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Chapter 1 Differing Perspectives on Quality 1 - 1 (© 2007 Pearson Education.

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1 Chapter 1 Differing Perspectives on Quality 1 - 1 (© 2007 Pearson Education

2  Today, supply chains compete, not individual firms.  A firm’s supply chain, upstream and downstream, constrains and enables the firm.  Firm’s must manage quality in their supply chain, upstream and downstream.  Quality management is not “owned” by any one of the functional areas such as operations, HRM, marketing, etc. All functional areas must own their “quality management” processes.  There is no one way to improve quality. Firms must use the contingency approach to assess the current position of the firm and identify an effective strategy for improvement based on a clear understanding of their company, market, customers, suppliers, and the quality management alternatives. Improvement is based on the contingent variables that are operative in the firm as it exists. 1 - 2

3  Chapter Overview  What is Quality?  Differing Functional Perspectives on Quality  The Three Spheres of Quality  Other Perspectives on Quality  Arriving at a Common Perspective ( 1 - 3 Differing Perspectives on Quality Chapter 1 (© 2007 Pearson Education In chapter 1 through 3, we form the basis for the contingency approach. To apply quality improvement on a contingency basis we need to understand the foundation that has been laid by leaders in the quality movement.

4  Quality management involves flows: process flows, information flows, material flows, and fund flows. Each of these flows has to operate efficiently, effectively, and with quality. Like a river, we have upstream and downstream flows. The sums of these flows make up the supply chain for a firm.  Using the supply chain as the model for competition, we must internalize external upstream and downstream processes from raw materials to after-sale service.  The firm must integrate differing functions, expertise, and dimensions of quality. This integration requires flexible, cross-functional, problem- solving and employees who can adapt to rapidly changing markets. 1 - 4

5  Garvin’s definitions of quality based on the perspective of the viewer (perception is reality)  Transcendent - quality is intuitively understood but nearly impossible to communicate  Product-based – quality is found in the components and attributes of a product  User-based – if the customer is satisfied, the product has good quality  Manufacturing-based – if the product conforms to design specifications, it has good quality  Value-based – if the product is perceived as providing good value for the price, it has good quality 1 - 5

6 1 - 6  Performance  Features  Reliability  Conformance  Durability  Serviceability  Aesthetics  Perceived Quality © (© 2007 Pearson Education Garvin’s dimensions (measures) of product quality These different dimensions of quality are not mutually exclusive.

7 ( 1 - 7  Performance  Features  Reliability  Conformance  Efficiency with which a product achieves its intended purpose (© 2007 Pearson Education

8 1 - 8  Performance  Features  Reliability  Conformance  Attributes that supplement the product’s basic performance – bells and whistles © 2007 Pearson Education

9 1 - 9  Performance  Features  Reliability  Conformance  Performs consistently over the product’s useful life. © 2007 Pearson Education

10 1 - 10  Performance  Features  Reliability  Conformance  Adherence to quantifiable specifications within a small tolerance – the most traditional definition of quality © 2007 Pearson Education

11 1 - 11  Tolerate stress or trauma without failing  Durability  Serviceability  Aesthetics  Perceived Quality © 2007 Pearson Education

12 1 - 12  A product is serviceable if it can be repaired easily and cheaply  Durability  Serviceability  Aesthetics  Perceived Quality © 2007 Pearson Education

13 1 - 13  Subjective characteristics such as taste, feel, sound, look.  Durability  Serviceability  Aesthetics  Perceived Quality © 2007 Pearson Education

14 1 - 14  Quality as the customer perceives it - image, recognition, word of mouth.  Durability  Serviceability  Aesthetics  Perceived Quality © 2007 Pearson Education

15 1 - 15  Tangibles  Service Reliability  Responsiveness  Assurance  Empathy © 2007 Pearson Education Parasuraman, Zeithamel, and Berry provide service quality dimensions (measures): Services have more diverse quality attributes than products because of wide variation created by high customer involvement.

