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Chapter 3 Quality Management Chapter Overview (1) TOM Basics Basic Concepts Stages in TQM PRAISE Process TQM Principles of TQM Benefits of TQM Limitations of TQM (2) Concept Framework in TQM 1. 6 Cs of TQM 2. 4 P's of TQM 3. Cost of Quality 4. Approaches & Measurement of COQ 5. Quality Dimensions 6. Deming's Philosophy 7. PDCA Cycle 8. Continuous Process Improvement 9. Control in TQM (3) Business Excellence 1. Business Excellence Model 2. EFQM Excellence Model 3. Baldrige Criteria for Performance Excellence Environmental Mgmt Alcg 1. EMA Concept 2. Environmental Costs 3. Relationship of Environ mental Costs with COO 4. Identification of Environmental Costs 5. Control over Environmental Costs 3.1 TQM - Basics 1.1 Basic Concepts CIMA Definition: TQM is the integrated and comprehensive system of planning and controlling all business functions so that products or services are produced which meet or exceed customer expectations. TQM is a philosophy of business behaviour, embracing principles such as Employee Involvement, Continuous Improvement at all levels and focus, as well being a collection of related techniques aimed at improving quality such as full documentation of activities, clear goal-setting and performance measurement from the customer perspective. TQM seeks to increase customer satisfaction by finding the factors that limit current performance. The TOM approach highlights the need for a customer-oriented approach to management reporting, eliminating some or more of traditional reporting practices. The emphasis of TQM is to design and build quality in the product, rather than allow defectives and then inspect and rectify them. The focus is on the causes rather than the symptoms of poor quality, The three core concepts of TQM are - (a) Quality Control (QC): It is concerned with the past, and deals with data obtained from previous production, which allow action to be taken to stop the production of defective units. (b) Quality Assurance (QA): It deals with the present, and focuses to create and operate appropriate systems to prevent defects from occurring. (C) Quality Management (QM): It is concerned with the future, and manages people in a process of continuous improvement to the products and services offered by the Firm. 21.2 Steps in TQM 2M involves the following Steps / Stages - Stage Description 1 Identification of Customers / Customer Groups. 2 Identification of Customer expectations - What does the Customer expect from the Firm? 3 Identification of Customer decision-making requirements and product utilities, 4 Identification of perceived problems in decision-making process and product utilities - What problem areas do we perceive in the decision-making process? 5 Comparison with other Firms and Benchmarking. 6 Customer Feedback. 3.1.4 Princ Stage 7 8 Pacheka's - Students Handbook on Strategic Cost Management & Performance Evaluation) - CA Final Description Identification of improvement opportunities. Quality Improvement Process throughy - (a) Determination of new strategies, (b) Elimination of deficiencies, and (c) Identifying solutions Clear exp Total Em Process Involver Eliminat Note: . 3.1.5 Ber . Stages 1 to 5 provide a Information Base developed without reference to the Customer. This is done by listing out managerial perceptions (using Team Approaches like Brainstorming, Multi-Voting, etc.) and not by actual interaction with the Customers. This is rectified at Stage 6 with a survey of representative customers, which embraces their views on perceived problem areas. Interaction with the customers and obtaining their views, helps the Firm in correcting its own perceptions and refining its processes. The outcomes of the Customer Survey, Benchmarking and Internal Analysis, provides the inputs for Stages 7 and 8, i.e. the identification of improvement opportunities and the implementation of a formal improvement process. This is done through a six-step process called PRAISE, for short. Splementa 1. Increa: Comm Greate 3.1.6 Li TOM may Focu 2. Emp Inte Uns "St This a organis Lo Re 3.1.3 PRAISE Process in TQM Identification of improvement opportunities and implementation of Quality Improvement Process, (Stages 7 and 8) of the TOM Process is through a six-step activity sequence, identified by the acronym 'PRAISE'. Elements Step Activity Problem Areas of customer dissatisfaction. 1 Identification Absence of competitive advantage. Prioritise problems and opportunities by - 2 Ranking Perceived importance, and Ease of measurement and solution. Ask "Why?" to identify possible causes. Keep asking 'Why?" to move beyond the symptoms 3 Analysis and to avoid jumping to premature conclusions. Ask 'What?' to consider potential implications. Ask "How much?' to quantify cause and effect. Use creative thinking to generate potential solutions. Operationalise these solutions by identifying - 4 Innovation (a) Barriers to implementation, (b) Available enablers, and (C) People whose co-operation must be sought. Implement the preferred solution. 5 Take appropriate action to bring about the required changes. Reinforce with training and documentation back-up. Monitor the effectiveness of actions. 6 Evaluation Establish and interpret performance indicators to track progress towards objectives. Identify the potential for further improvements and return to Step 1. D d Solution e . Note: Central to the PRAISE System are - (a) Quality Control - the search for continuous improvements in quality and (b) Total Employee Involvement - the co-operation and commitment of employees. This dual approach provides a single focus - the Customer - whose increased satisfaction remains the primary goal of the procedure. An action plan for smooth implementation of the PRAISE Process is - (a) Proceed gradually from Small to Big Issues, since a relatively small problem provides a greater chance of success and hence higher motivation. (b) Pick Solvable Problems, i.e. problem selected should not be trivial, but it should be one with a potential impact and a clear improvement opportunity. () Measurable Progress towards implementation should be accomplished within a reasonable time, in order to maintain the motivation of participants and advertise the success of the improvement itself. (d) Prominent individuals should be rewarded for their efforts through monetary / non-monetary prizes, as a measure of personal recognition and as encouragement to others. 