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KARANATAKA STATE OPEN UNIVERSITY

Total Quality Management

MBA III SEM

CENTRE CODE - MBA14


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5Aspects of Quality

UNIT 1

UNIT I


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6Total Quality Service Management6Total Quality Service Management


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LESSON 7Aspects of Quality

1ASPECTS OF QUALITY

CONTENTS

1.0 Aims and Objectives

1.1 Introduction

1.2 Different Perspectives of Quality

1.3 Definition given by the Quality Gurus

1.4 Dimensions of Quality

1.5 Dimensions of Quality for Goods

1.6 Dimensions of Service Quality

1.7 Quality Mission

1.8 Quality Policy

1.8.1 Quality of Services

1.8.2 Customers Satisfaction

1.8.3 Preparedness and Satisfaction of Employees

1.8.4 Competence of the Organisations Management and Administration

1.9 Objectives of Quality

1.10 Concepts of Quality

1.11 The Need and Importance of Quality

1.12 Evolution of Quality

1.12.1 From Inspection to Total Quality

1.13 Determinants of Quality

1.14 Interpretation and Process of Quality Audit

1.15 Let us Sum up

1.16 Lesson End Activity

1.17 Keywords

1.18 Questions for Discussion

1.19 Suggested Readings

1.0 AIMS AND OBJECTIVES

After studying this lesson, you should be able to:

Understand the concept of quality.

Learn about the process and determinants of quality.

Know the objective and dimensions of quality.

Write an appraisal of various costs of quality.


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8Total Quality Service Management 1.1 INTRODUCTION

Quality is an abstract concept. Without definition or specification, quality cannot beassured. Thinkers and writers have been trying to tackle big abstract words likeknowledge and beauty for thousands of years. Quality depends upon various factorsand hence can be defined in a variety of ways.

To start with, we can define it as a product or service free of deficiencies, as the

totality of characteristics of an entity that depend on its ability to satisfy stated orimplied needs. The customer defines quality.

For some, quality means excellence in all aspects. Here, the price or affordabilityaspect is ignored and this is a major limiting factor.

The Oxford English Dictionary defines quality as that aspect of things under whichthey are considered in thinking or speaking of their nature, condition, or properties.The Websters Dictionary defines it as degree of excellence.

Quality is the extent to which products, services, processes, and relationships are freefrom defects, constraints, and items which do not add value for customers. There are avariety of perspectives that can be taken into account when defining quality (e.g.customers perspective, specification-based perspective).

1.2 DIFFERENT PERSPECTIVES OF QUALITY

Quality is defined as meeting or exceeding the needs and expectations of thecustomer. It is necessary to give customers what they want, but customers may not bewilling to pay the price for features that vastly exceed their needs.

Quality can be defined as the degree to which a product is fit for the specific use. Itcan be defined as products and services beyond present needs and expectations ofcustomers.

Quality simply means delivering to the customer what they expect. Thus, for example,if a product:

Has the right configuration/features Does what its supposed to do, Is reliable, Is delivered on time, and Is well supported, then.. its a quality product!

Quality is defined as the totality of characteristics of an entity that bear on its ability tosatisfy stated or implied needs.

Quality is the ongoing process of building and sustaining relationships by assessing,anticipating, and fulfilling stated and implied needs.

The quality if a product is determined by how well it suits ones needs in terms of: Reliability Durability Safety Maintainability

Cost


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9Aspects of Quality1.3 DEFINITION GIVEN BY THE QUALITY GURUS

Shewhart: Shewhart, pioneer of modern quality control defined quality in terms ofobjective and subjective quality.

Objective quality: quality of a thing independent of people.

Subjective quality: quality is relative to how people perceive it. (Value).

Deming: Quality can be defined only in terms of the agent, who is the judge ofquality. Thus, quality may mean different things to different people.

Juran: Quality is fitness for use. Therefore, quality products should meet or exceedcustomer requirements.

Crosby: Quality is conformance to requirements. Thus requirements must be clearlystated so that they cannot be misunderstood.

Feigenbaum: Quality is the total composite product and service characteristics ofmarketing, engineering, manufacture, and maintenance through which the product andservice in use will meet the expectation of the customer.

Kaoru Ishiwaka: Quality does not only mean the quality product but also of after saleservice, quality management, the company itself and the human life.

Genichi Taguchi: Quality is the loss imparted to society from the time the product isshipped.

It is not easy to formulate a simple definition of what constitutes quality. Thedefinition of the inverse of quality is rather straightforward. Variation is the enemyof quality.

ISO 9000:2000 defines quality as the degree to which a set of inherent characteristicsfulfill requirements and as fitness for purpose meets requirements, delightingcustomers right first time and all the time.

ANSI/ASQC Standard A3-1978 defines quality as the totality of features andcharacteristics of a product or service that bear on its ability to satisfy given

needs. (This definition is also adopted in ISO 8402:1994 and other nationalStandards with the word given replaced by the words stated or implied.)

The features and characteristics referred to, in the above definition, may be of severaltypes. Physical characteristics are those continuous variables such as length, weight,voltage, viscosity, etc. The feature variables are usually discrete or attribute in naturesuch as sensory lines viz. taste, appearance, colour and smell.

Certain characteristics if quality, like reliability, maintainability, serviceability, aretime dependent. The phrase given needs in the definition requires a clear list of needsto be identified. It is obvious that all the needs of the customer of a product or service,including safety, design, aesthetics, etc, should be listed in the set of given needs.

The price or affordability of the product or service should also receive major

consideration. The performance or use quality characteristics should be improved onesif price is not a limiting factor.

Societal needs may be considered in addition to customer needs in certain cases. Howfar does the set of characteristics and features meet the given needs? That is, theability to satisfy the (customer) needs is the quality built into the product or servicethrough the features and characteristics.

Quality is thus a multi-dimensional perspective-based concept having dimensions asunder:

Performance

Features


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10Total Quality Service Management

Reliability

Conformance

Durability

Serviceability

Aesthetics

Perceived QualityOne thing is certain: the client ultimately decides if the quality of the productdelivered is acceptable. Hence, quality of the product may, therefore, include manythings other than a single deliverable.

Defining quality means developing expectations or standards of quality. Standardscan be developed for inputs, processes or outcomes. A good standard is explicit,reliable, realistic, valid and clear.

Defined standards or definitions of quality are prerequisites for measuring quality. Ifstandards dont exist, they must be designed. Although standards are context-specific,universally accepted standards are often a good starting point for developing localstandards.

Standards of quality can be developed according to the dimensions of quality andshould be based on the scientific evidence available.

1.4 DIMENSIONS OF QUALITY

Quality exists in five distinct dimensions. It is made up of Experience, Measurement, Relationships and Systems Thinking, Inter-connectivity and Paradigm Logic, and Value Sharing

Experience: Quality of a product or service will not exist unless and until it istranslated into experience. The ability to translate vision into reality is the primaryimpact of this dimension. Experience is the translation into reality of the true stateof vision of the organization. Further, it provides learning. The successfulorganization is one that can experiences learn from it.

Measurement: Measurement gives quality the first of its multidimensionalcharacteristics. It provides the ability to, not only assess experience, but also todetermine how well or how poorly it was done. This dimension provides theknowledge of the system. Examples of this dimension are the use of statisticaltools such as the check sheet, the Pareto chart, the histogram, the run chart and thecontrol chart.

Relationships and Systems Thinking: Systems thinking transforms a qualitysystem beyond a shallow, two-dimensional system to one that is dynamic,integrated, and leveraged. The ability to see one set of data plotted against anotherset of data reveals relationships and common threads. From these, inferences can

be drawn that begin to define the quality system and set its parameters. It alsoaddresses the impact of interpersonal relationships on trading relationships.

Inter-connectivity and Paradigm Logic: The first three dimensions give us theability to establish a system, as we measure the results of relationships amongvarious parts of the system and make modifications necessary to produce the


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11Aspects of Quality

desired results. However, a system existing only in three dimensions is a closedsystem. This dimension gives us the ability to look beyond three-dimensionalthinking to the inter-connectivity of all systems and processes. This gives us the

power to understand the paradigm, or set of rules or guiding principles, uponwhich a system is based. The power of interconnectivity is that it provides afoundation for quantum leaps in quality improvement.

