Quality Management
Production & Operation Management
Production & Operation Management
Today more and more companies are recognizing that quality can be defined in many ways. With the realization that quality has many dimensions, firms are now able to not only identify new market niches, but also increase their market share in existing ones.
Quality in goods:
David Garvin has identified 8 different quality dimensions, with respect to goods, on which a company can compete; (a) performance, (b) features, (c) reliability, (d) durability, (e) conformance,
(f) serviceability, (g) aesthetics, and (h) perceived quality.
Quality in services:
Parasuraman, Zeithaml, and Berry (1986, 1990) identified the following 10 ‘generic’ factors or dimensions that contribute to the level of service quality a firm provides to its customers. Those are;
- Tangible (Physical evidence of the service)
- Reliability (Consistency of performance & dependability of the service)
- Responsiveness (The willingness and/or readiness of employee)
- Competence (Workers having the required skills & knowledge)
- Courtesy (Politeness, respect, consideration, & friendliness)
- Credibility (Trustworthiness, believability & honesty)
- Security (To freedom from any danger, risk, or doubt)
- Access (Approachability and ease of contact)
- Communication (How well are we kept informed of the process)
- Understanding the customer (How well the service worker makes the effort to understand the specific needs of each customer)
Additional views of quality:
(a) Technical quality versus functional quality: In service operations, as in manufacturing operations, it is important to note the distinction between technical quality, which relates to the core element of the good or service, and functional quality, which relates to the customers’ perception of how the good functions or the service is delivered.
(b) Expectations and perceptions: Another approach that is used to define quality in services is to measure how satisfied the customer is with the service received.
Satisfaction=(Perception of performance)- (Expectation). Advertisement, promotions, and promises may also be the expectations of customers. Customers will be satisfied only if the service meets or exceeds their satisfactions.
The Cost of Quality
According to Joseph M. Juran, we divide the cost of quality into 3 major categories
- Cost of prevention
- Cost of detection/appraisal, and
- Cost of failure
- Internal failure costs
- External failure costs
- Cost of prevention, by definition, are those costs incurred by an organization in its effort to prevent defective goods and services from being produced. Included in this category are investments in machinery, technology, as well as education and training programs, which are designed to reduce the number of defects that the process produces. Also included in this category are the costs to administer the firm’s quality program, data collection and analysis, and vendor certification.
- Cost of detection or appraisal are those costs associated with evaluating the quality of the product. Costs included in this category are incoming material inspection, tests and inspection throughout the transformation process, test equipment maintenance, and products destroyed during destructive testing.
- Cost of failure pertain to nonconforming and nonperforming products. Also included in this category are the costs associated with the evaluation and disposition of customer complaints. As stated earlier, we further subdivide failure costs into internal and external failure costs;
1. Internal failure costs are identified as those costs that are incurred when defects are produced within the system. They include only those costs attributed to defects that are found before the products are delivered to the customer.
2. External failure costs are those costs that are after the product has been delivered to the customer. Included in this category are the cost of returned material, warranty charges, field survey costs, legal expenses from lawsuits, customer dissatisfaction, loss of revenues due to downgrading products as seconds, and costs of allowances/concessions made to customers.
It is generally now recognized that increased spending on prevention provides significant returns in the form of reductions in direct/appraisal and failure costs – and in the over all cost of quality. Thus the old adage, ‘An ounce of prevention is worth a pound of cure’ is also most appropriate for quality.
Organization wide quality initiatives
As the quality movement gained momentum, managers looked to develop initiatives that would allow them to integrate quality throughout their entire organizations. The purpose of these initiatives is to provide a common framework for identifying quality issues with the goal of improving the overall quality of the firm’s goods and services.
Two of the more successful quality initiatives that been adopted by many firms are total quality management and six sigma.
- Total Quality Management can be viewed as an organization wide approach that focuses on producing high-quality goods and services. TQM when properly used, is an integral part of an organization, not separate, stand-alone program, and it encompasses all of the functional areas and levels within the organization, including suppliers.
Elements of TQM
Elements of TQM: There are 4 primary elements that are integral to every successful TQM program: (a) leadership, (b) employee involvement, (c) product/process excellence, and (d) customer focus.
• Leadership: The leadership provided by an organization’s management is a major cornerstone in the development and implementation of a successful TQM program. When properly executed, a TQM program is companywide, transcends the traditional functional areas, and involves all of the firm’s employees. It therefore requires vision, planning, and communication, all of which are the responsibility of top management. Studies have indicated that total commitment from management is considered to be a critical element in successfully implementing such programs.
Top management can demonstrate its commitment to a TQM program in several ways. These include incorporating TQM into the firm’s overall strategy and demonstrating by actions as well as by words that quality is the number one operating priority of the organization.
• Employee involvement: Employee involvement is another critical element in successfully implementing a TQM program. A key element in employee involvement is that each worker assumes the responsibility for inspecting the quality of his or her work. This view changes the often-adversarial practice of having a QC inspector, typically from the QC department, making decisions about good or bad quality.
• Product/process excellence: Product/process excellence involves the quality of the product’s design and analysis of field failures. It also includes statistical process control (SPC) and other analytical tools. However, process control is concerned with monitoring quality while the product is being produced or the service is being performed .
