Fifth Edition

MANAGING QUALITY

INTEGRATING THE SUPPLY CHAIN

S. Thomas FosterBrigham Young University

International Editions contributions by

Kunal K. GangulyInstitute of Management Technology Ghaziabad

PEARSON

Boston Columbus Indianapolis New York San Francisco Upper Saddle RiverAmsterdam Cape Town Dubai London Madrid Milan Munich Montreal Paris Toronto

Delhi Hong Kong Mexico City Sao Paulo Seoul Singapore Sydney Taipei Tokyo

CONTENTS

Preface 20

Part 1 Understanding Quality Concepts 25

Chapter 1 DIFFERING PERSPECTIVES ON QUALITY 26Recognizing Different Perspectives on Quality 26

• A CLOSER LOOK AT QUALITY 1 - 1 : What's in an Airport? 27

What Is Quality? 27Product Quality Dimensions 27Service Quality Dimensions 29

Why Does It Matter That Different Definitions of Quality Exist? 30

Differing Functional Perspectives on Quality 31

A Supply Chain Perspective 31

An Engineering Perspective 32

An Operations Perspective 33

A Strategic Management Perspective 34

• QUALITY HIGHLIGHT 1 -1: Quality Strategy at GE 36

A Marketing Perspective 37

A Financial Perspective 38

The Human Resources Perspective 40

Is Quality Management Its Own Functional Discipline? 41

Three Spheres of Quality 41

• QUALITY HIGHLIGHT 1 -2: Federal Express Corporation 43

Other Perspectives on Quality 43

The Value-Added Perspective on Quality 43

Cultural Perspectives on Quality 44Arriving at a Common Understanding of Quality Using a ContingencyPerspective of Quality 44

Summary 44Key Terms 45Discussion Questions 45 .

• CASE 1-1: FedEx: Managing Quality Day and Night 46• CASE 1-2: Granite Rock Company: Achieving Quality through Employees 47

Chapter 2 QUALITY THEORY 49What Is Theory? 49

Is There a Theory of Quality Management? 51

• A CLOSER LOOK AT QUALITY 2-1: Quality and Management Fads 51

History of Quality Management 52

Leading Contributors to Quality Theory: W. Edwards Deming 52

Deming's 14 Points for Management 54

Contents

Leading Contributors to Quality Theory: Joseph M. Juran 57

The Juran Trilogy 57

Control versus Breakthrough 58'

Project-by-Project Improvement 58

• A CLOSER LOOK AT QUALITY 2-2: Juran on the Past Century of Quality 59

Pareto Analysis 60

Leading Contributors to Quality Theory: Kaoru Ishikawa 60

Basic Tools of Quality 60

Ishikawa's Quality Philosophy 60

Leading Contributors to Quality Theory: Armand Feigenbaum 61

The 19 Steps of TQC 62

Leading Contributors to Quality Theory: Philip Crosby 62

Leading Contributors to Quality Theory: Genichi Taguchi 63

Definition of Quality 64

Quality Loss Function 64

Robust Design 64

Leading Contributors to Quality Theory: The Rest of the Pack 64

Robert C. Camp 64

Stephen R. Covey's "8" Habits 65

Tom Peters 65

Michael Hammer and James Champy 66

• A CLOSER LOOK AT QUALITY 2-3: Selling Quality Fads 66

Viewing Quality Theory from a Contingency Perspective 67Resolving the Differences in Quality Approaches:An Integrative View 67

Leadership 69

Employee Improvement 69

Quality Assurance 69

Customer Focus 69

Quality Philosophy 69

Information Analysis 69

Strategic Planning 69

Environment or Infrastructure 70

Team Approach 70

Focus of the Quality Department 70

Breakthrough 71

Theoretical Framework for Quality Management 71Summary 71Key Terms 71Discussion Questions 71

• CASE 2-1: Rheaco, Inc.: Making a Quality Turnabout by Asking for Advice 72• CASE 2-2: Has Disney Developed a Theory of Quality Guest Services

Management? 73

Contents

Chapter 3 GLOBAL SUPPLY CHAIN QUALITY AND INTERNATIONALQUALITY STANDARDS 75Managing Quality for the Multinational Firm (MNF) 76

