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Managing Quality Integrating the Supply Chain S. Thomas Foster

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1 Managing Quality Integrating the Supply Chain S. Thomas Foster
Chapter 2 Quality Theory © 2007 Pearson Education

2 Quality Theory Chapter 2 Leading Contributors to Quality Theory
Viewing Quality Theory from a Contingency Perspective Theoretical Framework for Quality Management © 2007 Pearson Education

3 Quality Theory Is there a theory of quality management?
There is not a unified theory explaining quality management in the supply chain that is widely accepted by the quality community. The literature concerning quality is contradictory and somewhat confusing. The differing approaches to quality improvement represent competing philosophies that are seeking their place in the quality marketplace of theories. Practicing quality managers must apply those theories that are appropriate to their particular situations using the contingency approach. The contingency approach identifies the relevant conditions in a situation and applies the appropriate theory. This means the effectiveness of the competing philosophies depends on the context. You cannot buy effective quality systems off-the-shelf or apply them without question from books. You must grow your own quality system yourself within your firm for your firm. © 2007 Pearson Education

4 Quality Theory Leading Contributors to Theory – W. Edwards Deming
Deming was widely accepted as the world’s leading authority on quality management prior to his death in 1993. Deming significantly influenced Japanese industry before the late 1970s when the quality of Japanese products surpassed U.S. products. Deming emphasized the management of a system for improving quality and statistics for continual improvement. After WWII, Deming was sent to Japan by the U.S. Secretary of War to work on a population census. During this time, Deming presented lectures to the Japanese Union of Scientists and Engineers on statistical quality control. Deming became impressed with the precise, single-minded, focus of the Japanese on quality. Deming believed that the lack of focus on quality in America led to mediocre results with regard to quality. Deming’s emphasis was “continuous, never-ending improvement.” © 2007 Pearson Education

5 Quality Theory Leading Contributors to Theory – Deming’s 14 Points
The closest Deming came to expounding a theory was his 14 points for management. The foundation of the 14 points was Deming’s belief that the historic approach to quality used by American management was wrong in one fundamental aspect: Poor quality was not the fault of labor; it resulted from poor management of the system for continual improvement. 1. Create a constancy of purpose toward improvement of product and service with the aim to become competitive, stay in business and provide jobs. Constancy of purpose means that management commits resources long-term to see that the quality is completed. U.S. management is too short-term oriented. © 2007 Pearson Education

6 Quality Theory Leading Contributors to Theory – Deming’s 14 Points
2. Adopt a new philosophy: We are in a new economic age. Western management must no longer accept defective products and services as normal. 3. Cease dependence on mass inspections to improve quality. Build quality into the product or service – do not inspect quality into the product or service. Quality at the source means management must train and trust workers so workers can be responsible for quality and inspections. © 2007 Pearson Education

7 Quality Theory Leading Contributors to Theory – Deming’s 14 Points
4. End the practice of awarding business on the basis of price tag alone. Minimize total cost by sole sourcing, developing long-term relationships of loyalty and trust, JIT purchasing, and certified suppliers (Malcolm Baldrige National Quality Award Criteria, ISO 9000:2000 international standard for quality systems). Using many suppliers causes an overemphasis on per piece cost, increased variability, and increased supplier management cost. © 2007 Pearson Education

8 Quality Theory Leading Contributors to Theory – Deming’s 14 Points
5. Improve constantly and forever the system of production and service to improve quality and productivity, and, thus, constantly decrease cost. Management is responsible for system design. Workers can be held responsible only for their inputs into the system. Mediocre or poor performance of a system is most often the result of poor performance of management. 85% of errors and defects are caused by flaws in the system and only 15% are caused by workers. 80% of the errors and defects are caused by 20% of the system. © 2007 Pearson Education

9 Quality Theory Leading Contributors to Theory – Deming’s 14 Points
6. Institute training on the job. Training, although a necessary condition for improvement, is not sufficient to guarantee successful implementation of quality management. 7. Improve leadership. This is key to improving quality. Improvement by employees can occur only within the realm of influence of the employee. For wide-ranging improvements to occur, upper management must be committed (hogs, not chickens). © 2007 Pearson Education

10 Quality Theory Leading Contributors to Theory- Deming’s 14 Points
8. Drive out fear of admitting or identifying problems and creating change so that everyone may work effectively for the company. Does an organization want employees who are satisfied with the status quo or who are fearful of challenging the waste in the status quo because of blame-fixing or layoffs? 9. Break down barriers between departments. Employees from different departments must work together in cross-functional teams in team-based decision making. Sequential or departmental approaches to team-based decision making limit the knowledge, information, and perspectives. Parallel processing in cross-functional, focused teams bring all available knowledge, information, and perspectives to bear on the subject. In design, parallel processing in cross-functional, focused teams is called concurrent engineering. © 2007 Pearson Education

