managing quality ch01

PART ONE

Understanding Quality Concepts

To understand quality in the supply chain, we need a common language. In thegeneral public, the language of quality is imprecise and inconsistent. Thelanguage of quality professionals is much more precise and consistent.

To understand the advanced concepts in the later chapters, in Chapters 1 through3 we build a conceptual foundation of quality theory. This forms the basis of the con-tingency approach. To apply quality improvement on a contingent basis, one needs tounderstand the foundation that has been laid by leaders in the quality movement suchas W. Edwards Deming, Joseph Juran, Philip Crosby, Kaoru Ishikawa, and others.Thesepeople have made huge contributions to the well-being of the world, and a knowledgeof their teachings and ideas is necessary for quality application.

In Chapter 3 we consider important frameworks, such as ISO 9000:2000, theDeming Prize, and the Baldrige criteria. These provide models for improvement thatare being used in many countries around the world.

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Because of permissions issues, some material (e.g., photographs) has been removed from this chapter, though reference to itmay occur in the text. The omitted content was intentionally deleted and is not needed to meet the University's requirements forthis course.

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Managing Quality: Integrating the Supply Chain, Third Edition, by S. Thomas Foster. Published by Prentice Hall. Copyright © 2007 by Pearson Education, Inc.

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CHAPTER 1

Differing Perspectives on Quality

You know a dream is like a riverEver changing as it flows.

—GARTH BROOKS

RECOGNIZING DIFFERENT PERSPECTIVES ON QUALITY

Quality management involves flows. There are process flows, information flows,material flows, and flows of funds. Each of these flows has to operate effec-tively, efficiently, and with outstanding quality. Like a river, we refer to

upstream flows and downstream flows. The sums of these flows construe the supplychain.

Considering the supply chain causes us to think about quality differently. One ofthe problems with quality efforts has been that they tend to be too internally oriented.The supply chain causes us to expand our vision as we internalize processes that hadpreviously been externalized. These include upstream processes relating to our dealingwith suppliers—negotiating, selecting, and improving supplier performance—anddownstream processes—delivering products and services and serving customers.

The supply chain encompasses many differing functions and processes. It includes allof the core activities from the raw materials stage to after-sales service. To execute all ofthese processes correctly involves integrating differing functions, expertise, and dimen-sions of quality.This need for integration increases the need for flexible, cross-functional,problem-solving and employees who can adapt to rapidly changing markets.

There are many different definitions and dimensions of quality in the supply chain.We will present several of these definitions and dimensions in this chapter. For thepresent, you should view quality as a measure of goodness that is inherent to a productor service. Employees working for the same firm often view quality differently. Thinkof the different functions that are involved in creating products and services. Theseinclude design engineering, marketing, operations, cost accounting, financial manage-ment, and others throughout the supply chain. A product design engineer might feelthat customer satisfaction is mostly influenced by product design and product attrib-utes and might take great pains to design a product that satisfies the customer.However, the product also needs to satisfy marketing’s need for quick design cycletimes and accounting’s need for low-cost products. So perceptions differ on a variety oflevels, including what our goals for the product or service are. A Closer Look atQuality 1-1 illustrates this point by comparing people’s perceptions of differing musi-cal technologies. The discussion shows just how perceptions of quality can vary.Although CDs have many technological advantages, including improved durabilityand less surface noise, many consumers and performers long for the intangible“warmth” of LPs.

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4 PART 1 Understanding Quality Concepts

A CLOSER LOOK AT QUALITY 1-1

WHICH ARE BETTER, CDS OR LPS?In the early 1980s, the introduction of the digitalcompact disc (CD) revolutionized the music world.The predecessor of the CD, the long-playing record(LP), was made of pressed vinyl that was subject towear after repeated use. CDs were much moredurable than LPs. LPs had a much greater tendencyfor surface noise, and many closets were filled withold, scratchy LP records that owners were loath tothrow away. LP records also had limited capacity.For example, if too many songs were pressed on arecord, the record would be more likely to skip, be-cause the groove in the record was too narrow forthe stylus (record player needle). CDs were capableof holding much more music for the same price.

In 1982, Sony and Philips launched the CD asthe “perfect sound forever.” However, music loverscomplained that CDs sounded too sterile andlacked the “warmth” of the LPs. Jazz pianist KeithJarrett complained “CDs lose the subtlety whereexpression lies.” An early adopter of digital tech-

nology, musician Neil Young, lamented “digital wasa disaster.” He stated that digital music was “an in-sult to the brain and heart and feelings.”

These feelings fueled a move away from digitalCDs and back to LPs among some customers andperformers. For example, the popular rock groupPearl Jam from Seattle, Washington, released arecording in vinyl LP format only. Several reissuesof recordings by classic blues, jazz, rock, and rapartists such as Muddy Waters,Albert Collins, JohnnyCopeland, Koffee Brown, The Manhattan Transfer,Aerosmith, and the Buzzcocks have been marketedin vinyl.

CD technology is being supplanted by digitalvideo disc (DVD) technology with up to 17 times thestorage capacity of the CD, improved video capability,and better-quality audio as well as MP3 and otherdigital technologies.What is clear is that the meaningof quality varies drastically from person to person. Itis left to each of us to decide. Which do we like best?

Perceptions affect every aspect of our world—including the business world.In order to communicate effectively about quality, managers need to recognize thatdifferences in perceptions of quality exist. Although this observation may not seemtoo startling, many managers have strong opinions about what quality is. Sometimesthese opinions can be at variance with the beliefs of the majority of their customers.This may hurt the competitiveness of a firm. For that reason, in this chapter we studyquality from a variety of perspectives. Later we provide a means for recognizing andresolving differences in perception. Finally, we introduce contingency view of qualitymanagement that we emphasize throughout this book.

WHAT IS QUALITY?

If you ask ten people to define quality, you probably will get ten definitions.

Product Quality DimensionsThere are several definitions of quality, or quality dimensions. One of the mostrespected collections of quality dimensions was compiled by David Garvin1 of theHarvard Business School. Garvin found that most definitions of quality were eithertranscendent, product-based, user-based, manufacturing-based, or value-based. Whatdoes each of these terms mean?

1Garvin, D., “What Does ‘Product Quality’ Really Mean?” Sloan Management Review (Fall 1984):25–43.

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CHAPTER 1 Differing Perspectives on Quality 5

Transcendent: Quality is something that is intuitively understood but nearlyimpossible to communicate, such as beauty or love.Product-based: Quality is found in the components and attributes of a product.User-based: If the customer is satisfied, the product has good quality.Manufacturing-based: If the product conforms to design specifications, it hasgood quality.Value-based: If the product is perceived as providing good value for the price, ithas good quality.

Using these five definitions of quality, Garvin developed a list of eight qualitydimensions (see Table 1-1). These dimensions describe product quality specifically inthe following paragraphs.

Performance refers to the efficiency with which a product achieves its intendedpurpose.This might be the return on a mutual fund investment, the fuel efficiency of anautomobile, or the acoustic range of a pair of stereo speakers. Generally, better perfor-mance is synonymous with better quality.

Features are attributes of a product that supplement the product’s basic perfor-mance. These include many of the “bells and whistles” contained in products. A visit toany television or computer retail store will reveal that features, such as surround sound,HDTV capability, plasma, and size, are powerful marketing tools for which customerswill pay a premium. A full-line television retail store may carry televisions priced from$200 to $12,000.This range represents a 6,000% price premium for additional features!

Reliability refers to the propensity for a product to perform consistently over its use-ful design life. A subfield in quality management has emerged, called reliability manage-ment, based on the application of probability theory to quality. A product is consideredreliable if the chance that it will fail during its designed life is very low. If a refrigeratorhas a 2% chance of failure in a useful life of 10 years, we say that it is 98% reliable.

Conformance is perhaps the most traditional definition of quality. When a productis designed, certain numeric dimensions for the product’s performance will be estab-lished, such as capacity, speed, size, durability, or the like. These numeric productdimensions are referred to as specifications.The number of ounces of pulp allowed in ahalf-gallon container of “pulp-free” orange juice is one example. Specifications typi-cally are allowed to vary a small amount called a tolerance. If a particular dimension ofa product is within the allowable range of tolerance of the specification, it conforms.