Value Sharing: Value sharing is a universal paradigm that provides a foundationfor a complete quality system. An understanding of value sharing gives us the

power to measure the strength of relationships. The measure of this strength is inthe willingness of participants to consecrate resources to other participants or to acommon good.

Value sharing is expressed in the phrase, Delight the Customer. In other words,Give the customer more than what the customer is paying for.

As the relationship with the customer grows, there is mutual consecration of resources by both parties as each share the value it derives from trade with the other party.

The five dimensions of value sharing involve the integration and fulfillment of all theother dimensions with respect to all the participants.

Since quality means different things to different people, the dimension of quality isalso different. Dimensions of quality are also different for manufacturing and servicefunctions.

Example: Quality of Health Care

Quality of care should be defined in light of both technical standards and patients'expectations. While no single definition of health service quality applies in allsituations, the following common definitions are helpful guides:

Quality Assurance is that set of activities that are carried out to monitor and improve performance so that the care provided is as effective and as safe as possible (QualityAssurance Project, 1993).

The application of medical science and technology in a way that maximizes its benefits to health without correspondingly increasing its risks. The degree of qualityis, therefore, the extent to which the care provided is expected to achieve the mostfavorable balance of risks and benefits (Avedis Donabedian, 1982).

Proper performance (according to standards) of interventions that are known to besafe, that are affordable to the society in question, and that have the ability to producean impact on mortality, morbidity, disability, and malnutrition (M.I. Roemer and C.Montoya Aguilar, WHO, 1983).

The most comprehensive and perhaps the simplest definition of quality is that used byadvocates of total quality management (W. Edwards Deming, 1982): "Doing the rightthing right, right away." Experts generally recognize several distinct dimensions ofquality that vary in importance depending on the context in which a QA effort takes

place. The following nine dimensions of quality have been developed from thetechnical literature on quality and synthesize ideas from various QA experts.Together, they provide a useful framework that helps health teams to define, analyze,and measure the extent to which they are meeting program standards for clinical careand for management services that support service delivery. While all of thesedimensions are relevant to developing country settings, not all nine deserve equalweight in every program. Each should be defined according to the local context andspecific programs.

1. Technical performance: The degree to which the tasks carried out by healthworkers and facilities meet expectations of technical quality (i.e., adhere tostandards).


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2. Access to services: The degree to which healthcare services are unrestricted bygeographic, economic, social, organizational, or linguistic barriers.

3. Effectiveness of care: The degree to which desired results (outcomes) of care areachieved.

4. Efficiency of service delivery: The ratio of the outputs of services to theassociated costs of producing those services.

5. Interpersonal relations: Trust, respect, confidentiality, courtesy, responsiveness,empathy, effective listening, and communication between providers and clients.

6. Continuity of services: Delivery of care by the same healthcare providerthroughout the course of care (when appropriate) and appropriate and timelyreferral and communication between providers.

7. Safety: The degree to which the risks of injury, infection, or other harmful sideeffect are minimized.

8. Physical infrastructure and comfort: The physical appearance of the facility,cleanliness, comfort, privacy, and other aspects that are important to clients.

9. Choice: As appropriate and feasible, client choice of provider, insurance plan, ortreatment.

1.5 DIMENSIONS OF QUALITY FOR GOODS

The dimensions of quality that can be explicitly defined and is exclusive of the otherdimensions of quality can be given as:

1. Performance: It is the main or primary operating characteristics of the product.

Example: the mileage of a car

2. Features: Features are those secondary characteristics that supplement the products basic functioning. These are the extra characteristics or the extraitems added to the basic features such as stereo CD in a car.

3. Conformance: The degree to which the physical and performance characteristicsof a product match with pre-established standards.

4. Reliability: The consistency of performance or the probability a product willoperate properly over a specified period of time under stated conditions.

Example: Usage of a fridge without repair for about 7 years.

5. Aesthetics: How a product looks, feels, tastes or smells. A dimension of qualitythat refers to subjective sensory characteristics such as taste, sound, look andsmell.

6. Durability: This includes useful life or life span of the product. It is the ability ofa product to function when subjected to hard and frequent use. It is measured as

the period or amount of use one gets from a product, before it physicallydeteriorates or until replacement is preferable.

7. Serviceability: This includes speed, courtesy and competence of repair. Itindicates the ability to repair a product quickly and easily including the courtesyand competence of the repairer.

8. Perceived Quality: Customer perception or subjective assessment resulting fromimage, advertising or brand names.

9. Safety: Assurance that the customer will not suffer injury or harm from a product.


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These dimensions of product quality provide a good conceptual framework forunderstanding the multidimensional nature of product quality. To determine thedimensions of service quality is more difficult.

1.6 DIMENSIONS OF SERVICE QUALITY

Many researchers have shown that service quality is also multidimensional. Evans andLindsay provide a list of 8 dimensions of service quality. These are general lists and

serve as good starting points.1. Time how long must a customer wait?

2. Timelines will a service be performed when promised?

3. Completeness Are all items in the order included?

4. Courtesy Politeness, consideration for property, clean and neat appearance.

Do front line employees greet each customer cheerfully?

5. Consistency Are services delivered in the same fashion for every customer andevery time for the same customer?

6. Accessibility and convenience Approachability and ease of contact. Is theService easy to obtain?

7. Accuracy Is the service performed right the first time?

8. Responsiveness Willingness or readiness to provide prompt service. CanService personnel react quickly and resolve unexpected problems?

1.7 QUALITY MISSION

Quality mission of a company can be defined through its quality mission statement,which may state it as the companys mission.

To provide a quality product that satisfies our customers needs and expectations thefirst time, every time!

Our goal is to satisfy our customers needs, whether it be through timely\delivery; providing the best value for the money; efficient and courteous service; or superiorquality, reliability and durability of our products.

As such, we have committed ourselves to the following:

1. Understanding and responding to our customers needs and expectations.

2. Providing proven design products.

3. Improving the systems of production to generate continuing quality and productivity improvements.

4. Developing a highly trained and motivated workforce with full accountability andresponsibility.

5. Establishing long-term relations with suppliers.

6. Continually improving on all of the above.


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14Total Quality Service Management Check Your Progress 1

1. Define quality.

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2. What is quality mission of a company?

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1.8 QUALITY POLICY

The companys quality edifice stands on the following Pillars:

1. Total commitment for customer satisfaction.

2. Protection and Advancement of Environment.

3. Market Leadership.

4. Strive for Quality Excellence.5. Sustainable Development of Stakeholders.

In its quality policy declaration a company may state as under:

The companys commitment to quality is unflinching, our hunger for growth is deep-rooted and our capacity for details is amazing. Over the decades, the company hasdemonstrated a rare resilience and fortitude. The company is determined to improve

productivity and focus continuously on innovation and up-gradation of its productsand people.

In order to support good-quality fulfillment of its tasks, the Centre for RegionalDevelopment has introduced a suitable and effective quality management system,

implemented following an internationally approved model of the ISO 9001:2000standard, and has declared its quality policy which fully covers all the organisationsactivities, is binding for each employee and targeted as follows:

1.8.1 Quality of Services Services and products must be delivered in a highest professional quality, respect

the needs of customers, co-operating partners and Management Authorities of thenational state administration;

Through continuously increasing the quality of its services and products, the CRDCR aims at:

Achieving very good and stable evaluation of the organisations activities by

control and audit companies; Achieving the very best evaluation of the organisation in main spheres of its

activities in the domestic and foreign markets.

1.8.2 Customers Satisfaction Customers satisfaction is the priority objective of quality policy. It rests on the

provision of high-quality services, products and information by responsible,educated, professionally advanced and satisfied employees able to communicatewith customers in a positive way.


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A further objective is to eliminate serious complaints about the organisationsactivities and its employees caused by their own mistakes.

