TQM.

Summary

TQM SUMMARY NOTES

1.1 Quality definition
➢ Meeting customer’s needs continually
➢ Delivering the right product or service for he required purpose by the customer at the
right price, right time and right place
➢ What it takes to satisfy the customer
➢ A characteristic of a product or service which ensures that the product or service is
attractive in the customer’s eyes.
➢ Conformance to specifications: quality is a measure of how well a product or service
meets the target and tolerance by its designers e.g. a machine part with 3 cm and
tolerance of +-0.05 has the target value 3 and the acceptable tolerance of 2.95 to 3.05
cm.
➢ Fitness to use: quality is how well the product or service is performing its intended
functions.
➢ Value for price paid: quality is the product/service for the price paid.
➢ Support Service: quality is support provided after the product or service is purchased.
➢ Quality applies to the people, processes and organisational environment associated
with the product/service
1.2 Importance of quality
➢ Helps in increasing the need to focus on the customer; satisfying the customer is the
foundation of successful organisations
➢ Helps distinguish the offerings of competing companies; customer chooses which
product or service which satisfies him/her.
➢ Helps improve the design of the product/service; two goods may serve the same
purpose, sell the same price. But the customer will go for the one which is well-designed
from high standards materials. Raises customer loyalty
➢ Quality increase the price of the product; the more the product is paid for the better the
product. “you get what you paid for”
➢ It increases the market share; make the sale of the product if the quality is sufficient to
satisfy enough customers.
1.3 What is focus on the customer?
➢ Quality is conceptualised in terms of customer’s perception
➢ Customer receives a product/service
➢ Organisation objectives; to identify customer’s needs so as to meet the customer’s and
the company’s needs.
➢ Organisation intends to meet the requirement first time to avoid the cost of sorting out
problems

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1.4 Reasons for hardships in quality in service industry

➢ High volume of transaction
➢ Immediate consumption
➢ It difficult to measure and control quality
➢ Mare labour intensive
➢ High degree of customisation required; making specifications.
➢ Image is a quality characteristic
➢ And behaviour is a quality characteristic
1.5 Deming’s Seven deadly diseases faced the production companies
➢ Lack constancy of purpose; lack of consistency of the target
➢ Emphasis on short term profits
➢ Evaluation of performance, merit rating or annual review performance; the top
management comparing their subordinates’ performance to others
➢ Mobility of management; change of management within short periods of time
➢ Running the company on visible figures only; neglecting the feedback from the
customers while focusing only on the profit.
➢ Excessive medical costs; maintaining the health of workers
➢ Excessive costs of warranty fuelled by lawyers who work on contingency fees; fees that
are payable only if the outcome is successful
1.6 Cost of quality
➢ The cost associated with providing poor quality product/service; cost associated with non-
achievement of product/service quality
➢ Need to understand cost of quality
1. Helps understand hidden costs
2. Helps reduce and eliminate unnecessary costs
3. Helps prevent problem from happening
➢ Cost of quality estimates
1. Manufacturing: 25% because the cost of quality of a product can easily be measured
2. Service industry: 35% because the difficulty in measuring the cost of quality of a
service
➢ TQM perspective on quality costs
1. Deming; improving quality reduces and improves profitability. Therefore, quality
should be improved continually
2. Profit is maximised at the optimum quality level; optimum quality level is achieved
before the maximum attainable profit is reached. Draw the graphs to show the
relationships between the total revenue and costs, and quality. Return on quality
(ROQ).
1.6 Classification of Quality Costs
➢ Prevention costs: costs incurred during design
➢ Appraisal costs: costs of measuring, testing and analysis
➢ Failure costs: costs due to poor quality

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Prevention Costs (conformance costs)

1. Quality Planning costs: cost of developing and implementing the quality mgt program
2. Product Design costs: costs of designing a product with quality characteristics
3. Process costs: costs of ensuring that productive process conforms to quality specs
4. Training costs: costs of developing and putting training programs for mgt and
employees
5. Information costs: costs of acquiring and maintaining data related to quality; also
developing reports on quality performance
Examples: prototype testing, design review, market analysis, equipment maintenance
repair etc
Appraisal Costs (conformance costs).
➢ Inspection and Testing Costs: costs of inspecting and testing products at every stage and
at the end of the process.
➢ Test Equipment costs: cost of maintaining the testing equipment used to test the quality
characteristics of the product
➢ Operator costs: cost of time spent by the operator to collect data for testing product
quality, to maintain the quality by adjusting the equipment and to stop the work to assess
quality
➢ Examples: lab-test, final inspection, equipment calibration, prototype inspection etc