The advantage of the conformance definition of quality for products is that it iseasily quantified. However, it is often difficult for a service to conform to numeric spec-ifications. For example, imagine trying to measure the quality of a counselor’s work

NOT AVAILABLE FORELECTRONIC VIEWING

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2King, C., “A Framework for a Service Quality Assurance System,” Quality Progress 20, 9 (1987):27–32.

versus that of a carmaker. Because counseling is intangible, it is almost impossible tomeasure.

Durability is the degree to which a product tolerates stress or trauma without fail-ing. An example of a product that is not very durable is a light bulb. Light bulbs aredamaged easily and cannot be repaired. In contrast, a trash can is a very durable prod-uct that can be subjected to much wear and tear.

Serviceability is the ease of repair for a product. A product is very serviceable if itcan be repaired easily and cheaply. Many products require service by a technician, suchas the technician who repairs your personal computer. If this service is rapid, courteous,easy to acquire, and competent, then the product generally is considered to have goodserviceability. Note that different dimensions of quality are not mutually exclusive.

Aesthetics are subjective sensory characteristics such as taste, feel, sound, look,and smell. Although vinyl interiors in automobiles require less maintenance, are lessexpensive, and are more durable, leather interiors generally are considered more aes-thetically pleasing. In terms of aesthetics, we measure quality as the degree to whichproduct attributes are matched to consumer preferences.

Perceived quality is based on customer opinion.As we said in the beginning of thischapter, quality is as the customer perceives it. Customers imbue products and serviceswith their understanding of their goodness. This is perceived quality. We can witness anexample of the effect of perceived quality every year in college football polls that rankteams. In many cases, the rankings are based on past records, team recognition, tradi-tion of the university, and other factors that are generally poor indicators of teamquality on a given Saturday. In the same way that these factors affect sportswriters’perceptions, factors such as brand image, brand recognition, amount of advertising, andword of mouth can affect consumers’ perceptions of quality.

The Garvin list of quality dimensions, although it is the most widely cited and used,is not exhaustive. Other authors have proposed lists of additional quality measures,such as safety. Carol King2 identified dimensions of service quality such asresponsiveness, competence, access, courtesy, communication, credibility, security, andunderstanding. Allowed time, you probably could think of additional dimensions aswell.

Service Quality DimensionsService quality is even more difficult to define than product quality. Although servicesand production share many attributes, services have more diverse quality attributesthan products. This often results from wide variation created by high customer involve-ment. For example, the consumer of a fountain pen probably will not care that the fac-tory worker producing the pen was in a foul mood (as long as the quality of the pen isgood). However, excellent food served in a restaurant generally will not suffice if theserver is in a foul mood. In addition, a consumer probably will not consider a pen poorquality if he or she is in a bad mood when using the pen. However, food and service in arestaurant could be excellent and still be perceived poorly if the patron is feeling badly.

Parasuraman, Zeithamel, and Berry, three marketing professors from Texas A&MUniversity, published a widely recognized set of service quality dimensions. Thesedimensions have been used in many service firms to measure quality performance.TheParasuraman, Zeithamel, and Berry dimensions are defined here (see Table 1-2).

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Tangibles include the physical appearance of the service facility, the equipment,the personnel, and the communication materials. For example, a hotel with yellowedlinens will be rated low for quality. Hair salons catering to an elite clientele mightinvest in ambient lighting and employ only well-dressed hairstylists.That the hairstylistis dressed well does not affect the service being provided; however, clients believe thattheir hair will be better styled by someone who is dressed stylishly.

Service reliability differs from product reliability in that it relates to the ability ofthe service provider to perform the promised service dependably and accurately. Forexample, a firm might hire a consultant based on reputation alone. If the consultantdelivers what the customer wants, then the customer will be satisfied and pay the con-sultancy fee. If the consultant delivers something other than what the customerexpects, the customer will not pay the consultancy fee.

Responsiveness is the willingness of the service provider to be helpful and promptin providing service. When you last called your bank for service, how long did it takefor a response? Were your problems taken care of quickly, or did you have to pay for atoll call while you listened to “elevator music” for an hour? Does your service provideralways respond to you within three rings of the phone—without forwarding your callto another location?

Assurance refers to the knowledge and courtesy of employees and their ability toinspire trust and confidence. If you needed heart surgery, you probably would not optfor a doctor who appeared forgetful and disorganized during an office consultation.Rather, you would want assurance that the doctor is competent.

Finally, consumers of services desire empathy from the service provider. In otherwords, the customer desires caring, individualized attention from the service firm.A maxim in the restaurant industry is that “if you are in it for the money, you probablywon’t survive.” A restaurant where the employees are constantly focused on efficiencywill not give the customers the feeling that their needs are important. Therefore, noempathy will be shared, and restaurant employees will not adequately provide servicethat will make customers want to return again and again.

Just as there are many quality dimensions relating to production, there are sev-eral other dimensions of service quality, such as availability, professionalism, timeliness,completeness, and pleasantness. It should be noted that service design strives toaddress these different service dimensions simultaneously. It is not sufficient for aservices firm to provide only empathy if responsiveness and service reliability areinadequate.


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Why Does It Matter That Different Definitions of Quality Exist?One problem with having multiple dimensions of quality is communication. It is diffi-cult to devise a coherent strategic plan relating to quality when communication isimprecise. One important attribute of a strategic plan is functional alignment or con-sistency. If different departments in a company understand quality differently, then thestrategic plan will not be in alignment. Understanding that different definitions anddimensions of quality exist allows measures to be taken to provide a good basis forcommunication and planning. By sharing a common definition of quality, each depart-ment within a company can work toward a common goal. In addition, understandingthe multiple dimensions of quality desired by consumers can lead to improved productand service design. Hewlett-Packard Corporation, a producer of laser printers for com-puters, understands this concept very well. Early in their quality journey, Hewlett-Packard developed products that consistently conformed to specifications. Thisinvolved years of product design, process control, and process improvement. Once theprinters conformed to specifications, the company emphasized reliability. After theprinters were found to be reliable, the company was able to improve the aesthetics oftheir printers. After years of working on these different quality dimensions, Hewlett-Packard embarked on a “customer one-on-one” program that emphasized customerinteraction with production workers. In this program, Hewlett-Packard productionworkers take time to call customers on the phone to assess and improve the “relation-ship” that the customer has with a printer.

DIFFERING FUNCTIONAL PERSPECTIVES ON QUALITY

One of the important determinants of how we perceive quality is the functional role wefulfill organizationally. Just as artists and scientists process information differently, sodo employees who perform different functions in an organization.

For example, information systems analysts often find it difficult to communicatewith information systems users and internal managers for several reasons. Why? A pri-mary reason is that the basic nature of the two jobs is different. Users might deal withthe consumer of the product or service as the final customer. Analysts almost neverinteract with the external customer. To the analyst, the user is the customer. Trainingreceived by analysts and users is very different. Analysts usually have a computer sci-ence background that stressed logic, systems languages, and hardware architectures.Management training more often stresses decision making, human resource manage-ment, and strategic planning. Analysts are more detail oriented. Users often are morefocused on “big picture issues” such as productivity improvement and cost contain-ment. User system requirements differ from analyst system requirements. For example,users often are concerned with work flows and quality, whereas analysts are concernedwith the efficiency and function of the machine. This difference in the nature of thework performed by users and analysts causes them to see quality issues differently. Toan analyst, machine performance may be an important definition of quality. However,to the user, the manner in which the system improves responsiveness to customerinquiries may be more important.

Differences between users and analysts are only one instance of different perspec-tives created by functional differences. Accountants are interested in information foraccounting and tax purposes; operations people want information for process controland scheduling; finance people need information to manage cash; and marketing needsinformation to see if sales quotas are being met.

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The organic view of the organization sees the whole as the sum of different partsuniting to achieve an end. The heart and the liver do not perform the same function ina body, but they each perform processes that are necessary for survival of the whole.Just as the body is subject to breakdown when different parts do not perform properly,so are organizations. Unfortunately, firms do not have the magnificent communicationnetwork (i.e., the central nervous system) to coordinate activities that human bodieshave. For this reason, firms must constantly improve their communication.Recognizing fundamental differences between how different functions view quality isan important first step in understanding and resolving problems associated with mis-matches of quality perceptions within organizations.

As organizational processes become more cross-functional, many of these commu-nications issues will find resolution. However, experience with cross-functional teamshas been difficult for many firms because of poor communication skills among teammembers. Therefore, it is expected that cognitive differences between different func-tions will continue to be a major problem that firms must overcome.