1.8.3 Preparedness and Satisfaction of Employees Preparedness and satisfaction of employees and their responsible approach to

fulfilling tasks are linked to the sense of belonging to the organisation andknowledge of personal development prospects.

Employees are personally motivated to high-quality performance of theorganisations tasks entrusted to them. They bear full responsibility for their

proper fulfillment, which is reflected in their evaluation.

In relation to their colleagues and customers, all employees apply principles of positive communication at work.

Employees bear personal responsibility for their professional growth and theutilisation of conditions created by the organisations top management.

1.8.4 Competence of the Organisations Management and Administration Top management continuously inform their employees about the organisations

objectives, tasks and its overall targeting.

Top management have committed to implementing advanced informationtechnologies and creating working environment in their organisation leading tosustainable high-quality work of employees.

Top management, together with other managers, have committed to continuouscreating - through a training system, work meetings and support to informalactivities of the employees conditions for increasing qualification of theemployees, strengthening team spirit and human relations.

Managers continuously improve their management skills and professionalknowledge.

The organisations managers bear personal responsibility for adhering to the

quality management system and creating jointly conditions for continuousimprovement of its efficiency.

It is of crucial importance to mention here that the relationship between specificbundles of human resource management (HRM) policies and practices andorganisational performance in the service industry is not well understood. Based onopen-ended interviews with managerial staff, and examination of managementdocuments, the human resource management policies and practices adopted by anorganisation in support of a strategic decision to enhance quality are considered inorder to shed light on the nature of the relationship between HRM bundles andeffectiveness in a quality-focused service context. The changes in service quality areadopted to have measurable positive effects on the key indicators of service used bythe organisation.

1.9 OBJECTIVES OF QUALITY

The Total Quality Management (TQM) process begins with a definition of the specificquality objectives important to the clients business. Assessments are conducted to

benchmark the business relative to standards agreed upon with the client.

Establishing objectives is serious business and requires close attention and greatunderstanding. They must be set within the process capability in order to driveimprovement.


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The following five steps should be observed for writing the broad quality objectivesfor an organization.

Assemble input: The mission statements of the organization must be circulatedwidely through out the organization and get the input from all stake holders as towhat we have to accomplish to fulfill the mission.

Find the optimum input: Analyze the inputs received and take those that are intune with the organizations mission and vision.

Resolve differences: Discuss the proposed objectives in detail and resolve thedifferences.

Select the final objectives: After resolving the differences, finalize the list. Theobjectives are then rewritten and edited to ensure that they are in tune with themission and vision of the organization.

Publicize the objectives: Inform all the stakeholders the organizations objectives.Publish it with vision, mission and guiding principles.

A successful TQM environment requires a committed and well-trained workforce that participates in quality improvement activities. Such participation is reinforced byreward and recognition systems emphasizing the achievement of quality objectives.

Now develop the specific tactics for achieving the objectives.Specific tactics are well-defined, finite projects and activities that are done toaccomplish the objectives. They have the following characteristics:

They are specific in nature. They are measurable. They can be quantified. They can be achieved within the specified time. They can be assigned to a specified person or group. They are tied to a broad objective directly.

1.10 CONCEPTS OF QUALITY

Quality Concepts is a concept-driven business that focuses on Specialty BusinessDevelopment! With Quality Concepts as the central hub, and building on the strengthof shared resources, we are developing the model for training, management, andaccountability necessary to the success of any business model! Growing from thecenter out, the model for specialty industries and the added value support of QualityConcepts systems is steadily being pioneered, piloted, and duplicated on a regional

basis.

1.11 THE NEED AND IMPORTANCE OF QUALITY

According to Juran, there remains need for quality as it involves fitness for use asseen by the user(or, rather, something like approximate fitness for use as seen by a

big enough group of users). Put at its most simple, we define service qualitymanagement as the processes and systems used to monitor and manage the service

provided by a company. We see it as part of an operator's OSS (operational supportsystem). An OSS is net of computerised systems that support the business andoperational processes peculiar to the online business industry. These are broadly:

1. order management

2. inventory and workforce management

3. mediation and service provisioning.


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According to industry insiders there are two schools of thought about managingnetwork quality. One view is that the network has inbuilt mechanisms to control andheal itselfa view subscribed to by many network equipment vendors. On the otherhand, many feel that, from a business point of view, an overall system of control isneeded. Networks are composed of many desperate elements. Whilst they may well begenerating alarms and be able to heal themselves to some extent, this does notnecessarily take into account any knock-on effects or an unusual combinations ofevents. One of the primary aims of network management is to be able to understand

the root cause of performance problems. There also remains a need for quality aseffective management of the service network brings with it a number of benefits:

1. improved performance

2. better return on investment by facilitating maximizing use of resources

3. revenue assurance

4. improved customer satisfaction

5. better forecasting.

Network management draws this information together into reports that are used forthe various activities. Some of these activities can happen automatically and some will

need human intervention. The network monitoring and management process entailsthree activities:

1. collecting data from the network

2. sorting and analysing this data

3. presenting the findings as intelligible reports that provide visibility, inunderstandable terms, of the behaviour of the networks and the services that rideupon them.

This overall process is service quality management.

There has been considerable realignment in the service market through mergers,acquisitions and divestments. This, coupled with the development of new services,means that operators are increasingly operating in a multi-vendor, multi-technologyenvironment. Their newly acquired companies may well be using equipment sourcedfrom different vendors, or may even be offering different services. Networkmonitoring and management needs to have the ability to address this type ofenvironment, and all types of networkfixed, mobile, IP and cable, across all domainsincluding switching, transport and access. In this climate, the need and importance ofquality remains in benefiting the operators, in understanding the network behaviourthrough effective use of the information generated from network monitoring are

broadly:

1. Operations-relatedcentred on protecting the service provider's infrastructurewhilst making the most of its assets and streamlining operations.

2. Business-relatedreducing costs such as SLA penalties, maximising revenues andsatisfying customers.

3. Understanding and controlling network performance.

4. Keeping track of the growing complexity of networks.

Further, the importance of the Quality of Service Management approach lies in thefact that, it:

Allows you to quantify the monetary benefits of a particular configuration so thatyou can obtain the maximum profit from that environment.


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Allows you to predict when upgrades and enhancements will be required so theycan be planned and achieved at lowest possible cost.

Ensures that you can plan and prepare better Service Level Agreement targets,confident in the knowledge that you can support them without penalty.

Provides the means to measure and maximise the return on your investmentswhile minimising overall Total Cost of Ownership.

Today's growth in Service Level Agreements and the costs involved with entireservice networks are significant management challenges that need to be addressed.

1.12 EVOLUTION OF QUALITY

Before the concepts and ideas of TQM were formalised, much work had taken placeover the centuries to reach this stage. This section charts the evolution, frominspection through to the present day concepts of total quality.

1.12.1 From Inspection to Total Quality

During the early days of manufacturing, an operatives work was inspected and adecision made whether to accept or reject it. As businesses became larger, so too did

this role, and full time inspection jobs were created. Accompanying the creation ofinspection functions, other problems arose:

More technical problems occurred, requiring specialised skills, often not possessed by production workers.

The inspectors lacked training.

Inspectors were ordered to accept defective goods, to increase output.

Skilled workers were promoted into other roles, leaving less skilled workers to perform the operational jobs, such as manufacturing.

These changes led to the birth of the separate inspection department with a chiefinspector, reporting to either the person in charge of manufacturing or the works

manager. With the creation of this new department, there came new services andissues, e.g, standards, training, recording of data and the accuracy of measuringequipment. It became clear that the responsibilities of the chief inspector were morethan just product acceptance, and a need to address defect prevention emerged.

Hence the quality control department evolved, in charge of which was a qualitycontrol manager, with responsibility for the inspection services and quality controlengineering.

In the 1920s statistical theory began to be applied effectively to quality control, andin 1924 Shewhart made the first sketch of a modern control chart. His work was laterdeveloped by Deming and the early work of Shewhart, Deming, Dodge and Romigconstitutes much of what today comprises the theory of statistical process control

(SPC). However, there was little use of these techniques in manufacturing companiesuntil the late 1940s.