• QUALITY HIGHLIGHT 3-1: Supply Chain Quality in the Global Context 79

Quality Improvement: The American Way 80

The Malcolm Baldrige Award 80

• A CLOSER LOOK AT QUALITY 3-1: Who Was Malcolm Baldrige? 85

The Baldrige Process 86

Baldrige Scoring 89

• QUALITY HIGHLIGHT 3-2: Honeywell Federal Manufacturing & Technologies 89

Being a Baldrige Examiner 90

State Awards 90

Quality Improvement: The Japanese Way 91

Deming Prize 91

Other Japanese Contributions to Quality Thought 92

Lean Production 92

• QUALITY HIGHLIGHT 3-3: The Humbling of Toyota 92

Japanese Total Quality Control (TQC) 93

Quality Improvement: The European Way 95

European Quality Award 95

ISO 9000:2008 96

Quality Management Principles Underlying ISO 9000:2008 98

Selecting a Registrar 99

The ISO 9000:2008 Process 99

ISO 14000 100 /

Quality Improvement: The Chinese Way 102

Does Chinese Quality Management Exist? 102• A CLOSER LOOK AT QUALITY 3-2: Outsourcing Woes 103

Are Quality Approaches Influenced by Culture? 104Summary 105Key Terms 105Discussion Questions 105

• CASE 3-1: Denver International Airport Becomes ISO 14001 Certified 106• CASE 3-2: Wainwright Industries: An Entirely New Philosophy of Business

Based on Customer Satisfaction and Quality 107

Part 2 Designing and Assuring Quality 109

Chapter 4 STRATEGIC QUALITY PLANNING 110Strategy Content 110

The Importance of Time in Quality Improvement 110• A CLOSER LOOK AT QUALITY 4-1 : Problems with Measuring EducationalPerformance 112

Leadership for Quality 112

Leadership Dimensions 113

10 Contents

• QUALITY HIGHLIGHT 4-1: Solectron Corporation 115

Quality and Ethics 116

Quality as a Strategy 116

Costs of Quality 116

PAF Paradigm 117

Accounting for Quality-Related Costs 118

Lundvall-Juran Quality Cost Model 119

Differentiation through Quality 120

Focus through Quality 120

Order Winners 121

Quality as a Core Competency 122

Quality Strategy Process 122

Forced-Choice Model 122

Deploying Quality (Hoshin Kanri) 123

• A CLOSER LOOK AT QUALITY 4-2: A Mature Strategic Planning Process 123

Does Quality Lead to Better Business Results? 125

Quality and Price 126

Quality and Cost 126

Quality and Productivity 126

Quality and Profitability 127

Quality and Sustainability 127

Supply Chain Strategy 128Summary 129Key Terms 130Discussion Questions 130Problems 130

• CASE 4-1: Ames Rubber Corporation: Realizing Multiple Benefits throughImproved Quality 132

• CASE 4-2: Midway USA 133

Chapter 5 THE VOICE OF THE CUSTOMER 135Customer-Driven Quality 136

• A CLOSER LOOK AT QUALITY 5-1: Online Review of Merchandise 136

The Pitfalls of Reactive Customer-Driven Quality 137

Customer-Relationship Management 138

Complaint Resolution 138 —

Feedback 139

Guarantees 139

Corrective Action 140

The "Gaps" Approach to Service Design 140

Segmenting Customers and Markets 142

Strategic Supply Chain Alliances between Customers andSuppliers 143

The Role of the Customer in the Supply Chain 144

Contents 11

Communicating Downstream 145Actively Solicited Customer-Feedback Approaches 146

Telephone Contact 146Focus Groups 146Customer Service Surveys 147• A CLOSER LOOK AT QUALITY 5-2: Misusing Surveys 147

Passively Solicited Customer-Feedback Approaches 150Customer Research Cards 151Customer Response Lines and Web Sites 151

Managing Customer Retention and Loyalty 152

Customer-Relationship Management Systems 152

A Word on Excellent Design 154

Summary 154

Key Terms 155

Discussion Questions 155

Problems 156

• CASE 5-1: Customer Quality Feedback at Apple Computer 156• CASE 5-2: Chaparral Steel: Achieving High Quality through a Commitment to

Both External and Internal Customers 157

Chapter 6 THE VOICE OF THE MARKET 159What Do We Mean by the Voice of the Market? 159

