These are costs associated with the discovery of failure
and the cost of preventing poor quality.
The American Society for Quality Conrtol (1971) categorized quality costs into four categories
(i) Internal failure costs
(ii) External failure costs
(iii) Appraisal costs
(iv) Prevention costs
1.5.1 Internal Failure Costs
Failure costs are costs that result from producing defective products. They are costs of doing it
wrong. They are considered as internal failure costs if it is detected within the organization
before delivery to the final customer. Internal failures may occur due to a variety of reasons such
as defective materials from vendors, faulty equipments and machine, incorrect methods
carelessness, faulty materials handling procedures and incorrect processing. The cost of internal
failure costs include:
 Downtime: This is the cost of idle personnel and facilities when production is halted to
correct a quality problem, including stoppages due to defects materials.
 Scrap: These are defective products which cannot be repaired, used or sold
 Reworked or rectification: It involves the cost of correcting non-conforming unit such as
additional manufacturing operations.
 Cost of re-inspection: Reworked items may require re-inspection or retesting to ensure
compliance to quality standards.
 Downgrading costs: Products which do not meet specification may be sold at a discount
price or as second hand at throw away prices.
  Waste: The activities associated with doing unnecessary work or holding stocks as the
result of errors, wrong materials among others.
 Cost of investigation:- Includes the cost of all activities required to establish the causes
of internal product failure.
 No body want the responsibility for high proportion of defectives; hence, one
department or an employee may shift the blame to another which eventually affects the
morale of the workforce.
 Inventory safety stocks: Costs of extra safety stocks held specifically to guard against
shortages and breakdowns due to making defective products.
 Excess capacity cost: Cost of excess capacity that must be maintained to make up for
capacity cost from making defective products. This include the cost of extra facilities and
equipments above those that would be needed if production were defect free .
 Defect generated overtime costs:- Additional costs of having employees work overtime
to meet delivery deadlines for orders that were ate because defective items had to be
reworked.

1.5.2 External Failure costs

These are costs incurred when the product fails to perform satisfactorily after being transferred to
the customer. External failure costs include;
 Loss of goodwill: Good will is always created as a result of good performance over a
long period of time. Poor quality has a negative impact on the reputation and image and
impinges directly on future prospects for sales. Re-establishing a lost goodwill is a
difficult task.
 Warranty charges: Failed products within the warranty time may have to be replaced
under guarantee.
 Liability costs: These are costs of defending law suits and compensating customers for
injury deaths and business losses and even change of contracts.
 Cost of returned, replacement or allowances : These costs include cost of investigation
of the rejected product, replacing shipping and handling, or any price reduction or
allowance to compensate for a defective product.
  Compliant costs: These include all costs incurred with servicing customers’ complaints
such as cost of investigation and adjustments, cost of receiving and handling the
complaints.

1.5.3 Appraisal costs

According to Mitra 9(2000) appraisal costs are those costs associated with measuring, evaluating
or auditing products, components or purchased materials to determine their degree of
conformance to the specified standards. It relates to costs of inspection, testing and other
activities intended to uncover defective products or services, or to assure that there are no
defects. Such costs involve costs checking whether it is right and include the following
 Incoming material inspection: These are costs of inspection and testing items received
from suppliers.
 In process inspection and testing: These are costs of inspecting and testing the product
throughout the production process to ensure conformance to specified standards.
 Cost of maintaining inspection facilities;- These are costs such as the calibration and
maintenance cost of any equipment used in appraisal activities.
 Cost of quality audits:- These are costs incurred to check that the quality system is
functioning satisfactorily.
 Cost of materials and product consumed in a destructive test or devalued by reliability
tests
 Cost of interruption of production to take samples
 Vendor rating costs to assess and approve suppliers of all products and services.

1.5.4 Prevention Costs

Prevention costs are normally costs incurred in planning, implementing and maintaining a
quality system (Mitra, 2000). They are costs incurred in order to prevent defects from occurring.
According to Muhlemmann, Oaskland and Lockyer (1992) prevention costs are associated with
the design, implementation and maintenance of the quality system. Such costs include:
  Quality planning: These include all costs related to developing and planning the quality
assurance system e.g. costs of setting up the design and operational policies and
development and the cost of communicating quality plans to workers.
 The Cost of determining product and service requirement : or example e the cost of
determining quality requirements and the setting of corresponding specifications for
incoming materials, processes and finished products.
 The cost of product design and review: - Any incremental costs of product design
incurred to review and improve the quality f the product.
 The cost of process design and review: Any incremental costs of process design to
review and improve quality conformance of the product or service, including equipment
enhancements intended primarily to improve quality.
 Training costs: - Consists of costs associated with the development, preparation and
maintenance of quality education and training for operators, supervisors and managers.
 Data collection analysis and reporting costs: - it includes costs of electing data relating
to quality problems and the costs of analyzing and reporting data to monitor and improve
quality.
 Cost of quality improvement efforts: - These are costs related to programs or activities
designed to monitor and improve quality; for instance quality circles, and defect
reduction programs.
 Cost of working with vendors to ensure the quality of incoming materials preventing
costs re meant to ensure that the product is made right the first time and reduce cost of
getting it wrong (failure cost) and the cost checking if it is right (appraisal cost).
Prevention costs goes up because of the investment in training and other action oriented
efforts towards making it right first time, however, the real benefits will be realized when
it yields significant reduction in failures( both internal and external) and appraisal
activities. Therefore the more the prevention costs, the lower he failure and appraisal
costs, which reduces the total cost of quality as illustrated.

According to Juran (1979), the total cost of quality (TCQ) is the sum of failure costs (internal
failure costs ‘IFC’ and external failure costs ‘EFC’) and effect control costs ‘CC) and appraisal
costs ‘AC’. He derived the following formula
TQC = PC + AC + IFC+EFC

PC and AC are costs relating to ensuring that the product conforms to specifications; while IFC
and EFC are costs of non-conformance. Bank (1992) extends this classification by adding to the
cost of non-conformance, the cost of exceeding requirements, while a third category of cost has
also been added; the cost of opportunity.

The cost of exceeding the requirements refer to those costs incurred as a reslt of providing
information or services that are not necessary. Examples include excessive features in a mobile
phone which are generally unnecessary. The cost of lost opportunity may be difficult to quantify,
however, some costs can be attributed to lost opportunity , for instance, cancellation of customer
order due to inadequate product or service supply , ordering the competitors products because
the organization products were not available, and the intangible cost of demoralized employees.

1.6 Quality and other functional areas of Management

At the outset, quality was primarily an operations functions, more recently, however its relevance
t other organizational functions has become more apparent and recognized as crucial to the
successful functioning of the organization as a whole. Several organizations are currently
pursuing quality management initiatives that cut across functions from marketing, strategy to
human resources and accounting. Therefore, this section explores the relationship between
quality management and other management disciplines and practices as follows:

1.6.1 Quality and Marketing

Marketing plays an important role in identifying requirements. Any pre occupation with quality
must start with knowing what the customer want. Such wants must then be translated into an
appropriate product or service which not only meet customers expectations but also matches the
operational capabilities of the organization. The main reason why new products fail is due t lack
of understanding of the whole experience of the customer from awareness to the disposal of the
product. Therefore, marketing activities could help organizations understand the complexity of
customer experience and enhance the relationship in the value chain. Marketing activities also
help the organization furnish information regarding the competitors operating levels, sets
products and service specification, help analyze customer complaints, sales staff reports,
warranty clams and product liability cases all of which are critical activities in quality
management.
Similarly, the current philosophy of marketing has turned inwards towards other functions
individuals within the organization, the so called internal customers. Internal customer embraces
the idea of getting everyone in the organization to practice marketing that is to be individuals
employees. All these marketing effort have a significant effect on the management of quality in
organization.

1.6.2 Quality and Human Resource Management

According to Victor et al (2000) the pursuit of quality alters significantly the way jobs are
designed, requiring new behaviors, roles and responsibilities for all organizations’ members.
Work under a quality regime is dual in that it combines two distinct types of tasks; standardized
tasks and continuous improvement tasks. When employees are confronted with this dual role
some may experience stress.

Most quality programmes rely on the use of HRM policies to encourage employees to focus on
tasks and generate employee commitment. The rhetoric of the committed employee builds upon
the imagery of total immersion in quality goals and supporting organizational practices.

Developing quality across the entire organization is an important function of the HR department
HR can act as senior management’s tool in implementing TQM in two fundamental ways; first
by modeling the TQM philosophy and principles within its departmental operations; the HR
department can serve as a beachhead for the TQM process throughout the company. Second the
HR department with senior management’s support take TQM process company wide by
developing and delivering the long-term training and development necessary for the major
strength in terms of recruitment, selection, appraisal, and reward system to institutionalize a
quality first orientation.

1.6.3 Quality and Strategy

Quality programmes have a strong relationship with strategic change due to the fact that many
companies adopt quality management programmes at times of crises or due to pressure from
customers’ competition, government regulations, among others. Such changes may or may not
be revolutionary but they are strategic in that they typically require that the organization makes
quality a long term objective, allocate appropriate resources for its achievement and institute
control and evolution procedures to review its progress, consequently, quality management
requires strategic management skills.

Strategic management is a process which provides guidance and direction for all aspects of
operational management. It is carried out by top-level management. It emphasizes organizational
adaptation to environmental demands and opportunities via the dynamic and complex interaction
between the behavioural aspects of organization such as culture, learning and leadership and
technical aspects such as planning and budgeting. Quality management programmes are
adaptation tools for they aim to ensure fit between the organization and the environment by
combining the hard technologies (i.e employee, involvement training, leadership and
organizational culture).

1.6.4 Quality and Production / Operation Management

The role of operation management in the achievement of quality objectives is very crucial
production and operations management is concerned with the ways of achieving the most
effective and efficient use of organizations resources, such as its financial and human, capital
resources and materials (Bicheno and Elliot, 1999). Quality on the other hand means confirming
to the requirements and specifications, which implies that production and operations
management activities determine the level of quality of an organization. The major production
and operation management activities that influence quality in the organization include:
agreement of specifications provided by the marketing department, pre-production and
operations and prototype trails, design of product and service, special handling and storage of
material for purpose of production, process control, storage of finished products and analysis of
scrapped, reworked, rectified, replace and downgraded products. These activities are necessary
for an organization to achieve quality hence production and operations’ success in quality.
1.7 Sample Examination questions
1. Discuss the quality eras in the evolution of quality management thought.
2. a) Describe four dimensions of quality.
b) Quality can be evaluated on multiple dimensions. Explain how organizations can use
these dimensions for strategic competitiveness.

3. A defense contractor manufacturer rifles for the military. The military has exacting quality
standards that the contractor must meet. The military is very pleased with quality of the
products provided by the contractor. However, the contractor I experiencing high quality
related costs. Discuss the reasons for the contractor’s high quality related costs.

4. a) What are the major categories of quality costs? Explain each of them and give examples.
b) Cost and quality are seen to have some conflicts as strategies for competitiveness in products.
Explain how this arises and to what extent.
5. The cost of quality is what it costs a company to get things wrong. Discuss the various
classifications of a typical quality costs.
6. a) Explain why organizations view quality as a source of competitive advantage.
b) “For any organizations to succeed in this challenging business environment, it has to be
proactive in its plans” Discuss this quote in relation o quality functions.
7. Quality management is an important concept in strategic planning and a component of
strategy. Explain.
8. a) Explain the extent to which quality is a universal concept.
b) Discuss the responsibilities of the different departments of an organization as far as the
quality function is concerned.
c) Which functions of management must be integrated with the quality function to give
valuable complimentaries.

CASE STUDY
Quality at Nairobi Central Hospital
Nairobi Central Hospital is 60- bed hospital situated in Nairobi central Business district the
Hospital began facing serious competitive pressures as other health facilities started
mushrooming. Top management knew they had to establish and maintain a competitive
advantage against other health care providers. Their strategy was to dramatically improve the
quality of care Nairobi Central delivered to its patients.

Hospital administrators attended a seminar given by a leading quality management consultant.

The administrators decided to use the consultant approach to improve total quality in all aspects
of the hospital’s operation.
The administrators targeted a number of operations for quality improvement accuracy of patient
billing, nursing retention, turnaround time in the emergency department, quality of dietary
service, purchasing procedures and promptness and completeness of medical record entries.
They further decided to create teams of hospital employees as he primary mechanism for the
implementing process improvements.
Required
a) Define quality in the context of the case
b) Discuss the types of costs that may be incurred in the hospital and propose the best approach
to manage quality costs at the hospital.
c) Propose a specific quality improvement plan for the hospital.
 WEEK 3-4
CHAPTER TWO
CUSTOMER SATISFACTION
OBJECTIVES:

 To learn the concepts of customer satisfaction

 The learner should learn various ways of identifying customer satisfaction.
 The learner should be able to describe Strategies to Enhance Customer Satisfaction

INTRODUCTION
One of the most critical quality management concepts is customer satisfaction. Lee Locaca once
said that Chrysler has three rules.” Satisfy the customer, satisfy the customer, satisfy the
customer and satisfy the customer.” For anybody who believes in the quality management
philosophy customers is a golden word because customer satisfaction s a competitive tool for
increasing market share, sustaining log-term profitability and survival.

A customer is a person or a group of persons who receives the output of a process of the system.
Although it is generally understood that a customer is a recipient of the work output, customers
are classified into two; one is the traditionally view, which sees customers as a people outside
the company who buys the company’s products or services; while the current understanding is
that customers are both internal and external to the organizations. Customers internal to the
organization comprises employees who receive products and services within the organization for
the purpose of processing. This perspective sees every employee inside The Company as a
supplier and a customer. External customers are the end user of the product or service or the
ultimate customers.

The Concept of Customer Satisfaction

Satisfaction may be considered as a customers’ evaluate reaction to how particular product

performed when compared to how he or she anticipated that it would perform ( Woodruff and
Gardial 1999). Satisfaction is the customers’ feeling about the value that they received from a
particular product experience. According to Valarie, Zaithamal and Bitner (2005) satisfaction is
the customers’ fulfillment response. It is a judgement that a product or service features, or the
terms, satisfaction is the customers’ evaluation of a product or service in terms of whether that
product or service has met their needs and expectation.

Customer satisfaction has been defined in plethora of ways; for instance, Westbrook and Reilly
(1983) defined customer satisfaction as an emotional response to the experiences provide by and
associated with particular product as or services purchased, retail outlets or even modular
patterns of behavior such as shopping and buyer behavior. Howard and Sheth (1969) defined
customer satisfaction as the buyers’ cognitive state of being adequately or inadequately rewarded
for the sacrifices he has undergone. Curchill and Surprenant (1982) Considered customer
satisfaction as an outcome of purchase in relation to the anticipated consequences. It is about a
customer’s response resulting from an evaluation of the expected performance of the product or
service and its actual performance customers get dissatisfied. The management has a
responsibility to ensure that customers’ expectations are monitored so as to allow the
organization gauge whether they are providing what is actually needed by the customers. In this
way the organization should identify the characteristics or the dimensions of the product or
service which the customers require and ensure that it is provided in a manner expected by the
customers. For example a durable product which does not conform to customer design and
expectation may cause customer dissatisfaction.