At that time, Japans industrial system was virtually destroyed, and it had a reputationfor cheap imitation products and an illiterate workforce. The Japanese recognisedthese problems and set about solving them with the help of some notable quality gurus

Juran, Deming and Feigenbaum.

In the early 1950s, quality management practices developed rapidly in Japanese plants, and become a major theme in Japanese management philosophy, such that, by1960, quality control and management had become a national preoccupation.


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By the late 1960s/early 1970s Japans imports into the USA and Europe increasedsignificantly, due to its cheaper, higher quality products, compared to the Westerncounterparts. In 1969 the first international conference on quality control, sponsored

by Japan, America and Europe, was held in Tokyo. In a paper given by Feigenbaum,the term total quality was used for the first time, and referred to wider issues such as

planning, organisation and management responsibility. Ishikawa gave a paperexplaining how total quality control in Japan was different, it meaning companywide quality control, and describing how all employees, from top management to the

workers, must study and participate in quality control. Company wide qualitymanagement was common in Japanese companies by the late 1970s.

The quality revolution in the West was slow to follow, and did not begin until theearly 1980s, when companies introduced their own quality programmes andinitiatives to counter the Japanese success. Total quality management (TQM) becamethe centre of these drives in most cases.

In a Department of Trade & Industry publication in 1982 it was stated that Britainsworld trade share was declining and this was having a dramatic effect on the standardof living in the country.

There was intense global competition and any countrys economic performance andreputation for quality was made up of the reputations and performances of itsindividual companies and products/services. The British Standard (BS) 5750 forquality systems had been published in 1979, and in 1983 the National QualityCampaign was launched, using BS5750 as its main theme. The aim was to bring to theattention of industry the importance of quality for competitiveness and survival in theworld market place. Since then the International Standardisation Organisation (ISO)9000 has become the internationally recognised standard for quality managementsystems. It comprises a number of standards that specify the requirements for thedocumentation, implementation and maintenance of a quality system.

TQM is now part of a much wider concept that addresses overall organisational performance and recognises the importance of processes. There is also extensiveresearch evidence that demonstrates the benefits from the approach. As we move into

the 21st century, TQM has developed in many countries into holistic frameworks,aimed at helping organisations achieve excellent performance, particularly incustomer and business results. In Europe, a widely adopted framework is the so-calledBusiness Excellence or Excellence Model, promoted by the European Foundationfor Quality Management (EFQM), and in the UK by the British Quality Foundation(BQF).

1.13 DETERMINANTS OF QUALITY

Quality, quality management, quality control, etc. are not functions but products ofsound management. Principles and effective management of design, are - scope,specification, documentation, cost, budgets and time. From inception to the

completion of a construction project, each function must be aimed at the achievementof quality, whether the function is design, specification, documentation or procurement. Furthermore, the element of competition and what it purports to achieve,must not be forgotten.

The traditional approach to competitive tendering involves the calling of tendersaddressed to a principal, which purports to carry out specified work and/or the supplyof goods in return for specified payment. In the evaluation of the tenders, the principalwill seek a tender that best suits the specific requirements of price, time and quality.From time to time, other criteria may also apply. In recent South African experience,tenders submitted to the various state bodies might also be evaluated on the basis of:

Affirmative action


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Training

Labour content

Local materials

Community involvement.

The appointment of professionals may also be classified as 'competitive' as theconsultant team should be able to produce a product meeting standard levels of

acceptability, manage the process and motivate the contractor to achieve the highestlevels of quality.

Taking the foregoing into account, the generation of quality products in constructionis influenced by the following determinants:

Budgets

Development cost plans

Design and design management

Specification

Documentation

Communication systems Total cost management and control

Time scheduling and time management.

Quality is inherent in each of these processes, which should not be reactive, but ratherinherent in dynamic and proactive management of quality-achievement. At the risk ofsubordinating the purposes and interests of those who use and live in buildings,

professionals, consultants, developers and contractors must realise the needs of themarket, the people and the community they serve. The danger is that through"conceptual frameworks we risk isolating fragments of social reality, decontex-tualising, then recontextualising and, in so doing, creating a different kind of world".In the final analysis, quality can only be achieved in a specific context, within aspecific environment, for a real community.

The determinants of quality are of importance to operations academics and managers,and they provide the identification of the determinants of service quality. There aresome quality determinants that are predominantly satisfiers and others that are

predominantly dissatisfiers. It is found that the predominantly satisfying determinantsare attentiveness, responsiveness, care and friendliness; and the dissatisfiers areintegrity, reliability, responsiveness, availability and functionality. Responsiveness isidentified as a crucial determinant of quality as it is a frequent source of satisfaction,and the lack of it is a major source of dissatisfaction. Contrary to the existingliterature, shows that the causes of dissatisfaction are not necessarily the obverse ofthe causes of satisfaction and, furthermore, that reliability is predominantly a source

of dissatisfaction not satisfaction.Further, determinants of quality include the management activities of control,improvement and the rest. Using various examples, the use of people and data areexplained in the management of control and improvement. It is concluded that ifcompanies are to improve their service/ product's quality, they must review the needsfor improvement of data collection and presentation and the quality skills needed at allmanagerial levels.

With the recent growing interest in service relationships in the industrial sector, a needexists to investigate the underlying determinants for service quality for business-to-

business service encounters.


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Example:

Here is an example of the determinants of quality needs in the case of childcare:

There is consensus around the world that young children must experience high qualityservices, not only to ensure the best possible future outcomes, but because childrenhave the right to the best possible present. All children are found to benefit from highquality early childhood programs, but those from disadvantaged backgrounds demon-strate stronger advantages. The catchphrase the importance of the early years has

now become a call to arms: it is recognised worldwide that we must provide the best possible services to young children and their families.

However, there is not universal agreement as to what constitutes best possible earlychildhood services. Understandings of quality are value-based and change as valueschange. (Childcare Resource and Research Unit 2004).

Understandings are also different across cultures, religions, contexts and the person orgroup making the judgment. Myers (2004, p.19) argues that different cultures mayexpect different kinds of children to emerge from early educational experience andfavour different strategies to obtain those goals. There is not a universal definition ofquality: in different times and places different kinds of practices are valued as highquality.

Despite this, within the Western world, professionals assume at least a basic commonunderstanding. The European Commission Childcare Network attempted to definethese commonalities and came up with 40 quality targets. Analysing the literaturefrom a range of European countries, Myers (2004) argues there is consensus aroundquality components including safety, good hygiene, good nutrition, appropriateopportunities for rest, quality of opportunity across diversity, opportunities for play,opportunities for developing motor, social, cognitive and language skills, positiveinteractions with adults, support of emotional development, and the provision ofsupport for positive peer interactions. However, performance indicators identifyinghow these principles play out in practice differ in different contexts and with differentlevels of expectations and resources.

What is clear is that quality is multidimensional, complex and multi-theoretical.Single indicators of quality are ineffective, as quality outcomes for children are foundto relate to a complex interplay of many different factors. In this context ofcomplexity and uncertainty, researchers attempt to measure quality, and states attemptto regulate for quality care. Research tools measuring quality tend to focus on

particular theoretical approaches to learning, for example the developmentallyappropriate practice approach. At state level, regulations are introduced addressingcertain easily measured aspects of care. There is general agreement that whereregulations are strict, quality is enhanced and outcomes for children are better, so theassumption remains that regulations must be doing some good. OKane (2005) agrees,arguing that regulations contribute to enhancing quality practice, but they are notsolely responsible as there are a number of other factors coming into play.

Check Your Progress 2

Fill in the blanks:

1. ______________________ cost is expended to develop data requirementsand measurements.

2. The Quality Council (QC) is the focal point of the _________________.

3. Leadership in quality can only be accomplished by ongoingimprovements and through the active participation of all _________.


