Introduction to Quality Management (QM) Chapter 5 Introduction to Quality Management (QM) DPT333/3

Introduction to Quality Management (QM) Learning Objectives At the end of this course, you are expected to have an ability to DESCRIBE, EXPLAIN and ILLUSTRATE Definition of Quality, Quality management and its pioneers, Total quality, 2 views of quality, Key elements of total quality, customer satisfaction, Retention and loyalty.

Quality “Quality is in the eye of the beholder” People deal with quality in daily lives. Eg: Shopping, eating in restaurant, buying motorbikes, buying cars, a house, TV, PC, etc Perceived quality is a major factor people consider in market place.

Quality Consider you are eating in a restaurant; How will you judge the quality of the restaurant? Most people apply such criteria below; Service Response time Food preparation Environment Price Selection / food varieties. Tasty

DEFINITION OF QUALITY Defined in a number of different ways by different people/organizations. Fred Smith, CEO of FedEX; “Performance to the standard expected by the customer” General Services Administration (GSA); “Meeting the customer‘s needs the first time and every time”

DEFINITION OF QUALITY US department of Defense; BOEING; “Provide our customers with products and services that consistently meet their needs and expectations” US department of Defense; “Doing the right thing right the 1st time, always strive for improvement, and always satisfying the customers ”

DEFINITION OF QUALITY W. Edwards Deming in his book – OUT OF CRISIS; “Quality can be defined only in terms of his agent….” Quality has many different criteria and different people value the various criteria differently. -Deming

Total Quality (TQ) Approach The total in TQ indicates a concern for quality in the broadest sense - “Big Q” Big Q refers to the quality of the products, services, people, processes, and environments. Little Q – Focus on individual criteria

Total Quality (TQ) Approach 1 The seat is “CUSTOMER FOCUS”. Each of 3 legs is a broad element of TQ approach. 3 legs; Measures - (SPC, Benchmarking, Quality tools) Description: Quality can and must be measured! People - (Quality is built in, Quality is expected but not inspected, employees are empowered) Description: QUALITY cannot be inspected into a product or service, it must be built in by people who are empowered to do their jobs right. Processes - (Continual improvement, Good enough is never enough) Description: PROCESSES must be improved, continually and forever.

Figure 1-1 CUSTOMER FOCUS Measures; Processes People; Continual Improvement Good enough is never enough Measures; SPC Benchmarking Quality Tools People; Quality is built in Quality is expected, not inspected Employees are empowered

Total Quality (TQ) Approach 2 Total Quality is an approach to doing business that attempts to maximize the competitiveness of an organization throuh the continual improvement of the quality of the products, services, people, processes, and environments.

Total Quality (TQ) Approach 2 Achieved by following characteristics; Strategically based Customer focused Obsession with quality Scientific approach Long term commitment Teamwork Continual processes improvement Education and training Freedom through control Employee empowerment

Traditional view of Quality Total Quality Philosophy 2 Views of Quality Traditional view of Quality Total Quality Philosophy Measured process performance in defective parts per hundred produced Measured process performance in defective parts per million produced Inspection of products Emphasis on Continual Improvement of product, processes, people Employee as passive workers, follow orders given. Brains not wanted. Employees empowered to think, make recommendations for CI.

Homework Read page 8-11 – Historic development of TQ

9 Key elements of TQ Strategically based Customer focus Obsession with Quality Scientific Approach Long term commitment Teamwork Continual Process Improvement Education and Training Freedom through Control

1. Strategically based Organizations contains at least vision, mission and broad objectives. Strategic plan designed to give sustainable competitive advantage. Toward achieving world-leading quality and improve forever.

2. Customer focus “Customer is the driver” Applied to both customers: Internal Customer External customer

3. Obsession with Quality Organization must become obsessed with meeting or exceeding quality. “How can we do this better?” “Good enough is never enough”

4. Scientific Approach Hard data are used to in establishing benchmarks, monitoring performance, and making improvements.

5. Long term commitment Management innovations after attending short term seminars often FAIL in their initial attempts to adopt quality approach. Because they often look TQ as another management innovation rather than as a whole new way of culture.

6. Teamwork Partnership is not a pretense, it is a common struggle for the customers, not separate struggles for power. Also applies to relationship with suppliers, regulating agencies, and local communities.

7. Continual Process Improvement Fundamental of Total Quality goal is; Quality of products / services. To continually improve the quality of the product, it is necessary to continually improve systems.