16 1 - 16  Tangibles  Service Reliability  Responsiveness  Assurance  Empathy  Physical appearance of the facility, equipment, and personnel © 2007 Pearson Education

17 1 - 17  Tangibles  Service Reliability  Responsiveness  Assurance  Empathy  The ability of the service provider to perform the promised service © 2007 Pearson Education

18 1 - 18  Tangibles  Service Reliability  Responsiveness  Assurance  Empathy  The willingness of the provider to be helpful and prompt in providing service © 2007 Pearson Education

19 1 - 19  Tangibles  Service Reliability  Responsiveness  Assurance  Empathy  The knowledge and courtesy of the employees and their ability to inspire trust and confidence © 2007 Pearson Education

20 1 - 20  Tangibles  Service Reliability  Responsiveness  Assurance  Empathy  Caring individualized attention from the service company © 2007 Pearson Education In service “If you are in it for the money, you probably won’t survive.” If employees are constantly focused on efficiency, they will not give the customers the feeling that they care. There is no empathy, so there are no return customers.

21 Why does it matter that different definitions of quality exist? 1 - 21 © 2007 Pearson Education  Different functional areas have different definitions of quality.  However, we want everyone in all functional areas to execute from the same playbook with regard to the meaning of quality for the firm.  Cross-functional teams must share a common definition of quality so these diverse teams will be working for a common goal. All functional areas must focus on what they need to do to meet the customer’s definition of quality.  However, cross-functional teams have poor communication because of their different vocabularies, priorities, and cognitive styles.  As organizational processes become more cross-functional, many of these communication issues will resolve themselves.

22 Functional perspectives include:  Supply Chain  Operations  Strategic Management  Marketing  Financial  Human resource 1 - 22 What is Quality? Differing Functional Perspectives on Quality © 2007 Pearson Education

23 Supply Chain Management (SCM) Perspective  Supply chain management (SCM) grew out of the concept of the value chain.  The value chain includes inbound logistics, core processes (operations and marketing), and outbound logistics – processes which directly add value to the product or service.  Functions such as HRM, IS, and Purchasing support the core processes in the value chain – non-value added processes which provide a context for the value chain processes.  Upstream activities include all of those activities involving interaction with suppliers.  Downstream activities include shipping and logistics, customer support, and focusing on delivery reliability. 1 - 23

24 Supply Chain Management (SCM) Perspective  Supplier development activities include evaluating, training, and implementing systems with suppliers, such as electronic data interchange (EDI) to link customer purchasing systems to supplier enterprise resource planning systems (ERP).  Supplier qualification involves evaluating supplier performance with regard to conformance rates, cost levels, delivery reliability, etc. using supplier filters, such as ISO/TS 16949 (an automotive standard), ISO 9000:2000, and QS9000.  Value stream mapping flowcharts processes to determine where customer value is created as well as identifying non-value-added process steps. Value stream mapping also involves analyzing processes from a systems perspective such that upstream and downstream effects of core process changes can be evaluated. 1 - 24

25 Operations Management (OM) Perspective 1 - 25  The OM view of quality is rooted in the engineering approach and was the first functional field of management to adopt quality as its own.  OM is concerned about product and process design. However, rather than focusing on only the technical aspects of these activities, OM concentrates on the management and continuous improvement of conversion processes.  OM uses the systems view which is the basis for quality management. The systems view maintains that product quality is the result of the interactions of several variables (manpower, materials, methods, machinery, feedback, environment, time, and technology) which comprise a system, and these variables and their interactions are the cause of quality problems.

26  Ferdows and Demeyer link the strategic view of OM to quality management with their sand-cone model: quality is the basis on which lasting improvement in other competitive dimensions (reliability - dependability, cycle time - speed of delivery of concept to market, and cost - efficiency) are accomplished. 1 - 26 Operations Management (OM) Perspective Inputs Conversion Process OutputsCustomer Process Control Customer Feedback Planning Organizing Controlling  OM has an operations-marketing interface which focuses priorities on the customer in the product and process design and operations decisions.