Gaining Insight through Benchmarking 160

Process Benchmarking 161

Financial Benchmarking 161

Performance Benchmarking 161

Product Benchmarking 162

Strategic Benchmarking 162

• QUALITY HIGHLIGHT 6-1: Pal's Sudden Service 162

Functional Benchmarking 163

Purposes of Benchmarking 163

Difficulties in Monitoring and Measuring Performance 164

Commonly Benchmarked Performance Measures 166

Why Collect All These Measures? 168

Key Business Factors 168

Business Process Benchmarking 168

Robert Camp's Business Process Benchmarking Process 169

Leading and Managing the Benchmarking Effort 171

• A CLOSER LOOK AT QUALITY 6-1: Benchmarking at Intuit 171

Training 172• A CLOSER LOOK AT QUALITY 6-2: The Legal Environment of

Benchmarking 172

Baselining and Reengineering 174

12 Contents

Problems with Benchmarking 174Summary 175Key Terms 175Discussion Questions 175Problems 176

• CASE 6-1: Amgen Corporation: Using Benchmarking as a Means of Copingwith Rapid Growth 179

• CASE 6-2: AT&T Teleholdings: Making Benchmarking a Part of the ProcessImprovement Tool Kit 180

Chapter 7 QUALITY AND INNOVATION IN PRODUCT ANDPROCESS DESIGN 182

Designing Products for Quality 182

The Design Process 183• QUALITY HIGHLIGHT 7-1: A Turnaround at Kellogg's Cereals: Driven by

Design 185

Quality Function Deployment (QFD) 187

Technology in Design 191

Other Design Methodologies 194

Organizing the Design Team 194

The Product Life Cycle 195

• A CLOSER LOOK AT QUALITY 7-1: Ski Design 195

Product Families and the Product Life Cycle 196

Complementary Products 196

Designing Products That Work 196• A CLOSER LOOK AT QUALITY 7-2: It Takes a Scientist to Design a Winter

Coat 197

Design for Manufacture Method 198

Design for Maintainability 199

Designing for Reliability 200

m QUALITY HIGHLIGHT 7-2: Designing Reliable Luxury at Vuitton 200

Reliability Analysis Tools 201

Failure Modes and Effects Analysis 201

How FMEA Works 202

Fault-Tree Analysis 202

Failure Modes, Effects, and Criticality Analysis 204

Product Traceability and Recall Procedures 204 —

Environmental Considerations in Design 205

Summary 206Key Terms 206Discussion Questions 206Problems 207

• CASE 7-1: Keeping Apple's iPhone Competitive 209

• CASE 7-2: Nucor Corporation: Producing Quality Steel by Stressing SoundManagement Practices 210

Contents 13

Chapter 8 DESIGNING QUALITY SERVICES 211

Differences between Services and Manufacturing 212

Internal versus External Services 213

Voluntary versus Involuntary Services 213

How Are Service Quality Issues Different f rom Those ofManufacturing? 213• A CLOSER LOOK AT QUALITY 8-1: Service Warranties: Profitable or a

Rip-off—You Decide 214

How Are Service Quality Issues Similar to Manufacturing? 215

What Do Services Customers Want? 215

• QUALITY HIGHLIGHT 8-1: Ritz-Carlton Hotels 216

SERVQUAL 217

Expectations 217

Perceptions 219

Gap Analysis 220Assessing Differences in Expectations and Perceptions by Using theDifferencing Technique 221

Designing and Improving the Services Transaction 224

Services Blueprinting 224

Moments of Truth 225

• A CLOSER LOOK AT QUALITY 8-2: Quality in Health Care 226

Poka-yoke 227

The Customer Benefits Package 228

Service Transaction Analysis 229

Improving Customer Service in Government 232• A CLOSER LOOK AT QUALITY 8-3: Government Service Quality:

A Stop-and-Go Process 232

Quality in Health Care 233

Supply Chain Quality in Services 234

A Theory for Service Quality Management 234

Summary 235Key Terms 236Discussion Questions 236Problems 237

• CASE 8-1: Yahoo! Designs Quality Services with Customers in Mind 240• CASE 8-2: UPS: Delivering the Total Package in Customer Service 241

Chapter 9 MANAGING SUPPLIER QUALITY IN THE SUPPLYCHAIN 243

The Value Chain 243

The Chain of Customers 244

Managing the Supply Chain 244

Supplier Alliances 244

• A CLOSER LOOK AT QUALITY 9-1: Supply Chains and Terrorism 247

14 Contents

Single-Sourcing Examples 247

• QUALITY HIGHLIGHT 9-1: A Bumpy Ride at Boeing 248

Supplier Development 250a QUALITY HIGHLIGHT 9-2: Integrating Forward along the Supply Chain:

3M Dental Products Division 250

Supplier Awards 252

Supplier Relationship Management Systems (SRMSs) 252

Applying the Contingency Perspective to Supplier Partnering 252

A Supplier Development Program: /SO/73 1 6949:2009 252

ISO/TS 16949 252

Quality Management System 254

Management Responsibility 254

Resource Management 254

Product Realization 254

Measurement, Analysis, and Improvement 254

Acceptance Sampling and Statistical Sampling Techniques 254

Is Acceptance Sampling Needed? 254• A CLOSER LOOK AT QUALITY 9-2: For RFID to Take Hold, Reliability

Needs to Improve 255Building an Understanding of Supply Chain QualityManagement 256

Summary 256Key Terms 257

Discussion Questions 257• CASE 9-1: AT&T: Setting High Standards for Suppliers and Rewarding

Supplier Performance 257• CASE 9-2: Managing the Supply Chain at Honeywell 258

Part 3 Implementing Quality 261

Chapter 10 THE TOOLS OF QUALITY 262

Improving the System 262

Ishikawa's Basic Seven Tools of Quality 263

Process Maps 264• A CLOSER LOOK AT QUALITY 10-1: Extended Value Stream Mapping of

Supply Chains 268

Check Sheets 270

Histograms 271

Scatter Diagrams 272

Control Charts 274

Cause-and-Effect (Ishikawa) Diagrams 274

Pareto Charts 276

The Seven New Tools for Improvement 279

The Affinity Diagram 281

Contents 15

The Interrelationship Digraph 283

Tree Diagrams 284

Prioritization Grid 286

Matrix Diagram 288

Process Decision Program Chart 289

Activity Network Diagram 289

Reflections on the Managerial N7 Tools 291

Other Tools for Performance Measurement 291

Spider Charts 291

Balanced Scorecards 291

Dashboards 293Summary 293

Key Terms 293Discussion Questions 293Problems 294

• CASE 10-1: Corporate Universities: Teaching the Toolsof Quality 297• CASE 10-2: Lanier: Achieving Maximum Performance by Supporting Quality

Products with Quality Services 298

Chapter 11 STATISTICALLY BASED QUALITY IMPROVEMENT FORVARIABLES 300Statistical Fundamentals 300

What Is Statistical Thinking? 300• QUALITY HIGHLIGHT 11-1: Statistical Tools in Action 301

Why Do Statistics Sometimes Fail in the Workplace? 302

Understanding Process Variation 302

Process Stability 304

Sampling Methods 304

Random Samples 304

Systematic Samples 304

Sampling by Rational Subgroups 304

Planning for Inspection 305

Control Plans 305

Process Control Charts 305

Variables and Attributes Control Charts 305

A Generalized Procedure for Developing Process Charts 307

Understanding Process Charts 307

x and R Charts 309

Interpreting Control Charts 310

Using Excel to Draw x and R Charts 315

X and Moving Range {MR) Charts for Population Data 316

Using Excel to DrawXand MR Charts 318

Median Charts 318

16 Contents

Using Excel to Draw Median Charts 320

x and s Charts 320

Using Excel to Draw s and x Charts 322

Other Control Charts 322

Moving Average Chart 322

Cusum Chart 323

Some Control Chart Concepts for Variables 323

Choosing the Correct Variables Control Chart 323

Corrective Action 325

How Do We Use Control Charts to ContinuouslyImprove? 325

Tampering with the Process 325

Process Capability for Variables 325• A CLOSER LOOK AT QUALITY 11-1: A Justification for Meeting Standards in

Software Quality 326

Population versus Sampling Distributions 326

Capability Studies 328

Ppk 330

The Difference between Capability and Stability 330

Other Statistical Techniques in Quality Management 330Summary 331Key Terms 332Discussion Questions 332Problems 332

, • CASE 11-1: Ore-Ida Fries 336

Chapter 12 STATISTICALLY BASED QUALITY IMPROVEMENT FORATTRIBUTES 338Generic Process for Developing Attributes Charts 339