8. Education and Training Fundamental to TQ Represent the best way to improve people. In an organization, every should constantly learning. Encouraged by management Know how to work hard and smart.

9. Freedom through Control Increase the ownership feel about the decision made. Mistake: Management see employee involvement as a loss of management control.

Customer Satisfaction Understanding Customer-Defined Quality Identifying customer needs (Internal & external) Communicating with customers Customer Feedback for Design Improvement Customer Satisfaction process

Customer Satisfaction Customer defines Quality, employee produce it. In a TQ setting, External Customers (Buyers/purchasers) define quality, and Internal Customer (staff) produce it.

Who is a CUSTOMER? Company and its processes Figure 7-1: History: Traditional view of supplier and customer relationship Supplier Supplier Supplier Supplier Company and its processes Customer Customer Customer Customer

Who is a CUSTOMER? Fig7-2: Contemporary view of customer supplier relationship Supplier Supplier Supplier Supplier Customer & Supplier Customer & Supplier Customer & Supplier Customer & Supplier Customer & Supplier Customer Customer Customer Customer

Customer defined value Product/service must have attributes customers want. Factors important to customers: Products/service quality Service provided by organization Organization’s personnel Organization’s image Selling price Overall cost of product.

Customer Satisfaction, Retention, and Loyalty MAJOR TOPICS Understanding Who Is a Customer Understanding Customer-Defined Quality Identifying External Customer Needs Identifying Internal Customer Needs Communicating with Customers Using Customer Feedback to Make Design Improvements

Customer Satisfaction, Retention, and Loyalty Customer Satisfaction Process Customer-Defined Value Customer Value Analysis Customer Retention Establishing a Customer Focus Recognizing the Customer-Driven Organization Value Perception and Customer Loyalty Customer Loyalty Model Customer Loyalty versus Customer Profitability Customers as Innovation Partners

Customer Satisfaction, Retention, and Loyalty Historically - customers were considered who used a company’s products and suppliers were outsiders who provided the materials needed to produce the products. A more contemporary view - every organization has both internal and external customers.

Customer Satisfaction, Retention, and Loyalty An external customer - one referred to in the traditional definition. An internal customer - any employee whose work depends on that of employees whose work precedes his or hers.

Customer Satisfaction, Retention, and Loyalty In a total quality setting, customers define quality. Customer satisfaction must be the HIGHEST PRIORITY.!!! Can be achieved by producing high-quality products that meet or exceed expectations. Must be renewed with each purchase. The key to establishing a customer focus is to put employees in touch with customers so that customer needs are understood.

Customer Satisfaction, Retention, and Loyalty Scholtes’ six-step strategy for identifying customer needs: speculate about results, develop an information-gathering plan, gather information, analyze the results, check the validity of conclusions take action.

Customer Satisfaction, Retention, and Loyalty Customer needs are NOT STATIC. So constant contact with customers is important in a total quality setting. Should be in-person or by telephone. Written surveys - can be used, but will not produce the level of feedback that personal contact can generate.

Customer Satisfaction, Retention, and Loyalty Quality function deployment (QFD) is a mechanism for putting into operation the concept of building in quality. It makes customer feedback a normal part of the product development process, thereby improving customer satisfaction.

Customer Satisfaction, Retention, and Loyalty Measuring customer satisfaction alone is not enough. Many customers who defect are satisfied. Organizations should measure customer retention. Organizations should go beyond satisfying customers to creating value for them in every supplier-customer interaction.

Customer Satisfaction, Retention, and Loyalty The customer loyalty model consists of four components: Business performance Global perceptions Loyalty behaviors Financial outcomes

Customer Satisfaction, Retention, and Loyalty The goal of organizations should be more than just earning customer loyalty; it should be earning the loyalty of profitable customers. Organizations should never assume a positive correlation between customer loyalty and profitability, nor should they assume that a customer who is initially profitable will always be profitable.

Customer Satisfaction, Retention, and Loyalty An innovative approach to product development that is gaining acceptance is turning customers into innovation partners. With this approach, the customer is given a technological tool kit for designing his or her own products and making product innovations..

Customer Satisfaction, Retention, and Loyalty Innovative approach is implemented using the following steps: Develop a tool kit for customers that is easy to use Increase the flexibility of your own production processes Carefully select the first customers to use your took kit Continually improve your tool kit Adapt business practices to suit the innovation partnership approach