The important of customer satisfaction in the quest for quality cannot be underestimated. Studies
have showed dissatisfied customer talk to more people han satisfied customers. Bearden, Ingram
and Lafarge (2004) observed that often dissatisfied customers never make a company. Because
new customers are harder to find, maintaining satisfaction among existing customers should be
paramount.

1.2 Identifying Customer Satisfaction

Identifying customer expectation especially the external customer is more difficult and
challenging, however, a number of different methods may be used as follow:
 Regular customer feedback system
The most ideal method of identifying customer expectation is to allow every single customer to
communicate complaints directly to the organization. Such regular communication can be
achieved by giving address, e-mail, or providing suggestion boxes at strategic and accessible
points in the organization. When using such communication channels, it is important to keep all
documents regarding complaints and send back relies to the person who made the complaint. The
first reply should acknowledge receipt of the complaint by the appropriate department and the
second once the corrective action has been taken. Customer complaints are very vital in
collecting data on customer satisfaction levels. Although about 1.5 percent of customers take
their time to complain to management, the presence of complaints can be seen as an opportunity
to obtain are giving the organization a second chance; hence, the management should receive
complaints with a lot of enthusiasm because it acts as cost free feedback system. Losing
customer complaints means losing valuable information and creating obstacles for improvement.

 Market Research
Organizations carry out occasional market research to understand their customer better. The
research is occasional because it is only done when there is need for more information regarding
customers without studying each and every customer. Instead, a few customers are chosen using
appropriate sampling techniques and a detailed study is conducted on their likes and dislikes. If
possible customers should be interviewed both at the time when they become customers and at
the time of departure or defection so as to understand the reasons for the behaviour.

Market research may entail preparation of a questionnaire that will help understand a wide range
of customer expectations. Before launching the research, it is useful to pretest the questionnaire
to evaluate its efficiency. Once this has been done, a choice has to be made on the method of a
ministering the questionnaire, i.e. e-mail, post, or personal administration by the researchers.
After collecting the information, it is summarized, analyzed and the findings be reported about
customers. Although such information is normally considered confidential, it must be made
available to planners inside the company when they need it.
 New / Lost customers survey
These are useful ways of finding out what attracts customers to the organization and indeed why
they left. While many organizations nowadays conduct exit interviews, the most successful ones
involve management to ensure appropriate access of information and action.

 Focus groups
Customer focus groups are among the popular methods to obtain feedback from customers. It is
used to find out what customers are really thinking. A group of customers is assembled n a
meeting to answer a series of questions. These questions are asked by a skilled moderator, who
probes into the participants’ thoughts, ideas, perceptions, or comments. Meeting is designed to
focus on current, proposed, and future products and services. The people selected to participate
should have the same profile as customers that the organization is trying to attract.

 Customers visit
Making visits to customers’ businesses provides another way to collect information. An
organization can monitor its products and service performance while t is in use by making
impromptu visits to the customers. These visits should involve both senior managers and
operating personnel so they can see first and how the product is performing.

 Frontline personnel
Employee who are in direct contact with the customers may be in better positions to understand
customers expectations. However, organizations need to train their employees to listen
effectively and to make immediate steps to correct customers’ bad experiences. The also need
too have systems in place to capture the information and pass it along to the rest of the company.
Successful companies have institutionalized best practices ad have a culture where all employees
spend significant amount of their time interacting with customers.

 Critical Incident Techniques

This method attempts to identify the issue that delight the customer and those that dissatisfy
them. Critical incidents are events that contribute significantly to perceived quality of the
product or service performance; for instance, one may ask customers to think for an instance
when they felt very pleased and satisfied with the product or services they received and, to
describe why they felt so happy. The other question would be to ask customers to think of a time
when they were unhappy and dissatisfied with the service they received and to describe why they
felt that way.

 Mystery shopper
This method is normally used by several organization wherein mystery shoppers, who may be
managers acting incognito as customers. Apart from managers, external agencies may be
contracted to carry out the assignment. In most cases an agreed scoring systems to rate the
quality of the service or the product in developed.

 Customers related information from other sources

Information can also be gathered from research Institutions outside the company. Such
institution conduct studies on a regular basis about public taste over different products. Although
such information may not give any specific information about the product, when combined with
information collected by the company, it can be a useful guide.

1.3 Measures of customers Satisfaction

Generally speaking, customers satisfaction enhances customer loyalty. Customer loyalty is the
feeling of attachment to or affection for a company’s products or services (Mohanty and Lakhe
2002). A satisfied customer has a higher tendency to be loyal to the company. Hence, customer
loyalty feelings and by extension customer satisfaction in manifested in many forms of customer
behavior. These forms or measures can be grouped into three major categories.

 Intent to purchase
At any time in the customer relationship, it is possible to ask customers about their future
intentions to purchase a given product or service. Although their responses are simply indications
of future behaviour and are not assurances, they play a key role in measuring satisfaction levels.
According to the Technical Assistance Research Program (TARP) over 68% of dissatisfied
customers defect to other providers of products or services. Therefore intent to purchase is a
strong indicator of future behavior.

 Primary Behavior
There are four categories of activities that show actual repurchasing behavior; frequency,
amount, retention and longevity. Although they are important measures of actual behavior, they
only provide a glimpse of overall share and are not most useful as an indication of changes
time. Frequency and amounts of purchase are significantly better measures of loyalty.

 Secondary behavior
Customer referrals, endorsements an spreading the word are extremely important forms of
customer behavior for an organization. Word of mouth is perhaps the most critical factor in
acquiring new customers.

1.4 Customer Satisfaction Model

The Kano Model is perhaps the most widely used model of customers satisfaction. Th Model
describes three levels of customer satisfaction; expected quality, desired quality and excited
quality. The expected quality level represents the eecpted basic attributes which could be rated as
important, but they are totally expected. The attributes define the functionality of the product and
establish the threshold of acceptability. They form the basic requirements that are expected
quality indices can make or break buying decisions. For instances, hotel guests expect certain
things during their visit; they expect the size of the bed to be normal and the towels to b changed
daily. If these basic requirements are not fulfilled the customers become dissatisfied.

The second level represents desired quality which is referred to as one-dimensional attributes’
these are articulated needs or more precisely what customers will say they need. The desired
quality is the level of quality the customer hope to receive – the “wished for” level of
performance ( Valerie, Zaithalm and brinter, 2005). Using the hotel example, customers desire to
be served in the hotel within the shortest time possible, say within 4 minutes. The shorter the
wait, the greater will be satisfaction; hence the better you are at providing the desired features,
the greater the satisfaction.
The third level is the excited quality which is characterized by delighted attraction attributes.
These delighted attraction attributes are unexpected, but if offered, generate delight and perhaps
even delight to he customer. Customers are not in expectations of these features of the product or
service and when provided pleasantly surprise the customer. For instance receiving a glass of
juice while waiting to check into the hotel may be a pleasant surprise. In most cases this level
represents unstated or unspoken requirements and hence the organization should employ a
proactive strategy to be able to identify what may excite the customers.

1.5 Determinants of Customer Satisfaction

According to Valerie, Zaithaml and Bitner (2005), customer satisfaction is influenced by a host
of issues as follows:-
 Product and service features
Customer satisfaction with a product or service is influenced by the customers’ perception of the
product or service features. A bank for instance, has important features such as speed, courtesy
of staff, appropriateness of technology and so forth. It is important to know he key features that
determine quality.

 Customer emotions
Customer emotions can also influence their perception of a particular product or service for
instance, when a customer is in bad mood, the negative feelings may carry over into how the
customer respond to products or services which may cause the customer to overreact or respond
negatively to a small problem. Positive emotions such as happiness, pleasure, elation and warm-
heatedness enhance customer satisfaction, while negative emotions such as sadness, sorrow,
and anger leads to customer dissatisfaction.

 Perception of equality and fairness

Customer satisfaction is influenced by perceptions of equity and fairness, for instance, customers
ask themselves whether they have been treated fairly compared with other customers, whether
other customers were given better treatment, whether prices were equal to others, among other
questions.
 Other customers, family members, friends and co-workers
Customer satisfaction is also influenced by other people, for example satisfaction with a
particular hotel is influenced by the reactions and expressions of individual family members of
friend including co-workers. What family members, friends and co-workers express in terms of
satisfaction or dissatisfaction with the hotel service will be influenced by stories that are narrated
among the group and even selective memories of events. Therefore customer satisfaction is
influenced by individuals personal experiences as well as by what others say about it.

Basically, customer satisfaction is determined by the interaction of customer perceptions and

customer expectation. The higher the match between perception and expectation, the higher the
satisfaction levels, however, any mismatch results in dissatisfaction. Customer expectation are
beliefs about a product or service that function as benchmarks or more precisely, the reference
points against which performance is judged. These standards help customers to evaluate their
perception. The level of expectation can vary widely depending on the reference point the
customer holds. Gonroos (2000) identified thre types of expectations that customers can hold.

 Fuzzy Expectations;- These expectations exist when customers expect a roduct or service
provider to solve a problem, but do not have a clear understanding of what should be
done.
 Explicit Expectations:- These are expectations which are clear in customers’ minds in
advance , which can either be realistic or unrealistic expectations.

 Implicit Expectations: Refers to elements of a product or service which are obvious to the
customers that do not consciously think about them but take them for granted.
Because expectations are play a critical role in customer evaluations of their products and
services, organizations need to understand the factors that influence them. As shown in the
model below, the most important factor is customer needs and values. Customer needs and
values fall into different categories, including physical, social, psychological and functional, for
instance, a customer may need say delivery of insurance cover to their premises if they do not
have adequate staff. Similarly, marketing communication such as advertising, direct mail, sales
promotion, internet communications and sales campaigns shape the expectations of customers
because it promises customers the kind of a product or service they should expect. Customer
experiences with other competitors, including previous encounters with the organization are
most likely to influence their expectation. Prior encounters make customers not only clear
about what they want, but sharper in terms of assessing the product or service. The word of
mouth and the image of the organization also sets standards for what the customers expect for
instance, a five – start hotel raises the customer expectations. The customer may complain if the
waiting time is say 10 minutes, however, the same customer would not raise a complain if the
waiting time is even more than 10 minutes in an ordinary hotel.

Customer perception on the other hand, is influenced by a host factors which includes employee
product or service delivery (.e is the receptionist courteous, helpful and knowledgeable? Does
the employee handle the inquires fairly and efficiently? Does say a doctor treat the patient
humanely?) Similarly, physical facilities create a perception on a customers’ mind, for instance,
is the waiting area clean? Are the service delivery systems fast? The pricing of the
organizational products may also create apperception, the higher the price, the more ideal
expectation become, in fact cheap products are perceived to be of poor quality for example,
expectation of a customer in a first class flight will be at different level as that in an economy
class, and lastly, customers emotions, such as anger and depression guilt or happiness, delight
and hopefulness, affect the cognitive perception of the product or service. Studies in consumer
behavior of Knowles, grove and Pickett (1999) indicated that customers’ mood has an effect on
their evaluations and behavioural responses to, among other things, product or service delivery.
 Therefore the model – figure 3.2 illustrates the interaction of expectation and perception and
underscore the fact that customers always engage in the matching process. A match between
perception and expectation enhances the customer satisfaction which in turn results in repeat
purchase and product or service quality. On the other hand , mismatch causes dissatisfaction
which result in customer complaints and in some cases brand switching.

Repeat Purchase Satisfaction Product / Service Loyalty

Customer Needs
and values
Employee
Service Match
Delivery Marketing
communication

Product/
Customer Service/ Customer Previous customer
Physical Perception Expectation encounters
facilities Delivery

Customer experience
Pricing with competition
Mismatch

Organizational
Customer image
Emotions
Complaint Dissatisfaction
Word of mouth

Figure 3.2 Expectation – perception Matching Model

1.6 Strategies to Enhance Customer Satisfaction

The strategies to enhance customer satisfaction include
1. Measures and monitor satisfaction consciously. Such measurements are needed to track
trends, diagnose problems and to link to other customer focused strategies.
2. Establish and maintain contact wit customers and develop effective yardsticks to measure
progress at all levels and undertake customer surveys to enable effective follow-up with
customers.
3. Focus on analyze processes for successful customer orientation .
4. Promote a culture of empowerment, leadership and customer care. A customer satisfaction
strategy requires that the Company’s customer focus and quality values be integrated into
day-to-day leadership and management to the extent that it becomes part of the
organizational operations.

5. Develop a commitment of trust, confidence and commitment to customers. The success of a

customer satisfaction plan requires an explicit and real commitment on the apart of the
organization to its customers. To promote trust and confidence in its products and services,
the Company must show commitment to deal with customers concerns. Commitment to
customers involves not only examining their current needs and expectations, but also
anticipating expectation.

6. Design the product or service delivery system to meet customers needs. This starts from the
definition of the product / service concept culminates in planning the characteristics of the
product / service to b supplied. Designing the characteristics of the production delivery
system starts from the customer’s needs and expectations. This requires eliciting both he
implicit and explicit customer requirements and expectations have been elicited customer
priorities must be highlighted which help in developing and standardizing the product
service.
7. Provide education and training for employees. Practices regarding employees education and
training should be designed to ensure that these activities provided the knowledge and skills
employees nee to achieve customer satisfaction. Content of education and training may
include quality awareness, leadership, problem solving meeting customers requirements, and
processes analyzing among others. Employees need appropriate coping and problem solving
skills to handle difficult customers as well as their own feelings during such encounters.

8. Rewards and recognition are the fundamental requirements for motivating people. With the
appreciation of the importance of customer satisfaction, the management reward and
encourage behavior based on personal initiative and on enhancing customer satisfaction,
rather than on hierarchy.
9. Honor the promises made to the customers. Promising exactly what will ultimately be
delivered would seem logical and the most appropriate strategy to manage customer
satisfaction, hence marketers need to be careful when designing marketing campaigns and
activities, so that they avoid making promises that are difficult to honor. Indeed, it may be
wiser to try to keep promises on a lower level than actual customer experiences because it
offers an opportunity for the organization to provide customers unexpected surprises it is
better to under – promise and over-deliver.

Sample Examination Questions

1. a) Describe the importance of customer relationship on customer loyalty
b) Identify the various steps in customer relationship management
2. Discuss the conditions that would cause customers to be lost.
3. a) Explain some of the solutions to conflicts between employee interests and customer
service.
b) Outline some of the strategies for building a loyal relationship with a customer.
4. The main issue in building customer satisfaction is to acquire satisfied customers the
indicators of customer satisfaction
5. Explain the factors that influence customer perception of quality. Discuss in the context
of an industry of your choice.