This section of the chapter views quality management from the perspectives ofseveral different functions. Many of the topics discussed in this chapter are presentedin concept only. More in-depth discussions of these topics appear in later chapters.Thischapter is designed to lay out the field of quality management from an interdiscipli-nary, integrative perspective. The functions that are discussed here include supplychain management, engineering, operations, strategic management, marketing,finance/accounting, human resources, and management information systems.

A Supply Chain PerspectiveSupply chain management grew out of the concept of the value chain. The value chainincludes inbound logistics, core processes, and outbound logistics. Other functions suchas human resources, information systems, and purchasing support these core processes.Operations, logistics, and marketing are the primary participants in the supply chain. Inrecent years, supply chain management has moved to the forefront in importance. Thisis largely due to the opportunity for cost savings along with quality and serviceimprovement. There are many important quality-related activities that are part of sup-ply chain management. We will discuss these separately as upstream activities, coreprocesses, and downstream activities.

Upstream activities include all of those activities involving interaction with suppli-ers. Supplier qualification involves evaluating supplier performance to determinewhether or not they are worthy providers. This often requires grading suppliers usingestablished criteria such as conformance rates, cost levels, and delivery reliability.Many times, supplier filters are used such as ISO 9000:2000, an international standard.This means that you can filter suppliers based on whether or not they are ISO9000:2000 registered. Related standards include QS9000 and ISO/TS 16949 (an auto-motive standard). Supplier development activities include evaluating, training, andimplementing systems with suppliers. This often includes the use of electronic datainterchange (EDI) to link customer purchasing systems to supplier enterprise resourceplanning systems. Where needed, acceptance sampling may be needed to determinewhether supplier products meet requirements. International sourcing is an importantsupply chain issue with many companies—especially in China. This will be discussed inmore depth in Chapter 3.

Core process activities include traditional process improvement as well as valuestream mapping. This requires flowcharting processes to determine where customervalue is created as well as identifying non-value-added process steps. Value stream

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mapping also involves analyzing processes from a systems perspective such thatupstream and downstream effects of core process changes can be evaluated. Six sigmais a procedure for implementing quality improvement analysis to reduce costs andimprove product, service, and process design. Six sigma black belts become supplychain quality consultants who can lead value-adding improvements. The steps in sixsigma include define, measure, analyze, improve, and control (DMAIC)-related activi-ties. A major tool used in six sigma is the design of experiments (DOE).

Downstream activities include shipping and logistics, customer support, and focus-ing on delivery reliability. Supply chain management has also focused more attentionon after-sale service.

An Engineering PerspectiveEngineering is an applied science. As such, engineers are interested in applying mathe-matical problem-solving skills and models to the problems of business and industry.One outgrowth of this approach is the field of operations research. In the early twenti-eth century, Sir R. A. Fisher and other researchers in England expanded the fieldof mathematical statistics to problems related to variation experienced in the produc-tion area.

Engineers typically are employed in manufacturing production environments.However, more and more engineers are being hired into services firms requiring astrong technical component. For example, American Airlines employs a large opera-tions research engineering staff that optimizes flight schedules.

Two of the major emphases in engineering are the areas of product design andprocess design. Product design engineering involves all those activities associated withdeveloping a product from concept development to final design and implementation.Figure 1-1 demonstrates the six steps in the engineering life cycle for the design ofproducts. The product design process results in a final design, possibly generated by acomputer-aided design (CAD) system. Product design is the key because quality isassured at the design stage.

Product and process design are fields of engineering that have experienced majorchanges in recent years. Whereas traditionally they have been considered separate andin most cases sequential activities, concurrent engineering has resulted in the simulta-neous performance of these activities. Typically, concurrent engineering involves theformation of cross-functional teams. This allows engineers and managers of differingdisciplines to work together simultaneously in developing product and process designs.The result of concurrent design has been improved quality and faster speed to marketfor new products.

Engineers also have applied statistical thinking to the problem of reliability. Asalready discussed, reliability management is concerned with assessing and reducingthe propensity of a product to fail. Reliability engineers use probability theory todetermine the rate of failure a product will experience over its useful life. Life testingis a facet of reliability engineering that concerns itself with determining whether aproduct will fail under controlled conditions during a specified life. Also, reliabilityengineers are interested in knowing if failure of certain product components willresult in failure of the overall product. If a component has a relatively high probabil-ity for failure that will affect the overall function of a product, then redundancyis applied so that a backup system can take over for the failed primary system. Manyredundant systems are used on the NASA space shuttle in the case of primary systembreakdown. After all, if a hard drive crashes in space, it is not easy to find a replace-ment close by.

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IdeaGeneration

PreliminaryDesign

PrototypeDevelopment

PrototypeIterations

FinalDefinition

ProductDesign andEvaluation

Implementation

FIGURE 1-1 Design Life Cycle

Another engineering-related contribution to quality management is the field ofstatistical process control (SPC). Statistical process control is concerned with monitor-ing process capability and process stability. If a process is capable, it will consistentlyproduce products that meet specification. If a process is stable, it will only exhibit ran-dom or common variation.This type of variation is often acceptable, if kept within lim-its.The control process as specified by Shewhart in his book Statistical Method from theViewpoint of Quality Control (1939) is shown in Figure 1-2. This is the process underly-ing SPC. A hypothesis is specified that the process meets a given specification, dataabout the process are gathered, and a hypothesis test is performed to see if the processis stable. SPC is discussed in greater depth in Chapters 12, 13, and 14.

In summary, the engineering view of quality is technically oriented, focusing onstatistics and technical specification that are needed to produce high-quality products.Only recently have engineers begun to interact with customers in meaningful ways.

An Operations PerspectiveThe operations management view of quality is rooted in the engineering approach.However, operations management has grown beyond the technical engineering per-spective. In many ways, because of the close interplay between operations manage-ment and engineering, engineering also has extended its view of quality management.

Operations was the first functional field of management to adopt quality as itsown. This effort began in the mid- to late 1970s and soon was integrated into otherfunctional areas of management. Like engineers, operations managers are concerned

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Specify Hypothesis

Inspect Datafor Consistencywith Hypothesis

Produce Databy Performingan Experiment

FIGURE 1-2 Shewhart’s Control Process

about product and process design. However, rather than focusing on only the technicalaspects of these activities, operations concentrates on the management of these activi-ties. Initially, operations quality was focused almost entirely on SPC. Beginning in theearly 1980s, statistical quality control (SQC) courses became more managerial innature, including teachings by W. E. Deming, an important quality expert, and others.Today, operations management has developed into an integrative field combining con-cepts from engineering, operations research, organizational theory, organizationalbehavior, and strategic management to address quality problems.

Operations management (OM) uses the systems view that underlies modern qual-ity management thinking (see Fig. 1-3). The systems view involves the understandingthat product quality is the result of the interactions of several variables, such asmachines, labor, procedures, planning, and management. OM focuses on the manage-ment and continual improvement of conversion processes. This systems view focuseson interactions between the various components (i.e., people, policies, machines,processes, and products) that combine to produce a product or service. The systemsview also focuses management on the system as the cause of quality problems.

In recent years, a major advance in operations management has been theimproved understanding of the operations–marketing interface. This interface hasresulted in an increased focus on the customer. For example, many firms, such asHarley-Davidson and John Deere, have involved their customers in product design byincluding the customers in product design teams. This has helped operations managersexternalize their views to the customer as well by making the customers part of thedesign process. This outsider, or externalized, view is important because operationsmanagers in firms still tend to be focused heavily on meeting production schedules,sometimes at the expense of good quality. (It is a sign of maturity in operations man-agers when they are willing to miss a shipment deadline because quality isn’t right.Toooften manufacturing managers are still willing to say “ship it” when they know that theproduct they are shipping is defective.)

Operations management has migrated toward a more strategic view. Ferdows andDemeyer3 linked this strategic view of OM to quality management by proposing amodel (see Fig. 1-4) in which quality was identified as the base on which lastingimprovement in other competitive dimensions (dependability, speed of delivery of

3Ferdows, K., and Demeyer, A., “Lasting Improvement in Manufacturing Performance: In Search of a NewTheory,” Journal of Operations Management 9, 2 (1990):168–184.

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Planning Organizing

Controlling

InputsConversion

ProcessOutputs Customer

ProcessControl

CustomerFeedback

FIGURE 1-3 The Conversion System Model of Operations Management

concept to market, and cost efficiency) were established. For example, service andproduct quality are important foundations for firms, such as Wal-Mart, that desire to below-cost competitors. This strategic view also has led to a better understanding of therelationship between quality and other competitive variables such as profitability, costleadership, and operational success. Quality is a significant variable for predicting afirm’s success.

