Total Quality

Management

Goal 2

1
 What is Quality?
A degree or level of excellence.
●Difficult to define
●Various attributes

Quality is determined by what

Customers want & is willing
to pay for.
 What is Quality?

•Different needs of consumers

Different Quality Expectations
Fitness for Use
How well the product or service
does what the consumer thinks
It is supposed to do
 Customer’s Perspective
Manufactured products-Quality

● Performance – Basic operating characteristics.

How well a car handles or its gas mileage?
● Reliability – Product Operating properly within an
expected time frame.
● Durability – Life span of product before replacement.
● Serviceability – Ease of getting repairs, speed of repairs.
● Aesthetics – How a product looks, sound , feels, smells.
● Safety
 Customer’s Perspective
Service Quality

● Time and timeliness – Customer waiting time.

● Completeness – Is everything provided?
● Courtesy – How customers are treated?
● Consistency – Same level of service each time.
● Accessibility and convenience – Easy to obtain
Service.
● Accuracy – Is the service performed right every time?
Quality – Two Perspectives
 Quality Evolution
Quality Control: focus is to stop poor quality products
going to customers – Inspection after the fact.
 TQM
(Total Quality Management)

The management of quality

throughout the organization
at all levels and across all
areas.
 TQM
(Management Principles)
● The customer defines quality, and customer’s needs
are top priority.
● Top management must provide the leadership
for quality.
● Quality is a strategic issue.
● Quality is the responsibility of all employees.
● Focus on continuous quality improvement.
● Quality problems are solved through cooperation.
● Use of statistical quality control methods.
● Training & education of all employees.
 How TQM Companies Work?

Traditional Companies
TQM Companies
● Company / Product
● Customer driven
driven.
“What is our business?
“The customer can have any
Is not determined by the
Color car as long as it’s black.”
Producer but by the
Henry Ford
Consumer”.
Peter Drucker

● Short term profitability

● Long term commitment
 How TQM Companies Work?

TQM Companies Traditional Companies

● Continuous improvement ● High production cost

& waste
● Quality at the source ● Inspection after the fact
● High employee ● Top-down approach

Participation
● Cross functional teams ● Fortressed departments
● Elimination of waste ● High scrap & rework
 TQM Tools

1. The Plan- Do- Check- Act cycle

2. Quality Circles

3. Benchmarking

4. Statistical & quantitative tools

The PDCA Cycle
Quality Circles
 Benchmarking

Continuously evaluating the practices of

best-in-class and adapting company processes to incorporate
the best of these practices.

Benchmarking is the search for industry best practices

that lead to superior performance
 Benchmarking Types

●Internal Benchmarking

●Competitive Benchmarking

●Industry Benchmarking

●World-Class Benchmarking
 Benchmarking Advantages

• Prevents "reinventing the wheel“.

• Leads to adaptation of proven practices.
• Leads to adaptation of best practices.
• Results in a better understanding of
internal strengths and weaknesses.
• Make companies more competitive.
● Improves customer satisfaction.
 Benchmarking Process

1. Select and prioritize benchmarking projects.

2. Organize benchmarking teams.

3. Through investigation and documentation of the company’s internal

processes and development of performance indicators.
 

4. Researching and identifying the best in class.

5. Identifying performance gaps and understanding the reasons they

exist.
6. Implementing and managing the approved changes.
Statistical and Quantitative Techniques

Pareto diagrams

Control charts

Cause-and-effect
diagrams
Pareto Diagram
Pareto Diagram
 Control Charts
Production Line A
µ +
Defect Rate

2σ
µ +
σ
µ
µ -
σ 0 1 2 3 4 5 6 7 8 9 10
µ - Days
Cause-and-effect Diagrams
 Cause-and-effect Diagrams
Methods and
Human Factors
Design Factors
Inadequate Flawed part design
supervision Incorrect
Poor training manufacturing
New operator sequence
Inadequate tools Multiple suppliers
Incorrect speed Incorrect specification
Poor Variation in purchased
maintenance components
Machine-related Materials and
Factors Components Factors
 Costs of Quality
Cost of achieving good quality

Prevention costs Appraisal costs

Cost of poor quality

Internal failure costs External failure costs

 Prevention costs

Costs of trying to prevent poor quality products

from reaching the customer.

• Quality planning costs

• Quality training costs
• Product design costs
• Process design costs
 Appraisal or Inspection costs

Costs incurred to identify defective products

before they are shipped to customers.
• Testing and inspection costs –
Raw material, goods in process, finished goods.
• Test equipment costs
• Operator costs
 Internal failure costs

Costs incurred when poor quality products are

discovered during appraisal process.

• Scrap costs
• Rework costs
• Re-inspection of reworked products
• Downtime costs
 External failure costs

Costs incurred after the customer has received

poor quality product.

• Customer complaint costs

• Product return costs
• Warranty claims costs
• Lost sales costs
Costs Costs of Quality

Internal
Cost of
Internal and
external failure
&
Total
Total
External
failure Total
Cost
Prevention
Cost of
Prevention and
&
appraisal

Appraisal

Percentage of output
Quality of conformance
(Percent of output without
without defects
defects)
 Quality Cost Report
Assumed sales 50,000,000 Year 2 Year 1
Prevention costs: Amount Percent Amount Percent
Systemdevelopment 400,000 0.80% 270,000 0.54%
Quality Training 210,000 0.42% 130,000 0.26%
Supervision of prevention activities 70,000 0.14% 40,000 0.08%
Quality Improvement projects 320,000 0.64% 210,000 0.42%
Total 1,000,000 2.00% 650,000 1.30%

Appraisal costs:
Inspection 600,000 1.20% 560,000 1.12%
Reliability testing 580,000 1.16% 420,000 0.84%
Supervision of testing and inspection 120,000 0.24% 80,000 0.16%
Depreciation of test equipment 200,000 0.40% 140,000 0.28%
Total 1,500,000 3.00% 1,200,000 2.40%

Internal failure costs: 900,000 1.80% 750,000 1.50%

Net cost of scrap 1,430,000 2.86% 810,000 1.62%
Rework labor and overhead 170,000 0.34% 100,000 0.20%
Downtime due to defecs in quality 500,000 1.00% 340,000 0.68%
Disposal of defective products 3,000,000 6.00% 2,000,000 4.00%
Total

External failure costs:

Warranty repairs 400,000 0.80% 900,000 1.80%
Warranty replacements 870,000 1.74% 2,300,000 4.60%
Allowances 130,000 0.26% 630,000 1.26%
Cost of field servicing 600,000 1.20% 1,320,000 2.64%
Total 2,000,000 4.00% 5,150,000 10.30%
Total quality Cost 7,500,000 15.00% 9,000,000 18.00%
 Nonfinancial Measures

Nonfinancial measures of customer satisfaction:

• Number of customer complaints
• Defective units as a percentage of total units
shipped to customers
• Percentage of products that experience early
or excessive failure
• On-time delivery rate
 Nonfinancial Measures

Nonfinancial measures of internal performance:

• Number of defects for each product line
• Process yield
(ratio of good output to total output)
• Employee turnover
(ratio of the number of employees who left
the company to the total number of employees)
Evaluating Quality Performance

Financial measures are helpful to evaluate

trade-offs among prevention costs,
appraisal costs, and failure costs.
Nonfinancial measures help focus attention
on the precise problem areas that need
improvement and also serve as indicators
of future long-run performance.