Case study
Hairdressers’ Saloon
Most hairdressers that are located in the Nairobi’s busy streets have employed a good
relationship management strategy. They are able to generate extraordinary levels of loyalty
from their customers. This loyalty transcends price differences and the convenience of their
location. Many women living in Nairobi will go to their favorite hairdresser because of the level
of Customer – relationship Management. Ven when they move from one estate to another or
from one job to another they will still leave other establishments to g to their favorite ones.
Those who visit the saloon, go there because their favourite member of staff will do their hair,
even when there is a more trained person. Most saloons that have a rate of loyalty from its
customers can charge increasingly more for their services.

In most cases however, such loyalty are expensive to earn from the customer. They have a
unique ability that will constantly dwell on the style and the color of the service being provided.
The key thing however, is to manage every aspect of the relationship with customer in such a
way that the customer is always satisfied.

Some o the obvious levels of satisfaction are that the saloon is always clean, stylish and
attractive. Attention to details ensures that first impression becomes lasting impressions. A less
successful saloon can be understood by looking at the business from the customer’s perspective.
Required
a) Identify the features of the relationship of customer care
b) Describe the ways staying close to customers
c) Discuss the important steps that would ensure a successful customer service
d) Explain some of the customer dynamics in a hairdresser saloon business
 WEEK 5-7
CHAPTER THREE

TOTAL QUALITY MANAGEMENT

Objective of the study:
 To learn the concepts of TQM A and definition
 To learn principles of TQM
 To identify and describe TQM MODELS AND FRAMEWORK
 To know the steps necessary to make TQM systems work in an organization.

Introduction
Total quality management (TQM) became popular sometime in the 1980s and was widely
adopted both in manufacturing and service sector. TQM is a consideration of the views of the
quality groups recognizing that poor quality is expensive in terms of cash and market share and
that good quality provides a tool for competition. TQM first took its roots in improving quality
of physical products, however, subsequent developments have emphasized on organizational
transformations – specifically in bringing about a cultural change, in improving employee morale
and in facilitating an empowering working climate for attaining excellent human performance.
TQM focuses on the integration and coordination of all activities in a work process and aims at
continuous improvement in quality.

Definition of TQM
TQM has been defined n a variety of ways by different authors. Mohanty and Lakhe (2002)
defined TQM as a quest for excellence, creating the right attitude and controls to make
prevention of defects possible and optimize customer satisfaction by increased efficiency and
effectiveness. Oakland (1989) defines TQM as an approach to improving the effectiveness and
flexibility of a business as a whole. It is essentially a way of organizing and involving the whole
organization, every department, every activity, and every single person at every level. Zaire and
Simintas (1991) defines TQM a the combination of socio-technical process towards doing the
right things (externally) everything right 9internally) first time and all the time, with economic
viability considered as each stage of each process.
Pfau (1989) views TQM as an approach for continuously improving the quality of gods and
services delivered through the participation of all levels and functions of the organizations. Tobin
(1990) also views TQM as the totally integrated efforts for gaining competitive advantage by
continuously improving every fact of organizational culture. Kiritharan (2004) defines TQM as a
commitment to continuous improvement of quality. It can be viewed as process, wherein the top
management along with other people in the organization works to improve the product and
service quality including the work environment at every stage with the aim enhancing
customer and employee satisfaction.

Therefore, TQM is” total because it involves everyone, not just top management but
encompasses all. It is often termed as a journey, not a destination (Burati and Oswald, 1993); it
requires a complete turnaround in corporate culture and management approach (Quazi and
Padibjo, 1997). According to Mahanty and Lakhe (2002), TQM is a pragmatic long term system
approach initiated and driven by the top management to bring about a total culture change,
interlink and integrate every function, process and every activity of an organization through
cross-functional involvement and participation of people to meet the dynamic needs of customers
and to create a loyal but at the same time a diversified customer base. Stvenson (1999) refers
TQM as a quest for quality that involves everyone in an organization. He cites three
philosophies in TQM approach; first, is the never –ending push to improve, which is referred to
as continuous improvement, secondary, is the involvement of every one in the organization and
thirdly is the goal of customer satisfaction;; which means meeting or exceeding customer
expectations. TQM suggest that for an organization to remain competitive the customer
requirements should be met at lowest cost possible.

Principles of TQM
There are several principles that guide the success of a TQM program as follows:

1. Customer Orientation
The goal of satisfaction of customers is fundamental to TQM and is express by the
organization’s attempt to design and deliver products and services that fulfill the customer’s
needs. Lee Iacocca once advertised that Chrsitler has three rules;” satisfy the customer satisfy the
customer, and satisfy the customer” for anybody who believes in quality management
philosophy, customer is a golden word. The customer is the king in the market place. According
to Drucker (2002) it is the customer who determines what business is. The customer is the
foundation of business and keeps it in existence. The customer expects value at reasonable
price. Mohanty and Lakhe (2002) argue that everyone in the organization should appreciate the
fact that customers are:
 The most important people in the business
 Not an interruption to work but are the purpose of it.
 Not dependent on the organization but the organization depends on them.
 Doing a favor when they seek business
 People who come with their needs and the job of the organization is to satisfy them.
 Deserve the most courteous and attentive treatment.
 Life blood of the business.

TQM focuses every aspect of the organizations activity towards the customer needs. In order for
top management to ensure that organization’s activities are carried out to meet customer
requirements, they should consider the needs and expectations of their clients. If possible they
may even include their customers during their planning stages by conducting customer
feedbacks, analyzing past complaints or studying their satisfaction levels. The new clause for
customer related processes under ISO 9001:2000 requires the organization to identify and
document requirements, and to clarify with the customer the requirements it is to fulfill as part of
the contract. Management therefore needs o establish performance measurement instruments that
would reveal the level of customer satisfaction, and having known that an organization should be
in a position to respond appropriately to customer needs. A very useful fishbone model was
developed by Roberts (1999) detailing the activities of becoming customers oriented as follows;-
 Management commitment Employee
and Action employment

Training Rewards
Recognition

Product or
Service
Specialization

Benchmarks and
Standards
Resources / Technology
Customer research

2. Leadership
Top management commitment is very important for the successful implementation of TQM in an
organization. According to Hackman and wagenman (1995) quality is viewed as ultimately and
inescapably the responsibility to top management. Because top management create the
organizations systems that determine how products and services are produced, the quality
improvement process must begin with managements’ own commitment to TQM. Pheny and Teo
92003) also observed that top management must communicate to TQM to the entire
organization to create awareness, interest, desire and action. They should provide the vision of
where the organization is going with its quality efforts, and create cultural change within the
organization. Mohanty and Lakhe (2002) noted that top management should demonstrate
commitment to TQM by:
 Becoming the first set of recipients of training in the philosophies and methods of TQM.
 Imparting training to others
 Attending regularly the TQM meetings and seminars.
 Establishing customer satisfaction as their basic policy and determining the long term goals.
 Establishing TQM vision for the future and personally communicating.
 Generating enthusiasm for TQM activities and enforcing code of conduct.
 Providing opportunities to the subordinates to grow in their area of work.
 Delegating authority to subordinates to make them more responsible.
 Incorporating TQM programs in the organization’s overall strategy.
 Recognize employees for quality achievements
 Demonstrating by both words and actions that quality is a number one operating priority of
the organization.

3.Employee Involvement
Giving employees the responsibility for improvements and the authority to make change
accomplish them provides a strong motivation for employees. This puts decision making into the
hands of those who are closest to the job and have considerable insights into problems and
solutions.

Mohanty and Lakhe (20020 argues that the people who know the most about what is right or
wrong with system or process are those who do it. A key element in employee involvement is
that each worker assumes the responsibility of inspecting quality of his own work. This is a
practice commonly referred to as” Quality at source”, eliminates inspection as a method of
quality control.

Employees should also be encouraged to communicate upwards to top management. As

employees are organization’s human resources, they should be involved in top management
resources management procedures. Chadnler and Mc Evoy (2000) pointed out that because
employees are the prime source of human resources, their education, skills and experience
needed for a job need to be assessed and matched with the job requirements. Similarly, there is
need for the establishment of quality improvement team and the use of employee suggestion
system and surveys to obtain continous internal customer feedback. Atmospheres must be
created where employees feel they are encouraged to participate.

4.Team Working
The purpose of teamwork is to have all people involved in a process working to achieve common
goals. The use of team for problems solving and to achieve consensus takes advantage of group
synergy, gets people involved, and promotes a spirit of cooperation and shared values among
employees. The key to developing team work is establishing a common goal for all team
members.

Team work practices include identifying the needs of all groups involved in the decision making
trying to find solutions that will benefit everyone involved, and sharing responsibility and credit.
Management should design programs geared towards promoting team culture as such as training
to help people work better in teams.

Training components should include development of improved communication, conflict

resolution, coordination and team building. Team training helps to enhance self-esteem of the
individuals and also provides the tangible evidence about commitment of management to the
quality.

5.Continuous Improvement
TQM is not an accident but rather a dynamic process which requires continuous improvement.
This philosophy seeks to improve all factors related to the process of converting inputs into
output on an ongoing process. Under continuous improvement, the old adage ‘if it ain’t broke,
don’t fix it’ gets transformed into ‘just because it isn’t broke doesn’t mean it can’t be improved’.
The long-term heath of an organization depends on treating quality improvement as a never-
ending quest. According to Deming (1986) opportunities to develop better methods for carrying
out work always exist, and a commitment to continuous improvement ensures that people will
never stop learning about the work they do. Continuous improvement efforts may either be
incremental or breakthrough improvements which can be achieved by use of improvement tools
and techniques such as organizational learning, business process re-engineering, benchmarking,
si-sigma techniques, among others.

Continuous improvement for a quality management system is a mandatory requirement of ISO

90001:2000. Planning for continuous improvement must identify data to be collected, how it will
be analyzed, who will decide on outcomes of processes and how continuous improvement will
be implemented. ISO 9000:2000 provides two continuous improvement strategies and is
concerned with identification of non-conformities and how they can be avoided in future. The
second strategy is prevention and requires the anticipation of circumstances that cause non-
conformities rather than waiting for it to happen before responding.
Top management has to ensure that they implement systems that seek, overtime to continually
improve the overall performance of the organization, similarly, education and training reinforces
this role for everyone in the organization. The various steps that management need to adopt in
order to continually improve the process include the following as shown in figure

Select a process

Document the Process

Document

Seek ways to
improve it

Evaluate

Implement the improved Design an improved

process process Process
6.Process Improvement

Process is defined by Davenport and Short (1990) as a set of logically related activities
performed to achieve as set of defined business outcomes. For example, in a bank, processing a
customer’s cheque may involve the signature of the official for authorization of payment, a
cashier, a computer input operator and a filling clerk. Each of these individuals may work in
different departments within the bank to facilitate payment to the cheque. Process improvement
is a critical activity in quality management. The starting point o process improvement is a
process charting which helps to provide an overall picture of a connected set of activities from
the start to the end. It begins with collection of information about the process; identifying each
step in the process and analyzing each step in the process. For each step in the process, determine
the inputs and outputs of the process, he people involved and all decisions that are made. It is
important also to document such measures such as time, cost, space used, waste, employees’

Morale and turnover, accidents, safety and hazards, working conditions, revenue /profit customer
satisfaction, etc. Once a process has been identified, analysis is done. Of particular concern is the
recognition of error or failure in the process. The purpose of analyzing the process is to eliminate
unnecessary or irrelevant activities and to identify the triggers’ which start other processes. The
following questions need to be addressed in order to analyze the process:
 Is the flow logical?
 Are any steps or activities missing?
 Are there any duplication?

For each step, the following questions can be raised:

 Is the step necessary? What happens if it is eliminated
 Does the step add value
 Does any waste occur at any of the steps?
 Could the time be shortened?
 Could the cost to perform the step be reduced?
 Could some steps be combined?
Using the results of the analysis, redesign the process and document the improvement efforts
needed to enhance the potential of the process. Process development requires a range of
techniques which can be used to identify alternatives to the established process and ways of
overcoming quality problems. It relies on creative thinking about the situations, which in turn
requires an open mind. A lateral approach is useful especially because it attempts to find fresh
angles from which to view the process. Other tools that can be used for process improvement
include:

 Brainstorming: Brainstorming s a technique in which a group of people share thoughts

and ideas on problem in a relaxed atmosphere that encourage unrestrained collective
thinking (Stephenson, 1999). Brainstorming sessions can be very useful at this stage
because e it involves groups of individuals normally between 4 and 12 to general ideas
for problem solving. The main aim of brainstorming session is to generate ideas on
problem identification, finding the causes of the problems, providing solutions and ways
to improvement the sessions. An effective brainstorming exercise welcome wild ideals
and no criticism or evaluation occurs during brainstorming sessions, similarly, no single
of few members are allowed to dominate the brainstorming session.
 Quality Circles: Quality circles comprise a number of workers who get together
periodically and voluntarily during the normal working time under the leadership of their
supervisor to discuss ways of improving the organizations products, service and
processes. A quality circle usually select a project to work on through discussions within
the circle members. The leaders of the circle May then advice the management on the
project selected and if no objections are raised, then the circle proceeded with the work.
Sometimes the quality circle may invite exerts or consultants to assist them in say
diagnosing the problems and in generating eh solutions.
 Interviewing: Interviewing is one other method that can be used nto collect information
about a problem and use t to identify the problem. Interviewing may be carried out both
internally one employees ro externally with the customers and competitors. Because
customer satisfaction is the ultimate goal, interviewing the customers is very critical in
any quality improvement process.
  Benchmarking:- This s an approach that helps to compare the organizational
performance with he best performing companies. It measures an organizations’
performance on key customer requirement against the best in the industry. The purpose of
benchmarking is to establish a standard against which performance is judged.
 The 5w2H Approach:- The abbreviation stands for (5W; what, where, why, when, who
and 2’H’, how and how much). This approach involves asking the above questions
about the current process. These questions provide insights about why the current process
is not working well as it is expected, and also providing the potential ways to improve it.
Therefore the new process developed should aim at reducing time, cost, space, waste,
employee turnover, working conditions, quality, and customer satisfaction.

TQM MODELS AND FRAMEWORK

Several models and frameworks have been developed to define TQM. The following are
some of the models developed.