In summary, the historically, internalized view of operations managers has becomeexternalized. Still, the customer needs to become more central in the thinking of manyoperations managers who still tend to be too product focused. This will occur as opera-tions management becomes more service focused. One common complaint among criticsof operations management is that too much credence is given to fads of the day ratherthan honestly improving the fundamentals of the business. To the field of operations

SOURCE: Adapted from E. E. Adam and R. J. Ebert, Production and Operations Management, 5th ed.(Upper Saddle River, NJ: Prentice Hall, 1992). Reprinted with permission.


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management’s benefit, it is OM that has elevated quality management as a key area ofbusiness study.

A Strategic Management PerspectiveStrategy refers to the planning processes used by an organization to achieve a set oflong-term goals. The keys here are planning processes and a long-term orientation.Firms establish a planned course of action to attain their objectives. Further, thisplanned course of action must be cohesive and coherent in terms of goals, policies,plans, and sequencing to achieve quality improvement.

When the concept first arose, practitioners treated quality-related strategic plan-ning as if it were a separate exercise from strategic planning. However, we soon real-ized that quality management, to become pervasive in a firm, needed to be included inall the firm’s business processes, including strategic planning. Thus quality-relatedgoals, tactics, and strategies are becoming more a part of the strategic planning processinstead of a separate entity.

Company strategies are rooted in the building blocks of mission and core values.An organization’s mission states why the organization exists. For example, the missionof the Saturn Motor Company states that the company exists “to market vehiclesdeveloped and manufactured in the United States that are world leaders in quality,cost, and consumer satisfaction through the integration of people, technology, andbusiness systems and to transfer knowledge technology and experience throughoutGeneral Motors.” The core values of an organization refer to guiding operating princi-ples that simplify decision making in that organization. Therefore, if a company states“environmental consciousness” as a core value, it will institute policies leading to prac-tices that favor a clean environment. Companies go to great extents to establish, com-municate, and reinforce a sense of mission and values in their organizations becausemission and values strongly influence organizational culture. Organizational culture isoften seen as a major determinant (and sometimes roadblock) to the successful imple-mentation of quality improvement.

The quality movement has greatly influenced strategy process in recent years.Strategy process refers to the steps an organization uses in the development of itsstrategic plans. Although we discuss this in greater depth in Chapter 4, strategic plan-ning processes often involve a comprehensive environmental analysis that includes theremote, operating, and external environment that influence quality performance.

Figure 1-5 shows a generic strategic planning process and its components. Basedon the analysis of mission, vision, and goals, strategic options, and business-level andfunctional-level strategies are developed.

Development of functional-level strategies helps improve the coherence andalignment of strategic plans within an organization. Alignment refers to consistencybetween different operational subplans and the overall strategic plan. For example, ifan organization pursues a quality emphasis from a strategic standpoint, then the com-pany should pursue supply chain, human resources, budgetary, or marketing courses ofaction that support a quality emphasis.

The ultimate goal of strategic quality planning is to aid an organization to achievesustainable competitive advantage. In many markets, such as the auto industry, it isbecoming difficult to sustain a competitive advantage based on quality alone. By thelate 1970s and into the 1980s, Japanese cars were perceived as superior. Now, becauseAmerican automotive quality has improved, American, Japanese, and European autosare all perceived as having relatively high quality. Therefore, Japanese automakers arehaving a difficult time differentiating themselves based on quality alone. This is also

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FirmMission, Vision,

and Goals

Strategic Alignmentbetween

Structure and Goals

ChangeManagement

StrategicOptions

Business-LevelStrategy

Corporate-LevelStrategy

OperationalSubplans

ExternalAnalysis

InternalAnalysis

OrganizationalDesign

OrganizationalReward Systems

FIGURE 1-5 A Generic Strategic Planning Process

true in many other markets, where quality is an order qualifier. In some markets, suchas semiconductors, where yield rates are low, competitive advantage in cost can begained by a quality conformance strategy. Thereby, the quality–cost combination canbe used as an order winner.

Madu and Kuei propose a strategy process based on plan–do–check–act (see Fig. 1-6). In this approach, plan represents strategy formulation, do refers to imple-menting strategy, check relates to evaluation and control, and act results in full-scalestrategy implementation.

As quality has become integral to competitiveness, strategic planning for qualityhas become more important. Research shows that quality is still the major competitiveconcern of CEOs. Quality Highlight 1-1 shows how General Electric has made qualitya key strategic imperative. This Highlight also demonstrates the interrelatednessamong strategy, finance, and operations in achieving strategic objectives.

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QUALITY HIGHLIGHT 1–1

QUALITY STRATEGY AT GE

www.GE.com

broke down, stranding 8,000 commuters. AfterGE discovered it had insulated the motors inad-equately and had misdesigned auxiliary powersystems, the entire transit line was shut down for19 days while the company fixed the problem.

• A GE gas turbine sold to utility power plantsaround the world began cracking because offaulty design. GE’s cost of fixing the huge tur-bines climbed from $150 million to $200 million,the company says.

• Just four months before a new GE jet enginewas to power Boeing 777s for British Airways,the engine failed in a test and had to be re-designed. The plane’s delivery was seven weekslate. In addition, a Federal Aviation Administra-tion report cited sloppy GE manufacturing as areason for delaying permission for extendedflights by the plane over water. Permission wasgranted a year later than expected.

GE denied that such problems forced GE toadopt its new quality program. “We are not in trou-ble,” they said, citing the robust profits. But theyconceded that “the time wasted, the money wasted,in field fixes, in quality problems, in working thingsout, across corporate America, across the world, isenormous.”

GE’s quality program, which was borrowedfrom Motorola, Inc., involves training “Black Belts”for four months in statistical and other quality-enhancing measures. The Black Belts then spendfull time roaming GE plants and setting up qualityimprovement projects. The program is producing avariety of benefits. “Your customers are happy withyou, you are not firefighting, you are not running in areactive mode.” GE hopes the program, by prevent-ing costly snafus, will save $7 billion to $10 billionover the next decade and thus bolster profits.

For years, the exuberant management style of JackF.Welch,a chair of General Electric Co., helped driveGE ahead. Now, the company has reached an espe-cially notable milestone: It is the most profitablecompany in the United States.

Although GE is one of the world’s most prof-itable companies, its management neverthelessfaces a vexing problem: What can they possibly dofor an encore after the retirement of Jack Welch?Many other executives are worrying about that,too. Investors are also wondering; they fear a slow-down in earnings growth.

To keep GE ahead, managers have devised anarray of corporate strategies.They put exceptionallyheavy reliance on the quality control program thatfar outstrips run-of-the-mill efforts, shifting GE’ssales emphasis from manufacturing products to sup-plying services, pushing profitable niche acquisi-tions, and rapidly expanding abroad.

The quality control program was “a mammothundertaking; I mean, I can’t even begin to describethe size of this undertaking,” stated Welch. A suresign of top management’s determination was that40% of GE executive bonuses, which ran as high as$1 million, depended on implementation of theprogram. Previously, bonuses were only based onprofit and cash flow.

It could significantly bolster profits some secu-rity analysts say, if only because it may eliminatecostly, embarrassing blunders. One of GE’s mainmantras for growth has been new-product develop-ment. But some GE products ran into spectaculardesign and manufacturing snafus.

• GE’s locomotive unit in Erie, Pennsylvania, builtmotors for new rail cars that were put into ser-vice on a major transit line in Montreal. But inheavy snows the electric motors shorted out and

aCarley, W., “To Keep GE’s Profits Rising, Welch Pushes Quality Control Plan,” Wall Street Journal (January 13, 1997):A1.

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4Tellis, G., and Fornell, C., “The Relationship between Advertising and Product Quality over the ProductLife Cycle: A Contingency Theory,” Journal of Marketing Research 25, (February 1988):64–71.

A Marketing PerspectiveTraditionally, the term marketing has referred to activities involved with directing theflows of products and services from the producer to the consumer. More recently, in atrend known as relationship management, marketing has directed its attention towardsatisfying the customer and delivering value to the customer.

