Total Quality Management

What Is Total Quality Management (TQM)?

Total quality management (TQM) is the continual process of detecting and reducing or eliminating
errors in manufacturing, streamlining supply chain management, improving the customer
experience, and ensuring that employees are up to speed with training. Total quality
management aims to hold all parties involved in the production process accountable for the overall
quality of the final product or service.

TQM was developed by William Deming, a management consultant whose work had a great
impact on Japanese manufacturing. While TQM shares much in common with the Six Sigma
improvement process, it is not the same as Six Sigma. TQM focuses on ensuring that internal
guidelines and process standards reduce errors, while Six Sigma looks to reduce defects.

Total quality management (TQM) is a structured approach to overall organizational management.

The focus of the process is to improve the quality of an organization's outputs, including goods
and services, through continual improvement of internal practices. The standards set as part of the
TQM approach can reflect both internal priorities and any industry standards currently in place.

Industry standards can be defined at multiple levels and may include adherence to various laws
and regulations governing the operation of the particular business. Industry standards can also
include the production of items to an understood norm, even if the norm is not backed by official
regulations.

Primary Principles of Total Quality Management

TQM is considered a customer-focused process and aims for continual improvement of business
operations. It strives to ensure all associated employees work toward the common goals of
improving product or service quality, as well as improving the procedures that are in place for
production.

Special emphasis is put on fact-based decision making, using performance metrics to monitor
progress; high levels of organizational communication are encouraged for the purpose of
maintaining employee involvement and morale.
 TQM is a management philosophy that seeks to integrate all organizational functions (marketing,
finance, design, engineering, and production, customer service, etc.) to focus on meeting customer
needs and organizational objectives.

TQM views an organization as a collection of processes. It maintains that organizations must strive
to continuously improve these processes by incorporating the knowledge and experiences of
workers. The simple objective of TQM is “Do the right things, right the first time, every time.”
TQM is infinitely variable and adaptable. Although originally applied to manufacturing operations,
and for a number of years only used in that area, TQM is now becoming recognized as a generic
management tool, just as applicable in service and public sector organizations. There are a number
of evolutionary strands, with different sectors creating their own versions from the common
ancestor. TQM is the foundation for activities, which include:

 Commitment by senior management and all employees

 Meeting customer requirements
 Reducing development cycle times
 Just in time/demand flow manufacturing
 Improvement teams
 Reducing product and service costs
 Systems to facilitate improvement
 Line management ownership
 Employee involvement and empowerment
 Recognition and celebration
 Challenging quantified goals and benchmarking
 Focus on processes / improvement plans
 Specific incorporation in strategic planning

Industries Using Total Quality Management

While TQM originated in the manufacturing sector, its principles can be applied to a variety of
industries. With a focus on long-term change over short-term goals, it is designed to provide a
cohesive vision for systemic change. With this in mind, TQM is used in many industries, including,
but not limited to, manufacturing, banking and finance, and medicine.

These techniques can be applied to all departments within an individual organization as well. This
helps ensure all employees are working toward the goals set forth for the company, improving
function in each area. Involved departments can include administration, marketing, production,
and employee training.
 Principles of TQM
The key principles of TQM are as following:

Management Commitment
 Plan (drive, direct)
 Do (deploy, support, participate)
 Check (review)
 Act (recognize, communicate, revise)

Employee Empowerment
 Training
 Suggestion scheme
 Measurement and recognition
 Excellence teams

Fact Based Decision Making

 SPC (statistical process control)
 DOE, FMEA
 The 7 statistical tools
 TOPS (Ford 8D – team-oriented problem solving)

Continuous Improvement
 Systematic measurement and focus on CONQ
 Excellence teams
 Cross-functional process management
 Attain, maintain, improve standards

Customer Focus
 Supplier partnership
 Service relationship with internal customers
 Never compromise quality
 Customer driven standards
 The Concept of Continuous Improvement by TQM
TQM is mainly concerned with continuous improvement in all work, from high level strategic
planning and decision-making, to detailed execution of work elements on the shop floor. It stems
from the belief that mistakes can be avoided and defects can be prevented. It leads to continuously
improving results, in all aspects of work, as a result of continuously improving capabilities, people,
processes, technology and machine capabilities.

