1. 6 - 1

2. 6 - 2© 2011 Pearson Education, Inc. publishing as Prentice Hall The Flow of Activities Organizational Practices Leadership, Mission statement, Effective operating procedures, Staff support, Training Yields:What is important and what is to be accomplished Quality Principles Customer focus, Continuous improvement, Benchmarking, Just-in-time, Tools of TQM Yields:How to do what is important and to be accomplished Employee Fulfillment Empowerment, Organizational commitment Yields:Employee attitudes that can accomplish what is important Customer Satisfaction Winning orders, Repeat customers Yields:An effective organization with a competitive advantage Figure 6.2

3. 6 - 3© 2011 Pearson Education, Inc. publishing as Prentice Hall Service Industry Inspection Organization What is Inspected Standard Jones Law OfficeReceptionist performance Billing Attorney Is phone answered by the second ring Accurate, timely, and correct format Promptness in returning calls Table 6.4

4. 6 - 4© 2011 Pearson Education, Inc. publishing as Prentice Hall Service Industry Inspection Organization What is Inspected Standard Hard Rock HotelReception desk Doorman Room Minibar Use customer’s name Greet guest in less than 30 seconds All lights working, spotless bathroom Restocked and charges accurately posted to bill Table 6.4

5. 6 - 5© 2011 Pearson Education, Inc. publishing as Prentice Hall Service Industry Inspection Organization What is Inspected Standard Arnold Palmer Hospital Billing Pharmacy Lab Nurses Admissions Accurate, timely, and correct format Prescription accuracy, inventory accuracy Audit for lab-test accuracy Charts immediately updated Data entered correctly and completely Table 6.4

6. 6 - 6© 2011 Pearson Education, Inc. publishing as Prentice Hall Service Industry Inspection Organization What is Inspected Standard Olive Garden Restaurant Busboy Waiter Serves water and bread within 1 minute Clears all entrée items and crumbs prior to dessert Knows and suggest specials, desserts Table 6.4

7. 6 - 7© 2011 Pearson Education, Inc. publishing as Prentice Hall Service Industry Inspection Organization What is Inspected Standard Nordstrom Department Store Display areas Stockrooms Salesclerks Attractive, well-organized, stocked, good lighting Rotation of goods, organized, clean Neat, courteous, very knowledgeable Table 6.4

8. 6 - 8© 2011 Pearson Education, Inc. publishing as Prentice Hall Service Specifications at UPS

9. 6 - 9© 2011 Pearson Education, Inc. publishing as Prentice Hall Determinants of Service Quality ReliabilityConsistency of performance and dependability ResponsivenessWillingness or readiness of employees CompetenceRequired skills and knowledge AccessApproachability and ease of contact CourtesyPoliteness, respect, consideration, friendliness CommunicationKeeping customers informed CredibilityTrustworthiness, believability, honesty SecurityFreedom from danger, risk, or doubt Understanding/ knowing the customer Understand the customer’s needs TangiblesPhysical evidence of the service Table 6.5

10. 6 - 10© 2011 Pearson Education, Inc. publishing as Prentice Hall Service Recovery Strategy  Managers should have a plan for when services fail  Marriott’s LEARN routine  Listen  Empathize  Apologize  React  Notify

11. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 11 Chapter 14: Improving Service Quality and Productivity

12. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 12 Questions When Developing Strategies to Improve Service Productivity  How to transform inputs into outputs efficiently?  Will improving productivity hurt quality?  Will improving quality hurt productivity?  Are employees or technology the key to productivity?  Can customers contribute to higher productivity?

13. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 13 Long Waiting Times May Indicate Need for Service Process Redesign (Fig 14.8)

14. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 14

15. 3-15Copyright 2009, John Wiley & Sons, Inc. Total Quality Management  Commitment to quality throughout organization  Principles of TQM Customer-oriented Customer-oriented Leadership Leadership Strategic planning Strategic planning Employee responsibility Employee responsibility Continuous improvement Continuous improvement Cooperation Cooperation Statistical methods Statistical methods Training and education Training and education

16. 3-16Copyright 2009, John Wiley & Sons, Inc.