More and more companies are basing sales commissions on perceptual measuresof customer satisfaction rather than merely volume of sales. The reasons for this areobvious. Studies show that the value of the loyal customer is much greater than an indi-vidual transaction. For example, the profit on a single pizza might be $5, whereas thesame customer, if he or she orders one pizza per month over 10 years, is worth $600.This figure becomes $3,600 if the satisfied customer influences five friends to buy onepizza a month over 10 years. If all customers are satisfied, sales increase exponentially!Therefore, more firms are focusing on relationship management. This increases theimportance of high levels of customer service and after-sales support.

The marketer focuses on the perceived quality of products and services. Asopposed to the engineering-based conformance definition of quality, perceived qualitymeans that quality is as the customer views it. Therefore, marketing efforts are oftenfocused on managing quality perceptions.

The primary marketing tools for influencing customer perceptions of quality areprice and advertising. However, these are imperfect mechanisms for influencing per-ceptions of quality. Toothpaste selling for two dollars is not necessarily better thantoothpaste costing one dollar.The link between price and quality could be significant ifall products were priced based on cost of materials and production only. However, notall products are priced this way.

Advertising and quality levels might be related. However, the relationship is not asstraightforward as one would hope. Tellis and Fornell4 proposed a contingency theoryof advertising and quality saying that this relationship is “more likely when productquality is produced at lower cost and consumers rely less on advertising for their infor-mation.” Their research showed that the positive effects of quality also were more pro-nounced later in the life cycle of a product. In these later stages, products are morelikely to be standardized. This would give consumers more time to become informedabout products and give firms more time to standardize and control costs.

Marketing is also concerned about systems. The marketing system involves theinteractions between the producing organization, the intermediary, and the final con-sumer (see Fig. 1-7). Because of this relationship, it is often very difficult for firms andorganizations to agree on who the customer is.

For example, identification of the customer is particularly difficult for service andgovernmental agencies. The Department of Energy (DOE) facility in Idaho Falls,Idaho, in preparing for the Energy Quality Award competition, spent many days defin-ing their customer. One group believed that the parent body, the DOE in Washington,DC, was the primary customer because they were the funding body for the Idaho Fallsoffice. Others developed much more inclusive lists such as regulatory agencies—theNuclear Regulatory Commission, the Environmental Protection Agency—the taxpay-ers, the state of Idaho, and others. Although it might always seem obvious who the cus-tomer is to the casual observer, it is not always clear to those who are involved with thebusiness.

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Organization

IntermediaryOffering Payment

Offering Payment

Offering Payment

Customer

FIGURE 1-7 A Marketing System

SOURCE: Adapted from R. Bagozzi, Principles ofMarketing Management (Chicago: SRA, 1986).

5Griffin, A., and Hauser, J., “The Voice of the Customer,” Marketing Science 12, 1 (1993):1–26.

Another important contribution of the marketing perspective has been the focuson service at the time of the transaction and after-sales support.

One of the ways marketing has helped to improve product and service quality hasbeen to interact closely with engineering and operations in product design. The role ofmarketing in design has been to bring the voice of the customer5 into the design process.

Customer service surveys are important tools for assessing the multiple dimen-sions of quality. Surveys provide a means for developing multidimensional perceptualmeasures of quality.

In short, the marketing perspective on quality is unique because the customer isthe focus of marketing-related quality improvement. In trying to satisfy customerneeds, marketing often wants to develop specialized products for different customersto perfectly satisfy customer needs. This can make life more difficult for producersbecause operations wants to standardize products to reduce processing complexity.Often, quality strategies result in a compromise between these two polar positions.

A Financial PerspectiveOne of the most commonly asked questions about quality management is “will it payus financial benefits?” The answer to this question is an unqualified “maybe.” As weread about General Electric in Quality Highlight 1-1, management was pursuingquality improvement as a means of reducing waste and increasing profitability.Implemented correctly, improved quality reduces waste and can lead to reduced costand improved profitability. However, these returns tend to be long term rather thanshort term. W. E. Deming, the influential quality expert, made the first theoreticalattempt to link quality improvement to financial results through the “Deming valuechain.” In his value chain (see Fig. 1-8), Deming linked quality improvement to reduc-tion of defects and improved organizational performance. He also stressed quality as away to increase employment.

The finance function is primarily interested in the relationships between the risksof investments and the potential rewards resulting from those investments. The goal offinance is to maximize return for a given level of risk. A comptroller for a large U.S.corporation stated this as “helping the customer to decide where to buy assets.” In this

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ImproveQuality

ProductivityImproves

Capturethe Market

Stay inBusiness

ProvideJobs and

More Jobs

Cost Decrease(less rework,

fewer mistakes,fewer delays,

snags,better use ofmachine timeand materials)

FIGURE 1-8 The Deming Value Chain

SOURCE: Adapted from W. E. Deming, Out of the Crisis (Boston: MIT/CAES, 1986).

sense, this comptroller viewed his primary customers as the stockholders (i.e., owners)of the corporation.

Communication relating to quality might be made more difficult for comptrollersand treasurers because accounting is the primary language of the financial function.Joseph Juran, another influential quality expert, referred to this communication prob-lem when he stated that “the language of management is money.” One way to translatequality concerns is to identify and measure the costs of quality. These quality-relatedcosts can be in lost sales because of a poor reputation for reliability. Also, trainingand inspection cost money. Therefore, tradeoff and break-even analyses can be per-formed using the various costs of quality. Often what is discovered is that althoughimproving quality seems expensive, the savings from reducing scrap, defects, andrework results in favorable returns on investment. This is why companies such asMotorola, Westinghouse, and General Electric are willing to pay millions of dollars topursue quality.

However, the relationship between quality improvement and financial success isconfounded by several intervening variables. For example, a firm investing a great dealof effort and money to establish a quality program for a product in the decline stage of

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Total Quality Costs =Sum of Losses and Costs

Losses Due toPoor Quality

Optimum Quality Level

Costs of ImprovingQuality

Cost

Quality

MinimumCost

FIGURE 1-9 Basic Economic Quality Level Model

the product life cycle may not receive the expected benefits. Top management involve-ment that is limited to lip service often results in great expenditure, and great effort,but eventually failure. The pursuit of quality does not safeguard a company againstbad management.

Another concept that affects financial officers’ perceptions of quality improve-ment is the law of diminishing marginal returns. According to this law, there is a pointat which investment in quality improvement will become uneconomical. Figure 1-9shows a quadratic economic quality level model. According to this model, the pursuitof higher levels of quality will result in higher expenditures. Hence, to invest beyondthe minimum cost level will result in noneconomic decisions. This view is at oddswith the ethic of continual improvement. Such debate has resulted in much controversyin the quality field. Although we will save resolution of these issues for Chapter 4, itshould be emphasized that quality evangelizers who claim that the pursuit of quality iseternal and that any investment in quality is justified will be met with skepticism byfinancial officers trained in economics.

In summary, the financial perspective on quality relies more on quantified, mea-surable, results-oriented thinking. This has influenced quality thinking as quality pro-fessionals have had to seek approval for funding quality improvement efforts. If theobjective of a firm is to return value to its shareholders, then the financial view towardquality must be well understood and used.

The Human Resources PerspectiveHuman resources (HR) managers are involved in enabling the workforce to developand use its full potential to meet the company’s objectives. Understanding the HR per-spective on quality is essential because it is impossible to implement quality withoutthe commitment and action of employees. Although leadership is an importantantecedent to successful quality efforts, the involvement and participation of employ-ees is just as key.After all, it is the rank and file that implements quality throughout theorganization.

Of particular interest to HR managers is employee empowerment. Empoweringemployees involves moving decision making to the lowest level possible in the organi-zation. For example, empowerment can involve something fairly minor, such as allowing

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6Costigan, R., “Adaptation of Traditional Human Resources Processes for Total Quality Environments,”Quality Management Journal 2, 3(1997):7–24.

employees to replace broken or worn-out tools without management approval. In morespectacular instances, empowerment has resulted in the elimination of management asemployees do their own scheduling, design, and performance of work.

The topic of empowerment is closely related to organizational design. HR man-agers are involved in many aspects of organizational design, such as the design ofreward systems, pay systems, organizational structure, compensation, training mecha-nisms, and employee grievance arbitration.

HR balances the needs of the employee and the organization by advocating theemployee to management and advocating the company’s needs to employees. Qualitymanagement flourishes where the workers’ and the company’s needs are closely aligned.When needs are aligned, actions that are good for the company are also good for theemployee.