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22Total Quality Service Management 1.14 INTERPRETATION AND PROCESS OF

QUALITY AUDIT

Quality audit is the process of systematic examination of a quality system carried out by an internal or external quality auditor or an audit team. It is an important part oforganization's quality management system and is a key element in the ISO qualitysystem standard, ISO 9001.

Quality audits are typically performed at predefined time intervals and ensure that theinstitution has clearly-defined internal quality monitoring procedures linked toeffective action. This can help determine if the organization complies with the definedquality system processes and can involve procedural or results-based assessmentcriteria.

With the upgrade of the ISO9000 series of standards from the 1994 to 2000 series, thefocus of the audits has shifted from purely procedural adherence towardsmeasurement of the actual effectiveness of the Quality Management System (QMS)and the results that have been achieved through the implementation of a QMS.

Quality audits can be an integral part of compliance or regulatory requirements. Oneexample is the US Food and Drug Administration, which requires quality auditing to

be performed as part of its Quality System Regulation (QSR) for medical devices(Title 21 of the US Code of Federal Regulations part 820).

Several countries have adopted quality audits in their higher education system (NewZealand, Australia, Sweden, Finland, Norway and USA) Initiated in the UK, the

process of quality audit in the education system focused primarily on proceduralissues rather than on the results or the efficiency of a quality system implementation.

Audits can also be used for safety purposes. Evans & Parker (2008) describe auditingas one of the most powerful safety monitoring techniques and 'an effective way toavoid complacency and highlight slowly deteriorating conditions', especially when theauditing focuses not just on compliance but effectiveness.

The processes and tasks that a quality audit involves can be managed using a widevariety of software and self-assessment tools. Some of these relate specifically toquality in terms of fitness for purpose and conformance to standards, while othersrelate to Quality costs or, more accurately, to the Cost of poor quality. In analyzingquality costs, a cost of quality audit can be applied across any organization rather than

just to conventional production or assembly processes.

1.15 LET US SUM UP

Quality measurement should begin with a system for documenting non-conformances.Every time an item fails a test, a purchased item is rejected, a statistically controlled

process exceeds its limits, or a product is returned from a customer, the non-conformance must be documented.

Quality costs help to show the importance of quality related activities tomanagement. They identify opportunities for quality improvement and establishfunding priorities by means of Pareto analysis. This analysis allows the qualityimprovement program to concentrate on the vital few quality problem areas.

Once corrective action has been completed, the quality costs will measure theeffectiveness of that action in monetary terms. Quality improvement is synonymouswith a reduction in the cost of poor quality. Every amount saved on quality cost has a

positive effect on profits.


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23Aspects of Quality1.16 LESSON END ACTIVITY

Write a note on the concepts, evolution and determinants of quality.

1.17 KEYWORDS

Quality : Defined as that aspect of things under which they are considered in thinkingor speaking of their nature, condition, or properties.

Aesthetics: How a product looks, feels, tastes or smells.

Durability: Useful life or life span of the product.

Persuasiveness : Good leaders are able to use their power and communication skills togood use. They convert their power into influence.

1.18 QUESTIONS FOR DISCUSSION

1. Define the concept of quality and what are its determinants.

2. What are the various dimensions of quality?

3. Describe the various costs of quality and its process.

Check Your Progress: Model Answers

CYP 1

1. Quality can be defined as the degree to which a product is fit for thespecific use.

2. Quality mission of a company can be defined through its quality missionstatement, which may state it as the companys mission.

CYP 2

1. Information system costs

2. Total Quality Management (TQM) process3. Employees

1.19 SUGGESTED READINGSSundara Raju, S.M., Total Quality Management: A Primer , Tata McGraw-Hill, 1995.

Sreenivasan, N.S and V. Narayana, Managing Quality Concepts and Tasks , New AgeInternational, 1996.

Kume, H., Management of Quality , Productivity Press, 1996.

Dennis, Lock, Handbook of Quality Management , 1992.

Hammer, M. and Spect, Business Process Reengineering , 1995.

ISQUA Journal.

MCB Journal of Quality Management.


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24Total Quality Service Management LESSON

2BASIC CONCEPTS OF TOTAL QUALITY MANAGEMENT

CONTENTS

2.0 Aims and Objectives

2.1 Introduction

2.2 Characteristics of Good Leaders

2.2.1 Leadership for Quality

2.2.2 Styles of Leadership

2.3 Quality Control

2.4 Costs of Quality

2.5 The Process Model

2.5.1 The PAF Model

2.6 Life Cycle Model

2.7 Economics of Quality

2.7.1 Economic Cost of Quality

2.7.2 Organisations and the Economic Cost of Quality

2.8 Contribution of Quality Gurus

2.8.1 Walter A. Shewhart (1891-1967)

2.8.2 Joseph M. Juran (born in 1904)2.8.3 Armand V. Feigenbaum

2.8.4 Kaoru Ishikawa (1915-1989)

2.8.5 W. Edwards Deming (1900-1993)

2.8.6 Dr. Genichi Taguchi (born in 1924)

2.9 Statistical Process Control (SPC)

2.9.1 Benefits

2.10 Statistical Quality Control (SQC)

2.10.1 Advantage of Statistical Quality Control

2.11 Company Wide Quality Control (CWQC)2.12 Total Productive Maintenance (TPM)

2.13 Total Quality Control (TQC)

2.14 Let us Sum up

2.15 Lesson End Activity

2.16 Keywords

2.17 Questions for Discussion

2.18 Suggested Readings


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25Basic Concepts of


2.0 AIMS AND OBJECTIVES

After studying this lesson, you should be able to:

Know the basic concepts of TQM

Understand the quality objectives

Study the quality process mode

2.1 INTRODUCTION

Leadership is the ability to motivate people to make a total and voluntary commitmentto attain or exceed organizational goals. Leadership is the ability to inspire confidenceand support, with an aim to achieve organizational goals. The concept of leadershipcan be defined as the ability of top management to lead the firm in continuously

pursuing long-term overall business success.

Leadership plays a crucial role in creating the goals, values and systems that guide the pursuit of continuous performance improvement. The European Quality Award andthe Malcolm Baldrige Quality Award recognize this.

Leaders have to address the values, direction, and expectations of all stakeholders.The leaders need to ensure the creation of strategies, systems, and methods forachieving excellence.

2.2 CHARACTERISTICS OF GOOD LEADERS

Good leaders have the following characteristics:

Bal anced commi tment: Good leaders are committed to the jobs and the peoplewho must do it.

Positi ve in fl uence: Good leaders set positive examples at all times. They practicewhat they preach. They help people to achieve their goals.

Good communication skills: Good leaders communicate effectively. They aregood listeners. They are able to understand their followers well. They are able toestablish rapport with the followers.

Positi ve role model: Good leaders have positive traits. They are always positive intheir thinking and action. They are able to form a positive aura around them. Theyuse their hold over the followers in a positive manner. They are dependable andthey are able to influence people. They excel and are thus able to make othersexcel.

Persuasiveness: Good leaders are able to use their power and communicationskills to good use. They convert their power into influence. They use thisinfluence to persuade people.

2.2.1 Leadership for QualityLeadership for quality is the leadership from perspective of total quality. It involvesthe following:

Customer F ocus: Customer is the king. The prime reason for an organization isdelighting the customer. Leadership for quality requires customer focus. Customerincludes both external and internal customer. An organizations senior leadersneed to set directions. They must create clear customer orientation and makequality values visible.


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Obsession with qu ali ty: Leaders obsessed with quality will be breathing andtalking of quality. They can influence the people and make the organizationquality oriented.

Recognizing structur e of work : Quality involves continuous improvement. Work processes need to be recognized with appropriate structure. When the optimumstructure is in place, work processes must be analyzed and evaluated forcontinuous improvement. Achieving Total Quality is a journey and not adestination.

F reedom thr ough contr ol: Quality means reduction in variation of output. Thevariations in how work is done have to be eliminated. Leaders must ensure thatmangers and employees take control of the work processes and methods byworking together. People must be running the machines and not otherwise.

