quality cost & leadership tqm

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S T A R L E Y J A N E B . T R O N O - M B A 2 0 1 2

QUALITY COST &

LEADERSHIP TQM



Total quality management is a systemic

approach to productivity improvement

using qualitative and quantitativemethods and involving all stakeholders

to continuously improve the quality of

all products and services.

TQM IS NOT A DESTINATION BUT A JOURNEY TOWARDS IMPROVEMENT

(HUNT, MANAGING FOR QUALITY,1991)

TOTAL QUALITY MANAGEMENT



COMPONENTS OF TQM

1. PRICE REDUCTION

2. CUSTOMER SATISFACTION

3. INVOLVEMENT OF EVERYONE

4. CONTINUOUS QUALITY

IMPROVEMENT5. LEADERSHIP



DEFINING QUALITY

The definition of quality depends on the role of

the people defining it. Most consumers have a

difficult time defining quality, but they know itwhen they see it. The totality of features and

characteristics of a product or service that

bears on its ability to satisfy stated or implied

needs.



COMMON DEFINITIONS OF QUALITY

Conformance to specifications measures how

well the product or service meets the targets and

tolerances determined by its designers.

Fitness for use focuses on how well the product

performs its intended function or use.

Value for price paid is a definition of quality that

consumers often use for product or serviceusefulness. This is the only definition that

combines economics with consumer criteria; it

assumes that the definition of quality is price

sensitive.



COMMON DEFINITIONS OF QUALITY

Support services provided are often how the

quality of a product or service is judged. Quality

does not apply only to the product or service

itself; it also applies to the people, processes,and organizational environment associated with it.

Psychological criteria is a subjective definition

that focuses on the judgmental evaluation of what constitutes product or service quality.

Different factors contribute to the evaluation,

such as the atmosphere of the environment or

the perceived prestige of the product.



COST OF QUALITY

The “cost of quality” isn’t the price of creating a

quality product or service. It’s the cost of NOT

creating a quality product or service.

Every time work is redone, the cost of quality

increases. Obvious examples include:

The reworking of a manufactured item.

The retesting of an assembly

The rebuilding of a tool

The correction of a bank statement



COST OF QUALITY

The “cost of quality” isn’t the price of creating a

quality product or service. It’s the cost of NOT

creating a quality product or service.

Every time work is redone, the cost of quality

increases. Obvious examples include:

The reworking of a manufactured item.

The retesting of an assemblyThe rebuilding of a tool

The correction of a bank statement

The reworking of a service, such as the reprocessing of a loan operation or

the replacement of a food order in a restaurant



HISTORICAL VIEWS OF QUALITY

GURUS ABOUT COST OF QUALITY

Historically, business managers have assumed that

increased quality is accompanied by increased cost;

higher quality meant higher cost.

This concept was questioned by quality pioneers

like Juran and Feigenbaum. Juran examined economics

of quality and concluded the benefits outweighed the

costs. Feigenbaum introduced “total quality control” anddeveloped the principles that quality is everyone’s job,

thus expending the notion of quality cost beyond the

manufacturing function. In 1979 Crosby introduced the

new popular concept that “quality is free”.



THREE DIFFERENT VIEWS ABOUT

COST OF QUALITY

1. Higher quali t y means h igher cos t : Quality attributes

such as performance and features cost more in terms of

labor, material, design, and other costly resources. The

additional benefits from improved quality do notcompensate for the additional expenses.

2. The cos t o f improv ing qual it y is less than the

resu l tant savings : Deming promoted this view, which is

still widely accepted in Japan. The savings result from

less rework, scrap, and other direct expenses related to

defects. This paved the way of continuous process

improvement among Japanese firms.



THREE DIFFERENT VIEWS ABOUT

COST OF QUALITY

3. Qual it y cos ts are those incurred in excess of

those that would have been incurred i f

product were bui l t or serv ice performed

exact ly r ight the fi rs t t ime:

This view is held by adherents of the TQM

philosophy. Costs include not only those that aredirect, but also those resulting from lost customers,

lost market share, and many hidden costs and

foregone opportunities not identified by modern cost

accounting systems.



FOUR CATEGORIES OF QUALITY COST

1. External Failure Cost: Cost associated with

defects found after the customer receives the

product or service. Example: Processing customer

complaints, customer returns, warranty claims,

product recalls.