Job analysis is a major function of HR.6 Job analysis involves collecting detailedinformation about a particular job. This information includes tasks, skills, abilities, andknowledge requirements that relate to certain jobs. The information is used to define ajob description that is used in setting pay levels. Job analysis sometimes has limited theability of organizations to adapt to the flexibility needed for quality management.Important HR functions are recruitment and hiring of employees. A process calledselection is employed. Traditionally, selection involved finding workers who have thetechnical preparation to perform the tasks associated with a job. Fast learners arebecoming more valued by today’s organizations. Of course, this does not mean thatnuclear engineers will be replaced by former romance languages majors. However, itcould mean that groups of engineers might report directly to a romance languagesexpert.

Training allows firms to standardize the approaches their employees use in solvingunstructured problems. For example, when examiners for the prestigious MalcolmBaldrige National Quality Award perform site visits for applicants, they expect that topmanagers and low-ranking employees will use similar processes for solving problems.This is called vertical deployment of quality management. Similarly, examiners willexpect that different departments and units within a firm will use similar approaches tosolve problems. This is called horizontal deployment. It is unlikely that firms canachieve such standardization without effective training.

HR departments typically administer and oversee performance appraisal andevaluation. Traditionally, these evaluations involved face-to-face reporting sessionswith employees and supervisors. Although some critics, such as Deming, have foundthis system ineffective, many companies believe performance evaluations are a keymethod for motivating employees. One quality-related approach to improving theprocess of performance evaluation is the 360-degree evaluation, in which anemployee’s peers, supervisors, and subordinates are involved in evaluating theworker’s performance. The College of Business at the University of North Carolina atGreensboro performs 360-degree teaching evaluations for its faculty. Each semester,students fill out teaching evaluations. Fellow faculty members attend each other’sclasses and read each other’s student evaluations every semester. Then, a meeting isheld at which the faculty evaluates and critiques each other’s teaching performance. Inthis setting, the focus is on constructive criticism. Finally, the professor’s supervisoruses the student and peer input to complete an annual evaluation.This approach seemsto be effective in improving teaching performance. IS

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TABLE 1-3 HRM versus TQHRM

Traditional HRM TQHRM

Process characteristics Unilateral role Consulting roleCentralization DecentralizationPull ReleaseAdministrative Developmental

Content characteristics Nomothetic PluralisticCompartmentalized HolisticWorker-oriented System-orientedPerformance measures Satisfaction measuresJob-based Person-based

SOURCE: Adapted from R. Cardy and G. H. Dobbins, “Human Resources Management in a Total QualityEnvironment,” Journal of Quality Management 1, 1 (1996):3.

7Walman, D., and Gopalakrishnan, M., “Operational, Organizational, and Human Resource FactorsPredictive of Perceptions of Service Quality,” Journal of Quality Management 1, 1 (1996):91–108.8Cardy, R., and Dobbins, G. H., “Human Resources Management in a Total Quality Environment: Shiftingfrom a Traditional to a TQHRM Approach,” Journal of Quality Management 1, 1 (1996):5–20.

Although research has been performed to study HR variables that influence cus-tomer satisfaction, the results are as yet somewhat inconclusive.7 However, qualitymanagement concepts recently have been effective in influencing HR practice. Thishas resulted in the growth of a field called total quality human resources management(TQHRM).8 Table 1-3 shows differences between traditional HR management andTQHRM.TQHRM involves many of the concepts of quality management to provide asupportive and empowered environment.

In summary, the focus of quality management is to manage properly the interac-tions among people, technology, inputs, processes, and systems to provide outstandingproducts and services to customers. HR managers have been very active in advocatingquality approaches to improve organizational performance.Therefore, an HR focus onhuman performance provides important insights to quality thinking.

Is Quality Management Its Own Functional Discipline?A quick read of the Wall Street Journal in any given week will reveal job openings forquality managers and engineers. The companies that run these ads seek people who,like you, are committed to and interested in quality management. However, the rolesof these departments and specialists are changing in the new century of quality.

Historically, the quality management department performed a policing function inthe firm. Quality managers were responsible for quality conformance and spent theirtime ferreting out causes of defects. However, in the late 1950s,Armand Feigenbaum, awell-known quality consultant who is discussed in Chapter 2, and others showed thelimitations of this approach. Thus the movement began toward the total involvementof employees spawning total quality management (TQM). TQM was the 1980s term todescribe quality management programs.

With total involvement, the role of the quality department moved from a technical,inspection role to a supportive training and coaching role. As a manager or a qualityspecialist, you will be asked to either arrange or perform quality-related training. Thusthe abilities to conduct effective training and to facilitate teams are important tools forthe quality professional.

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QualityManagement

QualityAssurance

QualityControl

FIGURE 1-10 Three Spheres ofQuality

Is quality management its own discipline? Yes and no. Consultants, quality engi-neers, six sigma black belts, trainers, coaches, and managers are still needed. Therefore,the demand for quality specialists persists. However, because the eventual goal is tocompletely immerse the organization in quality thinking and commitment, the need forthe specialist decreases with time. Therefore, a strong knowledge of quality is best cou-pled with technical expertise in other areas such as materials management, supplychain management, finance, accounting, operations management, HR management,strategy, industrial engineering, or myriad other disciplines. Indeed, the eventual goalof many companies is to completely distribute the quality management functionthroughout the firm.

In this section of the chapter we have discussed many different functional perspec-tives toward quality. Skilled management must recognize that these functional differ-ences exist and provide communication in a way that completely addresses thedifferent perspectives. Recognition that these multiple dimensions exist improvesunderstanding among these disparate coalitions and helps all members of an organiza-tion to work toward a common goal.

THE THREE SPHERES OF QUALITY

One way to conceptualize the field of quality management is known as the threespheres of quality. These spheres are quality control, quality assurance, and qualitymanagement, and their functions overlap as seen in Figure 1-10.

The first sphere is quality control. The control process is based on the scientificmethod, which includes the phases of analysis, relation, and generalization. In theanalysis phase, a process is broken into its fundamental pieces. Relation involves under-standing the relationships between the parts. Finally, generalization involves perceivinghow interrelationships apply to the larger phenomenon of quality being studied.Activities relating to quality control include the following:

• Monitoring process capability and stability• Measuring process performance

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• Reducing process variability• Optimizing processes to nominal measures• Performing acceptance sampling• Developing and maintaining control charts

Quality assurance refers to activities associated with guaranteeing the quality of aproduct or service. Often, these activities are design-related. This view of quality statesthat quality control is reactive rather than proactive by detecting quality problemsafter they occur. Given this, the best way to ensure quality is in the design of products,services, and processes. Quality assurance activities include tasks such as

• Failure mode and effects analysis• Concurrent engineering• Experimental design• Process improvement• Design team formation and management• Off-line experimentation• Reliability/durability product testing

The management processes that overarch and tie together the control and assur-ance activities make up quality management. See Quality Highlight 1-2 for an exampleof a company with effective quality management. The integrative view of quality man-agement supports the idea that quality is the responsibility of all management, not justquality managers. For this reason, a number of managers, supervisors, and employeesare involved in quality management activities such as

• Planning for quality improvement• Creating a quality organizational culture• Providing leadership and support• Providing training and retraining• Designing an organizational system that reinforces quality ideals• Providing employee recognition• Facilitating organizational communication

Many quality-related activities can occur simultaneously within the framework ofthe three spheres of quality. Because these activities overlap, communication betweenthe protagonists performing the different activities becomes key.

OTHER PERSPECTIVES ON QUALITY

Although we have discussed a variety of perspectives on quality, there are a few others.

The Value-Added Perspective on QualityA customer-based perspective on quality that is used by services, manufacturing, andpublic sector organizations involves the concept of value. A value-added perspectiveon quality involves a subjective assessment of the efficacy of every step of the process

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QUALITY HIGHLIGHT 1–2

FEDERAL EXPRESS CORPORATION

www.fedex.com

FEDERAL EXPRESS AT A GLANCE

Conceived by Chairman and Chief Executive Offi-cer Frederick W. Smith, Federal Express beganoperations in 1973. At that time, a fleet of eightsmall aircraft was sufficient to handle demand. Thefirm’s cargo fleet is now the world’s largest at morethan 652.

FedEx’s “People–Service–Profit” philosophyguides management policies and actions. The com-pany has a well-developed and thoroughly de-ployed management evaluation system called SFA(survey/feedback/action) that involves a survey ofemployees, analysis of each group’s results by thework group’s manager, and a discussion betweenthe manager and the work group to develop writtenaction plans for the manager to improve and be-come more effective. Data from the SFA processare aggregated at all levels in the organization foruse in policy making.