Failure costs (non-conformance costs)

1. Internal failure costs (within the organisation)
➢ Scrap costs: costs of discarding poor quality products, including labour
material and indirect costs.
➢ Rework costs: costs of fixing the defective products to conform quality specs
➢ Process Failure: costs of determining why the production process is producing
poor quality products
➢ Process Down-time costs: cost of shutting the process down to fix the process
problem
➢ Price Down-grading: costs of discounting poor quality product; selling
products as seconds.
2. External failure costs:
➢ Customer Complaints costs: costs of investigating and responding to
customer complaints due to a poor-quality product
➢ Product return costs: costs of handling and replacing poor-quality products
returned by the customer
➢ Warranty claims costs: costs of complying with the product warranties
➢ Product liability costs: costs resulting from product liability and customer
injuries
➢ Lost Sales costs: the customers are dissatisfied and do not make additional
purchases

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TQM.Summary

1.7 The 1-10-100 Rule

➢ States that $1 spent on prevention will save $10 on appraisal and $100 on failure costs.
➢ Helps prioritise expenditure on prevention to bring in greater returns
➢ The earlier the defect is detected and prevented the more is saved
Example
➢ Catch a two-cent resistor and throw it away before use, lose two cents
➢ You don’t find it until it is soldered into a computer component, you need $10 to
repair the part
➢ You don’t catch the component until it is in the hands of the computer user, you
need hundreds of dollars to repair the part.
➢ If the computer to be repaired is $5000, the expenses may exceed the manufacturing
costs.
1.7 Difficulties in Using Quality Costing
➢ Management do not believe in the possibilities of improvement
➢ Quality costing is demanding; requires a lot of data of each activity related to quality
➢ Does not resolve quality problems
➢ Does not provide specific actions
➢ Subject to measurement errors
➢ Hard to match effort and achievement
➢ Vulnerable to short term mismanagement
➢ May neglect important or include inappropriate costs.
1.8 TQM
➢ Method by which mgt and employees get involved in the continuous improvement of
goods and services
➢ An integrated organisational effort designed to improve quality at any level
➢ Integrates all functions to focus on meeting the customer needs and organisational
objectives
➢ Functions: engineering, design, marketing, etc
➢ Incorporates the knowledge and workers’ experience
➢ Stresses that quality is customer-driven; embeds quality in all aspects of the
organisation
➢ Deals with technical aspects of quality and involvement of people in quality; customers,
employees and suppliers
➢ Do the right thing, the first time, over time by
➢ Identifying the root causes of quality problems
➢ Correcting them at the source; not inspecting the product after it has been made.

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1.9 Features of TQM

a) Customer Focus
➢ To identify customer needs
➢ Meet the customer needs as per definition of quality
➢ TQM
o Quality is customer-driven; a perfectly produced product has little value if it is
not what the customer wants
o What the customer wants, tastes and prefers varies from one customer to another
b) Continuous Improvement (KAIZEN)
➢ KAIZEN: a Japanese concept of continuous improvement
➢ Companies strive to better continuously by learning and solving problems
➢ To achieve perfection, evaluate performance and take measures to improve it.
➢ Improvements must be done even if a certain level of quality is reached
➢ Then KAIZEN involves
a. Analysis of every part of the process down to the smallest detail
b. Seeing how every part of the process can be improved
c. Looking at how employees’ actions, equipment and materials can be improved
d. Looking at ways of saving time and reduce wastes
➢ KAIZEN focuses on eliminating wastes in systems and processes to meet the
expectations of high quality, low-cost and on-time delivery
➢ It transforms companies into superior global competitors e.g Toyota
1.10 Approaches to Continuous Improvements
➢ PDSA Cycle, Benchmarking and Employee empowerment
PDSA (Plan-Do-Study-Act)
➢ Shows that continuous improvement is never-ending process
➢ Plan: Managers evaluate current process and make plans based on the problems found.
➢ Do: The plan is implemented; managers document all changes made and collect data
for evaluation
➢ Study: The collected data is evaluated to see whether the plan has achieved the goal
established
➢ Act: The results are communicated to other members in the company and a new
procedure is implemented if the plan has been successful
Benchmarking
➢ Studying other companies’ business practices for comparison
➢ Requires the ability to learn and study how others do things
➢ Benchmark company has to excel at what it wishes to emulate (strive to equal) although
not in the same business

