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MGT510 - Total Quality Management - Lecture Handout 11

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DEFINING QUALITY, QUALITY MANAGEMENT AND LINKS WITH PROFITABILITY

Beyond Total Quality

By the end of the 1990s Total Quality Management (TQM) was considered little more than a fad by many American business leaders (although it still retained its prominence in Europe).

As the 21st century begins, the quality movement has matured. New quality systems have evolved beyond the foundations laid by Deming, Juran and the early Japanese practitioners of quality.

Some examples of this maturation:

  • In 2000 the ISO 9000 series of quality management standards was revised to increase emphasis on customer satisfaction.
  • Beginning in 1995, the Malcolm Baldrige National Quality Award added a business results criterion to its measures of applicant success.
  • Six-Sigma, a methodology developed by Motorola to improve its business processes by minimizing defects, evolved into an organizational approach that achieved breakthroughs – and significant bottom-line results.
  • Quality Function Deployment was developed by Y. Akao as a process for focusing on customer wants or needs in the design or redesign of a product or service.
  • Sector-specific versions of the ISO 9000 series of quality management standards were developed for such industries as automotive (QS-9000), aerospace (AS9000) and telecommunications (TL 9000 and ISO/TS 16949) and for environmental management (ISO 14000) and also for IT Sector.
  • Quality has moved beyond the manufacturing sector into such areas as service, healthcare, education and government.
  • The CMM levels 1-5 emphasize quality in IT sector from the maturity point of view of processes and people.
  • Emphasis on learning by doing as a means of continual improvement has been accepted and has paved the way to consider Knowledge as a strategic resource of production in 21st century work place and in work organizations.
  • Discussion of Knowledge Management and Learning Organizations are becoming common in all sorts of companies and all sectors of economy and is rather being taken as a source of national competitive advantage in global interconnected and interdependent info-com oriented world.

THE CONCEPT OF QUALITY

People define quality in many ways. Some think of quality as superiority or excellence, others view it as a lack of manufacturing or service defects, still others think of quality as related to product features or price. As study that asked managers of 86 firms to define quality produced several dozen different responses, including.

  1. perfection
  2. consistency
  3. eliminating waste
  4. speed of delivery
  5. compliance with policies and procedures
  6. providing a good, usable product
  7. doing it right the first time
  8. delighting or pleasing customers
  9. total customers service and satisfaction

Today most managers agree that the main reason to pursue quality is to satisfy customers. The American National Standards Institute (ANSI) and the American Society for Quality (ASQ) define quality as “the totality of features and characteristics of a product or service that bears on its ability to satisfy given needs.” The view of quality as the satisfaction of customer needs is often called fitness for use. In highly competitive markets, merely satisfying customer needs will not achieve success. To beat the competition, organizations often must exceed customer expectations. Thus, one of the most popular definitions of quality is meeting or exceeding customer expectations.

What is Quality?

To understand total quality, one must first understand quality. Customers that are business organizations will define quality very clearly using specifications, standards, and other measures. This makes the point that quality can be defined and measured. Although few consumers could define quality if asked, all know it when they see it. This makes the critical point that quality is in the eye of the beholder. With the total quality approach, customers ultimately define quality.

People deal with the issue of quality continually in their daily lives. We concern ourselves with quality when grocery shopping, eating in a restaurant, and making a major purchase such as an automobile, a home, a television, or a personal computer. Perceived quality is a major factor by which people make distinctions in the market place. Whether we articulate them openly or keep them in the back of our minds. We all apply a number of criteria when making a purchase. The extent to which a purchase meets these criteria determines its quality in our eyes.

One way to understand quality as a consumer-driven concept is to consider the example of eating at a restaurant. How will you judge the quality of the restaurant? Most people apply such criteria as the following:

  • Service
  • Response time
  • Food preparation
  • Environment/atmosphere
  • Price
  • Selection

The example gets at one aspect of quality – the results aspect. Does the product or service meet or exceed customer expectations? This is a critical aspect of quality, but it is not the only one. Total quality is a much broader concept that encompasses not just the results aspect but also the quality f people and the quality of processes.

Chain Reaction and Profitability

Deming stresses that higher quality and improvement in quality leads to higher productivity, which in turn leads to long-term competitive strength. The Deming “chain reaction,” shown in Figure below, summarizes this view. This theory states that improvements in quality lead to lower cost because of less rework, fewer mistakes, fewer delays and snags, and better use of time and materials. Lower costs, in turn, lead to productivity improvements. With better quality and lower prices, the firm can achieve a higher market share and thus stay in business, providing more and more jobs. Deming states emphatically that top management has the overriding responsibility for quality improvement.

