TOTAL QUALITY MANAGEMENT

1. TOTAL QUALITY MANAGEMENT Presented by: Enrico C. Mina, DBA

2. The World Is Changing • Liberalization of trade and globalization of business • Tougher competition • More demanding customers • Faster rate of technological change • More turbulent environment

3. MATSUSHITA • Change of thought makes your behavior change. • Change of behavior makes your habits change. • Change of habits makes your personality change. • Change of personality makes your destiny change.

4. PARADIGM CHANGES (1) • THE PRINCIPAL PURPOSE OF A BUSINESS ENTERPRISE OLD: To make a profit. NEW: To satisfy customers and win their loyalty and continued patronage, which leads to sales, market share, growth, and profits.

5. PARADIGM CHANGES (2) • DEFINITION OF QUALITY OLD: The totality of the characteristics or features of a product or service; conformance to internal specifications NEW: Conformance to customer requirements; fitness for customers’ use.

6. Customer Superordinate Goals GOALS EXPECTATION LEVELS Explicit Implicit Customer Delight Quality Cost Delivery

7. Customer’s Bill of Rights • A customer has the right to courteous treatment by the seller’s representatives at all times and under all conditions. • A customer has the right to the representative’s full time and attention during each and every transaction. • A customer has the right to fast and accurate information about the product or service or the status of the order.

8. Customer’s Bill of Rights • A customer has a right to have his/her expectations met with a product or service of the quality represented before the purchase. • A customer has the right to complain when the product or service does not meet those expectations--and to a prompt remedy when the product or service is indeed at fault.

9. Customer’s Bill of Rights • A customer has the right to expect knowledgeability, resourcefulness, problem-solving ability, concern--and results--from those assigned to his/her account. • A customer has the right to expect responsiveness and follow-through in emergencies and special situations.

10. Customer’s Bill of Rights • A customer has the right to the benefits of teamwork in the company he/she deals with--without buck-passing, finger-pointing, or runarounds. • A customer has the right to care, accuracy, and attention to detail in filling his/her orders for services and/or products.

11. Customer’s Bill of Rights • A customer has the right to appreciation on the part of those with whom he/she does business -- appreciation both for the business already given and for the business to be given in the future so long as this Customer’s Bill of Rights continues to be observed. (From The Customer Communicator, published by Marketing Publications, Inc., Washington, D.C.)

12. PARADIGM CHANGES (3) • DEFINITION OF CUSTOMER OLD: The ultimate buyer or user of the product or service. NEW: The next person, process, or system; anyone on whom the product or service has an impact.

13. Chain of Customer-Supplier Relationships External Suppliers The Company 2 4 1 3 5 End-users or consumers Intermediaries or distributors

14. PARADIGM CHANGES (4) • HOW QUALITY IS TO BE ACHIEVED OLD: Produce large quantities, then have quality control inspectors separate the defectives from the good units; rework the defectives if possible. NEW: Emphasize prevention of defects by improving the product/service and the process that produces and delivers it.

15. Process • DEFINITION: a series of activities that transform inputs into desirable outputs • ELEMENTS: • Man (people) • Machines • Materials • Methods • Measurement • Environment

16. PARADIGM CHANGES (5) • RELATIONSHIP BETWEEN QUALITY AND PRODUCTIVITY OLD: Quality and productivity are mutually exclusive. High quality and low costs cannot go together. NEW: Quality is the road to productivity. A high-quality process leads to reduced waste, lower costs, and bigger volumes.

17. Cost of Quality (1) • Cost of Quality is defined as the cost of keeping customers satisfied. It includes all costs incurred to ensure that customer requirements are ultimately met. • Components: • Cost of prevention - costs incurred to prevent failures in each process element

18. Cost of Quality (2) • Cost of appraisal - costs of inspection, testing, measurement, and information-gathering to determine the state of the process • Cost of non-conformance - the costs of failure or poor quality. Two types: • Internal failure costs - incurred when failures are detected in-house, before sending output to the customer • External failure costs - incurred when failures are detected by the external customer.

19. Cost of Quality (3) • Quality experts estimate that costs of non-conformance are equal to 25% - 35% of gross sales or revenue. • Not all CONCs are visible because conventional accounting systems do not distinguish between productive vs. non-productive uses of resources.

20. The Cost of Non-conformance Iceberg visible costs hidden costs

21. Cost of Quality (4) What should happen: External failure cost Savings Costs Internal failure cost Total costs with improved process quality Appraisal cost Prevention cost T i m e

22. PARADIGM CHANGES (6) • MEASUREMENT OF QUALITY OLD: Acceptable quality levels (AQL) are good enough. NEW: Maximum defect incidence must be measured in terms of parts per million (ppm).

23. 99.9% Reliability • If the human heart were 99.9% reliable, it would miss 36,817 beats a year (@ 70 / minute), equivalent to 8.8 hours without a heartbeat.

24. 6-sigma Reliability • 99.99966% reliability or 3.4 failures per million • Equivalent to missing only one free throw out of 300,000 attempts.