Continuous improvement must deal not only with improving results, but more importantly with
improving capabilities to produce better results in the future. The five major areas of focus for
capability improvement are demand generation, supply generation, technology, operations and
people capability.

A central principle of TQM is that mistakes may be made by people, but most of them are caused,
or at least permitted, by faulty systems and processes. This means that the root cause of such
mistakes can be identified and eliminated, and repetition can be prevented by changing the
process.1
There are three major mechanisms of prevention:

1. Preventing mistakes (defects) from occurring (mistake-proofing or poka-yoke).

2. Where mistakes can’t be absolutely prevented, detecting them early to prevent them being passed
down the value-added chain (inspection at source or by the next operation).
3. Where mistakes recur, stopping production until the process can be corrected, to prevent the
production of more defects. (stop in time).

Implementation Principles and Processes

A preliminary step in TQM implementation is to assess the organization’s current reality. Relevant
preconditions have to do with the organization’s history, its current needs, precipitating events
leading to TQM, and the existing employee quality of working life. If the current reality does not
include important preconditions, TQM implementation should be delayed until the organization is
in a state in which TQM is likely to succeed.

If an organization has a track record of effective responsiveness to the environment, and if it has
been able to successfully change the way it operates when needed, TQM will be easier to
implement. If an organization has been historically reactive and has no skill at improving its
operating systems, there will be both employee skepticism and a lack of skilled change agents. If
this condition prevails, a comprehensive program of management and leadership development may
be instituted. A management audit is a good assessment tool to identify current levels of
organizational functioning and areas in need of change. An organization should be basically
healthy before beginning TQM. If it has significant problems such as a very unstable funding base,
weak administrative systems, lack of managerial skill, or poor employee morale, TQM would not
be appropriate.

However, a certain level of stress is probably desirable to initiate TQM. People need to feel a need
for a change. Kanter (1983) addresses this phenomenon be describing building blocks which are
present in effective organizational change. These forces include departures from tradition, a crisis
or galvanizing event, strategic decisions, individual “prime movers,” and action vehicles.
Departures from tradition are activities, usually at lower levels of the organization, which occur
when entrepreneurs move outside the normal ways of operating to solve a problem. A crisis, if it
is not too disabling, can also help create a sense of urgency which can mobilize people to act. In
the case of TQM, this may be a funding cut or threat, or demands from consumers or other
stakeholders for improved quality of service. After a crisis, a leader may intervene strategically by
articulating a new vision of the future to help the organization deal with it. A plan to implement
TQM may be such a strategic decision. Such a leader may then become a prime mover, who takes
charge in championing the new idea and showing others how it will help them get where they want
to go. Finally, action vehicles are needed and mechanisms or structures to enable the change to
occur and become institutionalized.
 Company: TOYOTA

Total Quality Management (TQM) would not be what it is today without Toyota Motors.
Renowned for its lean production system, Toyota Motors is the tenth most important company in
the world according to Fortune Global 500 and one of the only companies on the list to directly
address TQM.

Toyota Motors Co., Ltd. has received various prestigious awards for quality management,
including the Deming Application Prize in 1965 and the Japan Quality Control Award in 1970.

For Toyota, TQM is based on the concept of “customer first”, kaizen meaning continuous
improvement and “total participation” which means the involvement and input of all employees. In
1951, Toyota launched the Creative Idea Suggestion System to support and encourage
employees in making effective contributions to the company’s development. Toyota introduced
Statistical Quality Control (SQC) in 1949. The company also makes great efforts to give back with
community-based projects and environmental initiatives.

These concepts are at the core of Toyota’s Production System (TPS), and have led to higher quality
of products and work, and improvement in all aspects of the organization, from individuals to
services.