 The five Pillars of TQM

Creech (1994) identified the five pillars of TQM as shown in figure 6.2, which argued
provide the strong foundation upon which the system must rest. He proposed that a holistic,
humanistic management system is required that blends these new principles into every aspect
of the organization. The five pillars identified included: the organization, the product, the
process, leadership and commitment. He observed that the product is the focal point for
organizations’ purpose and achievement. Quality n the product is impossible without quality
in the process; similarly, quality in the process is impossible without the right organization .
The right organization is meaningless without proper leadership without adequate
commitment is sterile; hence a strong bottom- up commitment is the support pillar for all the
rest. Therefore, each pillar depends upon the other four, and If one is weak all are. This
perspective provides a total approach to put quality in every aspects of management.
 Process
Product

Organization

Leadership Commitment

The five Pillars of TQM- Source Creech (1994)

 The Oakland’s Model of TQM

The Oakland (1989) model of TQM as illustrated in figure 6.3 presented TQM to comprise
the following distinct components; management commitment, customer – supplier chain,
qualify system, statistical process control tools and techniques, and teamwork.

The management commitment is the most important factor in ensuring the successful
implementation of TQM. Top managers are seen to be engineers of culture hat respects the
individual and fosters creativity. In this capacity, their most important tasks are to provide
employees with an understanding of why quality s important, help them conceive of quality
in strategic terms, set achievable quality standards and provide training on quality;
customer supplier chain is at center of the pyramids. It refers process ownership, process
management and process improvement

propelled throughout the chain. Similarly, the model identifies the good quality management
system, statistical process control and teamwork are essential ingredients required to meet the
customers needs.
 Teams

Communication
Culture
Process
Customer
Supplier

Systems Tools

Commitment

The Oakland Model of TQm – Source: Oakland (1989)

The Four PS and Three Cs – A new Model for Quality Management

Oakland (2004) developed a new model compromising four Ps and three Cs for quality
management. The four Ps include; planning, performance, process and people, while the
three Cs include; culture, communication and commitment. According to Oakland (2004) the
“four Ps” form the basis of the simple model for quality management as shown in figure 6.4
and provide the hard management necessities to take organizations successfully into twenty-
five century. He argued that performance is achieved using a business excellent approach;
and by planning the involvement of people in the improvement to the processes.

Planning entails the development and employment of policies and strategies; the setting up of
a partnership and resources; and designing in quality. Performance involves establishment of
a performance measurement yardstick for the organization; carrying out regular audits and
reviews and benchmarking the organization with others . a process entails gaining an
understanding on the activities and events in the organization, management systems, quality
management system and continuous improvement efforts. People entails the management of
human resources; culture management; teamwork; management of communication systems
and network; innovation training an learning.
 The ‘three cs’ on the other hand includes; culture, communication and commitment. Oakland
(2004) agues that although the ‘ three Cs’ are derived from the early quality management
frameworks as shown in figure 6.4, there is need to integrate them into the new model to
move organization successfully forward. He further contends that to ensure successful
implementation of TQM, effective leadership and commitment is essential.

Planning
Culture

Communication
Performance

Process
People Commitment

The four Ps and Three Cs - New Model for Quality Management – Source: Oakland (2004

An Integrated Model of TQM

Sohal, Tay and with (1989) proposed an integrated model of TQM. The model proposed that
continuous improvement in quality is achieved through an integrated approach of managing
quality via action plans in different operation of the business cycle. The five critical elements
identified in the model are: customer focus, management commitment, total participation,
statistical quality control and a systematic problem solving process. The model emphases that
involving people at the grass root level. Improving their morale, else the belongingness and
responsibly using statistical techniques to collect and analyze data and adopting PDCA cycle and
the pursuit of continuous quality improvement helps significantly to deliver satisfying product or
service to customers. The authors presented the model in the following diagram figure 6.5:

QUALITY
IMPROVEMENT
TEAMS

STATISTICAL TOM MISSION

TOTAL
QUALITY CONTINOUS
PARTICIPATION
CONTROL QUALITY
IMPROVEMENT

SYSTEMATIC
PROBLEM CUSTOMER
SOLVING
FOCUS FOCUS

Integrated Model of TQM – Sohal, Tay and Wirth (1989)

The building Blocks of TQM

Zaire (1991) proposed the Building Blocks of TQM model which looks at TQM at three levels:
the foundation level, the pillars levels, and the top level. The foundation level entails continuous
improvement, added value management and employee involvement. The pillar level constitutes
statistical process control, statistical quality control, user suppliers chain, management control
systems, process flexibility and workplace design. The top level of the model comprises quality
planning, leadership and vision for world class competitiveness.

The model as show in figure 6.6 argues that TQM depends on these building blocks with
together determines the strength and safety of h organization. Weakness in one area will affect
 TQM process as whole; therefore the model proposes that organization need to focus their
implementation strategy on every aspect o business process.

THE TOP
- QUALITY PLANNING
- LEADERSHIP
- VISION FOR WORLDCLASS
- COMETITIVENESS
USER SUPPLIER

MANAGEMENT

WORLDPLACE
FLEXIBILITYT
CONTROL

PROCESS
SYSTEM

DESIGN
CHAIN
SPC,
SQC

THE
PILLARS

- CONTINOUS IMPROVEMENT
FOUNDATION - ADDED VALUE MANAGEMENT ACTIVITY
- EMPLOYEE INVOLVEMENT

The building blocks of TQM – Source: Zaire (1991)

TQM is not just a technique or a slogan or a jargon. It is an umbrella of varied quality initiatives. It is
an all encompassing philosophy that bnds together the use of quality improving activities. Rightly
approached, TQM should be a watch word rather than a catch word. TQM has moved up to strategic
level because the search of excellence and quality improvement philosophies occupy he limelight in
every organization; be they government institutions, educational institutions, hospitals, professional
associations, among others.

THE TQM APPROACH

Studies of companies that have successfully put TQM programs into action have suggested the
following 10 steps necessary to make TQM system work.
1. Building Organization Commitment to Quality;- TQM will do very little to improve performance
of the organization unless all employees embrace it, and often requires a change in the
organizational culture. To engineer a cultural change, there is need to educate the entire workforce,
from top management to operational management, abut the importance and operation of TQM.
Such training may require outside consultants to help train the staff.
2. Focus on the customer:- TQM practitioners view a focus on the customer as the starting point.
TQM philosophy is premised on the belief that the customer, not managers, defines what quality
is. The challenges therefore lies in identifying what customers want: identify what the organization
actually provide to the customer, identifying he gap that exist between what customers want and
what they actually get and formulating a plan for closing the quality gap.
3. Find Ways to Measure Quality:- It is important in any TQM program to create a measuring
system that managers can constantly use in evaluating quality and keep in guiding improvement in
the system. Devising appropriate measures is relatively easy in manufacturing organizations;
however, it is difficult in service organization where output s less tangible. This not withstanding,
managers must identify what quality means from a customer’s perspective and divers some
measure that can be used.
4. Set Goals and Create Incentives:- Once a quality measure has been devised, managers need to set
goals and create an incentive programmes to help stimulate the achievement of the goals. Once
way of creating incentives to achieve goals is to link rewards such as bonus pay, promotions,
among others to the goals.
5. Involvement of Employee: employee involvement is very critical in the achievement of TQM
goals. The management should establish a workforce for involving employees in the continuous
improvement efforts. The management should also consider formation f teams such as quality
circles who meet regularly to discuss way to improve quality. Deming argues that managers who
are committed to quality must be open to bd news, because bad news is a gold mine of
information.
6. Identify Defects and Trace them to their Source:- TQM provides the road for managers to
identify defects in the work process, trace those defects back to their sources, find out why they
occurred, and make correction so that they do not occur gain. Deming advocates the use of
statistical procedures to identify variation in quality of goods and services.
7. Introduce Just-In-Time Systems (JIT): Just in-Time system is a system in which part or supplies
arrive when needed, no t before. Under JIT system parts or supplies enter an organization’s
production system immediately, they are not warehoused for months before use. This means that
defective input can be quickly spotted, and hence helps management to trace the problem to
supply source and fix it even before defective parts are produced.
8. Work Closely with Suppliers:- Successful programs are built through the dedication of and
combined efforts of everyone in the organization. A major cause of poor quality output is poor
quality input. To reduce defects, management needs to work closely with supplirs to improve the
quality of their supplies. Similarly, management needs to reduce the number of their supplier; for
instance, Xerox reduced the number of suppliers from a whooping 5,000 to a mere 325. This
helped in providing an opportunity to develop cooperative relationship with remaining supplies
and improved their interaction.
9. Design for Ease of Manufacture and Use:- The more steps that are required to assemble a
product, the more opportunities there are for making mistakes, hence fewer parts and making
assembling easier provides an avenue for reduced defects. Design a product or service hat will
meet or exceed customers’ needs. Make it easy to use and produce similarly, design a production
process that facilitates ding the job right the first time. The design should strive to make the
organizational processes a “ mistake-proof”
10. Breakdown barriers Between Organizations functions:- Successful implementation of a TQM
requires organization-wide commitment from managers to quality and substantial cooperation
between the different functions of an organization. For instance engineering managers have to
operate with marketing managers and T & D managers so that customers’ need can be identified
and engineered into a product or service. On the other hand, human resource managers have a
cooperate with all other functions the company in order to develop suitable training programs for
the organization.

TEN MANTRAS OF TQM

 Quality is a never ending accident, it s always the result of untiring and intelligent effort
there has to be the will to produce a quality product.
 Quality is like prayer to God, which never comes out without hardwork and devotion.
 Quality is everybody’s business
 Quality begins with cleanliness of the workplace.
 Tae care of quality, quantity will take care of itself.
 Make it right first time and all times.
 Quality is achieved through teamwork
 Documents are dependable but not the memory
 Quality begins and ends with education
 Quality is the attribute that a customer use s to evaluate products or services

BENEFITS OF TQM
More than 50 percent of the published assessments of TQM describe what happened when the
TQM program was installed in one particular part of the organization. The outcomes most
frequently reported include:-
(i) Better performance in meeting customer requirement.
(ii) Improved organizational performance capability
(iii) Greater knowledge and work satisfaction on the part of the organization’s members.
(iv) Decreased time needed to complete a process, for instance, deceased assembly line
time (McDoonnel, 1992).
(v) Improvements in error rate i.e more accurate invoices (tereso,1990).
(vi) Dollar savings from process efficiencies, for example \, reduced turnaround time
resulting in dollar savings (Koska, 1990).

CRITICISM OF TQM
1. It creates a cumbersome procedure of bureaucracy of councils. Committees and
documentation relating to quality.
2. It relies heavily on quality experts, hence delegates most of the decisions.
3. TQM changes may be so ambitious and involves such fundamental alterations of the social
systems that, for all their potential merit, the organization cannot accommodate.
4. TQM changes may be more window-dressing than real, as is a program that exhorts people to
later their behaviour but that requires managers to do little other than issue the exhortation.

Sample Examination Questions

1. Highlight and explain the aspects of leadership which are ey to successful total quality (TQ)
approach?
2. Explain the causes of TQM program failure in an organization.
3. Among the philosophies or principles that govern Total Quality Management as a practice is
the principle of process approach to management.
a) Outline the benefits that an organization derives from adopting the principle of process
approach.
b) Explain how the principles of progress approach are practiced in a TQM organization.

4. Using organization you are familiar with, present a case for how the tQM model by Oakland
may be applied.

Case Study
Plugged into the Quality Circuit
In 1990 Southern Electricity was privatized. It supplies electricity to more than 2.5 million
customers. It has about 8,200 employees and annual turnover of a round kshs 200 million. As a
means of improving the performance of the business, Southern electricity has introduced a
quality control system.
Southern electricity managing director, Henry Njoroge, has been pursing the ‘Quest for Quality
as he calls it, with a great deal of commitment and enthusiasm. He says, satisfied customer,
means a satisfactory profitable business’ H firmly rejects the view that quality is expensive. ‘ in
our view, quality is about getting it right first time, identifying what the customers wants and
then making sure the customer gets it. Quality productivity and efficiency by a much more
acceptable name.

Southern electricity quality programme began in 1985. As part of effort to become the most
successful of the then area electricity boards, the business was reorganized into six new
divisions. Each division was asked to come up with proposals for overcoming problems like staff
attitudes and image. A plan emerged for team building and team briefing which started in
February, 1987.

By the summer of 1990, Njoroge was convinced that improving the service to customers, both
internal and external was the next challenge. He invited the briefing teams in the six divisions to
name the two or three things ‘that drive our customer crazy’. In relation to the response which
was overwhelming, h e appointed a ‘ quality manager’ adopted a quality improvement
programme and sought registration with marketing quality Assurance (MQA). MQA are an
independent UK body which assess and designate compliance with BS 5750- Type quality
standard for marketing, sales and customers service activities. He believed that the staff should
own the quality improvement programme’ rather than have it imposed upon them.

MQA conducted an initial assessment of Southern’s electricity system and procedures. A 48-
page quality manual was written, explaining the master plan. It aimed to ensure that all
Southern’s electronics employees worked together to provide a quality service which was
profitable and satisfies customers. Employees were encouraged to join or set up committees
called – Quality Improvement Groups (QIGs) - to tackle problem affecting quality. The plan was
communicated to all staff through wall posters, presentations, training riders and articles in the
staff newspaper which was sent to all staff homes.

Required
a) How might Southern Electricity evaluate the success of its quality programme?
b) Identify elements of TQM that are found in Njoroge’s approach to quality control.
c) Explain why Henry Njoroge reject the view that ‘ quality is expensive’
 A SAMPLE OF CAT II

1.Among the philosophies or principles that govern Total Quality Management as a practice is
the principle of process approach to management.
a) Outline the benefits that an organization derives from adopting the principle of
process approach. (6mks)
b) Explain how the principles of progress approach are practiced in a TQM organization.
(6mks)
2.
a) Explain the extent to which quality is a universal concept. (6mks)
b) Discuss the responsibilities of the different departments of an organization as far as the
quality function is concerned. (6mks)
c) Which functions of management must be integrated with the quality function to give
valuable complimentaries. (6mks)
 WEEK 8-9
CHAPTER FOUR
BENCHMARKING
Objective of the study:
 To learn the concepts of Benchmarking and definition
 To learn principles of Benchmarking.
 To identify and describe Types of Benchmarking
 To identify and describe the Benchmarking Process
.

INTRODUCTION TO BENCHMARKING
The history of benchmarking goes back to late 1970s and like other quality fads, has its origin in
manufacturing. The Xerox Corporation is credited to have been the first to use the techniques in
a systematic manner. Initially, it involved and in-depth studies of what competitors were doing
as well as the reverse engineering of competitors products and technology . this literally
involved taking things apart and trying to learn how they were made. Through such processes
companies learnt more about themselves and about the best practices of their competitors.
Soon the practice went beyond manufacturing to service industry and today, it has become a
mainstream part of the organizational strategy.