Training of frontline personnel is a responsibilityof managers, and “recurrency training” is a widelyused instrument for improvement. Consistently in-cluded in listings of the best U.S. companies to workfor, FedEx has a “no layoff” philosophy, and its “guar-anteed fair treatment procedure” for handling em-ployee grievances is used as a model by firms in manyindustries. Frontline employees can participate in aprogram to qualify themselves for management posi-tions. In addition, Federal Express has a well-devel-oped recognition program for team and individualcontributions to company performance.

SERVICE QUALITY INDICATORS

To spur progress toward its ultimate goal of 100%customer satisfaction, FedEx replaced its oldmeasure of quality performance, percent of on-timedeliveries, with a 12-component index that com-prehensively describes how its performance isviewed by its customers. Each item in the servicequality indicator (SQI) is weighted to reflect howsignificantly it affects overall customer satisfaction.

To reach its aggressive quality goals, the com-pany has set up one cross-functional team for eachservice component of the SQI. A senior executiveheads each team for each service component of theSQI and ensures the involvement of frontline em-ployees, support personnel, and managers from allparts of the corporation when needed. Two of thesecorporate-wide teams have a network of more than1,000 people working on improvements.

Employees are encouraged to be innovativeand to make decisions that advance quality goals.FedEx provides employees with the informationand technology they need to continuously improvetheir performance. An example is the DigitallyAssisted Dispatch System (DADS), which commu-nicates to some 30,000 couriers through screensin their vans. The system enables quick responseto pickup and delivery dispatches and allowscouriers to manage their time and routes with greatefficiency.b

9Shannon, P., “The Value Added Ratio,” Quality Progress 30, 3 (March 1997):94–97.

for the customer.9 A value-added activity can be pinpointed by asking, “Would thisactivity matter to the customer?” In other words, in most cases, a value-added activitywill have economic value to the customer.

bThis information is adapted from the Malcolm Baldrige National Quality Award “Profiles of Malcolm Baldrige Award Winners,”National Institute for Standards and Technology, Gaithersburg, MD, 2005.

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Cultural Perspectives on QualityInternational marketers have long noted that there are differences in tastes and pref-erences between cultures and nations. For example, Mexican food sold in the UnitedStates by the major restaurant chains is very different from the food sold in Mexico.This is so because American restaurant chains have found that customers prefer theAmericanized versions of these foods.

Although it is somewhat obvious that differences in tastes and preferences existbetween different cultures, it is not so obvious that approaches to quality improvementmay differ according to culture. However, differences do exist. For example, Japanesecompanies tend to stress conformity and uniformity in producing quality. This resultsin high consistency among Japanese products. American firms are more likely to favorempowerment approaches that reward creativity and individualism. Certainly, culturesthat are more class conscious or command-and-control oriented might have troubledelegating decision making to lower levels of employees.

ARRIVING AT A COMMON UNDERSTANDING OF QUALITY USING A CONTINGENCY PERSPECTIVE OF QUALITY

Businesses differ in key areas such as mission, core competence, customer attributes,target markets, technology deployment, employee knowledge, management style, cul-ture, and a myriad of other environmental variables. Contingency theory presupposesthat there is no theory or method for operating a business that can be applied in allinstances. A coherent quality strategy will need to address these key environmentalvariables. For example, a company that defines part of its mission as “valuing and satis-fying our customers through personalized service” likely will pursue a different tech-nological approach toward its customers than a company with the mission of “applyingtechnology to solving customer problems.” One approach implies personalized servicein interacting with customers, whereas the second company focuses on electronic datainterchange interfaces with the customer. Both companies are focused on satisfying thecustomer. The difference is that they pursue different paths and strategies to achievecustomer service.

The contingency approach to quality also helps to settle the different perceptionsconcerning the definition of quality. By adopting a contingency philosophy, we find thatthe definitions and dimensions of quality applied within organizations will, and should,vary. The definitions of quality used by the Department of Agriculture, Ford MotorCompany, and the University of Missouri at Columbia will not be the same. Differentdefinitions of quality also might exist within an organization, even though their qualitydefinitions should be consistent. In an organization that adopts the contingencyapproach, the dimensions of quality will depend on the environment in which the com-pany operates.This approach provides useful flexibility to managers in pursuing quality.

SUMMARY

There are many different perspectives on quality management. We found that cus-tomers and producers viewed quality differently. A focus on production and a focus onservices provide two very different perspectives on quality.

There is even a great deal of disagreement about an appropriate definition of qual-ity. A contingency perspective on quality shows that different definitions of quality areappropriate for different organizations.

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The functional perspectives on quality vary greatly. As we understand these differ-ent functional perspectives, we form the basis for alignment in strategies and improve-ment in quality communication.

The fundamental areas of quality control, quality assurance, and quality manage-ment within the field of quality focus us on different aspects of quality. By designingplans and systems in each of these areas simultaneously, we develop a robust system ofquality improvement that will set the stage for improved competitiveness.

Something else that becomes apparent is that quality improvement, despite thesimplicity of many principles, requires a complex mix of systems design, organizationaldesign, rewards design, and process design. As discussed throughout this text, these is-sues can be tied together in a strategic framework.

KEY TERMS

• Acceptance sampling• Aesthetics• After-sale service• Assurance• Concurrent engineering• Conformance• Contingency theory• Core processes• Define, measure, analyze, improve,

and control (DMAIC)• Design of experiments (DOE)• Downstream• Durability• Electronic data interchange

(EDI)• Empathy• Employee empowerment• Features• Inbound logistics• International sourcing• ISO 9000:2000• ISO/TS 16949

• Job analysis• Law of diminishing marginal

returns• Life testing• Manufacturing-based• Organizational design• Outbound logistics• Perceived quality• Performance• Product-based• Product design engineering• QS9000• Quality assurance• Quality control• Quality dimensions• Quality management• Redundancy• Relationship management• Reliability• Responsiveness• Selection• Serviceability

• Service reliability• Six sigma• Statistical process control (SPC)• Strategy• Supply chain• Supplier development• Supplier filters• Supplier qualification• Systems view• Tangibles• 360-degree evaluation• Three spheres of quality• Total quality human resources

management (TQHRM)• Transcendent• Upstream• User-based• Value-added• Value-based• Value stream mapping

DISCUSSION QUESTIONS

1. Why is quality a difficult term to define? How can we improve our understanding ofquality?

2. Briefly discuss Garvin’s eight dimensions of quality. Is Garvin’s multidimensional approacha step forward in improving our understanding of quality? Why or why not?

3. Is there a difference between service quality and product quality? If so, what are the impli-cations of these differences for a manager of a service business, such as a restaurant or aretail store?

4. Define the concept of empathy. Provide an example of empathy as a dimension of servicequality.

5. Why is communication within an organization an important part of the quality improve-ment process?

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6. Compare and contrast the engineering perspective and the marketing perspective of qual-ity. How could an overemphasis on the engineering perspective work to the disadvantage ofa business organization?

7. Describe the “systems view” that underlies modern quality management thinking. Which ofthe perspectives of quality discussed in Chapter 1 is most closely aligned with the systemsview?

8. Why is planning an important part of the quality management process? How could a firm’squality management initiatives be adversely affected if planning was not a part of theprocess?

9. Research has shown that quality is still a major competitive concern of CEOs in Americancorporations. Is this level of concern about quality warranted? Please explain your answer.

10. Summarize Jack Welch’s perspective on the importance of quality. Do Welch’s perspectivesstrengthen or weaken your confidence in the future of the General Electric Corporation?Why?

11. What is meant by the phrase cost of quality? How can this phrase help a firm address itsquality concerns?

12. What are the major differences between traditional human resource management and totalquality human resource management? How does total quality human resource manage-ment transcend traditional human resource management in regard to providing an environ-ment that is supportive of quality concerns?

13. Describe the three spheres of quality. How do these spheres provide another way to placethe field of quality in perspective?

14. Discuss the value-added perspective on quality. What are the implications of this perspec-tive for the manager of a business organization?

15. Discuss the application of contingency theory to quality management? Does contingencytheory make sense to you? Why or why not?

16. Should a firm consider the law of diminishing marginal returns when striving to improvequality? Why or why not?

17. Are the perspectives of quality independent of one another? If not, describe ways in whichthey are interrelated.

18. How can an understanding of the multiple dimensions of quality lead to improved productand service designs?

19. What is your concept of quality? Is it multidimensional, or does it focus on a single dimen-sion such as features, reliability, or conformance? Explain your answer.