17. 3-17Copyright 2009, John Wiley & Sons, Inc. Cost of Quality  Cost of Achieving Good Quality Prevention costs Prevention costs costs incurred during product design costs incurred during product design Appraisal costs Appraisal costs costs of measuring, testing, and analyzing costs of measuring, testing, and analyzing  Cost of Poor Quality Internal failure costs Internal failure costs include scrap, rework, process failure, downtime, and price reductions include scrap, rework, process failure, downtime, and price reductions External failure costs External failure costs include complaints, returns, warranty claims, liability, and lost sales include complaints, returns, warranty claims, liability, and lost sales

18. 3-18Copyright 2009, John Wiley & Sons, Inc. Prevention Costs  Quality planning costs costs of developing and implementing quality management program costs of developing and implementing quality management program  Product-design costs costs of designing products with quality characteristics costs of designing products with quality characteristics  Process costs costs expended to make sure productive process conforms to quality specifications costs expended to make sure productive process conforms to quality specifications  Training costs costs of developing and putting on quality training programs for employees and management costs of developing and putting on quality training programs for employees and management  Information costs costs of acquiring and maintaining data related to quality, and development of reports on quality performance costs of acquiring and maintaining data related to quality, and development of reports on quality performance

19. 3-19Copyright 2009, John Wiley & Sons, Inc. Appraisal Costs  Inspection and testing costs of testing and inspecting materials, parts, and product at various stages and at the end of a process costs of testing and inspecting materials, parts, and product at various stages and at the end of a process  Test equipment costs costs of maintaining equipment used in testing quality characteristics of products costs of maintaining equipment used in testing quality characteristics of products  Operator costs costs of time spent by operators to gar data for testing product quality, to make equipment adjustments to maintain quality, and to stop work to assess quality costs of time spent by operators to gar data for testing product quality, to make equipment adjustments to maintain quality, and to stop work to assess quality

20. 3-20Copyright 2009, John Wiley & Sons, Inc. Internal Failure Costs  Scrap costs costs of poor-quality products that must be discarded, including labor, material, and indirect costs costs of poor-quality products that must be discarded, including labor, material, and indirect costs  Rework costs costs of fixing defective products to conform to quality specifications costs of fixing defective products to conform to quality specifications  Process failure costs costs of determining why production process is producing poor-quality products costs of determining why production process is producing poor-quality products  Process downtime costs costs of shutting down productive process to fix problem costs of shutting down productive process to fix problem  Price-downgrading costs costs of discounting poor- quality products—that is, selling products as “seconds” costs of discounting poor- quality products—that is, selling products as “seconds”

21. 3-21Copyright 2009, John Wiley & Sons, Inc. External Failure Costs  Customer complaint costs costs of investigating and satisfactorily responding to a customer complaint resulting from a poor-quality product costs of investigating and satisfactorily responding to a customer complaint resulting from a poor-quality product  Product return costs costs of handling and replacing poor-quality products returned by customer costs of handling and replacing poor-quality products returned by customer  Warranty claims costs costs of complying with product warranties costs of complying with product warranties  Product liability costs litigation costs resulting from product liability and customer injury litigation costs resulting from product liability and customer injury  Lost sales costs costs incurred because customers are dissatisfied with poor quality products and do not make additional purchases costs incurred because customers are dissatisfied with poor quality products and do not make additional purchases

22. Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 22 16.1 Managing for Productivity WHAT IS PRODUCTIVITY?  Productivity is defined as outputs divided by inputs where: outputs are the goods and services produced, and inputs are labor, capital, materials, and energy  Productivity is important because it determines whether a company will make a profit and affects a country’s standard of living  Maintaining productivity depends on control

23. Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 23 16.1 Managing for Productivity Figure 16.1: Managing for Productivity and Results

24. Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 24 16.2 Control: When Managers Monitor Performance WHY IS CONTROL IMPORTANT?  Control is making something happen the way it was planned to happen, while controlling is monitoring performance, comparing it with goals, and taking corrective action as needed  Recall that:  -planning is setting goals and deciding how to achieve them  -organizing is arranging tasks, people, and other resources to accomplish the work  -leading is motivating people to work hard to achieve the organization’s goals  -controlling is making sure performance meets objectives

25. Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 25 16.2 Control: When Managers Monitor Performance Figure 16.2: Controlling for Productivity

26. Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 26 16.2 Control: When Managers Monitor Performance  There are six reasons why control is needed: 1. To adapt to change & uncertainty - organizations need to be able to deal with change and uncertainty in the environment 2. To discover irregularities and errors - without checks and balances, companies might not survive 3. To reduce costs, increase productivity, or add value - control systems can reduce costs, increase output, and add value to a product

27. Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 27 16.2 Control: When Managers Monitor Performance 4. To detect opportunities - controls can help firms identify opportunities that might otherwise go unnoticed 5. To deal with complexity - controls help firms deal with the complexities of multiple product lines, customer bases, and so on 6. To decentralize decision making & facilitate teamwork - controls allow top managers to decentralize control to lower levels and encourage teamwork

28. Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 28 16.2 Control: When Managers Monitor Performance  There are four steps in the control process: 1. Establish Standards  The desired performance level for a given goal is a control standard, or performance standard  Standards can be broad or narrow 2. Measure Performance  Performance is measured using three sources: written reports, oral reports, and personal observation

29. Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 29 16.2 Control: When Managers Monitor Performance 3. Compare Performance To Standards  Measured performance is compared to established standards  The amount of deviation acceptable depends on the predetermined range of variation  Some firms follow management by exception where managers are informed of a situation only if data show a significant deviation from standards 4. Take Corrective Action, If Necessary  Firms can make no changes to the current situation, recognize and reinforce positive performance, or take action to correct negative performance

30. Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 30 16.2 Control: When Managers Monitor Performance Figure 16.4: Steps in the Control Process

31. Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 31 16.6 Total Quality Management HOW CAN QUALITY BE IMPROVED?  Total quality management (TQM) is a comprehensive approach, led by top manager and supported throughout the organization, dedicated to continuous quality improvement, training, and customer satisfaction  The two core principles of TQM are people orientation (everyone involved in the organization should focus on delivering value to customers), and improvement orientation (everyone should work on continuously improving work processes)  There are several techniques for improving quality including employee involvement, benchmarking, outsourcing, reduced cycle time, and statistical process control

32. Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 32 16.7 Managing Control Effectively HOW CAN CONTROL BE MANAGED SUCCESSFULLY?  Successful control systems are: 1. Strategic & results oriented – they support strategic plans and focus on activities that will make a real difference to the firm 2. Timely, accurate, & objective 3. Realistic, positive, & understandable & encourage self- control 4. Flexible - so that they can be modified as needed

33. Total Quality Management CII Institute of Logistics Total Quality Management

34. 3-34 Meaning of Quality: Consumer’s Perspective  Fitness for use  how well product or service does what it is supposed to  Quality of design  designing quality characteristics into a product or service  A Mercedes and a Ford are equally “fit for use,” but with different design dimensions CII Institute of Logistics Total Quality Management

35. Dimensions of Quality: Manufactured Products  Performance  basic operating characteristics of a product; how well a car is handled or its gas mileage  Features  “extra” items added to basic features, such as a stereo CD or a leather interior in a car  Reliability  probability that a product will operate properly within an expected time frame; that is, a TV will work without repair for about seven years CII Institute of Logistics Total Quality Management

36.  Conformance  degree to which a product meets pre–established standards  Durability  how long product lasts before replacement  Serviceability  ease of getting repairs, speed of repairs, courtesy and competence of repair person Dimensions of Quality: Manufactured Products (cont.) CII Institute of Logistics Total Quality Management

37.  Aesthetics  how a product looks, feels, sounds, smells, or tastes  Safety  assurance that customer will not suffer injury or harm from a product; an especially important consideration for automobiles  Perceptions  subjective perceptions based on brand name, advertising, and the like Dimensions of Quality: Manufactured Products (cont.) CII Institute of Logistics Total Quality Management

38. Dimensions of Quality: Service  Time and Timeliness  How long must a customer wait for service, and is it completed on time?  Is an overnight package delivered overnight?  Completeness:  Is everything customer asked for provided?  Is a mail order from a catalogue company complete when delivered? CII Institute of Logistics Total Quality Management

39. Dimensions of Quality: Service (cont.)  Courtesy:  How are customers treated by employees?  Are catalogue phone operators nice and are their voices pleasant?  Consistency  Is the same level of service provided to each customer each time?  Is your newspaper delivered on time every morning? CII Institute of Logistics Total Quality Management