27  The Sand Cone Model for Priorities 1 - 27 Cost (Efficiency) Cycle Time (Speed) Reliability (Dependability) Quality

28 Strategic Management Perspective  For Quality Management to be pervasive in a firm it needs to be included in all of the firm’s business processes including Strategic Planning.  Strategy is the planning process used by an organization to achieve a set of long-term goals. This planned course of action must be cohesive and coherent in terms of goals, policies, plans, and sequencing to achieve quality improvement.  Company strategies are based on a mission (why the organization exists) and core values (guiding operating principals that simplify decision making).  Mission and core values influence organizational culture, a major determinant (and sometimes roadblock) to the successful implementation of quality improvements. 1 - 28 © 2007 Pearson Education

29 Strategic Management Perspective  The ultimate goal of strategic quality planning is to aid an organization to achieve sustainable competitive advantage.  Alignment refers to consistency between different operational sub- plans and the overall strategic plan.  Madu and Kuei propose a strategy process based on plan-do-check- act:  plan – strategy formulation  do – implement strategy in a pilot  check – evaluate pilot implementation and make adjustments  act – full scale strategy implementation 1 - 29

30 Financial Perspective  “Will quality management pay us financial benefits?” The answer is an unqualified “maybe.”  Deming made the first theoretical link between quality improvement and financial results: Quality Improvement leads to reduction of defects, improved organizational performance, and increased employment.  Finance is concerned with the relationship between the risks of investments and their potential return on investment to maximize return for a given level of risk.  Finance professionals communicate using an accounting language: the language of financial management is money.  Quality professionals must translate the quality concerns into the costs of (poor) quality in terms of lost sales, inspection, scrap, and rework.  The pursuit of quality does not safeguard a company against bad management because of intervening variables (e.g., products that don’t meet customer needs). 1 - 30 © 2007 Pearson Education

31 Financial Perspective - The Deming Value Chain 1 - 31 Improve Quality Decrease Costs Improve Productivity Capture Market Stay in Business Provide More jobs

32  Finance professionals believe the law of diminishing marginal returns applies to quality improvement. 1 - 32 Minimum Cost Total Quality Costs = Sum of Losses + Costs of Improving Quality Optimum Quality Level Cost Quality Costs of Improving Quality Losses Due to Poor Quality The financial perspective on quality relies on quantified measurable, results oriented thinking. Minimum Sum of Losses + Costs

33  Human Resources (HRM) Perspective  It is impossible to implement quality without the commitment and action of employees (want hogs – not chickens).  Employee empowerment moves decision making to the lowest level possible in the organization.  Organizational design is concerned with the design of reward systems, pay systems, organizational structure, compensation, training programs, and employee grievance and arbitration.  HRM advocates the employee to management and the company’s needs to the employee.  Quality management flourishes where the employees’ and the company’s needs are aligned – what’s good for the company is good for the employees. 1 - 33 © 2007 Pearson Education

34 HRM Perspective  HRM Functions  Job analysis involves collecting detailed information about each job. This information includes tasks, skills, abilities, and knowledge requirements for each job. This information is used to define a job description which is used to set pay levels. The bureaucratic delay in accomplishing job analysis to modify job descriptions can limit the ability of the organization to achieve the flexibility needed for quality management.  Selection in recruitment and hiring decisions involves finding employees who have the technical and behavioral preparation to perform the tasks for a job, and who are fast learners during quality improvements. The selection process is critical because people, politics, and culture constrain and enable organizational change. 1 - 34

35 HRM Perspective  HRM Functions  Effective training provides for standardizing methods for solving unstructured problems in quality management. Top managers and low- ranking employees should use similar processes for solving problems. This is called vertical deployment of quality management. Different departments should use similar processes for solving problems to achieve horizontal deployment of quality management.  Performance appraisals and evaluations are key methods for motivating employees. Face-to-face reporting sessions and 360-degree evaluations (an employee’s peers, supervisors, and subordinates evaluate the employee) are used. 1 - 35

36 HRM Perspective  The following table distinguishes between traditional HRM and total quality human resources management. Traditional HRMTQHRM Process CharacteristicsUnilateral roleConsulting role Centralized Decentralized Push - DemandPull – Empower AdministrativeDevelopmental Content CharacteristicsSingle-mindednessPluralistic CompartmentalizedHolistic Worker-orientedSystem-oriented Performance Satisfaction Job-basedPerson-based 1 - 36

