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QUALITY COST & LEADERSHIP TQM

STARLEY JANE B. TRONO - MBA 2012

TOTAL QUALITY MANAGEMENT


Total quality management is a systemic
approach to productivity improvement using qualitative and quantitative methods and involving all stakeholders to continuously improve the quality of all products and services.
TQM IS NOT A DESTINATION BUT A JOURNEY TOWARDS IMPROVEMENT (HUNT, MANAGING FOR QUALITY,1991)

COMPONENTS OF TQM
1. 2. 3. 4. PRICE REDUCTION CUSTOMER SATISFACTION INVOLVEMENT OF EVERYONE CONTINUOUS QUALITY IMPROVEMENT 5. LEADERSHIP

DEFINING QUALITY
The definition of quality depends on the role of the people defining it. Most consumers have a difficult time defining quality, but they know it when they see it. The totality of features and characteristics of a product or service that bears on its ability to satisfy stated or implied needs.

COMMON DEFINITIONS OF QUALITY


Conformance to specifications measures how well the product or service meets the targets and tolerances determined by its designers. Fitness for use focuses on how well the product performs its intended function or use. Value for price paid is a definition of quality that consumers often use for product or service usefulness. This is the only definition that combines economics with consumer criteria; it assumes that the definition of quality is price sensitive.

COMMON DEFINITIONS OF QUALITY


Support services provided are often how the quality of a product or service is judged. Quality does not apply only to the product or service itself; it also applies to the people, processes, and organizational environment associated with it. Psychological criteria is a subjective definition that focuses on the judgmental evaluation of what constitutes product or service quality. Different factors contribute to the evaluation, such as the atmosphere of the environment or the perceived prestige of the product.

COST OF QUALITY
The cost of quality isnt the price of creating a quality product or service. Its the cost of NOT creating a quality product or service.
Every time work is redone, the cost of quality increases. Obvious examples include: The reworking of a manufactured item. The retesting of an assembly The rebuilding of a tool The correction of a bank statement

COST OF QUALITY
The cost of quality isnt the price of creating a quality product or service. Its the cost of NOT creating a quality product or service. Every time work is redone, the cost of quality increases. Obvious examples include: The reworking of a manufactured item. The retesting of an assembly The rebuilding of a tool The correction of a bank statement
The reworking of a service, such as the reprocessing of a loan operation or the replacement of a food order in a restaurant

HISTORICAL VIEWS OF QUALITY GURUS ABOUT COST OF QUALITY


Historically, business managers have assumed that increased quality is accompanied by increased cost; higher quality meant higher cost.

This concept was questioned by quality pioneers like Juran and Feigenbaum. Juran examined economics of quality and concluded the benefits outweighed the costs. Feigenbaum introduced total quality control and developed the principles that quality is everyones job, thus expending the notion of quality cost beyond the manufacturing function. In 1979 Crosby introduced the new popular concept that quality is free.

THREE DIFFERENT VIEWS ABOUT COST OF QUALITY


1. Higher quality means higher cost: Quality attributes such as performance and features cost more in terms of labor, material, design, and other costly resources. The additional benefits from improved quality do not compensate for the additional expenses. 2. The cost of improving quality is less than the resultant savings: Deming promoted this view, which is still widely accepted in Japan. The savings result from less rework, scrap, and other direct expenses related to defects. This paved the way of continuous process improvement among Japanese firms.

THREE DIFFERENT VIEWS ABOUT COST OF QUALITY


3. Quality costs are those incurred in excess of those that would have been incurred if product were built or service performed exactly right the first time:
This view is held by adherents of the TQM philosophy. Costs include not only those that are direct, but also those resulting from lost customers, lost market share, and many hidden costs and foregone opportunities not identified by modern cost accounting systems.

FOUR CATEGORIES OF QUALITY COST


1. External Failure Cost: Cost associated with defects found after the customer receives the product or service. Example: Processing customer complaints, customer returns, warranty claims, product recalls.
2. Internal Failure Cost: Cost associated with defects found before the customer receives the product or service. Example: Scrap, rework, reinspection, re-testing, material review, material downgrades

FOUR CATEGORIES OF QUALITY COST


3. Inspection (appraisal) Cost: Cost incurred to determine the degree of conformance to quality requirements (measuring, evaluating or auditing). Example: Inspection, testing, process or service audits, calibration of measuring and test equipment. 4. Prevention Cost: Cost incurred to prevent (keep failure and appraisal cost to a minimum) poor quality. Example: New product review, quality planning, supplier surveys, process reviews, quality improvement teams, education and training.