40.  Accessibility and convenience  How easy is it to obtain service?  Does a service representative answer you calls quickly?  Accuracy  Is the service performed right every time?  Is your bank or credit card statement correct every month?  Responsiveness  How well does the company react to unusual situations?  How well is a telephone operator able to respond to a customer’s questions? Dimensions of Quality: Service (cont.) CII Institute of Logistics Total Quality Management

41. Meaning of Quality: Producer’s Perspective  Quality of Conformance  Making sure a product or service is produced according to design  if new tires do not conform to specifications, they wobble  if a hotel room is not clean when a guest checks in, the hotel is not functioning according to specifications of its design CII Institute of Logistics Total Quality Management

42. Another way to put it  At it’s simplest, TQM is all managers leading and facilitating all contributors in everyone’s two main objectives: 4(1) total client satisfaction through quality products and services; and processes, systems, people, suppliers, partners, products, and services. 4(2) continuous improvements to processes, systems, people, suppliers, partners, products, and services. CII Institute of Logistics Total Quality Management

43. Quality Throughout  “A Customer’s impression of quality begins with the initial contact with the company and continues through the life of the product.” Customers look to the total package - sales, service during the sale, packaging, deliver, and service after the sale. Quality extends to how the receptionist answers the phone, how managers treat subordinates, how courteous sales and repair people are, and how the product is serviced after the sale.  “All departments of the company must strive to improve the quality of their operations.” CII Institute of Logistics Total Quality Management

44. Value-based Approach  Manufacturing Dimensions Performance Features Reliability Conformance Durability Serviceability Aesthetics Perceived quality  Service Dimensions Reliability Responsiveness Assurance Empathy Tangibles CII Institute of Logistics Total Quality Management

45. Quality Gurus  Walter Shewart In 1920s, developed control charts Introduced the term “quality assurance”  W. Edwards Deming Developed courses during World War II to teach statistical quality-control techniques to engineers and executives of companies that were military suppliers After the war, began teaching statistical quality control to Japanese companies  Joseph M. Juran Followed Deming to Japan in 1954 Focused on strategic quality planning CII Institute of Logistics Total Quality Management

46.  Armand V. Feigenbaum  In 1951, introduced concepts of total quality control and continuous quality improvement  Philip Crosby  In 1979, emphasized that costs of poor quality far outweigh the cost of preventing poor quality  In 1984, defined absolutes of quality management—conformance to requirements, prevention, and “zero defects”  Kaoru Ishikawa  Promoted use of quality circles  Developed “fishbone” diagram  Emphasized importance of internal customer Quality Gurus (cont.) CII Institute of Logistics Total Quality Management

47. Strategic Implications of TQM  Strong leadership  Goals, vision, or mission  Operational plans and policies  Mechanism for feedback CII Institute of Logistics Total Quality Management

48. © 2007 Pearson Education How Process Performance and Quality fits the Operations Management Philosophy Operations As a Competitive Weapon Operations Strategy Project Management Process Strategy Process Analysis Process Performance and Quality Constraint Management Process Layout Lean Systems Supply Chain Strategy Location Inventory Management Forecasting Sales and Operations Planning Resource Planning Scheduling

49. © 2007 Pearson Education 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

50. © 2007 Pearson Education 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

51. © 2007 Pearson Education Costs of Poor Process Performance  Defects: Any instance when a process fails to satisfy its customer.  Prevention costs are associated with preventing defects before they happen.  Appraisal costs are incurred when the firm assesses the performance level of its processes.  Internal failure costs result from defects that are discovered during production of services or products.  External failure costs arise when a defect is discovered after the customer receives the service or product.

52. © 2007 Pearson Education Hidden costs of poor Quality

53. The 9 Dimensions of Quality Performance Features Conformance ----------------------------- Reliability Durability Service ----------------------------- Response- of Dealer/ Mfgr. to Customer Aesthetics – of product Reputation- of Mfgr./Dealer Cost Performance FeaturesService

54. Effects of poor Quality Low customer satisfaction Low productivity, sales & profit Low morale of workforce More re-work, material & labour costs High inspection costs Delay in shipping High repair costs Higher inventory costs Greater waste of material

55. Five ways to Improve a Process Reduce resources Reduce errors Meet or exceed expectations of internal/external customers Make the process safer Make the process more satisfying to the person doing it.