Chapter 6 Total Quality Management

Chapter Outline Quality imperative

Quality and Productivity Improved: Performance Reliability Features etc. Improved reputation for quality Increased Market share Experience- based scale economies Higher Prices Increased Profits I. Market Gains

Quality and Productivity Improved reliability or conformance Increased productivity Lower manufacturing costs Lower service costs Lower warranty and product liability costs Increased Profits II. Cost Savings Lower rework and scrap costs

Relative Quality Boosts rates of return Relative quality (percentile) %

The Costs of Poor Quality  Prevention Costs  Appraisal Costs  Internal Failure Costs  External Failure Costs

Costs of quality assurance Prevention Costs QC administration and systems planning Quality training Quality planning (QC engineering work) Incoming, in- process, final inspection Special processes planning Quality data analysis Procurement planning Vendor surveys Reliability studies Quality measurement and control equipment Qualification of material Source: Adapted form J. W. Gavett, Production and Operations Management (New York: Harcourt Brace Jovanovich

Costs of quality assurance Appraisal Costs Testing Inspection Quality audits Incoming test and inspection and laboratory acceptance Checking labor Laboratory or other measurement service Setup for test and inspection Test and inspection material Outside endorsement Maintenance and calibration Product engineering review and shipping release Field testing Source: Adapted form J. W. Gavett, Production and Operations Management (New York: Harcourt Brace Jovanovich

Costs of quality assurance Internal Failure Costs Scrap, at full shop cost Rework, at full shop cost Scrap and rework, fault of vendor Material procurement Factory contact engineering QC investigations (of failures) Material review activity Repair and troubleshooting Source: Adapted form J. W. Gavett, Production and Operations Management (New York: Harcourt Brace Jovanovich

Costs of quality assurance External Failure Costs Complaints and loss of customer goodwill Warranty costs Field maintenance and product service Returned material processing and repair Replacement inventories Strained distributor relations Source: Adapted form J. W. Gavett, Production and Operations Management (New York: Harcourt Brace Jovanovich

Costs of Detecting Defects Cost of detection and correction Process Final testing Customer Where defect is detected Figure 6.3

Percentage Cost Distribution by Category: Watches External failure 52% Internal failure 29% Appraisal 16% Prevention 3% Fourth-Quarter Indexes

Hidden costs of poor Quality

Chapter Outline Quality imperative Defining quality

TOTAL QUALITY INTERFACES QUALITY QUALITY OF PERFORMANCE QUALITY OF DESIGN QUALITY OF CONFORMANCE CONSUMER NEEDS/REQUIREMENTS WORK PROCESS/SYSTEM

Chapter Outline Quality imperative Defining quality Contrasting approaches to quality

Approaches To QM Passive Find it and fix it Emphasize on AQL It is a job of QC department Quantity is top priority Quality is expensive Active Build Q into the product Focus on PC and CI It is a company- wide concern Quality is top priority Higher Q means lower cost TraditionalNew

Chapter Outline Quality imperative Defining quality Contrasting approaches to quality How to build quality

TQM Wheel Figure 6.1

Employee Involvement Cultural change Teams Three types Individual development Awards and incentives

A (Act) P (Plan) (Check) C (Do) D Quality Never-ending improvement The Deming (PDCA) Cycle

TQM Wheel Figure 6.1

Chapter Outline Quality imperative Defining quality Contrasting approaches to quality How to build quality Quality awards and certification

ISO9000

ISO 9000 Standards and Their Areas of Application in Production Flow Design Development ProcurementProductionInstallationServicing ISO9001 ISO9002 ISO9003

Accredit ISO Guide 40, EN ACCREDITATION & REGISTRATION PROCESS Registrar Accreditation Board Registrars Suppliers* Purchasers Auditors Course Providers Assure ISO 9000 Series Certify ISO Assure ISO 9000 Series Recognize Train Audit Employ Register ISO Guide 48 * Registered to ISO 9001, 9002, or 9003

 Category 1 - Leadership 110 points  Category 2 - Strategic Planning 80 points  Category 3 - Customer and Market Focus 80 points  Category 4 - Information and Analysis 80 points  Category 5 - Human Resource Focus 100 points  Category 6 - Process Management 100 points  Category 7 - Business Results 450 points Criteria for Performance Excellence

 Leadership -  Leadership - The organization’s leadership system and senior leaders’ personal leadership  Strategic Planning -  Strategic Planning - How the organization sets strategic directions and how it develops the critical strategies and action plans  Customer and Market Focus -  Customer and Market Focus - How the company determines requirements, expectations, and preferences of customers and markets  Information and Analysis -  Information and Analysis - The selection, management, and effectiveness of use of information and data to support key company processes and action plans, and the company’s performance management system  Human Resource Focus -  Human Resource Focus - How the company enables employees to develop and utilize their full potential, aligned with the company’s objectives  Process Management -  Process Management - How key processes are designed, implemented, managed, and improved  Business Results -  Business Results - The organization’s performance and improvement in key business areas