Definition
A benchmarking is a reference or measurement standard against which to measure present
performance. Benchmarking is the process of measuring an organization’s performance on key
customer requirements against the best in eh industry. According to Oakland (2000)
benchmarking is the continues process of measuring products, services and processes against
those of industry leaders or the toughest competitors. A similar definition was given by
Spendolini (1991) that benchmarking is a continuous, systematic process for evaluating the
products, services and work processes of organizations that are recognized as representing best
practices for the purpose of organizational improvement. It is the continuous activity of
identifying understanding and adapting best practice and process that will lead to superior
performance.

Benchmarking measures an organization’s product, service an processes, to establish targets,

priorities and improvements, leading to competitive advantage and or loss reductions. It involves
analysis of the bet product and services available in a particular market place, or comparing best
practices across industry sectors.

In manufacturing for example, benchmarking is a powerful tool in new product development

because it helps in evaluating the new product against that of the industry leader. It may be taken
a stage further so that not only be product, but also the systems used to produce the product are
compared. The essence of benchmarking is about comparing the performance to identify how
they achieve their results. Benchmarking serves multiple functions consistent with TQM
philosophy; determining what customers can expect from competition, learning alternative work
processes, and in some cases, guiding the establishment of quality improvement goals.

Benchmarking is about finding out who is best and seeking to better it. It is about knowing
yourself and really knowing the competition. The point of benchmarking is to ensure that your
standards are least as good if not better than, hose of your competitors

Reasons for benchmarking

(i) Benchmarking saves reinvention because there is almost always someone somewhere who
has solved our problem.
(ii) Benchmarking helps in beating competition because an organization is able to understand the
nature of existing competition and gets ideas from proven practices.
(iii)Benchmarking helps in identifying in performance and aids in closing the gap between
present quality and expectation.
(iv) Benchmarking provides insight into new approaches especially those used by the
competitors. This in itself provokes innovation and new thinking.
(v) Benchmarking focuses on performance measures and processes, not on the product, hence is
not restricted to the same industry in which the company operates.
(vi) It helps in establishing effective and realistic goals, vision and objectives.
(vii) Benchmarking promotes the culture of a learning organization. A well structures
benchmarking exercise is a learning experience for the institution and the means of making
use of the best ideas and knowledge available in that organization.
(viii) Benchmarking helps in creating awareness of changing customer needs.
(ix) Benchmarking provides an opportunity for sharing information among the process
partners.

Types of Benchmarking
There are four types of bench marking as follows;
 Internal Benchmarking
 Functional benchmarking
 Competitive Benchmarking
 Generic benchmarking

1.Internal Benchmarking
Benchmarking does not have to be about comparing your organization with another
organization; rather one can compare and learn from the performance of different departments
within the same organization. For instance, one branch can be compared with the performance of
another branch. It is a comparison of internal operations and processes within the same
organization.

2.Competitive Benchmarking
This entails comparing with the toughest competitors. It is a specific competitor to competitor
comparison for a product or a function, for example, one can compare the performance of a
school with other schools who are competitors. This provides like for like comparison with other
educational institutions and gives a very good idea about overall organization \al performance. It
is vital in this exercise to compare against organizations that are leading performers.

3.Functional Benchmarking
This involves comparing similar processes with non-competitors. It may be a comparison of
similar functions within the same industry.

4.Generic benchmarking
It is often beneficial to make comparison with organizations outside the industry. Such
comparison may be of business processes that are similar regardless of the industry. This can
often be of value in areas such as management systems, teamwork, information technology,
human resource management, quality assurance processes and customer care. Making
comparison with outstanding practices, regardless of the industry is a powerful mans of quality
improvement. Most organizations are more willing to share information provided that the
approach is made in a professional manner.

The Pre-Requisites of Benchmarking

Benchmarking process requires the integration of both the ‘soft’ and ‘hard’ systems as shown in
figure 7.1. The real value of benchmarking can be harnessed when the organization successfully
integrates the following ‘soft’ and ‘hard’ systems in to operation. The merging organizational
culture should empower the employees to make decisions based on the management must
demonstrate its strategic commitment to continuous improvement and must also motivate
employees through adequate reward and recognition system that promotes learning and
innovative adoption. When dealing with ‘hard’ issues, resources must be made available; for
instance, access to information on best practices, and installation of new information system to
manage the acquired information. Technical skills are also required for benchmarking such as
flow charting and process mapping. This can be provided to the team members through
training sessions. The tam must also have yardsticks that can be used to measure their
performance. Such measures include return on investment, profitability, cycle time defect rate,
among other measures.
 ‘Soft’ Systems
B Performance
Organizational culture E measurement
of empowerment N
C
H
M Training for
A technical skills
Strategic commitment
R
K
I
N Resource
G
Motivation through commitment
reward and recognition

The Benchmarking Process

There are a number of fundamental questions that an organization should ask itself when
undertaking a benchmarking exercise as follows;
 How good do we want to be?
 Are there standards available that we can benchmark ourselves against?
 Do we know who is doing it best?
 How do we compare with the best?
 What are the gap in our performance?
 Where are the gaps in our performance?
 How can we learn their lessons?
 How can we do better than the best?
 What do we need to do to become the best?

Benchmarking process involves five main steps as follows and illustrated in figure 7.2

Step 1 Plan
Lanning stage involves selecting department or a process to benchmarked, choosing the type of
benchmarking to be used i.e. Internal, competitive, functional or generic benchmarking
identifying an organization

Step 2 Collect Data

This step entails recording the current performance levels, containing the benchmarking
organization, making a site visit and studying the benchmarking activity.

Step 3 Analyze the Data

Compare the organization vis-à-vis its identified competitors using the benchmark data construct
a comparison matrix to compare your performance data with your benchmark organization. It is
important to identify outstanding practices; drivers and process enablers that allow the
benchmark organization achieve the level of performance that you have identified as the best
practice. How they do it and how they keep doing it are key question of this stage.
Step 4 Adapt Enablers
Set stretching goals and target and consider the barriers to change. There is no point undertaking
a benchmark exercise if the organization is not going to adapt its own practices in the light of
information gained. A great deal of management efforts is needed in changing culture and
implementing new work practices.

Step 5 Review
As with all changes management exercise, it is important to review constantly the success and
effectiveness of the benchmark activity. It is necessary to carry out a review based on the
following questions: were the benchmark goals achieved? Was the activity worth undertaking?
Are you performing at the same or better level of performance than your benchmark
organization? It is vital to keep track of the results and improvements; similarly, review the
benchmarks and h relationships with the benchmark organization.
 Trigger for change

Review

Plan Collect Data Analyze data

Adapt
enablers

Drawbacks of Benchmarking
While benchmarking has been hailed as a strategic approach to quality management, critics have
raised the following issues:
(i) Benchmarking is a waste of effort and that the rewards do no outweigh the time that has
been invested.
(ii) Success is often a matter of culture and that it is very difficult to replicate those aspects of
organization that led to outstanding performance. Often the difference lies with the
competence and capability of the as well as the commitment, creativity and ability to rise to
the challenge.
(iii) Benchmarking can lead to shame culture whereby so called ‘poor performers’ are despised
such practices are not conducive to positive and forward change.
(iv) Issues of ethics and legal questions may need to be addressed especially those surrounding
the exchange of working information between organizations, particularly the competitors.
It can also be a potential security threat.
(v) Benchmarking does not identify the reasons why performance is at a particular level
whether good or bad.
(vi) Benchmarking is a catching – up exercise rather than development of anything distinctive.
In some cases after the benchmarking exercise, the competitors might improve
performance properly.
QUESTIONS
1. Benchmarking is a method in which most progressive organizations are interested:
A. what do you understand by word bench marking?
B. what are the purpose of bench marking?
C. Outline and describe the key steps in the benchmarking process?
2. What that merits and demerits of the organization using
Benchmarking as a way of qualit5y management
 WEEK 9-10
CHAPTER FIVE

OTHER QUALITY IMPROVEMENT TECHNIQUES

BUSINESS PROCESS RE-ENGINEERING (BPR)

Objective of the study:

 To learn the concepts of BPR and definition
 To identify and describe BPR
 To identify and describe The Process of Implementing BPR
Introduction
Business Process Re-engineering (BPR) emerged as a formal business practice during the 1980’s
and the early 1990’s although the term had been used as early as 1940 in operations research.
The earlier work of Hammer (1990) and the later expanded version of Hammer and Champy
(1993) popularized and crystallized BPR as a formal concept. The authors talked about re-
inventing the nature of work, starting again – re inventing the corporation from top to bottom.
BPR was launched at the time when the organizations needed to completely rethink on ways to
cope with ever-changing world, particularly with developments in the information technology.
BPR emerged as the concept which enables the organization take a radical and revolutionary
look at the way in which enables the organization take a radical and revolutionary look at the
way in which it operates and the way is done.

Definition of BPR
There is no consensus as to what BPR means. Oakland (2004) observed that there are almost as
many definitions of BPR as they are of quality. To understand the concept of BPR, it is
necessary to define its key terms; re-engineering and process. Hammaer (1990) defines re-
engineering as using the power of information technology to radically redesign business
processes to achieve dramatic improvements in performance. A process on the other hand is
defined as a set of activities that, taken together, produces a result of value o the customers
(Hammer and Champy, (1993). According to davenport and short (1990) a business process is a
set of logically related tasks performed to achieve a defined business outcomes. In a similar
vein, Earl (1994) defines a process as a lateral or horizontal form that encapsulates the
interdependence of tasks, roles, people, departments and functions required to provides a
customer with a product or service.

BPR is about starting again with a clean sheet, with a willingness to challenge existing power
structures, assumptions and conventional wisdom with an objective to find new ways of doing
business. Oakland (2004) defined BPR as the fundamental rethinking and radical redesign of a
business process, its structure and associated management systems, to deliver a major or a step
improvement in performance. According to Beckford (2002) BPR is the radical reinvention of
organization on process lines. Talwar (1993) defines BPR as to rethink, restructure, and
streamline the business structures, processes and methods of working, management systems and
external relationships through which we create and deliver value. Perhaps the most widely used
definition of BPR is that of Hammer and Champy (1993) which defines BPR as the functional
rethinking and radical redesign of business process to achieve dramatic improvements in
critical contemporary measures of performance such as cost, quality, service and speed.
The definition emphasis the following key issues.

 Fundamental Rethinking
This is a clear call for the organization to examine itself at the most basic level. It requires one to
ask the question “why do we do what we do?” perhaps we should go further and ask the question
“what do we do?” “why do we do the job this way?” does this process add value to the product
or service?” “Can technology be used to achieve productivity goals?” these questions help the
organization to focus on the purpose of the organization – that is redefining the organizations
goal without which improvement effort will fail however radical it may be.

 Radical redesign
It means not making superficial changes or fiddling with what is already in place, but discarding
the old. It implies not working from established processes and procedures but designing the
organization from scratch. Every activity I the organization is fundamentally re-appraised.
 Dramatic Improvement
This implies that BPR does no seek to achieve marginal or incremental improvement in
performance i.e. the normal 5-10 percent improvement rather the focus is on improvements of
35-50 percent becford (2002) argues that within certain processes, up to 70 percent
improvements are achievable. Hammer and Chammpy (1993) suggested that every company
should undertake a study of its processes to determine the level of improvement that might be
available. Simply being the best is not enough. If you are the best, but another organization finds
a way of being better, you will still face the re-engineering challenge. Therefore it is better to
undertake dramatic improvements while ahead of the park than while running behind. Trying to
catch up.

BPR challenges many of assumptions which underpin the way organizations have been run in the
past as follows;
 It rejects the idea of reductionism which entails fragmenting and breaking down of
organizations into simple tasks, it however, prefers the systematic recognition f flows of
interconnected activities with a common purpose.
 It encourages organizations to capitalize on substantial developments in technology. It
emphasizes the role of IT as an enabler of the radical design of the organization.
 BPR enables organizations to take advantage of the more highly developed education, skills
and capabilities of the staff they employ. With BPR system, people are treated as capable
individuals rather than lazy and incompetent as postulated by Mc Gragor’s Theory X.
 BPR embraces many of the developments in management thinking that have arisen in the
recent past such as empowerment, team working, culture among others.

Several organizations have embraced a radical overhaul of their processes due to a number of
reasons as follows:
 The increasing customer demands for quality products and services.
 The frequent changes in information technology.
 The increasing intensity of competitor for market share.
 The opening up of global markets ad labor sources.
 The need to cope with continuous changes.
The Process of Implementing BPR
The process of undertaking BPR draws a variety of tools, approaches and understanding,
according to hammer and Champy (1993), the implementation of BPR programmes requires a
number of stages as follows:-
Stage 1: The organization must have a clear understanding as to why re-engineering is needed.
There are many reasons for embracing BPR, for instance, to solve a well – know problems that
no other management programme could solve, to introduce TQM programmes in the
organization, to us it as a new banner under which to launch failed IT programme, to identify
the potential for outsourcing or as pre requisite to activity Based Costing. Having clarified and
communicated the need for BPR, the organization need to craft a broad strategic vision into
which process redesign fits

Stage 2: Obtain the Business Unit (BU) leaders commitment. This is a critical step because
without which the process of BPR implementation cannot proceed further. Business unit leaders
must grasp the business vision and refine it by challenging the assumptions and principles on
which the business is currently run.

Stage 3: This stage requires the company to identify the process need to be redesigned there are
two approaches that can be used:
 An exhaustive approach which attempts t identify all processes within the organization
and prioritize the according to urgency or importance criteria.
 The high – impact approach which attempts to identify only those most in conflict with
the organization vision.
In order to define the business processes clearly, one to collect supporting process data which
may emanate from various sources such as customer interviews, competitors bench marking, and
the analysis of best practices in other industries, among others.
Stage 4: Having identified each process, it is vital to measure ho well they perform and their
current contribution to the entire process. It is necessary to develop appropriate measures of
performance for the process, activities and tasks. Measurement will help serve as a means to
understand current process and as a basis for future improvement.

Stage 5: during this stage, the management stars to design new processes with the help of
available information technology. Managers must learn to recognize and build upon the new and
unfamiliar capabilities of new technology. To satisfy the needs of all user groups, it is necessary
to develop a process model which may have a least the following perspectives (Keleman, 2005).

 The functional Perspective: This concerns itself with what processes are to be performed
and what flows of information are relevant to these elements.
 The behavioral Perspective : This perspectives takes into account timing issues of when
process elements are being performed and how well they are performed given existing
policies and constraints.
 The Organizational Perspective: It focuses on where and whom in the organization performs
the process.
 The Informational Perspective: This concerns itself with those informational entities tat are
produced or manipulated by a process.
These perspectives need to be taken into account in order to develop a model that is realistic and
that meets the goals of re-engineering. Kaleman (2005) observed that one of the major problem
contribute to a high failure rat in real life re-engineering projects is the lack of tools for
evaluating the effects of design solutions before their implementation.