3.2 Pachaka's - Students Handbook on Strategic Cost Management & Performance Evaluation - Final Concept Hustration: Classify the following items under appropriate categories of Quality Costs, viz. Prevention Costs (PC), Appraisal Costa N 15 (AC), Internal Failure Costs (IFC), and External Failure Costs (EFC) (vi) Re-processing of a Loan Operation ( Unplanned Replacement to Customers (vii) Product Liability Warranty (ii) Correction of a Bank Statement (viii) Product Acceptance (1) Design Review (ix) Wastage of Material (iv) Equipment Accuracy Check W Staff Training (x) Planned Maintenance of Equipment (Candidates may opt for the following format and fill in the appropriate Roman numerals under each column) AC PC Costs EFC IFC Q. Nos Solution: Refer Principles and Examples above Costs PC AC IFC EFC Q.Nos. (i), (), (X) (iv), (vili) (), (vi), (x) (). (vii) Concept Ilustration: Classify the following under appropriate categories of COQ viz. Prevention, Appraisal, Internal Failure and External Failure. N 11 Question Answer Question Answer 1. Rework Internal Failure 6. Discount on Defective Sale Extemal Failure Internal Failure 7. Raw Material Inspection Appraisal External Failure 8. Finished Product Inspection Appraisal External Failure 9. Establishment of Quality Circles Prevention Internal Failure 10. Packaging Inspection Appraisal 2. Disposal of Scrap 3. Warranty Repairs 4. Revenue Loss 5. Repair to Manufacturing Equipment Concept Illustration: Classify the following under appropriate categories of COQ viz. Prevention, Appraisal, Internal Failure and External Failure. N 17 Item Answer Internal Failure Appraisal (1) Re-inspection of product reworked. (ii) Testing of Material of special nature from outside laboratory. (iii) Employee Time spent on reviewing & assessing the quality of output regarding material Prevention Appraisal supplied. Prevention Appraisal (iv) Customer Survey for assessing the feedback in quality of product sold. (v) Calibration of Testing Equipment Prevention Appraisal External Failure (vi) Warranty Claim Processing (vii) Repurchase of Components to create replacements External/Internal Failure (viii) Loss of Customer due to supply of low quality product. External Failure Concept Illustration: Century Electrical Company manufactures fans. As a first step to focus on quality improvements, the Company has compiled the following operating data for the year ending 31st March M 18 Cost of Quality Cost of Quality Re-inspecting Rework 2,90,500 3,25,600 Litigation Costs to defend allegations of defective products Training 3,75,500 Recording and Reporting Defects 2,67,60 Warranty Repairs 8,62,500 Supplier Evaluation 2,96,80 Line Inspection 2,12,500 Storing and Disposing Waste 1,72,00 Downtime 1,84,000 Product Liability Insurance 1,08,0 Design Engineering 3,62,800 Expediting 3,27,0 Product Testing Equipment 4,15,800 Procedure Verification 2,54 Recalls 3,42, Required: Classify the Costs into Cost of Quality Categories and determine the total amount being spent on each category. 3.6 Drive ou Padhukas - Students (K) Time with Dissatisfied customer, (1) Excessive Inventory related Costs, etc. Break do (d) Excessive Field Service Expenses, (e) Time Delays ( Planning Delays 0. Elimina M. Elimina Remo Institu M. The ti 3.2.7 P The Plar 3.2.5 Quality Dimensions Some dimensions of Quality under TQM are given below for reference - (Note: Alternative views are available.) Description Dimension 1. Performance Performance refers to a product's primary operating characteristics. This dimension of quality involve measurable attributes; brands can usually be ranked objectively on individual aspects of performance. 2. Features Features are additional characteristics that enhance the appeal of the product or service to the User, 3. Reliability Reliability is the likelihood that a product will not fail within a specific time period. This is a key element for Users who need the product to work without fail. 4. Conformance Conformance is the precision with which the product or service meets the specified standards. Durability measures the length of a product's life. When the product can be repaired, estimating 5. Durability durability is more complicated. The item will be used until it is no longer economical to operate it. This happens when the repair rate and the associated costs increase significantly Serviceability is the speed with which the product can be put into service when it breaks down, as well the competence and the behaviour of the Serviceperson. Aesthetics is the subjective dimension indicating the kind of response a User has to a product's exter finish. It represents the individual's personal preference. This involves aspects like Human-to-Human Interface, e.g. Courtesy of the Dealer. Perceived Quality is the quality attributed to a good or service based on indirect measures. Saprov 6. Serviceability Ev. Id FC P 7. Aesthetics 8. Response 9. Perceived Quality Concept Illustration: Quality Products can be determined by using a few of the "dimensions" of quality. Identify the following under appropriate Dimension: Aspect Reliability (0) Consistency of performance over time (ii) Primary Product Characteristics Performance (iii) Exterior Finish of a Product Aesthetics (iv) Useful Life of a Product Durability M 15 Quality Dimension 3.2.6 Deming's 14 Points in Quality Control Edwards Deming (regarded as the "Father of Quality Control) called for an enlightened "Management's Role" in ensuring Duality. He advocated that the firm's Management should correct system problems, and create an environment the promotes Quality and enables workers to achieve their full potential. Deming's Contribution is contained in "14 Points" listed below - Principle Description 1. Create constancy of purpose towards improvement. Replace short-term reaction with long-term planning. 2. Adopt the new philosophy. Management should actually adopt "Quality" philosophy, rather than merely expect the workforce to do so. Cease dependence on inspection. If variation is reduced, there is no need to insped manufactured items for defects. 4. Move towards a single Supplier for any one item. Multiple Suppliers mean variation between RM /Feedstock. 5. Improve constantly and forever. Constantly strive to reduce variation. Institute training on the job. If people are inadequately trained, they will not all work the same way, and this will introduce variation. 7. Mere supervision is quota and target-based, whereas Leadership seeks to eliminate numerical quotas. 3. 6. Institute Leadership. 3.8