11 Quality Theory Leading Contributors to Theory – Deming’s 14 Points
10. Eliminate slogans, exhortations and targets for the workforce that ask for zero defects and new levels of productivity. The bulk (85%) of causes of low quality and low productivity belong to the system and lie beyond the power of the workforce. By pressuring employees to higher levels of productivity and quality, managers place the onus for improvement on the employees. If systems or the means for achieving these higher levels of performance are not provided, workers can become jaded and discouraged. © 2007 Pearson Education

12 Quality Theory Leading Contributors to Theory – Deming’s 14 Points
11. Eliminate work standards on the factory floor. Eliminate management by objective. Eliminate management by numbers and numeric goals. Substitute leadership. Eliminate work measurement standards on the shop floor. Eliminate performance appraisals. Although objectives are set for employees, systems often are not provided by management to attain these goals. © 2007 Pearson Education

13 Quality Theory Leading Contributors to Theory – Deming’s 14 Points
12. Remove barriers that rob workers of their right to pride in the quality of their work. The responsibility of supervisors must be changed from sheer numbers to quality. Employees must be trusted with decisions and self-determination or employees will suffer from low morale and low commitment. © 2007 Pearson Education

14 Quality Theory Leading Contributors to Theory – Deming’s 14 Points
13. Institute a vigorous program of education and self improvement. Learning in an organization is a function of the creativity of employees and the ability of the organization to institutionalize the lessons over time. Organizational learning requires a structure that reinforces and rewards learning. Such an organization is difficult to create in a command-and-control environment because command-oriented managers will not understand what it takes to allow employees to achieve their best. 14. Put everybody in the company to work to accomplish the transformation. A total system for improving quality is needed that includes all of the people in the organization. © 2007 Pearson Education

15 Quality Theory Leading Contributors to Theory – The Deadly Diseases
Lack of constancy of purpose. Emphasis on short-term profits. Evaluation of performance, merit rating, or annual review. Mobility of management. Running a company on visible figures alone. Excessive medical costs for employee health care. Excessive cost of warranties. Deming believed these factors would keep the U.S. from achieving top quality or competitiveness in a world market. © 2007 Pearson Education

16 Quality Theory Leading Contributors to Theory – An Underlying Theory
Deming’s 14 points do not represent a theory but do represent the artifacts of a theory. Anderson, Rungtusanatham, and Schroeder propose a theoretical causal model underlying the Deming management method. Visionary Leadership Organizational Learning Employee Satisfaction Customer Satisfaction Process Management Process Outcomes Low Cost High Quality © 2007 Pearson Education

17 Quality Theory Leading Contributors to Theory - Juran
The Juran Trilogy – three basic processes are essential for managing to improve quality Planning – provides the operating forces with the means of producing products that can meet the customer’s needs Control – gathers data about processes to ensure that processes are stable and provide a relatively consistent outcome Improvement – can be continuous or breakthrough improvements which should occur simultaneously Continuous improvement – incremental process improvements Breakthrough improvement – major process improvements Improvement is accomplished on a project-by-project basis. Managers must prioritize projects based on financial return. Juran applied Pareto’s Law (80/20 rule) in stating that the majority of quality problems are the result of relatively few causes. Focus on the vital few instead of the trivial many. © 2007 Pearson Education

18 Quality Theory Leading Contributors to Theory – Scientific Management
Frederick Taylor wrote The Principles of Scientific Management. Scientific management separated planning from execution. The engineers and managers did the planning and the supervisors and workers executed the plans. Inspectors were moved out of the plant to a central inspection (quality) department. Upper managers concluded that quality was the responsibility of the quality department and these upper managers became detached from quality and lost their knowledge of how to build quality into the product. Inspecting quality into the product worked as long as all competitors did the same. However, the Japanese changed the game by building quality into the product in the 70’s. © 2007 Pearson Education

19 Quality Theory Leading Contributors to Theory – Kaoru Ishikawa
Ishikawa became the foremost Japanese leader in the Japanese quality movement. Ishikawa provided the basic seven tools of quality (B7) for continuous improvement. The B7 tools worked well within the Deming and Juran frameworks. Ishikawa democratized statistics which provided for the complete involvement of the workforce in improving quality. Ishikawa’s major theoretical contribution is his emphasis on total involvement of the operating employees in improving quality. Ishikawa created the phrase company-wide quality control. © 2007 Pearson Education