Un ity of pur pose: Unity of purpose is key to a leadership system. Core values andconcepts provide the unity of purpose. The core values and concepts enable aframework for leaders throughout the organization to make right decisions. Theyfoster TQM behavior and define the culture. Each organization will need todevelop its own values. The behavior of an organizations leader must create aclarity and unity of purpose within the organization and an environment in whichthe organization and its people can excel.

Fi nding fault: The aim of leadership is not to point fingers at individuals or tokeep records of failures. The leaders job is to remove barriers and create a

positive culture. Such a culture values helping others to do a better job and to feel pride in workmanship.

Team work: Leadership of quality requires teams work and team building.Teamwork is the fundamental principle in total quality. A team of people workingtogether toward a common goal can outperform a group of individuals workingtowards their own goals. More can be achieved by co-operation than competition.

Continu ous education and train in g: To be an effective leader in most modernfirms, the top manager must continue to develop and learn. Knowledge of the

business and continual learning are essential prerequisites to effective leadership.Continued learning at all levels are required. Technology is changing every day.Smart work is more important than handwork.

2.2.2 Styles of Leadership

The three basic styles of leadership are:

Auth oritati ve or Autocratic: An autocratic leader dominates. He has completecontrol over his subordinates. He takes all decisions himself. He does consult hisfollowers. He loves power. He uses rewards and penalties to get work done. Heexpects his subordinates to follow his commands without questioning . He doesnot delegate the authority. Communication follows only in the down warddirection. This style is task oriented. There is no scope for the followers to showinitiative or creativity.

Democratic or Participative style: A democratic leader takes decisions afterconsulting his subordinates. He takes all decisions himself. He does not consulthis followers. He loves power. He uses rewards and penalties to get work done.He expects his subordinates to follow his commands without questioning. He doesnot delegate the authority. Communication follows only in the down warddirection. This style is task oriented. There is no scope for the followers to showinitiative or creativity.

F ree rein or L aissez-fair e leadership: Free rein leadership as the name suggestsinvolves complete delegation of authority. Subordinates themselves take


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27Basic Concepts of


decisions. The leader here avoids power. He relinquishes the leadership position.He serves, as a contact to bring the information needed by the subordinates. Freeflow of communication occurs. Control is by self-discipline. There is full scopefor creativity and development of the subordinates.

Participative or democratic leadership style is more suited in total quality setup.Quality is the responsibility of everyone in the organization. Top commitment is thefoundation of an effective leadership effort. This is exemplified by:

Clarity of vision, Top management participation,

Coaching management style,

Employee empowerment,

Top management learning,

Top management commitment to employee education and training, and

Top management pursuit of product quality and long-term orientation

Managers can be good leaders only when they have the trust of the people whom theylead. Managers sometimes, have to make unpopular decisions. If it is seen that thedecision has been taken after due consideration and in an impartial way, it will notalienate the people from the leader. Good leaders may be popular but they will berespected always. All good leaders are not popular. However, they are all respected.Leaders build and maintain follower ship to earn respect. Some of the essentialcharacteristics, which would earn respect of the people, are:

Sense of pur pose: Successful leaders have a strong sense of purpose. They knowwhat they are capable of and the areas where they can contribute for improvingthe organization.

Self-discipline: Successful leaders have good self-discipline. It helps them to givea positive image. They are able to control their emotions like anger, nervousnessetc. They able to handle problems and pressures with poise and dignity.

H onesty: Successful leaders are trusted by their followers. They are open andtrustworthy. They are seen dealing with other members of organization withopenness and straightforwardness.

Credibility: Successful leaders have credibility. They are knowledgeable and areconsistent, fair and impartial. They adhere to the same standards in their

performance and behaviour.

Common sense: Successful leaders must have good common sense. They must beable to distinguish between what is important and what is not. They must knowwhen to be flexible.

Stamina: Successful leaders must have good health and stamina to cope up with

all these. Commitment: Successful leaders are committed to the goals of the organization.

A commitment to total quality means a willingness to change the style (andculture) in which the company operates, Lack of top management commitment isone of the reasons for the failure of TQM EFFORTS. Strong commitment fromtop management is vital for Quality demonstrating such commitment is a primaryleadership principle for achieving TQM.

Steadfastness: Successful leaders are steadfast and resolute. They get going whenit becomes tough also. Their commitment keeps them going.


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Quality gurus as Deming Juran and Crosby have also stressed the role of leadership in pursuit of continuous quality improvement. Top management must be committed toallocating sufficient resources to prevent and solve quality problems. They must

provide sufficient resources for employees education and training. They must becommitted to building trustful relationships with employees, and regard them asvaluable resources of the firm.

Top management must train and coach employees to assess, analyze, and improvework processes. Leadership in quality can only be accomplished by ongoingimprovements and through the active participation of all employees.

Top management should discuss quality frequently. Giving speeches on the topic andasking questions about quality at every staff meeting can do this. People make thingshappen.

Leadership covers the following four sub-criteria that should be addressed:

Leaders develop the mission, vision and values and are role models of a culture ofexcellence;

Leaders are personally involved in ensuring the organizations managementsystem is developed, implemented and continuously improved;

Leaders are involved with customers, partners and representatives of society; Leaders motivate, support and recognize the organizations people.

It is essential that top management focus on product quality rather than yields alone.More importantly, it is critical for the firm to pursue long-term business success.Pursuing short-term business success places quality behind yield, costs and meetingdelivery schedules.

To effectively lead the firm, top management must empower employees to solve the problems they encounter. Employees can have then the authority to fix problems and prevent their further occurrence. Empowerment is the process of delegating decision-making authority to lower levels within the firm. Particularly dramatic isempowerment of the workforce.


1. Define leadership.

.

.

2. Define free rein.

.

.

2.3 QUALITY CONTROLThe quality control has overall responsibility for continuous improvement. QualityCouncil is a group of senior managers appointed to plan, administer, facilitate andmonitor the entire Quality Process. The quality council consists of the key people inthe top management team. It is better that the CEO is a part of it. The quality councilat management level is a good tool to initiate, institutionalize, facilitate and evaluatequality improvement in a company.

Quality councils should be established at the corporate, division & product line levels.The strategic planning process must be initiated by the organizations managementand make sure it continues. A team is the best for carrying out actual planning.


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29Basic Concepts of


Ideally, such a team must have a diagonal cross-section of people within theorganization to ensure that all interests are met.

The council sets quality policy and reviews performance goals within theorganization, and it is responsible for the continuous improvement effort, and providesthe best information about what is really happening in the organization.

Both Juran and Crosby have made the establishment of quality control as one of thesteps in TQM. In general, the duties of the quality council are to:

Formulate the core values, vision statement, mission statement, qualityimprovement policy etc.

Strategic planning of quality improvement projects with goals and the annualquality improvement program with objectives.

Establishing the quality multifunctional project and departmental or work groupteams.

Allocating sufficient resources to each quality improvement project.

Providing adequate education and training for teams.

Monitoring the progress of the teams and supporting them to do their work and

provide a periodic critical review process for each project. Facilitating implementation of project results.

Establishing quality metrics to measure progress for the organization, approvethose for the functional areas, and monitor them.

Continually determine those projects that improve the processes, particularlythose that affect external and internal customer satisfaction.

Provide for team & individual recognition to account for the new way of doing business.

Establish an appropriate reward system that reinforces teamwork.

Most organizations establish a leadership group that will guide and direct the qualityeffort. The quality council meets regularly to deal with the major issues that arisegoverning the deployment of TQM throughout the organization. The chairperson ofthe council at all levels should be a manager having overall responsibility andauthority for that level.

A coordinator is necessary to assume some of the added duties that a qualityimprovement activity requires. He must report directly to the CEO. He has lots ofresponsibilities that include

Building trust among the people.

Co-ordinate the activities of various teams and council.

Share the expectations of the council with the teams.

Brief the council on the progress of the teams.

He has to play an active role in making the teams aware of their responsibilities,helping the team leaders to have regular meetings, share lessons learned among teamsetc.