2. Internal Failure Cost: Cost associated with

defects found before the customer receives the

product or service. Example: Scrap, rework, re-

inspection, re-testing, material review, material

downgrades



FOUR CATEGORIES OF QUALITY COST

3. Inspection (appraisal) Cost: Cost incurred to

determine the degree of conformance to quality

requirements (measuring, evaluating or

auditing). Example: Inspection, testing, process or service audits, calibration of measuring and test

equipment.

4. Prevention Cost: Cost incurred to prevent (keep

failure and appraisal cost to a minimum) poor

quality. Example: New product review, quality

planning, supplier surveys, process reviews, quality

improvement teams, education and training.



NINE DIMENSIONS OF QUALITY

1. Performance2. Features

3. Conformance-----------------------------4. Reliability5. Durability

6. Service-----------------------------7. Response- of Dealer/ Mfgr. to Customer8. Aesthetics – of product9. Reputation- of Mfgr./Dealer

Cost

Performance

Features Service



MARKET CHANGES

MONOPOLIST markets Seller’s market

GLOBAL markets Buyer’s market

Market more Customer-oriented

competitive

Demand is defined by Users.

Quality management is a necessity for survival and growth of the organization in a

global environment.



THE TQM ORGANIZATION

Q

U

A

L

I

T

Y

TM

MM

LM

Other Staff

Quality infused Personnel and Processes.

INPUTs



TQM 6 BASIC CONCEPTS

1. Management commitment to TQM

principles and methods & long term

Quality plans for the Organization

2. Focus on customers – internal & external

3. Quality at all levels of the work force.

4. Continuous improvement of the

production/business process.5. Treating suppliers as partners

6. Establish performance measures for the

processes.



EFFECTS OF POOR QUALITY

Low customer satisfaction

Low productivity, sales & profit

Low morale of workforce More re-work, material & labour costs

High inspection costs

Delay in shipping

High repair costs

Higher inventory costs

Greater waste of material



BENEFITS OF QUALITY

Higher customer satisfaction

Reliable products/services

Better efficiency of operations

More productivity & profit Better morale of work force

Less wastage costs

Less Inspection costs

Improved process More market share

Spread of happiness & prosperity

Better quality of life for all.



SEVEN HABITS OF HIGHLY

EFFECTIVE PEOPLE

Be pro-active

Begin with the end in mind

Put first things first Think win-win

Seek first to understand, then to be

understood Synergy

Sharpen the saw



DEMING’S 14 POINTS

PHILOSOPHY

1. Create a constant purpose toward

improvement.

2. Adopt the new philosophy. 3. Stop depending on inspections.

4. Use a single supplier for any one item.

5. Improve constantly and forever.

6. Use training on the job.

7. Implement leadership.



DEMING’S 14 POINTS

PHIOSOPHY

8. Eliminate fear

9. Break down barriers between departments.

10. Get rid of unclear slogans.

11. Eliminate management by objectives.

12. Remove barriers to pride of workmanship.

13. Implement education and self-

improvement

14. Make "transformation" everyone's job



ROLE OF TQM LEADERS

All are responsible for quality improvement especiallythe senior management & CEO’s

Ensure that the team’s decision is in harmony with thequality statements of the organization

Senior TQM leaders must read TQM literature andattend conferences to be aware of TQM tools andmethods

Senior managers must take part in award andrecognition ceremonies for celebrating the quality

successes of the organization Coaching others and teaching in TQM seminars Senior managers must liaise with internal ,external and

suppliers through visits, focus groups, surveys and etc. They must live and communicate TQM.



THE PDSA CYCLE – 7 Steps

Identify the opportunity

Analyze the current process

Develop the optimal solution(s) Implement changes

Study the results

Standardize the solution

Plan for the future.



THE PDSA CYCLE – 7 Steps

Act Plan

DoStudy

Phase I Identify the Opportunity

Phase 2

Analyze the process

Phase 3Develop the optimal solution(s)

Phase 4 ImplementationPhase 5 Study the results

Phase 7

Plan for the future

Phase 6

Standardise the solution



TQM ORGANIZATINAL

CULTURAL CHANGE

Traditional Approach

Lack of communication

Control of staff

Inspection & fire fighting

Internal focus on rule

Stability seekingAdversarial relations

Allocating blame

TQM

Open communications

Empowerment

Prevention

External focus on customer

Continuous improvement

Co-operative relations

Solving problems at their roots

quality cost & leadership tqm

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