An underlying philosophy in achieving product/process excellence is the concept of continuous improvement. This has a general meaning as well as a specific TQM meaning. Its general meaning is an ongoing effort to improve in every part of the organization and all of its outputs. Its more specific meaning focuses on continual improvement in the processes by which work is accomplished.
In Japanese companies, the concept of continuous improvement is referred to as Kaizen.
• Customer focus: The customer’s perception of quality must be taken into account in setting acceptable quality levels. In other words, a product is not reliable unless the customer says it’s reliable and a service is not fast unless the customer says it is fast.
Translating customer quality demands into specifications requires marketing (or product development) to accurately determine what the customer wants and product designers to develop a product (or service) that can be produced to consistently achieve that desired level of quality.
This in turn, requires that company has an operational definition of quality, an understanding of its various dimensions, and a process for including the voice of the customer in those specifications.
Implementing TQM
The implementing of a successful quality program throughout an organization is not a simple undertaking (As seen our study book, page 229, companies have adopted several approaches to implementing TQM. However, only when quality is totally integrated into the day-to-day operations of the firm can a TQM program be truly successful). As a result, there have been many failed attempts. Edward Fuchs identifies 2 major causes for the inability of firms to successfully adopt an organization wide quality program; ‘lack of focus on strategic planning and core competencies, and obsolete, outdated cultures’.
In addition to these 2 underlying causes, companies have identified the following obstacles that need to be addressed if a quality program is to be truly successful within an organization.
- Lack of a companywide definition of quality
- Lack of a formalized strategic plan for change
- Lack of customer focus
- Poor inter-organizational communication
- Lack of real employee empowerment
- Lack of employee trust in senior management.
Recognizing and Rewarding Quality
To encourage and promote high-quality goods and services, government and quasi-government organizations have begun recognizing those firms that provide outstanding levels of quality in the goods and services that they provide. Most countries, in fact, have some sort of quality award to recognize outstanding companies.
In Japan for example, it is the Deming Prize, while in the European Union it is the European Quality Award. Some these national awards, such as the Malcolm Baldrige National Quality Award (MBNQA) in the US., recognize outstanding firms in several categories. Other forms of recognition, such as ISO 9000, which is international, take the form of certification.
ISO 9000
Increasing international trade made universal standards for quality more important, however, until 1987, there was no standardized way for supplier organizations around the world to demonstrate their quality practices or to improve the quality of their manufacturing or service processes. In that year, the International Organization for Standardization (ISO) published its first standards for quality management.
ISO, headquartered in Geneva, Switzerland, is made up of representatives from each of the national standards bodies from over 90 countries. ISO and International Electrotechnical Commission (IEC) together ISO technical Committee 176 in 1986 completed the ISO 9000 series quality standards. It immediately became apparent that the ISO 9000 standards were different from the usual engineering standards, which often related to units of measure, standardization of terminology, and methods of testing.
The ISO 9000 Series of Standards
Instead, these new standards incorporated the belief that management practice can be standardized to the benefit of both the producers of goods and services and their customers.
The ISO 9000 Series of Standards:
The purpose of the ISO 9000 standards is to satisfy the customer organization’s quality assurance requirements and to increase the level of confidence of the customer organizations in their suppliers. The first major revisions to the ISO 9000 standards were completed in December 2000 with the issuance of the following 3 new standards that replaced the previously existing standards;
• ISO 9001:2000 – Quality Management Systems – Requirements: This standard is used to demonstrate the conformity of a quality management system to meet the requirements of customers and third parties. This standard is used for the certification of a firm’s management systems.
• ISO 9004:2000 – Quality Management Systems – Guidelines for Performance Improvement: This standard provides organizations with guidelines that can be used to establish a quality management system that is focused not only on meeting customer requirement but also on improving performance.
• ISO 9000:2000 – Quality Management Systems- Fundamentals and Standards: This standard provides the terminology and definitions used in the first two standards.
ISO 900 standards played a particularly important role in the formation of the EU because they promoted a single worldwide quality standard that would foster international trade and cooperation.
ISO 9000 Certification
The ISO 9000 registration process: Suppliers companies follow a fairly straightforward process to obtain ISO 900 registration.
• First, the firm submits an application to a registrar. Generally this involves providing information about the size and locations of the company, its products, what products will be included in the scope of the registration, Who the firms ISO contact people will be, and how the 20 elements of the standard are documented and supported by procedures. The registrar reviews the Quality Manual prior to the on-site audit
• The next step in the audit is a preliminary assessment, which can be either an on-site document review or a mock audit lasting several days. The preliminary assessment determines the current state of operations at the supplier firms. The registrar provides feedback to the supplier firm and suggestions for corrective action. When the issues of concern have addressed, a full audit is performed.
• The full audit typically takes two or three auditors two to four days to complete. Auditors review the supplier’s facility and determine how processes have been documented. The auditor’s final report is submitted to the registrar’s ‘Review Board’, which makes a final determination about registration.
Registration audits cost between $10,000 and $30,000. Companies will typically take 18 to 24 months to prepare for and undergo the registration process. Some companies undertake the registration process on their own; others engage outside consultants. During the registration period, surveillance audits are conducted every six months.---------------------------