NINE DIMENSIONS OF QUALITY


1. Performance 2. Features 3. Conformance ----------------------------4. Reliability Cost 5. Durability 6. Service ----------------------------7. Response- of Dealer/ Mfgr. to Customer 8. Aesthetics of product 9. Reputation- of Mfgr./Dealer
Performance Service

Features

MARKET CHANGES

MONOPOLIST markets GLOBAL markets

Sellers market Buyers market

Market more Customer-oriented competitive Demand is defined by Users. Quality management is a necessity for survival and growth of the organization in a global environment.

THE TQM ORGANIZATION


Quality infused Personnel and Processes.
TM Q U

MM

A L

LM

I T Y

Other Staff

INPUTs

TQM 6 BASIC CONCEPTS


1.

2.
3. 4. 5. 6.

Management commitment to TQM principles and methods & long term Quality plans for the Organization Focus on customers internal & external Quality at all levels of the work force. Continuous improvement of the production/business process. Treating suppliers as partners Establish performance measures for the processes.

EFFECTS OF POOR QUALITY


Low customer satisfaction Low productivity, sales & profit Low morale of workforce More re-work, material & labour costs High inspection costs Delay in shipping High repair costs Higher inventory costs Greater waste of material

BENEFITS OF QUALITY

Higher customer satisfaction Reliable products/services Better efficiency of operations More productivity & profit Better morale of work force Less wastage costs Less Inspection costs Improved process More market share Spread of happiness & prosperity Better quality of life for all.

SEVEN HABITS OF HIGHLY EFFECTIVE PEOPLE


Be

pro-active Begin with the end in mind Put first things first Think win-win Seek first to understand, then to be understood Synergy Sharpen the saw

DEMINGS 14 POINTS PHILOSOPHY


1. Create a constant purpose toward improvement. 2. Adopt the new philosophy.

3. Stop depending on inspections.


4. Use a single supplier for any one item.

5. Improve constantly and forever.


6. Use training on the job. 7. Implement leadership.

DEMINGS 14 POINTS PHIOSOPHY


8. Eliminate fear 9. Break down barriers between departments. 10. Get rid of unclear slogans.

11. Eliminate management by objectives.


12. Remove barriers to pride of workmanship.

13. Implement education and selfimprovement


14. Make "transformation" everyone's job

ROLE OF TQM LEADERS


All are responsible for quality improvement especially the senior management & CEOs Ensure that the teams decision is in harmony with the quality statements of the organization Senior TQM leaders must read TQM literature and attend conferences to be aware of TQM tools and methods Senior managers must take part in award and recognition ceremonies for celebrating the quality successes of the organization Coaching others and teaching in TQM seminars Senior managers must liaise with internal ,external and suppliers through visits, focus groups, surveys and etc. They must live and communicate TQM.

Customer Value/ Customer Types


External current, prospective and lost customers Internal Every person in a process is a customer of the previous operation.( applies to design,manufacturing,sales,su pplies etc.) [Each worker should see that the quality meets expectations of the next person in the supplier-tocustomer chain ] TQM is committed to customerfocus - internal and external customers.

CUSTOMERS

Front-line Staff Functional Department Staff Sr. Mgrs CEO

THE PDSA CYCLE 7 Steps


Identify

the opportunity Analyze the current process Develop the optimal solution(s) Implement changes Study the results Standardize the solution Plan for the future.

THE PDSA CYCLE 7 Steps


Phase I Identify the Opportunity

Phase 7 Plan for the future Act Plan

Phase 2 Analyze the process

Phase 6
Standardise the solution

Study

Do Phase 3 Develop the optimal solution(s)

Phase 5 Study the results

Phase 4 Implementation

TQM ORGANIZATINAL CULTURAL CHANGE


Traditional Approach Lack of communication Control of staff Inspection & fire fighting Internal focus on rule Stability seeking Adversarial relations Allocating blame

TQM
Open communications Empowerment

Prevention
External focus on customer Continuous improvement

Co-operative relations
Solving problems at their roots