20 Quality Theory Leading Contributors to Theory – Armand Feigenbaum Feigenbaum wrote Total Quality Control which studied quality in the context of the business organization. Feigenbaum’s primary contribution to quality thinking in America was his assertion that the entire organization should be involved in improving quality. Feigenbaum’s three step process to improving quality: quality leadership – the motivating force for quality improvement quality technology – includes statistics and machinery organizational commitment – including everyone in the quality struggle © 2007 Pearson Education

21 Quality Theory Leading Contributors to Theory – Armand Feigenbaum
Major impediments to improving quality: Hothouse thinking – quality programs that receive a lot of hoopla and no follow-through which happens when firms do not commit resources over time Wishful thinking – occurs with those who would pursue protectionism to keep American firms from having to compete on quality Producing overseas – used by managers who wish that out of sight, out of mind could solve quality-related problems Confining quality to the factory floor – quality is the responsibility of the shop-floor and not everyone’s responsibility Feigenbaum proposed 19 steps for improving quality which emphasize total organizational involvement in improving quality. © 2007 Pearson Education

22 Quality Theory Leading Contributors to Theory – Philip Crosby Crosby wrote Quality Is Free – in this book he stressed that quality, as a managed process, can be a source of profit. Crosby specified a 14 step quality improvement program. These steps provide the Crosby zero-defects approach to quality, the behavior and motivational aspects of quality rather than statistical approaches, and his prescribed actions for management and workers. Although he prescribes quality teams consisting of department heads, Crosby did not promote the same kind of strategic planning proposed by Deming and Juran. Crosby adopted a human resources approach similar to Deming’s in that worker input is valued and is encouraged as central to quality improvement. © 2007 Pearson Education

23 Quality Theory Leading Contributors to Theory – Genichi Taguchi
The Taguchi method was first introduced by Dr. Genichi Taguchi to AT&T Bell Laboratories in the U.S. in The Taguchi method for improving quality is now believed to be comparable in importance to the Deming approach and to the Ishikawa concept of total quality control. Unique aspects of the Taguchi Method: Definition of Quality - Ideal quality is a function of customer perceptions and satisfaction. The target specification should be a measure of the targeted customer perception and satisfaction. Quality Loss Function - Any deviation from the target specification results in a loss to society. The magnitude of the loss to society is directly related to the degree of deviation. Robust Design – Products and services should be designed so that they are inherently defect-free and of high quality. Robust design is achieved in a three-step process: concept design, parameter design, tolerance design. © 2007 Pearson Education

24 Quality Theory Leading Contributors to Theory – Stephan Covey
Stephan Covey wrote The 7 Habits of Highly Effective People. Dr. Covey’s approach to management is value-based. According to Dr. Covey, our beliefs affect how we interact with others, which in turn affects how they interact with us. Therefore, we need to focus on how we approach our lives rather than focusing on external factors that affect our lives. Many quality management principles from people such as Deming are integrated into Dr. Covey’s habits. Dr. Covey’s 7 habits include: Be proactive. Control your environment, instead of having it control you, in the way you react to your environment. Begin with the end in mind. Identify the desired outcome and focus on activities that achieve that end. © 2007 Pearson Education

25 Quality Theory Leading Contributors to Theory – Stephan Covey
Put first things first. Managers need to personally manage themselves and implement activities that aim to achieve the second habit – looking to the desired outcome. Habit two is the first, or mental, creation; habit three is the second, or physical creation. Think win-win. This is the most important aspect of interpersonal leadership because most achievements are based on cooperative effort. Therefore, the aim needs to be win-win solutions for all. Seek first to understand and then to be understood. Listening well is more important than speaking well. Be interested, not interesting. Once you understand their perspective then you can be understood. Synergize. Through creative cooperation, collaboration often achieves more than could be achieved by individuals working independently. Sharpen the saw. Learn from previous experience and encourage others to do the same. Find your voice, and inspire others to find theirs. Merge talent, passion, and conscience to achieve, and to help others to achieve. © 2007 Pearson Education

26 Quality Theory Leading Contributors to Theory – Other Quality Researchers
Robert C. Camp – Pioneered benchmarking with the sharing of information between companies so that both can improve. Tom Peters – wrote In Search of Excellence which produced eight best practices from empirical research of successful quality practices in the form of case studies of firms. The book is thought-provoking, though methodologically loose. His latest book, In Search of Wow!, is entertainment coupled with serious management thinking. © 2007 Pearson Education