The Quality Council (QC) is the focal point of the Total Quality Management (TQM) process. Its important to include perspectives from men and women, newcomers andestablished employees, people from different racial or ethnic backgrounds, anddifferent age groups. The plans validity is strengthened by the assurance that all

perspectives are involved in the creative process.


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A planning team consisting of only top-level managers is not effective. Vitalinformation and perspectives from other levels is likely to be filtered out. Hence, suchteam also must have people who perform hands-on work or have direct contact withcustomers. The team must have people senior-level people who can provide a broadview of the organizations situation.

The quality of the planning process is enhanced by the planning groups diversity. Aneffective team will offer a balance of perspectives from within and without theorganization. Quality council helps to build quality into the culture. It also helps to

provide over all direction. It is the driver for the TQM engine.

The Quality Control shall promote and coordinate continuous improvement efforts bysupporting all employees in carrying out the mission statement of the organization toensure exceptional customer service through involvement, communication andcommitment.

The council may use the group problem solving techniques, such as brainstorming andconsensus decision-making for identifying barriers and driving forces to the qualityeffort. It must stress the importance of relying on the knowledge, talents and skills ofeveryone in the group. The council also uses some of the structured tools such as datagathering, simple statistical analysis, and structured problem solving techniques.

The Quality Council initiate change for global problems as well as specific problems by preparing charters and suggesting team members. It further assists by offeringguidance when teams get stuck on issues or require facilitation.

Once the quality manager obtains and agreement to initiate a strategic planning process, he or she must assemble the right mix of people to form a planning team. Thequality manager must obtain assurance from other managers that team members will

be given adequate time to work on this process.

The quality manager will either facilitate the process or ensure that an experiencedfacilitator leads it. Often, the manager needs to participate as a team member, in whichcase its advisable to employ a neutral facilitator who will focus on the planning

process.

Many CEOs are aware that a quality council alone cannot bring about the attitudechanges necessary to sustain continuous quality improvements. People resist thedemands of continuous change because it creates uncertainty. Top managementsupport is definitely needed.

In a typical organization, the council is composed of CEO, the senior managers of thefunctional areas, such as design, marketing, finance, production, and quality and acoordinator or consultant. If there is a union, its representative must also be made onthe council.

Ideally, it is better that the CEO is the chairperson of the quality council. Practicalitysuggests that there is a limit on the CEOs time. Therefore, a senior Vice Presidentmay chair the council; the CEOs time can be thus used effectively for reinforcementand recognition programs after the council becomes operational.In large organizations, quality council is also established at lower level of thecorporation. Their duties are similar but related to that particular level in theorganization. The quality council is expected to operate as any other team formed in aquality context.

Hence, initially these activities will require additional work by council members. Inthe lone term, their jobs will be easier. These councils are the instruments for

perpetuating the idea of never-ending quality improvement.

Once the TQM program is well established, a typical meeting agenda might havefollowing items.


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31Basic Concepts of


Progress report on teams. Customer satisfaction report. Progress on meeting goals. New project teams. Recognition dinner. Benchmarking report.

The quality council activities will become part of the culture of the organization in 3to 5 years. Then they will become a regular part of the executive meeting. When thisstate is achieved, a separate quality council is no longer needed. Quality becomes thefirst item on the executive meeting agenda.

TQM has a universal appeal because it is an ongoing, long-term system to achievecustomer satisfaction by continuously improving the quality of a firms goods andservices.

2.4 COSTS OF QUALITY

Costs are not incurred or allocated, but rather caused. Cost information does not solve

quality problems. It also does not suggest specific solutions. Tracing the cause of aquality deficiency solves problems.

The cost of Quality is defined as the sum of the costs that would not have beenrequired had everything been done right the first time. It is considered to be any costthat the company would not have incurred if the quality of the product or service were

perfect.

Quality is more than meeting a product specification because a specification only provides a minimum set of requirements. it has been estimated that the costs of poorquality account for anything from 15% to 50% of all business costs. As most

businessmen do not keep reliable statistics, they do not know the actual amount oftheir quality costs.

Feigenbaum proposed categorization of quality costs into prevention, appraisal andfailure costs. Crosby took an economic approach by evaluation of quality costsassociated with the production, identification and rectification of non-conforming

product.

Following are some of the approaches to the classification of costs.

The process model

The PAF model

The life cycle model

2.5 THE PROCESS MODEL

The process model groups the costs as cost of conformity and cost of nonconformity.Cost of conformity is the cot to fulfill all of the stated and implied needs of customersin the absence of failure of the existing process. Cost of nonconformity is the costincurred due to failure of the existing process. The cost of quality is generally the sumof conformance and nonconformance costs.

2.5.1 The PAF Model

The PAF model groups the cost under the four primary cost categories:

Prevention,

Appraisal,


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Internal failure, and

External failure.

Prevent ion cost

The experience gained from the identification and elimination of specific cause offailure and their costs is utilized to prevent the recurrence of the same or similarfailures in other products or services. The prevention costs of poor quality have been

defined to include the cost of all activities specifically designed for this purpose.Corrective action that is directed toward elimination of the problem in the future may be classified as prevention. They are investments made to keep nonconforming products from occurring and reaching the customer. These could be:

Quali ty plannin g costs such as salaries of individuals associated with quality planning and problem-solving teams, the development of new procedures, newequipment design, and reliability studies.

Process control costs which include costs spent on analyzing production processes and implementing process control plans.

I nf ormati on system costs expended to develop data requirements andmeasurements.

Tr ain in g and general management costs including internal and external training programs, clerical staff expenses, and miscellaneous supplies

Costs associated with tr yin g to prevent defects and err ors inTraining for qualityEducating suppliersDesigning product for qualityDesigning production system for qualityPreventive maintenance

Appr aisal Costs

Appraisal costs of poor quality have been defined to include all costs incurred in the planned conduct of product or service appraisals to determine compliance torequirements. They are associated with efforts to ensure conformance to requirements,generally through measurement and analysis of data to detect nonconformance. Theseare

Test and inspection costs associated with incoming materials, WIP, andfinished goods, including equipment costs and salaries.

I nstruments main tenance costs arising from calibration and repair of measuringinstruments.

Process measurement and control costs which involve the time spent byworkers to gather and analyze quality measurements.

The first responsibility of a quality management system is assurance of theacceptability of product or service as delivered to customers.

I nternal Costs of D efects

Internal failure cost includes all the material and labor expenses that are lost or wasteddue to non-conforming or otherwise unacceptable work affecting the quality of end

products or service. It is the cost to fix a problem found internally when defects arefound before shipment/delivery to customer as:

Labor and materials going into scrap

Reworking and re-testing to correct defects


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33Basic Concepts of


Downtime of equipment and labor while waiting for repairs

Yield losses.

Ex ternal Costs of D efects

External failure cost includes all costs incurred due to actual or suspected non-conforming product or service after delivery to the customer. These costs consist

primarily of costs associated with the product or service not meeting customers or user

requirements. it is the cost to fix a problem found after receipt by customer as Loss of customer goodwill

Recalls to correct problem

Warranty, insurance, and legal suit settlements

Lost sales

Other indirect costs

Generally, internal failure costs are less expensive than external failure costs.

Conformance costs include the costs of testing and measuring the environment todetermine whether it conforms to the expected quality standards. Nonconformance

costs are the costs associated with mistakes.Total quality costs are the sum of Prevention costs, Appraisal costs, Failure costs, andIntangible costs.

Th e lif e cycle model: In the life cycle model, the costs are grouped under different phases of the life cycle of the product. Quality costs increase over time.

2.6 LIFE CYCLE MODEL

Measuring the quality costs is important in order to manage them.

We must measure it first. Measures of quality costs provide the information needed toanalyze where the excess costs are occurring. We can then target improvement

projects to reduce them.It can be seen from the above graph that quality costs increase over time. Hence it is

better to make the corrections at the earliest stage. That is Prevention.

Failure costs usually account for the major proportion of quality costs in companiesthat do not have an effective quality program. Prevention costs are typically quite low.When Quality Management is introduced one would expect prevention costs are toincrease and failure costs and appraisal costs to go down.