25. Overall Process/System Reliability Number of steps or elements R 20 10 5 0.95 0.36 0.60 0.77 0.98 0.67 0.82 0.90 0.95 0.99 0.90 0.82 0.99 0.98 0.999 0.995

26. PARADIGM CHANGES (7) • THE CAUSES OF QUALITY PROBLEMS OLD: It is the fault of the workers. They are not careful enough. NEW: The deficiency lies in the system or process, over which management has control and is therefore responsible.

27. Common and Special Causes (1) • According to W. Edwards Deming, the causes of quality problems fall under two categories: • Common causes, those which are related to the system of operation, and • Special causes, those that are identifiable with specific events and people.

28. Common and Special Causes (2) • Proportion of the incidence of problems due to these two categories are: • Common causes 94% Special causes __6% 100%

29. Process Muda (1) • Muda is the Japanese word for waste. • The presence of muda in a process, through one or more of its elements, deteriorates quality, increases costs, and delays delivery by lengthening the cycle time. • Muda is non-value-adding and therefore unproductive.

30. Process Muda (2) • Overproduction- Each work station or process stage tries to operate at full capacity, leading to a build-up of WIP or FGI. These hide problems by making them tolerable, although at high cost, and prevent them from being addressed. This is the “mother of all muda.”

31. Process Muda (3) • Inventory - Excessive supplies and parts are costly to carry: cost of tied-up capital, storage, security and pilferage, supervision, insurance, obsolescence and deterioration. • Waiting - Waste of time when people and work stations are capable of work but are idle.

32. Process Muda (4) • Transportation - Additional cost and time created by transferring the location of people, materials, or products without any value being added. • Motion - Created by people being made to exert physical efforts that merely add to fatigue and time but do not create value.

33. Process Muda (5) • Overprocessing - Created when the process is performing work that is unnecessary from the customer’s point of view. • Producing failures - Process failures like defects and errors result in customer dissatisfaction, higher costs, and delays.

34. Process Muda (6) • In most organizations, mudas are considered normal and have been tolerated over a long period of time. Many are even in budgets. • Every muda removed and prevented from recurring improves process quality and reduces cost and cycle time, thereby automatically increasing productivity.

35. Effect of Mudas • Mudas are non-value-adding. • They lengthen process cycle times. • They increase costs. • They cause quality to deteriorate. • The value-adding moment is very short. Eliminating mudas will cause QCD to improve, often with very little investment.

36. Process Flowcharting (1) • The first step in identifying muda is to draw a flowchart of the process. • A flowchart is a graphical representation of a process. It is essential to process analysis and improvement.

37. Process Flowcharting (2) • The flowchart, to be useful, must be the “as is” flow (based on the actual sequence of activities), not necessarily the theoretical one in the manuals. • The best sources of information are the people who are actually working on the process.

38. Basic Symbols (1) Beginning and end Operation Sub-process Wait/delay

39. Basic Symbols (2) Transportation Storage Connector A

40. Y ? N Basic Symbols (3) Direction of process flow Document Decision

41. D A A B F F B C C E E D Dept. Z Dept. Y Dept. X Customer START Total Cycle Time: Min.: ___hrs Max.: ___hrs Ave.: ___hrs N N N Y Y Y Total Distance Traveled: Min.: ___m Max.: ___m Ave.: ___m N Y END

42. Identifying Muda (1) • Ask the following questions: • What are we doing? Can we avoid doing it at all? • Who is doing it? Can it be done better by someone else (e.g., a subcontractor)? • Where are we doing it? Can it be done better somewhere else?

43. Identifying Muda (2) • When and how often are we doing it? Can it be done better at other times or with another frequency? • How are we doing it? Can it be done better through another way? • If it is done manually, can we automate it? • Can it be done simultaneously or in parallel? • Can we apply Information Technology and tele-communications effectively?

44. Identifying Muda (3) • If there is no clear value-added, then that particular activity is muda and should be eliminated. • Draw a new, “should be” flowchart incorporating all the muda-eliminating features. • Create, document, and continuously improve standards for each process element. Use the standards for training staff.

45. Muda Elimination • The process should be revised to eliminate identified muda. Every such muda eliminated and prevented from recurring reduces costs and cycle time and improves process quality. • The opportunities for improvement through the continuous elimination of muda are infinite.

46. PARADIGM CHANGES (8) • THE ROLE OF PEOPLE OLD: People should work in strict confor-mance with the instructions given by their superiors. NEW: The people in the workplace have detailed knowledge, experience, and ideas for improvement. They should be encour-aged to actively participate in improvement.

47. PARADIGM CHANGES (9) • TIME FRAME OLD: Achieve the bottomline targets set for this month or quarter. NEW: Allocate resources to ensure continuing ability to offer superior value to customers relative to competitors.

48. PARADIGM CHANGES (10) • THE ROLE OF QUALITY OLD: Quality is an internal problem to be solved. NEW: Quality is our strongest strategic weapon against the competition.

49. Profit Impact of Market Share • ACHIEVING COMPETITIVE SUCCESS THROUGH QUALITY • Achieve superior relative perceived quality in both products and services. • Achieve a high degree of conformance or process quality. (From The PIMS Principle by Robert Buzzell and Bradley Gale)

50. PARADIGM CHANGES (11) • PHILOSOPHY OF IMPROVEMENT OLD: “If it ain’t broken, don’t fix it.” NEW: “If it is not perfect, make it better.”