History of TQM at Toyota

Understanding the magnitude of the company’s contribution to overall total quality management
is a great feat. First of all, one must look back at history.

The Industrial Revolution marked a turning-point in the manufacturing industry with the
introduction of assembly-lines and mass production. It marked a time of innovation and Japan
wanted to compete – so it «put the call out for inventors». Another turning-point in TQM was
during the Second World War. Weapon-manufacturing, especially in the U.S., required the
optimization of manufacturing machinery, goods and statistical methods to keep track of
production. Although the U.S. took part in the development of Quality Control methods, industrial
engineers and statisticians who wanted to implement new techniques were often overlooked
because Quality was associated with a greater effort and restrictive regulations.

Japan’s economy was in need of total economic rebuilding, so they invited Statisticians and
Quality Managers such as Edward Deming and Malcolm Badridge to help reshape the
economy. Toyota was one of the first to implement Quality Control in the 1940’s and 1950’s.
Toyota’s current method known as Toyota’s Production System, aka “lean production”, owes itself
to the work of Edward Deming and is today a reference point for Quality Management
worldwide. Along with core principles such as “Customer First” and «kaizen», Toyota boasts
many management tools such as its 8 Step Practical Problem Solving method, PDCA, A3
Reporting and 5S.
 PRACTICE OF TQM IN TOYOTA

SWOT Analysis
SWOT analysis is a method used to analyze the internal and external environment of an
organization. Following is a comprehensive SWOT analysis of Toyota Motor Company.

Strengths
Toyota operates factories in US and China that led to increase in company profits since 2005.

The organization through careful segmentation, Targeting and positioning offers the right product
mix to the market.

Toyota is highly efficient in its manufacturing which uses total quality management.

Toyota has a strong brand name which is a house hold brand name all around the world.

Weaknesses
Toyota is excessively focused on US and Japanese markets. Thus, suffers from fluctuating
economic and political conditions of these countries.

Toyota has few layers in its hierarchy and as a result there are few opportunities for promotions.

Heavy emphasize on techniques such as kaizen has led to higher level of stress among workers.

Opportunities
Toyota and Lexus have pioneered the environmentally friendly technologies. The world needs
vehicles inspired by such technologies more than ever.

The company is targeting the urban youth market which has a huge potential.

The European Union is emerging as a world of opportunities for auto manufacturers. Toyota
already has a large market share in countries such as Denmark, Finland, Ireland et al.

Threats
Global recession has drastically affected the performance of the global auto industry.

Rising gas prices due to the OPEC decision of price hike is a severe damage.
PESTLE Analysis
The PESTLE stands for

P – Political

E – Economical

S – Social

T – Technological

L – Legal

E – Environmental

Political
Since it is a global organization Toyota needs to observe the global political situation. For the past
few years Toyota has been enjoying from some of the government’s key decisions. The
government’s decision to limit vehicle imports to Japan and the US government’s introduction of
quota system in vehicle importing eases the pressure of heavy competition from the outsiders.

The Japanese government has provided stimulus packages and tax reliefs to deal with the recent
economic down turn.

Economical
The global recession has hit the global auto industry severely. With inevitable losses companies
tend to cut jobs. The same is applicable to Toyota.

Due to sky rocketing cost of living people might be prioritizing the fulfillment of their needs at
primitive levels. In such a background the industry might get a serious blow. Also, during the past
5 consecutive years the global auto mobile sales in major markets have sharply dropped.

Social
Social factors are vital in deciding the demand for a certain good. Throughout the past decade
Japan is experiencing a growing adult population. It is estimated that by 2030 the 65-year-old
population will be 25.6% of the total population of Japan. Some critical changes in the age structure
of the country can be observed. Also, the country’s negative population growth rates provide
serious implications for the business organizations. Because the shrinking population implies that
the business organizations will have to face a shortage in skilled labor in the near future.
Technology
With the introduction of cutting-edge production technologies adoption of such technologies in
the auto industry can be widely seen. Use of robotics for production in Japan has become a major
trend.