27 Quality Theory Leading Contributors to Theory – Other Quality Researchers
Michael Hammer and James Champy – Their collaboration is termed reengineering, which has produced unfortunate consequences for many companies. Their underlying model is sound: Firms can become inflexible and resistant to change and must be able to change in order to become competitive. The problem is in the flawed process for reengineering they promote in their book Reengineering the Corporation. They admit their failure rate is 70% or higher. By ignoring the necessity for attention to detail and analysis, they led many firms to make radical changes to reengineer processes that led to major failures. Lesson to be learned from reengineering failures – Some quality and performance improvement approaches are brainchildren. Others have been observed to work in a number of organizations, in a variety of cultures, and in a number of economic sectors. Avoid the former until they become part of the latter. © 2007 Pearson Education

28 Quality Theory Quality Theory from a Contingency Perspective
There is a mass of contradictory, conflicting information and disagreement… it is best to focus on fundamental questions during the self-assessment phase of strategic planning such as the following types of questions: What are our strengths? What are our competencies? In what areas do we need to improve? What are our competitors doing to improve? What is our organizational structure? What do our customers want? What are our customer’s unmet needs? Where are our customers going? © 2007 Pearson Education

29 Quality Theory Quality Theory from a Contingency Perspective
Once you answer these types of questions, you will have a deep understanding of your business. You combine your business understanding with your understanding of the major approaches to quality improvement. This combination will provide the basis for selecting those points, philosophies, concepts, and tools that will form the basis for your quality improvement plans. Then you creatively apply your selected quality approaches to your business. Firms well known for quality do not adopt only one quality philosophy. The successful firms adopt aspects of each of the various approaches that help them improve. This is called the contingency perspective. © 2007 Pearson Education

30 Quality Theory Resolving Differences – An Integrative View
Reviewing the literature identifies common variables used by Deming, Juran, Crosby, Taguchi, Ishikawa, and Feigenbaum and by Parasurmaman, Zeithamel, and Berry for the services approach. Leadership Information Analysis Strategic Planning Employee Improvement Quality Assurance Customer role in Quality Quality Department Environment Philosophy Driven Quality Breakthrough Project/team-based improvement The core variables are in red. The second layer variables are in blue. And the third layer variables are in black. The primary driver is a customer focus. © 2007 Pearson Education

31 Quality Theory Resolving Differences – An Integrative View
The core variables: Leadership – The role of the leader in being the champion and major force behind quality improvement is critical. Companies having weak leadership in quality will not achieve a market advantage in quality. Leaders must become proficient in quality management approaches and must be willing to lead by example, not just by words. Employee Improvement – Employees must be trained and developed. This training is a long-term undertaking requiring direct investment in training delivery costs and indirect costs associated with temporary lost productivity and time spent in training. Quality Assurance – Quality can be assured only during the design phase. Although statistical inspection is important to improving quality, it is inherently reactive. Effort must be invested in designing products, services, and processes so they are consistently of high quality. © 2007 Pearson Education

32 Quality Theory Resolving Differences – An Integrative View
Customer Focus – An understanding of the customer is key to quality management efforts. Unless firms are gathering data about customers and analyzing these data, they are poorly informed about customer needs and wants. You will not go wrong if you continuously focus on your customer’s needs. Quality Philosophy – Adoption of a philosophy toward quality improvement should establish a clear, simple, focused message providing the company with a map to follow during their quest for improvement. It is up to each organization to determine its own philosophy. © 2007 Pearson Education

33 Quality Theory Resolving Differences – An Integrative View
The second layer variables. Information Analysis – Fact-based improvement requires information gathering and analysis. Data gathering is a key variable for quality improvement. Included in data gathering are statistically related quality control activities. Strategic Planning – This provides a framework for a rational quality strategy that will align your key business factors with your quality management philosophy. Environment or Infrastructure – This infrastructure must provide human resource systems and technological networks that support all other variables in this list. Team approach – Cross-functional teams achieve process improvement and manage key processes. The firm should become a collection of loosely related cross-functional teams performing the work of the firm. © 2007 Pearson Education

34 Quality Theory Resolving Differences – An Integrative View
The third layer variables. Focus of the Quality Department – Rather than performing the policing function, these departments fill more of a coaching role. Also, the knowledge these quality specialists have is useful for training and in-house consulting. Breakthrough – The need to make large improvements is not precluded by continuous improvement. Firms must find ways to achieve radical improvements. You must run the firm with excellent execution and control processes, grow the firm with continuous improvement, and destroy the firm with radical breakthroughs. The processes used to achieve this often involve technological or organizational redesign. Analysis and data are necessary for successful continuous improvements and breakthrough implementations. The power of these common variables is that they focus management on systemic issues rather than the tactical, day-to-day problems. © 2007 Pearson Education

35 Quality Theory The Primary Driver Variable
Theoretical Framework for Quality Management The Primary Driver Variable 2nd Layer Variables Core Variables 3rd Layer Variables © 2007 Pearson Education

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