37  Marketing Perspective  Traditional marketing involved directing the flows of products and services from producer to consumer. The new relationship marketing directs its attention toward satisfying the customer and delivering value to the customer.  Companies are basing sales commissions on perceptual measures of customer satisfaction rather than volume of sales because the value of the loyal customer is much greater than an individual transaction.  The marketer focuses on the perceived quality of products and services, quality as the customer views it, and marketing efforts are focused on managing quality perceptions.  The primary marketing tools for influencing customer perceptions of quality have been pricing and advertising, but these tools are inadequate for influencing perceptions of quality because not all products are priced based on cost of materials and production only. 1 - 37 © 2007 Pearson Education

38  Marketing Perspective  Marketing systems involve interactions between the producing organizations, the intermediaries, and the final consumer, and it is often very difficult for firms to agree on who the customer is.  Marketing is also focused on service at the time of the transaction and after-sales support.  Marketing interacts closely with engineering and operations in product design to bring the voice of the customer into the design process.  Customer service surveys are used for assessing the multiple dimensions of quality.  The customer is the focus of marketing-related quality improvement in developing specialized products for different customers, which is in conflict with standardizing products to reduce complexity by operations. 1 - 38

39  The focus of quality management is to manage properly the interactions among people, technology, inputs, processes, and systems to provide outstanding products and services to customers.  With total quality management (TQM), the role of the quality department has moved from a technical, inspection, policing role to a supportive training and coaching role.  A strong knowledge of quality is best coupled with technical expertise in business disciplines such as materials management, supply chain management, finance, accounting, operations management, HRM, strategy, and industrial engineering.  The goal is to completely immerse the organization in quality thinking and commitment. 1 - 39

40 The Three Spheres of Quality 1 - 40 Quality Management Quality Assurance (proactive) Quality Control (reactive) © 2007 Pearson Education

41  Quality Control  The control process is based on the scientific method which includes the phases of analysis, relation, and generalization. ▪ Analysis involves breaking the process into its fundamental pieces. ▪ Relation involves understanding the relationships between the parts. ▪ Generalization involves perceiving how interrelationships apply to the larger phenomenon of quality being studied. 1 - 41

42  Quality Control  Activities relating to quality control include: ▪ Monitoring process capability and stability ▪ Measuring process performance ▪ Reducing process variability ▪ Optimizing processes to nominal measures ▪ Performance acceptance sampling ▪ Developing and maintaining control charts 1 - 42

43  Quality Assurance  Assurance refers to proactive activities associated with guaranteeing the quality of a product or service, especially during the design phase.  By contrast, quality control is reactive, rather than proactive, by detecting quality problems after they occur.  Quality assurance activities include: ▪ Failure mode and effects analysis ▪ Concurrent engineering ▪ Experimental design ▪ Process improvement ▪ Design team formation and management ▪ Off-line experimentation ▪ Reliability/durability product testing 1 - 43

44  Quality Management  The management processes that overarch and tie together the control and assurance activities make up quality management.  The integrative view of quality management supports the idea that quality is the responsibility of all management, not just quality managers.  All managers, supervisors, and employees are involved in the following quality management activities: ▪ Planning for quality management ▪ Creating a quality organizational culture ▪ Providing leadership and support ▪ Providing training and retraining ▪ Designing an organizational system that reinforces quality ideals ▪ Providing employee recognition ▪ Facilitating organizational communication 1 - 44

45  A customer-based perspective on quality involves the concept of value-added. A value-added perspective on quality involves a subjective assessment of the efficacy of every step of the process for the customer. A value-added activity can be identified by asking, “Would this activity matter to the customer?” “Would the customer pay for this activity?”  A contingency perspective of quality is based on the theory that businesses differ in key areas such as mission, core competence, customer attributes, target markets, technology deployment, employee knowledge, management style, culture, and a myriad of other environmental variables.  Contingency theory presupposes that there is no theory or method for operating a business that can be applied in all instances. A coherent quality strategy will need to address these key environmental variables. All organizations pursue different paths and strategies to achieve quality. 1 - 45 ` © 2007 Pearson Education

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