Quality measurement should begin with a system for documenting non-conformances.Every time an item fails a test, a purchased item is rejected, a statistically controlled

process exceeds its limits, or a product is returned from a customer, the non-conformance must be documented.

Quality costs help to show the importance of quality related activities tomanagement. They identify opportunities for quality improvement and establishfunding priorities by means of Pareto analysis. This analysis allows the qualityimprovement program to concentrate on the vital few quality problem areas.

Once corrective action has been completed, the quality costs will measure theeffectiveness of that action in monetary terms. Quality improvement is synonymouswith a reduction in the cost of poor quality. Every amount saved on quality cost has a

positive effect on profits.

Traditional systems do not measure quality costs. So management may not realize thesize and importance of these costs. Quality costs are part of a firms quality


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management system. They require understanding customer requirements andtranslating them into appropriate defect rates.


1. Define costs of quality.

.

.

2. Define internal failure cost.

.

.

2.7 ECONOMICS OF QUALITY

Although the terms "economics of quality" and "quality costs" are often considered to be synonymous, but there is the clear distinction between the two. The first weinterpret as economic analysis applied to Quality Control and the second we interpretas the specific cost items attributable to quality improvement activities.

Generally speaking, there are two main approaches to dealing with the economics ofquality. Firstly, there are models which are supposed to reflect the 'economic cost ofquality'. Secondly, emerging developments have a basis in systems approaches toquality costs. This paper seeks to illustrate the problems which arise in collectingappropriate data for a "cost of quality" exercise and evaluating the economic cost ofquality. The practical measurement of quality costs involves dealing with the attitudesand approaches by management to exactly what constitutes a quality cost. Manycomponents of quality costs can only be estimated and this adds to the difficulty inapplying the economic models of analysis in an organisation. Turner (1969) explainedthat there were too many variables to illustrate the situation graphically. Other writershave commented on factors which have a bearing on the determination and use ofquality costs. For example, Bajpai and Willey (1989) indicated that since data onquality costs are elusive, many companies are unable to identify real benefits whichcan accrue from improving quality.

Organisations are likely to use accounting cost principles rather than economic cost principles in deciding on their quality level. For example, opportunity costs willgenerally not be taken into account. In quality terms, activities such as doing thingstwice could be included as opportunity costs as the staff concerned are not availablefor other tasks (there will be lost production) whilst they are correcting failures.

However, before the practitioner can use the model as a management tool, it isessential that the subject organisation (department or company) is geared to providinginformation. The problems identified in the two organisations featured in this paperinclude consistency in data collection, verification of the data collected and adding a

'real' value to the data.

2.7.1 Economic Cost of Quality

Juran (1951, p8) discussed the 'economics of quality of conformance' when he firstoffered a model which showed the 'economics of quality'. He fully recognised theeconomic dilemma:

"...the basic quality problem ... is to strike the optimum balance between cost ofquality and value of quality for each quality characteristic ...."

He argued that increased conformance reduces the losses due to defectives and statesthat "the cost of the controls needed for greater conformance rises geometrically as


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35Basic Concepts of


perfection is approached". This reflects the economist's perception of falling marginalreturns (to added quality effort) and from this we can deduce (when we also considerthat marginal benefits from added quality effort are likely also to decline) that

perfection will not be achievable - let alone optimal! Since Juran's paper there has been a great proliferation of notional or conceptual models based on Juran's work andthese very often relate costs in dollars to the quality of conformance from 100%defective up to no defectives at all. There are , however, very few explanations as tohow the economic models are supposed to work in practice.

Gryna analyses the differences between Juran's early model and his later (1988)model. Gryna's model suggests that perfection can almost be reached in an economicmanner in that the costs of appraisal plus prevention are finite not infinite.

Sittig (1963) not only explained 'the economics of quality', he also dealt with 'the problem of optimal quality' and introduced aspects of 'the dynamics of quality'. Hesays: ".... the difference between 'production costs' and 'quality costs' is entirelyartificial. Quality costs do not exist as a category opposed to production costs andtherefore strictly speaking, do not exist at all. This does not mean that it isunimportant to analyse the relationship between cost and quality. On the contrary thisrelationship has been the pivot of our theoretical discussion ......"

A number of issues emerge from this investigation of the literature, including the lackof real economic models of quality and cost - as most tend to be notional modelswithout supporting evidence.

Turner (1969), following methodologies from economics, illustrated the relationships between 'quality of conformance' and 'dollars' as well as 'the amount of inspection andquality control for operations' and 'unit cost - dollars'. Both of these illustrate that the"optimum" point at maximum total cost is not the same as the break even point of theother curves. Turner 's key contribution was to discuss quality costs in economic termssuch as marginal cost and marginal revenue but the quality cost curves, althoughdepicted this way, are rarely supported by evidence.

As can be seen from Juran's initial models, the costs of improvement continue to risewhilst the costs of failure continue to fall (again this illustrates the principle ofdiminishing marginal returns in both benefits and effort). For a regular decision abouthow much to produce, the Marginal Cost curve illustrates the additional cost incurred

by the firm to produce one more unit of output. (In practice, the output units do nothave to be single and judgements have to be made in relation to unit or batch size.) Afirm should produce where Marginal Revenue is equal to Marginal Cost but when

profit is less than zero it may be preferable to shut down rather than continue. Theshut down rule is "if for every choice of output level the firm's average revenue is lessthan its average cost, the firm should shut down" (Katz and Rosen, 1994).

The key point to this decision is, of course, the distinction that needs to be made between short- and long-run costs and revenues. In the short-run losses may betolerated because of the expectation of making long-run profits but long-run losses

can be expected to lead to shut down.2.7.2 Organisations and the Economic Cost of Quality

Aspects of the economics of quality include the attitudes and approaches bymanagement to the quality problem and this section outlines some of theorganisational factors which contribute to determining the optimal quality decision.Gupta and Campbell (1995) explained that not all companies measure the costs ofquality. They showed that only five out of the 22 companies in the final round of the1991 Malcolm Baldrige National Quality Award calculated quality costs. Mostimportantly, they stressed that the barriers to introducing prevention programmes were


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behavioural rather than economic because they "require vision, innovation and abreak from the status quo ."

One underlying principle in dealing with the economic side of quality is that failurecosts are assumed to be higher than prevention (and appraisal) costs. Elshazly (1999)dealt with accounting for quality costs and provided an outline of seven lessons fromthe accounting aspect. One key lesson is that if a company wants to reduce its qualitycosts and enhance its product and service quality, then it must be willing to spendmore money on prevention , because there is an obvious trade-off between preventionand appraisal along with the internal and external failure costs. Elshazly explains thatthe underlying premise that failure costs exceed prevention costs means that, as

prevention costs increase failure costs will drop. The main thrust of the argument isthat the accountant can help provide company-wide costs of quality in a number ofdifferent ways, including management involvement and adapting accounting systemsmeaningfully.

In his 1998 paper Kume states that "many companies treat the economic problems pertaining to quality asquality costs" . Kume explains that this is not the way thingshappen in practice and management should not be concerned with these costs butshould try to minimise the loss using quality management. For example, changes inwhat the workers were actually doing in a sub-process in a car manufacturer rendered

the whole process was sub-optimal. His view is that when loss prevention and thedevelopment of new business and sales (which are just two parts of a company) arewell balanced, a company can maximise long-run profit.

2.8. CONTRIBUTION OF QUALITY GURUS

2.8.1 Walter A. Shewhart (1891 1967)

Born in Illinois, USA, Shewhart graduated University of Illinois and then he obtainedthe doctorate in physics at University of California in 1917. Working at WesternElectric Company as an engineer, he was able to make a serious contribution to amajor problem: reliability of the equipment buried underground. Control chartscreated by him were use to differentiate between assignable sources of variation and

pure chances of variation. Shewhart studied randomness and recognized variabilitywhich exists in all manufacturing processes. In his opinion, reducing variability isequivalent to quality improvement. Later Shewhart worked for Bell TelephoneLaboratories until his retirement in 1956. He wrote several articles and books, mostrepr

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