Stage 6: Having redesigned existing processes, top management must specify he technical and
social solutions needed to implement the new processes. The management should plan for the
new technology will be absolute and may require fundamental transformation. In most instances,
staff planning may be necessary to either reduce he staff involved in the process or increase
depending on the needs of the redesigned system. Similarly, training and retraining for the new
technology and the role played by staff are vital in the implementation process. People need to be
equipped with requisite skills and knowledge to assess, re- engineer and support the key
processes that contribute to customer satisfaction and organizational goals. Therefore, BPR
require substantial investment in training but also require genuine management commitment and
support.

Stage 7: Having planned for the resource necessary to transform existing processes,
management may start implementing their plans. The style of management enquired for
implementation has been a subject of debate. Hammer and Champy (1993) Advocates a tough
almost dictatorial style of management in the initial state of BPR implementation. But after the
new processes are in place, management can involve and empower their employee. However,
other research studies suggest that during the initial stage of BPR implantation morale is usually
very low die to the fact that individuals feel threatened by the process and typically reset to the
dictatorial style of management. The critical issue at this stage especially for management is
overcome resistance to the new re-engineered process.

Stage 8: This stage involves continuous redesign and improvement. However, appropriate the
new processes may be, they have to be continuously improved. Continuous improvement does
not require fundamental shifts but gradual, incremental changes brought about constantly
improvement of the new process should become the norm and this can be achieved by a team
of people working in the process and charged with the responsibility of undertaking the task of
continuous improvement.

The principles of BPR

The fundamental principles of BPR can be summarized as follows: 9Dale, vann der wiele and
Van Iwaarden, 2007).
 Strategic in concept
 Customer focused
 Focused on key business process.
 Process responsibility and decisions at the point where work is performed.
 Cross functional in nature.
 Involves internal and external customers.
  Involves senior management commitment
 Involves integration of people and technical aspects.
 Requires clear communication and vision
 Has a mindset on radical improvement.
 Everybody in the organization must be prepared to query to status of; technology,
particles, procedures and strategies.

Benefits of BPR
 Increased customer focus
 Improved profitability
 Improved quality and control
 Improved corporate flexibility
 Enhanced speed of service delivery and responsiveness.
 Improved measurability within the process operation and the management of that
information.

Drawback of BPR
 Inadequate analysis, planning and assessment of the current process design may by
extension provides inappropriate specification of the new design.
 The high cost of redesigning a process may far outweigh the savings, especially, when
the changes impact negatively on delivery schedules in terms of response and
development times to customers.
 Process redesigning may take considerably longer times to b completed, hence may take
longer to produce beneficial results to the business.
 BPR projects normally exclude people from the lower levels of the organization in the
design and building of he new processes. Hence people fail to own up the initiate.
 BPR does not focus on the soft issues in the organization.
 BPR is founded on misconception relating to downsizing and restructuring which creates
resistance to change.
  BPR concept huge investment of resources such as financial, time commitment and
belief of its usefulness to the organization. Many organizations may not engage in
radical transformations of the process because of perceived lack of resources to support
the process.
 BPR relies heavily on investment in information technology. Many organizations may
harbor reservation as to their ability to use new technologies; similarly staff may resist
efforts to introduce technology – based systems for fear of lack of skills.

BPR and Quality

There is some ongoing debate as to whether BPR replaces or subsumes he pursuit of quality or
quality subsumes BPR. This debate is not useful. He pursuit of quality is about “rightness” in all
actions and interactions of an organization, both internally and externally. The emphases of
quality methods and tools are incremental in their impact and lead the organization towards
“kaizen philosophy” of continuous improvement. BPR on the other hand is about embracing the
hidden potential of change by recognizing that incremental change only improves what is already
done, and hence advocates for fundamental change. This means tat while quality entails
incremental change in organizational processes, BPR rots for fundamental and radical change in
the process so as to tap hidden potential of the system. Hence BPR and quality are
complementary, not competitive.

QUESTIONS
1. With examples, discuss the merits and demerit of BPR
2. Highlight various process which undertaken for the implementation of BPR.
 WEEK 11-12
CHAPTER SIX

THE SIX SIGMA

Objective of the study:
 To learn the concepts of six-sigma and definition
 To identify and describe Six-Sigma as a System of Management
 To identify and describe the pre-requisites and the Core elements of Six-sigma
 To learn various Skill to in order to develop in a Six-Sigma Organization

Introduction
Six sigma is a revolutionary business process which originated at Motorola in 1980’s and aims to
reduce organizational inefficiencies and achieve defect free processes and products. Six Sigma is
smatter way to manage. It puts customers’ first and use facts and data to drive better solutions.
Six sigma efforts target three main areas; improving customer satisfaction, reducing defects. The
basis of six-sigma is measuring a process in terms of defects. The statistical concept of six sigma
means our processes are working nearly perfectly delivering only 3.4 defects per million
opportunities (Bruce, 2003). According to Pande and Holpp (2003) reaching six-sigma means
that your processes or products will perform with almost o defects. The sigma is a Greek
alphabet letter ‘o’ which is used to describe variability it is statistical term that measure defects
in management. It is used to measure defects in the output of a process and show how far process
deviates from projection, for instance, a one-sigma process produced 691, 462.5 defects per
million opportunities, which translates to a percentages of satisfactory outputs of only 30.854%.
This obviously portrays poor performance. Similarly, if we have process functioning at a three
– sigma level, then the system produces this level there is still opportunities, delivering 93.319%
satisfactory. However, even at this level there is still a lot of waste and disappointment of
customers. Evans and Lindsay surprising, for instance, if your cell phones operated at four-
sigma, it would be without service for more than four-sigma process would result in one non
conforming package for every three truckloads, while a six-sigma process would have only one
non conforming package in more than 5,000 truckloads. They noted that a change from three to
four sigma represents a 10- fold improvement; from four to five sigma, a 30 fold improvement
and from five sigma, a 70 fold improvement. This improvement represents difficult challenges
for the organization.

Capability Index Defects Per Million Percentages of Output

Opportunities (DPMO) Defect Free
6 Sigma 3.4 99.999966%
5 Sigma 233 99.97%
4Sigma 6,210 99.4%
3 Sigma 66,807 93.3%
2 Sigma 308,537 69.2%
1 Sigma 690,000 31%
0.5 Sigma 841,000 16%

Six Sigma is not merely a quality initiative, it is a business initiative. Achieving the goal of six
sigma requires more than small, incremental improvements; it requires breakthrough in every
area of operation including a culture change. For instance, at Motorolla, six – sigma is part of a
common language of all employees. To them, it means near perfection in everything, in fact
some staff use terms such as ‘have a six – sigma weekend’. The real message of six-sigma goes
beyond statistics. Six sigma is a total management commitment and philosophy of excellence,
customer focus, process improvement and the rule of measurement, rather than guess work. It is
about making very area of the organization better able to meet the changing needs of customers,
market and technologies

A six sigma organization is expected to focus on the following key issues:

 Understanding the customer requirement
 Identifying and focusing on core critical processes that add value to the organization’s
customers.
 Engage in continuous improvement by involving all employees
 Being responsive to change
 Managing based n factual information.

Six sigma can be understood by defining it as;

A statistical measure of the performance of a process or a product.
A goal reaches near perfection for performance improvement.
A system of management to achieve lasting business leadership and a world class
performance.

Six – Sigma as a Statistical Measure

Six Sigma is a statistical way to describe how much variation exists in a set of data. For instance
if you prepare chips there will be variation as to the size. The higher the variation in size, the
higher the standard deviation. Similarly, assuming you engage in outside catering and have a
promised customer’s delivery of lunch between 12.00 p.m. and 12.30 pm, you have also
agreed that if lunch is served before 12.00 p.m. or after 12.30 p.m. (a defect”) you will discount
their order by 20 percent. Because you and your staff get a bonus for on time delivery, you are
all motivated to deliver the lunch during the half – hour window agreed with customers. Six
Sigma as a measure play a role in this simple process. If you deliver only 68 percent of your
orders in time , your processes is at only “ two – sigma” level if you deliver 93 percent on time
which suds good you are operating at only “ three sigma” level performance. If you get 99.4
percent of them on time, you are operating a “four sigma” levels. To be at 6 sigma restaurant you
would have to have on time lunch delivery 99.9997 percent of the tie! Meaning that for every a
million lunch deliveries, you end up with only three or four every a million lunch deliveries,
you end up with only three or four late deliveries.
Six – Sigma as a Goal
The goal of six sigma is to help people and process am high in aspiring to deliver defect free
products and services. Six sigma discounts the notion of zero defects; it recognizes that there is
always some potential for defects, even in the best run processes or best built products at 99.9997
percent performance, six sigma sets a performance goal where defects in many processes and
product are almost non existent.

The goal of six sigma especially ambitious when one consider that prior to the start of a six
sigma effort, many processes a systems operate at 1,2 and at most 3 sigma levels. This implies
that such businesses are operating at 66,000 to as many as 700,000 mistakes per million
transactions. Indeed, it is often a shock for organizations to see how their processes and products
and services perform through the lenses of six-sigma. Low sigma levels in the organization have
detrimental effects. According to Pande and Holpp (2002) when customers experience the
negative results of faulty products and services they don’t just sit around and feel depressed, they
act for instance

 A dissatisfied customer will tell nine to ten people about unhappy experiences
 A dissatisfied customer will only tell five people if a problem is handled satisfactorily.
 Thirty one percent of customers who experience service problems never register
complaints, because it is “too much trouble”, there is no easy channel of communication
or because they believe that no one cares.
 Of that 31 percent, only 9 percent will do additional business with the company.
These shocking statistics indicates that defects can lead to loss of customers, and turned of
customers tell others about their experiences, making it much more difficult to recover from
defect. As customers get more and more demanding it much more difficult to recover from
defect. As customers get more and more demanding and impatient, high levels of defects put
a company is serious risk.

Therefore, when taking up six-sigma as a goal, a business is saying that we would like to
get as many of our customer – related activities and products performing as close to six
sigma as we can. Keeping customers happy is good for business because it enhances
profitability. A 5 percent increase in customer retention increases profit by more than 25
percent (Pande and Holpp, 2002). It is also estimated that organization lose 15 percent to
20 percent of revenues each year to inefficient and ineffective processes and systems.
Hence, six-sigma provides a goal that applies to both product and service activities and that
sets achievable.

Six-Sigma as a System of Management

When Jack Welch introduced the six-sigma concept at GE, he told senior executives that 40
percent of their annual bonus would be based on their involvement and success in
implementing six –sigma. This helped to focus executive attention on implementing six –
sigma programs in their individual divisions. Training in GE was given priority and
thousands of teams trained in large sessions. Executives throughout GE also participated in
six –sigma training especially on accountability for results and o going reviews to ensure
results.

With both accountability and regular reviews, managers can begin to use six-sigma as a
guide to leading their businesses. The six-sigma program require that managers at all levels
are held accountable for a variety of measures; customer satisfaction, key process
performance, score card metrics on how the business is running, profit and loss statements
and employee attitude. At regular meetings managers review key measures in the
organization and select a new sigma project that targets those measures that have fallen
off; for instance, if a customer in a bank complains, the management will charter a six-
sigma team to find out why and take corrective action. Good solutions developed a one
branch can be communicated and adapted as best practices, making services better for
customers in other bank branches. The net effect is to make six-sigma a means of
responding to critical business needs and ingraining productive customer focused
management into the daily routine.
As a management system, six-sigma is not owned by top management, or driven by middle level
management; rather the ideas, solutions and process discoveries, and improvements that arise
from the six-sigma take place at the front lines of the organization. Six sigma organizations are
striving to put more responsibility into the hands of the people who work directly with
customers. Therefore, six-sigma is a system that combines both strong leadership and grassroots
energy and involvement.

Six – Sigma Pre-requisites

Six sigma progamme depends on the following factors for its successful implementation:
(i) It involves high levels of commitment and involvement of management. It is based on an
understanding of statistics which is not popular area for most managers. It also requires
managers to be trained on the six-sigma concepts.

(ii) Six-sigma cannot b treated as stand a- lone activity. Like TQM, it requires adherence to a
total quality philosophy. Six-sigma style imitative demands a degree of sophistication
from the organization adopting it and the organization must be ready fro change. The
organization must form cross-functional teams to help identify the processes that need
change and also help in its implementation

(iii) Six-sigma is about reducing the defects. Improvement depends on how opportunities for
defects or failure are defined and measured. For instance, if a six-sigma approach s used
in hospitals, then the measure of failure needs to be defined. What matters in a six-sigma
approach is what the customer wants or needs.

(iv) Six sigma need to be concentrated on core elements of a business which satisfy the
customers more and causes them to deal with the company rather with its competitors.
Therefore, van der wile et al (2007) puts it that six-sigma like any other performance
drive should start from strategy; where does a company want to be? What will really
make a difference to getting there? Where should the company concentrate its
improvement drives?
Core elements of Six-sigma
Six –sigma builds on a range of quality improvement techniques that have been proven to be
effective. The core elements of six sigma include.

 Focus on the Customer

Six sigma emphasizes on understanding the customer’s requirements and expectations

 Data and Fact-driven Management – six sigma is built on the foundation of speaking with
data and basing management decision on facts.

 Specific Training: A defined system based on the martial arts hierarchy of champion: master
Black Belt (MBB), Black Belt and Green Belts are used to head and influence six-sigma
project. MBB serves as a coach and mentor or constant to Block Belts working on a variety
of projects. The MBB is a real expert in six-sigma analytical tools, often with a background
in engineering or science or advanced degree in business. As a coach MBB’s job is to
ensure that the Black Belt and his/her team stay on track, complete heir work properly and
provide advice and even hands on help for such task as collecting data, ding statistical
analysis, designing experiments and common stating with key management. The Black
belt leads, inspires, manager, delegates, coaches and “baby – sits” colleagues and becomes
almost expert in tools for assessing problems and fixing rod designing processes and
products. Black Belt usually works alongside a team assigned to a specific six-sigma project
project. He /She is responsible for getting the team started, building their confidence,
observing and participating in training, managing team dynamics and keeping the project
moving to successful results. Without a strong and tireless Black Belt, six –sigma teams are
usually not effective. The Black Belt must posses many skills, including strong problem
solving, the ability to collect and analyze data, leadership and coaching experience, and good
administrative sense. Black Belts are drawn from middle level management.
The Green Belt is someone who is trained in six sigma skills, often to the same level as Black
belt; however, the Green Belt serves as either a team member or a part- time six sigma team
leader. The role of the Green Belt is to bring the new concepts and tools of six-sigma right to the
day-to-day activities of the business.

 Structural Approach: Six sigma is based on a structured problem – solving approach the
approach consist of the following steps:
Define measure, Define, Analyze, Improve and Control (DMAIC) for existing process while for
new processes, the approach consists of: define, Measure, analyze, design and verify (DMADV).

 Quality engineering: Six sigma uses a full range of tools and techniques such as flow
charting, brainstorming, check sheets pareto analysis, cause and effects diagrams, among
others.