In this information age people have more ways to know about products which makes the present
consumer a highly aware one compared to some decades back.

The development in World Wide Web led to many organizations going online. The organization
will have to adapt to the new ground realities of online marketing to stay ahead of the curve.

Legal
Today although the free trade is been heavily promoted some key player in the global economy
are following protectionism. Countries such as India, Brazil et al are imposing legal restrictions on
foreign auto manufacturers in order to promote indigenous manufacturing.

With its recall of some of the car models in 2010 Toyota had to face several court cases over
accidents occurred due to defect Toyota cars. It was reported that Toyota has paid $ 1.2 million in
settlement of a case that was filed against the company.

Environment
The global warming and climate change have become a burning problem in today’s world. The
changes in this regard have a major influence on the global auto mobile industry.

The global warming has insisted the global auto manufacturing firms to come up with less emission
solutions. Governments all around the world are raising the standards and tightening the
environmental laws on this matter.

In addition to the global warming problem the dwindling oil reserves in Middle Eastern countries
which are expected to come to an end as soon as 2040s has urged the auto manufacturers to seek
more sustainable and energy efficient solutions for the future.

The green marketing has become a major weapon for any organization competing in today’s auto
industry. Today the green products as well as green production methods has become a threshold
in many cases. Thus, any organization lagging behind its counterparts in green marketing is in the
path to destruction.

Analysis
Although the total quality management is widely adopted in today’s highly dynamic business
environment Toyota motor company has its own version of quality management called the Toyota
production system or TPS. The TPS includes just in time production which means manufacturing
products in required amounts avoiding excess inventories Kanban and Jidoko or automation.

According to the field research done and published by Harvard’s Steven J. Spear it leads to the
conclusion that Toyota has achieved a dynamic capability by following the ‘Rules-in-Use’ for

Organizational design, improvement, and adaptation.

The paper identifies that in TPS managed organizations every operation is performed by carrying
out hypothesis testing experiments that makes accelerated generation and accumulation of
individual and organizational learning about coordinating delegating, and performing work done
collaboratively. This also includes work which is done repeatedly few times.

Just in time
The idea behind just in time is manufacturing the required amounts in required numbers at the
required time. For instance, the assembly line of a car arrives all the sub assembly lines should
reach the main assembly line in right quantities. This will eliminate the need for inventories thus
removing the requirement for warehouses and storage facilities. As a result the inventory cost will
be drastically reduced giving a higher capital turn out to the company.

The JIT manufactures quality products in an efficient manner by completely eliminating waste,
inconsistencies and unwanted use of production lines. According to the JIT the Toyota by adhering
to the following guidelines can manufacture a car which was ordered by a customer in a soonest
possible manner.

No sooner an order is received for a vehicle the instructions as well as specifications of the vehicle
reach the start of the production line.

The assembly line is stored with sufficient parts and components to enable the plant to assemble
any kind of vehicle model without any delays.

The assembly line must replace the parts used by retrieving the same number of parts from the
parts-producing process.

The preceding process should store a small number of all types of parts to manufacture only the
numbers of parts that were retrieved by an operator from the next process.

The Toyota production system is a practical and effective as it popped out from the real-life
experience of the organization. This system is enriched with practical effects, actual practices and
implications over the analysis.
This system has a vital role in developing the quality of operations of the companies all around the
world. Even to this date hundreds of western companies are using the Toyota quality management
methods which are a clear indication of Toyotas success.

Since Toyotas founding, we have adhered to the core principal of contributing to society through
the practice of manufacturing high quality products and services. Our business practices and
activities based on this core principal created values, beliefs and business methods that over the
years have become a source of competitive advantage. these are the managerial values and business
methods that are known collectively as the Toyota way. – Fujio Cho, president Toyota
ISSUES FACED BY TOYOTA IN LAST FIVE YEARS