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Employee Empowerment
➢ Empower employees to seek out quality problems
➢ Employees shouldn’t be criticised or rebuked when they identify problems
➢ Instead, provide incentives for them to identify problems; rewarding them for
uncovering the quality problem not punishing them
➢ TQM
o Emphasises team work to solve quality problems (two heads are better than
one); quality is an organisational effort
o Uses techniques: brainstorming, quality control tools and team work to correct
problems
1.11 The 7 Basic Tools to Improve Process Quality
Quality control tools help employees interpret findings and how to correct them.
a. Scatter Diagrams
➢ Used to show how two variables are related to each other
➢ Used to detect the amount of correlation or degree of linear relationship between
the two variables
➢ Positive correlation: increase in one variable results in the increase in the other
variable e.g production speed increases with the number of defects
➢ Negative correlation: increase in one variable results in the decrease in the other
variable e.g.
➢ The greater the degree of correlation the more linear are the observations, and the
less the correlation the more scattered are the observations
b. Pareto Analysis
➢ Data organised on the histogram based on the frequency
➢ Explains the 80-20 rule; most quality problems are as a result of few causes and the
trick is to identify these causes.
➢ The Pareto analysis helps identify major causes of quality problems on their degree
of importance.
➢ Construction
o Analyse data to determine the frequency
o Identify vital few causes
o Calculate the percentages and add them to find the vital few causes (80%)
o Draw the cumulative curve
➢ Example: make a tally of the number of defects that results from different causes
(e.g operator error, defective parts, or inaccurate machine calibration). Calculate the
percentage of defects from the tally. Place the percentages in a chart beginning from
the most prevalent. Draw the cumulative frequency curve
c. Checklists/Check sheets/Flow charts
➢ Schematic diagrams of sequence of steps involved in an operation or process
➢ Provide a visual tool of understanding; seeing the steps involved makes it easy to
develop a clear picture of how the operation works and the source of problems
➢ Frontline workers count the frequency of occurrence of the defect
➢ They list the common defects and the number of occurrences
➢ The workers collect information regarding the defects observed

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d. Histograms
➢ They categorise data in cells and plot them to see if any pattern is emerged.
➢ The chart shows the frequency distribution of observed values of variables
➢ Plot frequency against variable observed.

e. Run Charts
➢ They plot data as a function of time

f.Cause-and-Effect Diagram (Fishbone diagram-Ishikawa)

➢ Network identifying potential causes for a particular problem
➢ Head of Fish: the quality problem
➢ Spine connected to the head: possible causes of the problem e.g workers, machine
problem: old equip., lack of training poor supervision or fatigue
➢ Construction
1. Determine the problem (issue)
2. Write the problem statement in a box to the right of the diagram
3. Find the main causes and write them on branches following the main branch
4. Identify all possible causes and write them on the diagram as sub-causes in each
category
➢ Pareto diagrams help
o determine the real causes of the problem
o check the potential effects of a solution

g. Control Charts
➢ They determine whether the variations in the results are caused by common or special
causes
➢ Evaluates whether a process is operating within expectations relative to the reference
values
➢ If the process is in control, it is operating within expectations
➢ To evaluate control, a variable of interest is measured and plotted on a control chart
➢ Chart has a centre line drawn representing the average of the variable being measured
➢ The centre line has the UCL and LCL
➢ If the observed value falls within the UCL and LCL, the process is in control and there
is no problem with the quality; otherwise there is a problem.
1.12 Product Design
➢ Companies translate customer’s daily language onto specific technical requirements;
product design must meet customer specifications
➢ Companies use quality function development (QFD) to translate customer’s voice into
specific requirements.
➢ QFD enables communication between different functions eg marketing, operation and
engineering
➢ QFD helps analyse relationships such as running tests to see how changes in certain
technical requirements affect customer requirements