20. Describe an instance in which you and a coworker (or superior) perceived the needs of acustomer very differently. How did your differences in perception influence how each ofyou wanted to meet your customer’s needs?

C a s e s

Case 1-1 FedEx: Managing Quality Day and NightFedEx Homepage: www.fedex.com

ery company with white delivery vans, courteous dri-vers, and the distinctive purple-and-orange FedExlogo. But behind what the casual observer sees is avery complex company with the capacity to delivermillions of packages to millions of addresses aroundthe globe overnight.Throughout the course of virtually

As darkness falls across America and most business-es are locking up for the evening, one company isgearing up for a long night’s work. FedEx, the worldleader in the overnight package delivery market, de-livers more than 5.3 million packages per businessday. Most of us know FedEx as the overnight deliv-

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every day and night, FedEx mobilizes its army of218,000 employees, 69,000 vans and trucks, and 652planes to get the job done.

For FedEx, getting the job done means managingquality 24 hours a day, with a watchful eye oncustomer expectations. The company’s goals are sim-ple: 100% customer satisfaction, 100% on-time deliv-eries, and 100% accurate information available onevery shipment to every location around the world.Although these sound like far-fetched goals, the com-pany goes to great lengths to try to make them a re-ality. One of the principal weapons that FedEx usesin pursuit of its goals is its total commitment to qual-ity management.

Quality management at FedEx encompasses allof its operations. Although the company is theacknowledged leader in the air freight industry,a formal Quality Improvement Process (QIP)plays an integral role in all of the company’sactivities.10

At the heart of the QIP program is the philoso-phy that quality must be a part of the way that FedExdoes business, not part of the time, but all of the time.As a result, themes such as “Do it right the firsttime,” “Make the first time you do it the only timeanyone has to,” and “Q = P” (quality = productivity)are important parts of the FedEx culture.To reinforcethese themes, the company teaches its employees the1–10–100 rule. According to the rule, if a problem iscaught and fixed as soon as it occurs, it costs a certainamount of time and money to correct. If a mistake iscaught later in a different department or location, itmay cost 10 times that much to repair. And if a mis-take is caught by a customer, it may cost 100 times asmuch to fix.

A number of substantive strategies have beenimplemented by FedEx to support its quality efforts.Quality action teams (QATs) design work processesto support new product and service offerings.A set ofservice quality indicators (SQI) has been establishedto determine the main areas of customers’ percep-tion of service. Through careful tracking of these in-dicators, the company generates a weekly summaryof how well it is meeting its customer satisfaction tar-gets. An SQI team works through problems revealedby the indicators. For example, if problems were

10www.fedex.com.

being created by confusion in FedEx labeling instruc-tions, the team would work on improving the clarityof the instructions. Some of the company’s tactics toensure total quality are extraordinary. For example,every night FedEx launches an empty airliner fromPortland, Oregon, bound for Memphis. The jet fol-lows a course that brings it close to several FedExterminal airports. The purpose of the jet is to swoopdown and pick up FedEx packages if any of the com-pany’s regularly scheduled airplanes is experiencingmechanical difficulty.

Along with a focus on its external customers,FedEx’s approach to quality also involves strength-ening the bonds between its internal customers, oremployees. To reinforce this notion, the companyasks all its employees to ask the following threequestions when they interface with a coworker:

1. What do you need from me?2. What do you do with what I give you?3. Are there any gaps between what I give

you and what you need?

The company also reaches out to its employees ina number of substantive ways. In 1973, the companyadopted its People–Service–Profit (PSP) philosophy,which articulates the view that when people areplaced first, service and profit follow. An aggressivetraining program, competitive wages and benefits,profit sharing, bonuses, and a state-of-the-art employ-ee grievance process are all elements of the PSPphilosophy. Employee recognition also plays an im-portant role in the company’s quality pursuits. For ex-ample, each quarter FedEx divisions select theirbest-quality success story, which is entered in acompany-wide competition. Presentations are madeby the finalists before the company’s CEO, executivevice president, and other top managers.The award forbeing a finalist is a gold quality pin for each memberof the team and the opportunity to be interviewed onthe company’s internal television network.

The quality efforts practiced by FedEx have paidoff. The company has achieved a remarkable 99.7%on-time delivery level.The list of awards the companyhas won are too numerous to publish. The most im-pressive are the Malcolm Baldrige National QualityAward, the AT&T Top Performer Award, the QualityCarrier of the Year Award presented by Merck IS

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Pharmaceuticals, and the Company of the Year Dis-tinguished Service Award presented by the NationalAlliance of Businesses.Will FedEx’s pursuit of qualityend here? Asked if winning the Malcolm BaldrigeNational Quality Award signifies that FedEx has

achieved the ultimate level of quality, CEO FredSmith said, “receipt of the award is simply our licenseto practice.”Apparently, the quest for improved qual-ity at FedEx will continue, day and night. ■

Case 1-2 Granite Rock Company: Achieving Qualitythrough Employees

Granite Rock Homepage: www.graniterock.com

Granite Rock, a California-based mining and con-struction company, was founded in 1900, but its jour-ney toward improved quality did not start until themid-1980s. The managers at Granite Rock knew thata resulting decline in customer satisfaction was in-evitable and responded to this self-assessment bydeciding it needed to become more customerfocused. At Granite Rock, this meant not only learn-ing more about the customer but also providing itsemployees the training and skills necessary to prop-erly implement the company’s new philosophy.

At first this focus on HR management was em-phasized through employee training.As explained byCEO Bruce Woolpert, you can’t have employees outtelling customers “yes” unless everyone else in thecompany knows how to follow up on “yes.” As a re-sult, an aggressive training program was implement-ed involving on-the-job training and classroom timefor the majority of the firm’s employees. A programcalled IPDP (Individual Personal DevelopmentPlan) was created to help each employee take re-sponsibility for his or her own training program. Asthe program gained momentum, remarkable thingsstarted to happen. One employee indicated that hewanted to learn to read better. As a result of that re-quest, the company initiated a reading program that

has helped a number of Granite Rock’s employeesimprove their reading skills.As part of the company’seffort to reduce process variability and increaseproduct reliability, many employees were trained instatistical process control, root-cause analysis, andother quality-minded competencies. Today, GraniteRock spends up to $1,600 per year for training ofeach employee, which is more than 10 times the aver-age for the mining and construction industries.

An equally important step in equipping its em-ployees to contribute to the firm’s efforts was estab-lishing an atmosphere of trust between managementand the rank-and-file employees.That effort has beenpursued in a number of ways, and the trust developedthroughout the company has resulted in the effectiveimplementation of employee empowerment andteamwork. In addition, the company has done awaywith its conventional performance appraisal system(feeling that it was ineffective) and has incorporatedperformance appraisal into each employee’s IPDP.As part of this plan, at least once a year, each em-ployee meets with his or her supervisor to discuss job responsibilities, review accomplishments, assess skills, and set skill and career development goals. Al-though the IPDP is not mandatory for the company’sunionized workers, overall participation stands at


1. What is FedEx’s “common language” of quality?Is it important for a company to establish a“common language” of quality? If so, why?

2. There are several different perspectives of quality,including the operations perspective, the strategic

perspective, the marketing perspective, thefinancial perspective, the HR perspective, and thesystems perspective. Which of these perspectivesare being emphasized by FedEx? Why?

3. Is FedEx’s level of emphasis on quality appro-priate? Why or why not?

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83%. Because the IPDP approach to training and appraisal prepares employees to assume greaterresponsibilities, Granite Rock promotes heavily fromwithin.

Today, Granite Rock, having won the MalcolmBaldrige National Quality Award, is aggressivelypursuing its quality initiatives, with the cooperationof its 400 employees. ■


1. Rather than focusing on human resourcemanagement (HRM) as a means of supportingits quality initiatives, Granite Rock could havechosen another area as its focal point (i.e.,marketing, operations, information systems, andso on). How does a focus on HRM support acompany’s quality initiatives?

2. Discuss the different components of GraniteRock’s HRM initiatives. How can each of these

components support the company’s qualityefforts?

3. Discuss CEO Woolpert’s feelings about com-munication with the customers (paragraph 2).What happens when others in the company don’tknow what has been promised to the customer?How can quality management help to overcomethis situation?

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