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Chapter 2Chapter 2Chapter 2Chapter 2

Total Quality inTotal Quality in

OrganizationsOrganizations

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Growth of Modern Growth of Modern Quality ManagementQuality Management

Manufacturing quality

Improvedproduct designs

Servicequality

Performanceexcellence

Key IdeaKey Idea

As consumer expectations have risen, a focus on quality has permeated other key sectors of the economy, most notably health care, education, not-for-profits, and government.

SystemsSystems

A A systemsystem is a set of functions or is a set of functions or activities within an organization that activities within an organization that work together for the aim of the work together for the aim of the organization.organization.

Subsystems of an organization are linked Subsystems of an organization are linked together as internal customers and together as internal customers and suppliers.suppliers.

A systems perspective acknowledges the A systems perspective acknowledges the importance of the interactions of importance of the interactions of subsystems, not the actions of them subsystems, not the actions of them individually.individually.

Key IdeaKey Idea

Successful management relies on a systems perspective, one of the most important elements of total quality.

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Manufacturing Systems Manufacturing Systems (1 (1 of 2)of 2)

Marketing and salesMarketing and sales Product design and engineeringProduct design and engineering Purchasing and receivingPurchasing and receiving Production planning and Production planning and

schedulingscheduling Manufacturing and assemblyManufacturing and assembly Tool engineeringTool engineering

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Manufacturing Systems Manufacturing Systems (2 (2 of 2)of 2)

Industrial engineering and Industrial engineering and process designprocess design

Finished goods inspection and Finished goods inspection and testtest

Packaging, shipping, and Packaging, shipping, and warehousingwarehousing

Installation and serviceInstallation and service

Key IdeaKey Idea

Traditional quality assurance systems in manufacturing focus primarily on technical issues such as equipment reliability, inspection, defect measurement, and process control.

Relationships in a Typical Relationships in a Typical Manufacturing System Manufacturing System (Fig.2.1)(Fig.2.1)

Quality in MarketingQuality in Marketing

Marketing and sales personnel are responsible for determining the needs and expectations of consumers.

Quality in Product Quality in Product DesignDesign

Product design and engineering functions develop technical specifications for products and production processes to meet the requirements determined by the marketing function.

Quality in PurchasingQuality in Purchasing

A purchasing agent should not simply be responsible for low-cost procurement, but should maintain a clear focus on the quality of purchased goods and materials.

Quality in Production Quality in Production Planning & SchedulingPlanning & Scheduling

Poor quality often results from time pressures caused by insufficient planning and scheduling.

Quality in Process Quality in Process DesignDesign

Manufacturing processes must be capable of producing output that meets specifications consistently.

Quality in ManufacturingQuality in Manufacturingand Assemblyand Assembly

Both technology and people are essential to high-quality manufacturing.

Quality in Finished Goods Quality in Finished Goods Inspection and TestingInspection and Testing

The purposes of final product inspection are to judge the quality of manufacturing, to discover and help to resolve production problems that may arise, and to ensure that no defective items reach the customer.

Quality in Installation Quality in Installation and Serviceand Service

Service after the sale is one of the most important factors in establishing customer perception of quality and customer loyalty.

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Quality in Business Quality in Business Support Functions for Support Functions for ManufacturingManufacturing

Finance and accountingFinance and accounting Quality assuranceQuality assurance Legal servicesLegal services

Key IdeaKey Idea

Every manager is responsible for studying and improving the quality of the process for which he or she is responsible; thus, every manager is a quality manager.

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Quality in ServicesQuality in Services

ServiceService is defined as “any is defined as “any primary or complementary primary or complementary activity that does not directly activity that does not directly produce a physical product – that produce a physical product – that is, the non-goods part of the is, the non-goods part of the transaction between buyer transaction between buyer (customer) and seller (provider).”(customer) and seller (provider).”

Key IdeaKey Idea

The American Management Association estimates that the average company loses as many as 35 percent of its customers each year, and that about two-thirds of these are lost because of poor customer service.

Importance of Quality in Importance of Quality in ServicesServices

Studies show that companies can Studies show that companies can boost their profits by almost 100% boost their profits by almost 100% by retaining just 5% more of their by retaining just 5% more of their customers than their competitors customers than their competitors retain. That is because the cost of retain. That is because the cost of acquiring new customers is much acquiring new customers is much higher than the costs associated higher than the costs associated with retaining customers.with retaining customers.