 Process focus, control and Improvement: The key keep of six sigma is to understand the
process in order to facilitate its improvement. This involves an examination of potential
defects, root causes and corrective actions.

 Proactive Management: Management must attempt to understand key principles of six

sigma. They must be active in challenging why things are done in certain way, defining root
causes of problems, setting and maintaining aggressive improvement targets, and being
prepared to devote a large amount of their time.

 Proactive management: - management must attempt to understand key principles of six

sigma. They must be active n challenging why things are done in a certain way, defining root
causes of problems, setting and maintaining aggressive improvement targets, and being
prepared to devote a large amount of their time.

 Collaboration: teamwork is an essential ingredient of six sigma and it is important to have

range of skills within the team.
 Short term Improvement Projects: A key requirement is that a time scale agreed for as
specific projects completion.

Six – Sigma problem – Solving Approaches

Six sigma improvement projects adhere to strict problem solving approaches. The existing
process improvements require the use of DMAIC approach, while new processes uses DMAIC
approach.
The implementation of six-sgma involves three aspects of process development.
 Process improvement
 Process design/ Redesign process management
 Process management

Process Improvement
This concern the elimination of the root values of process problems and is clearly associated
with continuous improvement activities. A structured problem solving approach is employed in
making improvements to existing process and products. This problem –solving approach is
referred to as DMAIC process: define, Measure, analyze, Improve and Control. By following
this process, a flexible but powerful set of five steps for making improvements happen and stick,
the team works from statement of the problem to implementation of a solution. In working
through this DMAIC process, the team is also interacting with he larger organization,
interviewing customers collecting data and talking to stakeholders whose work will affected by
the team’s solutions and recommendations. The DMAIC approach involves the following steps:

 Define the Problem

Define in clear terms the specific problem to be solved and the process to be improved. The
team must grapple with any array of questions in an effort to define the problem for instance;
what are we working on? Who is the customer? What are the customers’ requirements? How is
the work currently being done? What are the benefits of making the improvements? Once these
questions are answered, the DMAIC charter is developed. The charters vary from organization
but typically include:

 Problem / Opportunity and goal statements:- What is the specific problem being
addressed and what results will be sought.
 Constraints/ Assumption: What limitations are placed on the projector resources
expectations being made?
 Scope: How much of the process and range of issues will be covered?
 Player and Roles: Who are the team members, champion and other stakeholders?
 Milestone: when will each phase (D,M,I and C) be completed?

This blueprint is intended to define and narrow the project focus, clarify the results being sought
establish boundaries and resources for the team, and help the eam to communicate its goals and
plans. The projects blueprint is the first, and often most critical task that must be signed off by
the project champion before the team proceeds.

The team’s next job is to identify most important player in the most important player in any
process: the customer. Thy may be either internal or external,. It is the job of the Black Belt and
the team to get a good fix on what customers want. The next task for the team is to present the
activities in a high level diagram. The diagram shows about five to ten major steps describing he
current process. This enables everyone on the team t have the same picture of the process and to
work from the same assumptions. Creating the diagram also sets the stage for the next major step
– measure, which gives the team ideas of where it may want to collect data.

 Measure
This involves selecting the process outputs to be enhanced, developing a data collection
methodology, collecting data and assessment of performance measurement system and their
capacity. Basically, measure step has two mainly objectives:
  Gather data to validate and to quantify the problem.
 Uleasing facts and numbers that clues about the cause of the problems.
The key questions that need to be answered in this step include: what are the key metrics for the
is project? Can these metrics be measured? Can these metrics be used?

Six sigma projects takes a process view of the business and use that to set priorities and make
good decision about what measures are needed. A business process has three main categories of
measures:
 Output Measures: Output entails the outcome of the process. Output measure
focus on immediate results ( deliveries, defects, complaints etc)
 Process Measures: Process can be tracked and measured; for instances the time it
takes to serve a customer in bank can be tracked and measured.
 Input Measures: This involves what comes into the business process for
transformation. This in many ways determined the quality of output because bad
inputs can create bad outputs, hence input measures help identify possible causes
of the problem.

 Analyze
This involves analyzing the relationship between cost of detects and key process variables. In
this step the DMAIC team delves into the details, enhances its understanding of the process and
problem and identifies the issues behind the problem. The questions that must be raised during
this step include: can the gaps be identified in the current process? What are the causes what are
the resources required and obstacles?

Sometimes the root cause of a problem is quite evident, however many times the root causes are
buried and lost among the complexities of many people doing work in their own way and not
documenting it year in year out. One of the principles of a good DMAIC problem –solving is t
consider many types of causes so as not to bias cloud the term’s judgment. Te team should
analyze the following:-
 Methods : The procedures used in doing the work
 Machine:- The technology use in the process
  Materials:- The data, instructions, number or facts used in the business
 Measures:- The measurement used in the process. Faulty data resulting from
faculty measurement affects the process.
 People:- the people that are involved in the process.

One of the challenging affecting DMAIC team in eh analyze step is to use the right tools simple
tools. Fairly simple tools can be used to get to the root cause of the problem, but when the
problem is complex or when relationship between the problem and the other factors is complex
and hidden, more advanced statistical techniques may be required.

 Improve
This step involves putting solutions to action. The process needs to be improved using
experimentations, pilot studies and simulation techniques to address the root causes of the
problem identified in the analysis phase. The key question that must be asked in this stage
include: what are the key tasks to implement the change? Are the changes producing results? It is
recommended that quality improvement techniques such as mistake Proofing design of
experiments, simulation, et.c, may be used.

 Control
This step involves controlling the process output to ensure the long term gains and improve
performance of the process. It involves verifying the benefits and savings ensuring that the
changes are fully integrated into procedures and communicating the findings as appropriate. The
questions that need answers at this stage includes:- have risks, scope, schedule and costs been
controlled? Have we ensured the leverage of best practices? The tools and techniques that can be
used in this stage include statistical process control, failure Mode and Effects Analysis, benefit
tracking among others.

Specific control task that DMAIC Black Belts and teams must complete include:
 Developing a monitoring process to keep track of the changes which have been set out.
 Creating a response plan for dealing with problem that may arise.
 Help focus management’s attention on few critical measures that give them current
information on the outcomes of the project and key process.
The DMAIC team also should ‘sell’ the project through presentation and demonstrations hand
over project responsibilities to those who engage in the day to day work and ensure support from
top management.

Merits of DMAIC
(i) It provides a systematic approach to involve everyone in the six-sigma project, hence
enhances teamwork.
(ii) The DMAIC presents a lifecycle of a six-sigma project which helps in imparting
discipline in its management.
(iii) DMAIC techniques unlike their quality improvement techniques such as Design for
experiments, QFD, among others, is simple and easy fr all members of the project
to understand and follow
(iv) Six- sigma emphasizes on training which equips people with a range of skills and new
focus on smarter ways to do business.

Process Design / Redesign

This is the second stage after process improvement and emphasis on new processes rather than
fixing existing ones. The method uses DMADV approach which is also called Design for Six-
sigma (DFSS). DFSS is the system or process for designing o r creating a component. The goal
of DFSS is ‘ right first time’ so that there can be no manufacturing or service issues with the
design after the initial release. It involves the following activities: define, Measure, Analyze,
design and verify.

 Define: determine the project goals and the requirement of customers both internal and
external
 Measure: Assess customer needs and specifications
 Analyze: examine process options to met customers requirements.
 Design: develop the process to meet the customer requirements.
 Verify: check the design to ensure that its meeting customer requirement
Process Management
This phase emphasizes process facilitation and has the following five stages:
Stage 1- Identify the Need: collect and analyze data; determine the cost of poor quality
Stage 2- Clarify the Vision:- Define project goals and target objectives and determine realistic
time scales.
Stage 3 – develop the plan:- Establish the projects initiative; identify the project champion;
select the team; understand the present documentation system; review the current process
understand current process performance; consider training requirement and available resources.
Stage 4- Implementation plan:- promote clear process ownership; optimize the process, record
process results evaluate improvement and process management; review cost savings and
establish continuous improvement mechanisms.
Stage 5 Sustain Improvement: document the imitative; maintain team responsibility; apply
knowledge gained across the board, communicate ad recognize success and identify the ext six-
sigma project.

Skill to develop in a Six-Sigma Organization

The skill that must be nurtured in a six-sigma organization include the following:-
(i) The skill to see a ‘Big Picture’: Six sigma performance rely on people who can see
and understand a process from the start to the end. Six sigma requires the so called
empowered people who have a broader view n and have the ability to make
decisions o what works for the end customer and the whole process.
(ii) The skills gather Data: Gathering data does not mean statistical wizardry. Its about
being able to separate factual observation from opinion and guesswork and to record
or explain facts accurately.
(iii) The skill to break through old Assumption: The biggest unseen obstacle to
improving upon business is probably the current belief on such thing as; what the
customers care about, we can never afford, or we have the best process in the
industry. Most of these statements turn out to be wrong, hence holding on to these
beliefs freeze changes and invite complacency.
 (iv) The skill to work collaboratively: Six sigma projects rely heavily on team working
and collaboration. It creates an atmosphere for a win- win situation; hence an
organization must nurture the skill is of working together.
(v) The skills to anticipate Change: Change will happen whether you will like it or not,
hence some people say change is the only constant, meaning change must take
place. Dynamic organizations must anticipate change so that change may work for
the organization and the customers. Therefore, the most importance skill overall in six
sigma is the skill to anticipate change.

Conclusion
A well implemented six-sigma program require the leadership involvement and sponsorship;
training the employees including the management of the entire organization, proper selection of
tools and analysis, and proper measurement of performance. Similarly, six sigma programs
should be adequately communicated to the entire organization.

SUPPLIER DEVELOPMENT
Introduction
Te quality of purchased supplies is crucial to an organizations products and services and
consequently to its success in the market place. The quality of material inputs to a transformation
process are strong determinants of the quality of output. Therefore, as outsourcing of both
products and services in the business arena increase, the quality f bought in products and services
becomes critical to the competitiveness and performance of the organization.

Suppler development involves a commitment by a company to set and attain internal quality
standards which meet the requirements of its customers and to support its suppliers in enabling
them to meet those same requirements. According to Lysons and Farrington (2006) Suppliers
development is any activity that a buyer undertakes to improve a supplier’s performance and /
capabilities to meet the buyers short or long-term needs.

Traditionally, companies wishing to exercise control over the upstream or down-steam elements
of the value chain have followed the route of vertical integration, either through development of
their own products and services or through acquisition of organizations producing the same
products and service. However, this approach has been less successful because the company
losses focus on its core business, hence resulting in producing mediocre products and
services. Suppliers development moves away from this strategy, recognizing its inherent
difficulties and limitations and respecting the expertise and knowledge specific to the
fulfillment of a particular need.

Supplier development requires that the organization change its posture in relations to its
suppliers. Because traditional buyer – supplier relationship was adversarial; each party seeking to
maximize its own benefits from the relationship, supplier development requires that this
relationship become collaborative, such that the buyer and the supplier work together to
maximize their mutual benefits. Many organizations across the globe have started to encourage
their suppliers to develop their quality management systems, adopt a continuous improvement
philosophy, eliminate non-value added activity, improve their processes, become more flexible
and responsive, pursue cost reduction activities, and concentrate on their core competences and
product lines.

This process of customers working together with their suppliers to effect these changes is given a
variety of names such as suppliers development, supplier relations management, partnership
sourcing, customer supplier alliances and proactive purchasing.

Importance of Supplier Development

 Reduction and elimination of the inspection of supplied parts and materials.
 Improved product and service quality, and delivery performance and responsiveness.
 Improved productivity increased stock turns and lower inventory carrying cost.
 Security and stability of suppliers.
 Transfer of ideas, expertise and technology between customer and suppliers and
dissemination and implementation of best practice.
 Joint problem – solving activities, with the customer providing assistance to the suppliers
to help improve process, leading to easier and fast resolution of problem
  A comprehensive customer supplier communication network ensures that the supplier s
provided with quick access to he customer’s future designs and manufacturing plans and
is kept informed of changing customer requirements.
 It helps to develop sustainable growth of the supplier in terms of investment in equipment
and manufacturing resources.
 It helps in the provision of advisory services to suppliers such as training, operating
procedures and methods.

How to Undertake Supplier Development

The decision to pursue a policy of suppler development can reasonably be undertaken only by an
organization already fully committed and which recognizes that improved input quality is
essential for enhanced output quality. Before undertaking a supplier development, the
organization should attempt to provide answer to the following questions:
 Who are my supplier?
 What are my requirements?
 How do I communicate my requirements?
 Do my suppliers have he capability to measure and meet the requirements?
 How do I inform them of changes in the requirements?

Beckford (2002) outlined seven stages in the supplier development as follows

(i) Make a commitment to supplier development

The senior management of an organization must be committed to the process of supplier
Development and its outcomes which may include the need to provide short – term
Financial support and to commit the workforce to the strategy.
(ii) Audit and evaluate the internal standards
The customers need to audit and evaluate the process in which the supplier’s inputs are used, to
ensure that it met is the current internal expectations. Similarly, the inputs themselves must also
be evaluated. If a process is failing because of internal factors, then no amount of suppliers
development will cut it. Critical issues that need evaluation include examination of vendors
financial and production capability and vendors process capability. If suppliers are be
approached to improved their performance, it is vital that the buyer can precisely demonstrate the
need by showing the impact on the buyers own output.
(iii) Define and Quantify the necessary Changes
The customer need to determine what standards it expects from its suppliers and consequently,
what changes are necessary or desirable to meet the required standards. This defines the initial
scope for the supplier development strategy and provides a basis for measuring subsequent
performance improvement.

(iv) Develop agreements with identified Supplier

This step entails the development of agreements, however, if the suppliers are not willing to
joint programme the customer need to look at other alternatives sources. The supplying
organization must be prepared to make the same commitment to improving performance as the
buying organization. The basis of moving forward should b a written agreement setting out the
main objectives of the programe and the benefits to be derived.

(v) Form Joint Teams and development Training Programmes

The joint teams may take the terms of quality circles and may require training in order to
functions effectively ideally, teams should include representatives of all relevant functions in the
two organizations, for instance, it should include sales staff, operational staff, accounting staff
costing purposes, statisticians for development of processes control, et.c.

(vi) Definition of team Objectives, deliverables and Timescales

This is the implementation phase; where the designated teams are require defining precise
objective, tasks and timetable in the light of the current performance gap.

(vii) Implementation of Changes and Monitoring Impacts

This is concerned with implementing any changes arising and monitoring the impact against the
expected benefits. It may require a steering or supervisory board to oversee the implementation
programme, especially if the strategy requires transfer of learning. There is need for continuous
auditing through verification of the effectiveness of the vendors quality systems and processes
and also recognizing good performance by way of giving of awards.
(viii) Suppliers certification
Suppliers need be recognized by giving certifications if performance is at our above expected
quality level. Supplier development, like any aspects of quality programme can never be
considered complete. It is an ongoing process which aims to conditionally improve performance
for the benefit of both parties.