Understanding Attributes Charts 339

p Charts for Proportion Defective 339

Using Excel to Draw p Charts 341

np Charts 342

Using Excel to Draw np Charts 344

c and u Charts 344

Using Excel to Draw c and u Charts 346 —

Attributes Charts Summary 347

Choosing the Right Attributes Chart 347

Reliability Models 349

Series Reliability 349

Parallel Reliability 350

Measuring Reliability 351

Mean Time to Failure (MTTF) 352• A CLOSER LOOK AT QUALITY 12-1: Is Quality on the Decline? 352

Contents 17

System Availability 353Summary 354Key Terms 354Discussion Questions 354Problems 355

• CASE 12-1: Decision Sciences Institute National Conference 358

Chapter 13 SIX SIGMA MANAGEMENT AND LEAN TOOLS 361What Is Six Sigma? 361

Organizing Lean-Six Sigma 363

Packaging Lean with Six Sigma 365

DMAIC Overview 365m A CLOSER LOOK AT QUALITY 13-1: DMAIC in Action 366

Define Phase 367

Developing the Business Case 367

Project Evaluation 368

Pareto Analysis 371

Problem Definition 371

Measure Phase 371

Selecting Process Outcomes 371

FMEA 375

Verifying Measurements 375

Gauge R&R 376

Using Excel to Perform Gauge R&R Analysis 379

Analyze Phase 379

Defining Objectives 379

Identifying Xs 379

Analyzing Sources of Variation 379

Improve Phase 380

Control Phase 380

Taguchi Design of Experiments 381

Robust Design 381

Background of the Taguchi Method 382

Taguchi Definition of Quality 382

Quality Loss Function 382

The Taguchi Process 384

Using Excel to Solve Taguchi Experiments 386

Design for Six Sigma 388

Lean-Six Sigma from a Contingency Perspective 388Summary 388Key Terms 389Discussion Questions 389Problems 389

• CASE 13-1: The Neiman-Marcus Cookie 394

18 Contents

Part 4 Forever Improving the Quality System 395

Chapter 14 MANAGING QUALITY IMPROVEMENT TEAMS ANDPROJECTS 396

Why Employees Enjoy teams 397

Leading Teams for Quality Improvement 397

Employee Empowerment and Involvement 397

• A CLOSER LOOK AT QUALITY 14-1: Empowerment in Action 398

Flattening Hierarchies for Improved Effectiveness 399

Team Leader Roles and Responsibilities 399

Team Roles and Responsibilities 400

Team Formation and Evolution 401

Team Rules 402

Types of Teams 402

Process Improvement Teams 403

Cross-Functional Teams 403

Tiger Teams 403

Natural Work Groups 403

Self-Directed Work Teams 403

Virtual Teams 404• A CLOSER LOOK AT QUALITY 14-2: Lessons from Effective Teams outside the

Business World 404

Implementing Teams 405

Meeting Management 405

Conflict Resolution in Teams 406

Saving Quality Teams from Failure: Diagnosing Problems andIntervening Before It Is Too Late 409

Managing and Controlling Projects 409

Qualifying Projects 410

Project Charters 411

Force-Field Analysis 412

Work Breakdown Structure (WBS) 413

Identifying Precedence Relationships 413

Identifying Outcome Measures 413

Identifying Task Times 414

Activity Network Diagrams 415

Arrow Gantt Charts 418

Managing Multiple Projects 418

Summary 419Key Terms 420Discussion Questions 420

Problems 421• CASE 14-1: Whole Foods Market: Using Teamwork as a Recipe

for Success 423

Contents 19

Chapter 15 IMPLEMENTING AND VALIDATING THE QUALITYSYSTEM 425Building Blocks for the system of Quality Improvement 426

People 426

Organizational Learning and Knowledge 427

Culture 428

Closeness to Customers 428

Information and Finance 429

The Three Spheres of Quality 429

The Integrative Approach 429

Alignment between the Quality System and Strategy 430

m QUALITY HIGHLIGHT 15-1: Back to Basics at Ford 430

Internal Validation: Documenting and Assessing the Quality System 430

• A CLOSER LOOK AT QUALITY 15-1: A Simple Self-Assessment Tool 433

Quality Audits 436

Quality Audit Process 437

Types of Audits 437

Operational Audits 438

Performance Audits 438

• A CLOSER LOOK AT QUALITY 15-2: Quality Audits in Action 440

Qualitative and Quantitative Elements in Audits 440

Validating the Quality System 441Summary 442Key Terms '442Discussion.Questions 443Problems 443

• CASE 15-1: Setting Priorities Using the Baldrige Criteria 443

Appendix 446

Glossary 449

Index 464