The Deming Chain Reaction


SIPOC Analysis:

A fundamental step in improving a process is to understand how it functions from a process management perspective. This can be seen through the analysis diagram of the process to identify the Supplier-Input-Process-Output-Customer (SIPOC) linkages.

It begins with defining the process of interest and listing the outputs that the process creates that go to the customers.

What is a SIPOC Diagram (High-Level Process Map) and how is it Used in Six-Sigma?

A SIPOC diagram, also known as a high-level process map is a tool used in the Six Sigma methodology. In order for your company to receive a Six Sigma certification, you must first complete a project that demonstrates your ability to follow the Six Sigma process and show that you understand how to use the tools.

The reason you would want to map your company's current process is so that you can put yourself in a position to be able to quickly define, document, analyze, prioritize and recommend solutions and follow-up plans to move the company toward its financial and customer-focused goals.

Before beginning a process improvement project, you must first identify all the relevant elements. You use a SIPOC Diagram to help define these. It is typically used at the Measure phase of the Six Sigma DMAIC (Define, Measure, Analyze, Improve, and Control) process. A SIPOC diagram helps to identify the process outputs and the customers of those outputs so that the voice of the customer can be captured.

The SIPOC diagram includes a high-level map of the process that "maps out" its basic steps. Through the process, the suppliers (S) provide input (I) to the process. The process (P) your team is improving adds value, resulting in output (O) that meets or exceeds the customer (C) expectations. These can be better defined as:

  • Suppliers: Significant internal/external suppliers to the process
  • Inputs: are the significant inputs to the process. This would include things such as materials, forms, information, staff, etc.
  • Process: One block representing the entire process
  • Outputs: are the significant outputs to internal/external customers. This would be anything the business unit distributes. Frequency/timing is listed along with the output. Examples of outputs would be reports, ratings, products, documents, etc.
  • Customers: are the significant internal/external customers to the process. This would include anyone who receives outputs. It is important to note that the customer must get the output directly from the business unit and does not necessarily have to be a user of the output. If the output is received from a third party, they are not customer s. Examples of customers could be managers, CEOs, boards of directors or other departments.

When creating a SIPOC diagram, your project team does not necessarily need begin at the beginning. In fact, the team should probably start in the process (P) phase and ask questions about the process itself. The team should label the process with the summaries of the most critical three to six steps. After analyzing the process, they should document what (O) is delivered to whom (C). The team can brainstorm and prioritize the most critical one to three customers. They then can identify, prioritize and align the outputs most significant to those customers. The next step would be to verify these initial assumptions with voice of the customer tools from the DMAIC process and/or designate as critical to quality, speed or cost. Lastly, the team can identify what input or information (I) is needed to perform that process and who provides that input (S). This brainstorming and prioritization of significant inputs finishes the activities around building a SIPOC.

In summary, there are three main reasons we many times begin the Six Sigma process by building a SIPOC diagram. These are:

  1. A SIPOC diagram quickly and easily captures the current or "as is" state of the organization and processes in question.
  2. The SIPOC exercise brings associates together in a non-threatening way that builds.
  3. The SIPOC exercise allows the team to review all the processes in a way that they can easily see which next steps can be identified.

Source:
http://www.businessknowledgesource.com/manufacturing/what_is_a_sipoc_diagram_high_level_process_map_and
_how_is_it_used_in_six_sigma_021699.html

Quality Terminology:

Quality: is fitness for use (Juran)
Quality Control: It is a system where the qualities of products or services are inspected into to produce them economically to meet the requirement of the purchaser. It is the operational technique.
Quality Assurance: It means to assure quality in a product so that a customer can buy it with confidence and use it for a large period of time with satisfaction.
According to ISO, QA means, “all those planned and systematic actions necessary to provide adequate confidence that a product or service will satisfy given requirements for quality.”
Quality Management system refers to the organization's structure for managing its processes - or activities - that transform inputs of resources into a product or service which meet the organization's objectives, such as satisfying the customer's quality requirements, complying with regulations, or meeting environmental objectives.
Total Quality Management: TQM is both philosophy and a set of guiding principles that represent the foundation of a continuously improving organization. It is the application of quantitative methods as well as human resources to improve the whole supply chain for customers and suppliers.
Customer: Any one who receives or is affected by the product, service, or process.
External Customer: The one outside the company walls or office/department walls or the next one in chain who receives your product, service or idea.
Internal Customers: Staff members, employees or any one who works for the interest of a company or office or boss and expects a reward or salary or benefit from the company or office or boss.
Investor Customer: The one who has invested his fortune and finance to build a company and expects a good return on his/her financial capital or fortune. Shareholders, Stockholders
Social Customer: The society at large.


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