Barriers to Support Development

There are certain aspects of customer suppler relationship that can act as barrier to supplier
development.

Lack of Customer Credibility

Suppliers need to be convinced a customer is serious about continuous improvement. The
requires that the customers behaviour and attitudes to be consistent with hat they are saying to
suppliers. Customers should avoid frequent switches from one supplier to another; last minute
exchanges to order schedules, over-stringent specification incontinent decision regarding
supplier quality assurances, pricing policy of forcing down the customer should be seen to
practice and embrace quality systems and values in its own organization, rather than presenting
an excellent quality image with suppliers which is not reflected in practice when the supplier
staff visit the customer organization. Other indicators of lack of customer credibility in the
supplier development programme include:

QUESTIONS

1. a) Explain the concept of business process re-engineering.

b) Discuss how information technology can enhance BPR in contemporary firms
c) State the characteristics of a firm that desperately needs to be re-engineered.
2. A) explain the supplier evaluation method you would use before actual supplier selection.
b) Outline the circumstances under which adversarial buyer and seller relationship maybe
employed
3. Discuss motorolla concept of six-sigma quality and explain the level of non-conforming
products that could be expected from such a process.
Case study

Simu Ltd is engaged in the manufacture and supply of fixed and mobile communications net
works. Over the past two years there have been financial pressures due to weaker markets,
leading to a limited inflow of capital. The Chief Executive Officer has addressed this with a
strategy to deal with improving the profitability and performance of the company.
You are the purchasing manager and have been asked to submit a paper to the next Board
Meeting in four weeks time. You are asked to reply to three specific questions:
i) How can supplier relationship be improved.
ii) What financial benefits will accrue?
iii) How long will it take to produce and appropriate suppliers management
strategy?
You begin to reflect on how suppliers are currently managed and decide to put your points into
bullets point as follows:
 No formal partnership is in place.
 All key items are dual sourced for supply security.
 Reverse auction has been introduced.
 Generally there are adversarial relationships.
 Payments to suppliers have moved 30 days to 90 days.
 General business stance is to keep suppliers ”on their toes”

Required
a) Propose recommendations on how Simu Ltd suppliers relationship can be improved.
b) Explain the challenges that maybe encountered as you seek to improve relationships
c) Outline the financial benefits that will accrue to your company for improving the
relationship.
 WEEK 13-14
CHAPTER FIVE

QUALITY TOOLS AND MEASUREMENTS

Objective of the study:

 To learn the concepts and various types quality tools for measurement.
 To learn the practical application of quality tools for measurement.
 To identify and describe the pre-requisites and the Core elements of Six-sigma
 To learn various Skill to in order to develop in a Six-Sigma Organization

INTRODUCTION

To make rational decisions using data obtained on the product, or process, or from the consumer,
organizations use certain graphical tools. These methods help us learn about the characteristics of a
process, its operating state of affairs and the kind of output we may expect from it. Graphical methods are
easy to understand and provide comprehensive information; they are a viable tool for the analysis of
product and process data. These tools are effect on quality improvement. The seven quality control tools
are:
i) Pareto charts
ii) Check sheets
iii) Cause and effect diagram
iv) Scatter diagrams
v) Histogram
vi) Graphs or flow charts
vii) Control charts

1. PARETO CHARTS
Pareto charts help prioritize by arranging them in decreasing order of importantce. In an environment of
limited resources these diagrams help companies to decide on the order in which they should address
problems. The Pareto analysis can be used to identify the problem in a number of forms.
(a) Analysis of losses by material (number or past number).
(b) Analysis of losses by process i.e., classification of defects or lot rejections in terms of the process.
(c) Analysis of losses by product family.
(d) Analysis by supplier across the entire spectrum of purchases.
(e) Analysis by cost of the parts.
(f) Analysis by failure mode.
Example: The Fig. 6.1 shows a Pareto chart of reasons for poor quality. Poor design will be the major
reason, as indicated by 64%. Thus, this is the problem that the manufacturing unit should address first.
A — Poor Design B — Defective Parts
C — Operator Error D — Wrong Dimensions
E — Surface Abrasion F — Machine Calibrations
G — Defective Material

2. CHECK SHEETS
Check sheets facilitate systematic record keeping or data collection observations are recorded as they
happen which reveals patterns or trends. Data collection through the use of a checklist is often the first
step in analysis of quality problem. A checklist is a form used to record the frequency of occurrence of
certain product or service characteristics related to quality. The characteristics may be measurable on a
continuous scale such as weight, diameter, time or length.

Pareto chart
 Example: The table is a check sheet for an organization’s computer related
problems.

Checklist

CAUSE AND EFFECT DIAGRAM

It is sometimes called as Fish-bone diagram. It is first developed by Kaorv Ishikawa in 1943 and is
sometimes called as Ishikawa diagram. The diameter helps the management trace customer complaints
directly to the operations involved. The main quality problem is referred to Fish-head; the major
categories of potential cause structural bones and the likely specific causes to ribs. It explores possible
causes of problems, with the intention being to discover the root causes. This diagram helps identify
possible reasons for a process to go out of control as well as possible effects on the process.

Fishbone diagram

SCATTER DIAGRAM (SCATTER PLOTS)

It often indicates the relationship between two variables. They are often used as follow-ups to a cause and
effect analysis to determine whether a stated cause truly does impact the quality characteristics.

Scatter diagram
Example: The above figure plots advertising expenditure against company sales and indicates a strong
positive relationship between the two variables. As the level of advertising expenditure increases sales
tend to increase.

HISTOGRAM (OR) BAR CHARTS

It displays the large amounts of data that are difficult to interpret in their raw form. A histogram
summarizes data measured on a continuous scale showing the frequency distribution of some quality
characteristics (in statistical terms the central tendency and the dispersion of the data).

Fig. 6.5 Histogram

Often the mean of the data is indicated on the histogram. A bar chart is a series of bare representing the
frequency of occurrence of data characteristics, the bar height indicates the number of times a particular
quality characteristic was observed.

FLOW CHARTS (OR) GRAPHS

It shows the sequence of events in a process. They are used for manufacturing and service operations.
Flow charts are often used to diagram operational procedures to simplify the system. They can identify
bottlenecks, redundant steps and non-value added activities. A realistic flow chart can be constructed by
using the knowledge of the person who are directly involved in the particular process. The flow chart can
be identifies where delays can occur.
 Flowchart

CONTROL CHARTS
It distinguish special causes of variations from common causes of variation. They are used to monitor and
control process on an ongoing basis. A typical control chart plots a selected qualitycharacteristic found
from sub-group of observations as a function of sample number. Characteristicssuch as sample average,
sample range and sample proportion of non-conforming units are plotted.
The centre line on a control chart represents the average value of characteristics being plotted.
Two limits know as the upper control limit (UCL) and lower control limit (LCL) are also shown on
control charts. These limits are constructed so that if the process is operating under a stable system of
chance causes, the problem of an observation falling outside these limits is quite small.
Figure 6.7 shows a generalized representation of a control chart.
Control chart shows the performance of a process from two points of view. First, they show a snapshot of
the process at the moment the data are collected. Second, they show the process trend as time progresses.
Process trends are important because they help in identifying the out of-control status if it actually exists.
Also, they help to detect variations outside the normal operational limits, and to identify the cause of
variations. Fig. 6.7 shows a generalised representation of a control chart.

Causes of Variation in Quality

The variation in the quality of product in any manufacturing process is broadly classified as:
(a) Chance causes
(b) Assignable causes.

(A) CHANCE CAUSES

The chance causes are those causes which are inherit in manufacturing process by virtue of operational
and constructional features of the equipments involved in a manufacturing process.
This is because of—
1. Machine vibrations
2. Voltage variations
3. Composition variation of material, etc.

They are difficult to trace and difficult to control, even under best condition of production.
Even though, it is possible to trace out, it is not economical to eliminate. The chance causes results in only
a minute amount of variation in process. Variation in chance causes is due to internal factors only the
general pattern of variation under chance causes will follow a stable statistical distribution (normal
distribution). Variation within the control limits means only random causes are present.

(B) ASSIGNABLE CAUSES

These are the causes which creates ordinary variation in the production quality.
Assignable cause’s variation can always be traced to a specific quality. They occur due to—
1. Lack of skill in operation
2. Wrong maintenance practice
3. New vendors
4. Error in setting jigs and fixtures
5. Raw material defects

Variation due to these causes can be controlled before the defective items are produced.
Any one assignable cause can result in a large amount of variation in process. If the assignable causes are
present, the system will not follow a stable statistical distribution. When the actual variation exceeds the
control limits, it is a signal that assignable causes extend the process and process should be investigated.
Control Charts
SPC is implemented through control charts that are used to monitor the output of the process and indicate
the presence of problems requiring further action. Control charts can be used to monitor processes where
output is measured as either variables or attributes. There are two types of control charts: Variable
control chart and attribute control chart.

1. Variable control charts: It is one by which it is possible to measures the quality characteristics of a
product. The variable control charts are X-BAR chart, R-BAR chart, SIGMA chart.
2. Attribute control chart: It is one in which it is not possible to measures the quality characteristics of a
product, i.e., it is based on visual inspection only like good or bad, success or failure, accepted or rejected.
The attribute control charts are p-charts, np-charts, c-charts, u-charts. It requires only a count of
observations on characteristics e.g., the number of nonconforming items in a sample.

CHARACTERISTICS OF CONTROL CHARTS

A control chart is a time-ordered diagram to monitor a quality characteristic, consisting of:
1. A nominal value, or centre line, the average of several past samples.
2. Two control limits used to judge whether action is required, an upper control limit (UCL) and a lower
control limit (LCL).
3. Data points, each consisting of the average measurement calculated from a sample taken from the
process, ordered overtime. By the Central Limit Theorem, regardless of the distribution of the underlying
individual measurements, the distribution of the sample means will follow a normal distribution. The
control limits are set based on the sampling distribution of the quality measurement.
BENEFITS OF USING CONTROL CHARTS
Following are the benefits of control charts:
1. A control chart indicates when something may be wrong, so that corrective action can be taken.
2. The patterns of the plot on a control chart diagnosis possible cause and hence indicate possible
remedial actions.
3. It can estimate the process capability of process.
4. It provides useful information regarding actions to take for quality improvement.

OBJECTIVES OF CONTROL CHARTS

Following are the objectives of control charts:

1. To secure information to be used in establishing or changing specifications or in determining whether
the process can meet specifications or not.
2. To secure information to be used on establishing or changing production procedures.
3. To secure information to be used on establishing or changing inspection procedures or acceptance
procedures or both.
4. To provide a basis for current decision during production.
5. To provide a basis for current decisions on acceptance for rejection of manufacturing or purchased
product.
6. To familiarize personnel with the use of control chart.
CONTROL CHARTS FOR VARIABLES
As the name indicates, these charts will use variable data of a process. X chart given an idea of the central
tendency of the observations. These charts will reveal the variations between sample observations. R chart
gives an idea about the spread (dispersion) of the observations. This chart shows the variations within the
samples.
X-Chart and R-Chart: The formulas used to establish various control limits are as follows:
(a) Standard Deviation of the Process, , Unknown
R-Chart: To calculate the range of the data, subtract the smallest from the largest measurement in the
sample.

Procedures to construct X-chart and R-chart

1. Identify the process to be controlled.

2. Select the variable of interest.
3. Decide a suitable sample size (n) and number of samples to be collected (k).
4. Collect the specified number of samples over a given time interval.
5. Find the measurement of interest for each piece within the sample.
6. Obtain mean (X) of each sample.
7. Establish control limits for X and R-charts.

CONTROL CHARTS FOR ATTRIBUTES

P-charts and C-charts are charts will used for attributes. This chart shows the quality characteristics rather
than measurements.

P-CHART

A p-chart is a commonly used control chart for attributes, whereby the quality characteristic is counted,
rather than measured, and the entire item or service can be declared good or defective.
The standard deviation of the proportion defective, p, is:
Conclusion: All the samples are within the control limit and we can say process is under control.

QUESTIONS
1. Distinguish between Pareto chart and control chart.
2. Outline the main steps in the functioning of control charts as an instrument for quality
management in the organization.
3. The production and home delivery of pizza is very easy is relatively staright forward and simple
process. Develop a fishbone diagram to identify potential defects and opportunities for poor
quality in the process.
4. It’s often said ‘you can control what you can’t measure and you can’t manage what you can’t
measure”. In the light of TQM-based performance measurement, discuss this statement.
 A SAMPLE OF CAT II
1. Many organizations in Kenya are seeking ISO 9000 certification. Discuss the potential
benefits associated such an organization may derive from certification. (6mks)
2. Explain the benefits of COYA in Kenya. (6mks)
3. Outline the main steps in the functioning of control charts as an instrument for quality
management in the organization. (8mks)
4. Explain the supplier evaluation method you would use before actual supplier
selection. (5mks)
5. Outline the circumstances under which adversarial buyer and seller relationship
maybe employed. (5mks)
 6. Sample exam

SPM321: QUALITY MANAGEMENT

MAIN EXAMINATION
DATE: MAY/AUGUST 2011 TIME: 2 HOURS
INSTRUCTIONS:
Answer QUESTION ONE and any other TWO QUESTIONS.
QUESTION ONE

A. A defense contractor manufacturer rifles for the military. The military has exacting
quality standards that the contractor must meet. The military is very pleased with quality
of the products provided by the contractor. However, the contractor I experiencing high
quality related costs. Discuss the reasons for the contractor’s high quality related
costs.(10marks)
B. For any organizations to succeed in this challenging business environment, it has to be
proactive in its plans” Discuss this quote in relation o quality functions. Quality
management is an important concept in strategic planning and a component of strategy.
Explain. (8marks)
C. Outline the following terms as applied in quality process planning: (12marks)

i. Brainstorming
ii. Pareto analysis
iii. Ishikawa diagrams
iv. Checklists

QUESTION THREE

a) Explain the extent to which quality is a universal concept. (10MKS)

b) Discuss the responsibilities of the different departments of an organization as far as the
quality function is concerned. (10MKS)
QUESTION FOUR
a) Explain the factors that influence customer perception of quality. Discuss them in the
context of an industry of your choice. (10mks)
b) The main issue in building a customer satisfaction is to acquire satisfied customers.
Discuss the indicators of customer satisfaction. (10mks)
Question FIVE
a) Explain the meaning of the term statistical process control. (6mks)
b) A statistical process control is designed to identify the underlying causes of the
problems in an organization. Discuss. (8mks)
c) Discuss the benefits of implementing ISOL in a manufacturing systems. (6mks)