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Critical Differences Between Critical Differences Between Service and Manufacturing Service and Manufacturing (1 (1 of 2)of 2)

Output is intangible, quality Output is intangible, quality measurement is more difficult and measurement is more difficult and subjectivesubjective

No inventory, services are produced No inventory, services are produced and consumed simultaneously, and consumed simultaneously, customer is in the system, brings customer is in the system, brings more variety more variety

Customer needs and performance Customer needs and performance standards are more difficult to standards are more difficult to identify and measureidentify and measure

Critical Differences Between Critical Differences Between Service and Manufacturing Service and Manufacturing (2 (2 of 2)of 2)

Services requires a higher degree of Services requires a higher degree of customizationcustomization

Customers are often involved in actual Customers are often involved in actual processprocess

Services are more labor-intensive than Services are more labor-intensive than manufacturing, interactions with manufacturing, interactions with customers are criticalcustomers are critical

Services handle large numbers of Services handle large numbers of transactionstransactions

Key IdeaKey Idea

These differences make it difficult for many service organizations to apply total quality principles, and foster misguided perceptions that quality management cannot be effectively accomplished in services.

Understanding ServicesUnderstanding Services

Degree of customer contactDegree of customer contact

Pure service vs. quasi-Pure service vs. quasi-manufacturingmanufacturing

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Components of Service Components of Service System QualitySystem Quality

EmployeesEmployees Information technologyInformation technology

Key IdeaKey Idea

Researchers have repeatedly demonstrated that when service employee job satisfaction is high, customer satisfaction is high, and that when job satisfaction is low, customer satisfaction is low.

Key IdeaKey Idea

Information technology is essential for quality in modern service organizations because of the high volumes of information they must process and because customers demand service at ever-increasing speeds.

Quality in Health Care Quality in Health Care

Joint Commission on Accreditation Joint Commission on Accreditation of Healthcare Organizations (JCAHO)of Healthcare Organizations (JCAHO)

National Committee for Quality National Committee for Quality Assurance (NCQA)Assurance (NCQA)

Institute for Healthcare Institute for Healthcare Improvement (IHI)Improvement (IHI)

1999 expansion of the Baldrige 1999 expansion of the Baldrige Award to nonprofit health care Award to nonprofit health care organizationsorganizations

Quality Issues in Health Quality Issues in Health CareCare

Avoidable errorsAvoidable errors Underutilization of servicesUnderutilization of services Overuse of servicesOveruse of services Variation in servicesVariation in services

Key IdeaKey Idea

Although the national health care system as a whole may need a sweeping overhaul, many individual providers have turned toward quality as a means of achieving better performance and customer satisfaction.

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Quality in EducationQuality in Education

Koalaty KidKoalaty Kid– Active involvement of whole Active involvement of whole

school communityschool community– Committed leadershipCommitted leadership– System for continuous System for continuous

improvementimprovement– Environment that celebrates Environment that celebrates

successsuccess

Quality in Higher Quality in Higher EducationEducation

Business plays an important role in fostering quality improvement efforts in higher education by transferring knowledge and expertise on quality processes and implementation practices.

Academic Quality Academic Quality Improvement Project Improvement Project (AQIP)(AQIP)AQIP criteria focuses on institutional practices for helping students learn, accomplishing other distinct objectives, understanding student and stakeholder needs, valuing people, leading and communicating, supporting institutional operations, measuring effectiveness, planning continuous improvement, and building collaborative relationships—all of which are key elements of TQ.

Quality in Small Business Quality in Small Business and Not-for-Profitsand Not-for-Profits

Slow to adopt quality approachesSlow to adopt quality approaches– General lack of understanding and General lack of understanding and

knowledge about qualityknowledge about quality– Focus on sales and market growth, Focus on sales and market growth,

cash flow, and routine fire fightingcash flow, and routine fire fighting– Lack of resources for formal quality Lack of resources for formal quality

systemssystems

Key IdeaKey Idea

Perhaps the most important factor in successful quality initiatives in small businesses is the recognition by the CEO or president that a quality focus can be beneficial and lead to achieving organizational goals.

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Quality in the Public Quality in the Public SectorSector

Quality in the Federal Quality in the Federal GovernmentGovernment– Federal Quality InstituteFederal Quality Institute– President’s Quality AwardPresident’s Quality Award

State and Local Quality EffortsState and Local Quality Efforts

Key IdeaKey Idea

Quality concepts and principles are universal and can be applied in all types of organizations. The difficulty, of course, is developing an infrastructure to make it happen and the discipline to sustain efforts over time.