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TQM.Summary

QFD STEPS
1. Identify important customer requirements as seen from the market dept
2. Score the requirements numerically based on their importance
3. Translate scores into specific product characteristics
4. Evaluate how the product compares with its main competitor relative to the
identified characteristics
Reliability: the probability that the product/service will perform its intended functions.
A product with 90% reliability has 90% chances of functioning as intended
1.13 Process Management
➢ TQM emphasises that quality product comes from a quality process; quality must be
built into process
➢ Quality at service: it is far much better to uncover the sources of quality problems and
correct them than to discard defective items after production
➢ The problem continues if it is not corrected at the source
➢ Quality indicates the difference between the old and new concept of quality
➢ Old concept of quality: Inspecting the goods after they are produced or after a
particular stage of production. If there is a defect after inspection, the defective products
are either discarded or sent back for reworking; costs the company which in turn affects
the customer
➢ New concept of quality: Identifies quality problems at the source and correcting them.
1.14 Managing Suppliers Quality
➢ Suppliers engage in competitive price bidding for companies
➢ When materials arrive, companies inspect the materials to check their quality
➢ TQM views this as contributing to poor quality and wasted time and cost
➢ So, TQM ensures that the suppliers engage in the same quality practices so that if
suppliers meet the pre-set quality standards, materials do not have to be inspected upon
arrival.
➢ Companies send their representatives in their suppliers’ locations thereby involving
suppliers in every stage from design to final production
1.14 The 5 whys Problem Solving Technique
➢ This is an iterative interrogative technique used to explore the cause-and-effect
relationships underlying a particular problem
➢ The goal is to determine the root cause of a defect by repeating the question “why” at
least five times
➢ Example: The vehicle will not start (problem)
1. Why? – the battery is dead
2. Why? – the alternator is not functioning
3. Why? – the alternator belt is broken
4. Why? – the alternator belt was beyond its useful service life and was not replaced
5. Why? – the vehicle was not maintained according to the recommended service
schedule (5th Why: the root cause)

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1.15 The Six Sigma

➢ Scientific and statistical program aimed at near elimination of defects from every
product, process and transaction
➢ Strategic initiative to boost profitability, increase market share and improve customer
satisfaction.
➢ It is a 4s (systematic, scientific, statistical and smarter)
➢ It integrates the four elements: man power, process, customer, strategy to provide
mgt innovation (creation of new process or device through expts)
➢ Six Sigma tells how good the process is.
➢ Provides efficiency in man power cultivation and utilisation: correct labour allocation
➢ Provides flexibility is the 3Cs
o Change: changing business society
o Customer: understanding that quality is customer-driven. Power shifte to
customers
o Competition: competition in the quality and productivity
➢ So, six sigma is a measure of process capability; how capable of meeting the customers’
needs the process is.
Key Concept of MGT
o Objective of six sigma is to improve the performance of the process to
▪ Reduce costs
▪ Improve customer satisfaction
▪ Increase revenue; increase profits
A process transforms inputs into outputs
Input: anything from labour, machines, decisions
o Control Factors: inputs that can be physically controlled
o Noise Factors: Uncontrollable inputs
1.16 Variation
➢ An indication that no two products are exactly alike; because process has many sources
of variability.
➢ Data values for any process always vary
➢ Variation is the major cause of defects and excess costs in every company; number one
enemy
➢ But Six Sigma focuses on practical solutions of reducing variations
1.17 Sources of Variations
➢ Common Sources
o sources within a process
o also called “in a stable of statistical control”
o common sources are random variations inherent in the process
o not easily removed unless changing the design of the process or product
o found everywhere
o the output of the process can be predicted if only common causes are present

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➢ Special Causes
o Factors causing variation not present in the process
o Make change in the process distribution
o They are identified and acted upon
o The process output is unpredictable and not stable over time
1.19 Customer Satisfaction (Six sigma loop)
➢ Achieved when all customers’ requirements are met
➢ Six Sigma: customer requirements must be fulfilled by measuring and improving
processes and products
➢ Critical-to-quality (CTQ) is measured on a basis to produce few defects in the eyes of
the customer
➢ Improvement of customer satisfaction gives increased market share and revenue growth
➢ Cost reduction and revenue growth increases profit and commitment
1.20 Process Performance Measurement Methods
➢ Defect rate (p), PPM, DPMO, and Sigma Level
➢ Defect rate: ratio of the number of defective products out of specs to the total number
of items process or produced
➢ PPM: number of defective items out of one million inspected items
➢ DPMO: number of defective opportunities that do not meet the required specs of one
million possible opportunities of defects; used when ppm becomes unuseful
➢ Sigma Level: see the Six sigma table and interpret the table relating the DPMO to the
sigma number.
1.21 DMAIC vs DMADV
Finish this up. I am really tired.

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