TOTAL QUALITY MANAGEMENT

Transcription

1 SEMESTER - IV TOTAL QUALITY MANAGEMENT COURSE MATERIAL CII Institute of Logistics 1

2 CONTENT DEVELOPED BY P K Vishwanathan All rights reserved. No part of this work may be reproduced in any form, without the permission in writing from CII INSTITUTE OF LOGISTICS. Material adopted from the reading material prepared for the Post Graduate Diploma in Supply Chain Management, CII Institute of Logistics for the specific requirements of the course PG Diploma in Logistics Management offered for the Post Graduate students of MIM, Chennai. No part of this material could be shared by the intended readers with others. Further information about the course offered by CII INSTITUTE OF LOGISTICS may be obtained from the CII INSTITUTE OF LOGISTICS (Southern Regional Headquarters) at Velacherry Main Road, Guindy, Chennai For restricted circulation only. CII Institute of Logistics 2

3 Course Content Module 1 1. Introduction 2. Approaches & Philosophies in TQM 3. Quality & Competitiveness 4. Enhancing Customer value through TQM 5. Strategic Planning for Quality Module 2 6. Implementation 7. Leadership 8. Teambuilding & Teamwork 9. Employee empowerment Module Tools for Quality Improvement 11. Quality Function Deployment 12. Statistical Process Control 13. Continuous Improvement Module Benchmarking 15. JIT 16. Si Sigma 17. ISO Standards & Quality Management 18. Quality Management & Ethics CII Institute of Logistics 3

4 Total Quality Management 1.1 Introduction Total Quality Management (TQM) a sound methodology for continuous improvement has established itself very well over the years. It is deep rooted in the philosophy that status quo is painful and indeed going backwards. In-built in the minds of all of us is a strong desire to improve. TQM has evolved as a system, which can facilitate improvement-efforts within organizations. We are not merely talking about increased profits but more importantly interested in relentless improvement programs where ecellence in service and product quality is paramount. Some organizations may begin their TQM journey from a position of financial strength or quality reputation. Others may begin from a position of survival in which there are two alternatives namely get smarter or go out of eistence. In a lighter vein, Dr. Deming said, Survival is not compulsory. In this present challenging and changing world, remaining static is a definite passport for eistence. [ standing still is a definite recipe for going out of eistence]. The climate today is such that any progressive organization that wants not only to survive but also to grow and prosper on a long-term time horizon must be able to cope with rising customer epectations, higher standards in product and service quality, and intense competition both in the domestic and international marketplace. In addition, the other important factors namely government policies and legislations, demographic changes, customer choices and tastes, and eternal environmental pressures will compulsorily kindle the desire to improve. TQM is a long-term strategy. It is not simply a matter of conformance to customer s specifications. If developed and implemented correctly, TQM will positively impact the hearts and minds of all people in an organization who are involved in various tasks. CII Institute of Logistics 4

5 Historical Perspective of TQM In the 1920s, W.A. Shewhart developed control charts for reducing and stabilizing process variation using statistical methods. Thus, he paved the way for what we call statistical process control (SPC). In the 1930s, Dr. W. Edward Deming and Dr. Joseph M. Juran started to develop best approaches to quality control and assurance. While Dr. Deming was focusing on the philosophical foundations of quality, Dr. Juran adopted a full systems approach to quality. In 1948, Deming went to Japan and conducted his first seminar having found virtually no acceptance for his ideas in USA, which was giving more importance to quantity than quality. Japanese Standards Association was formed in 1950 and in the following year the Deming Award Scheme was announced. The 1950s saw Japan consolidating its home market, adding value to product and copying ideas from the rest of the world. The low cost structure of the 1960s enabled Japan to eport globally, continuously adapting and eploiting markets. Yet, the western perception about Japan was still one of poor-quality goods. In the following twenty years, in a dramatic manner, the perception about Japanese goods and services has changed from shoddy quality to reliability, and good value for money, with the result that the economic balance of power has shifted from the West to Japan and the East in industries that include motor vehicles, shipbuilding, consumer goods, electronic components, tetiles, banking and financial services, photography, video and watch making among the many. In the mid 1060s, United States pointed to a slow development of conventional quality control techniques coupled with Quality Circles. During the same period, Philip B. Crosby introduced the concept of zero defects as a performance yardstick within the conceptual framework of his quality absolutes. At the end of the 1970s, the first CII Institute of Logistics 5

6 Fortune 500 companies started adopting the organization wide quality management processes and Tom Peters rejuvenated Total Quality Management movement through his famous book In Search of Ecellence. In the United Kingdom in the year 1963, the National Productivity Council made pioneering efforts in quality management movement through its far-seeing film Right First Time, but with little success. The year 1966 was National Quality and Reliability Year, which raised awareness of the value of quality followed by Productivity Year in 1967??. In 1978, the National Strategy for Quality was formed by the government, based on the belief or assumptions that enormous money was being wasted every year on account of bad quality. The campaign went out with the Labor Government in 1979, and was replaced four years later by The National Quality Campaign, which continues to this day to be the most sustained program in UK history. 1.2 What is Total Quality Management? Total Quality Management popularly known as TQM was pioneered initially by the quality Guru Dr. Edward Deming and further strengthened by Dr. Juran, and Philip Crosby. These three luminaries can be considered to be the triple pillars of TQM who spread the TQM movement like a current of air. The following definition succinctly brings out the essence of TQM. TQM Definition TQM involves continuous improvement in quality to meet or eceed customer norms at the lowest cost by releasing the potential of employees of the concerned organization. If we read some of the Quality Policy Statements of the world s leading organizations we will see words similar to those above recurring regularly. For the eperienced TQM CII Institute of Logistics 6

7 practitioner there are probably four elements in the definition, which stand out as being important. Please note that they are highlighted in bold. 1) Continuous Improvement in Quality implies that TQM is not a short-term program but a long-term strategy focusing on the right way of operating for all time. 2 )Customers are both internal and eternal, and in order to meet the requirements it is essential to articulate in a clear fashion what needs to be done so that all assumptions between the customers and suppliers have been eliminated. 3) Lowest Cost means building quality into the products and services in every stage. This includes preventing defectives from being manufactured in the first place thus eliminating financial loss. Lowest cost implies lowest in relation to competition in the marketplace. 4) Employees are concerned with reducing fear and creating a climate where ideas are encouraged, recognized, rewarded, and acted upon so that the full potential of the employees is realized. TQM Definition-Point to Ponder Each of the four elements is vitally important. However, their strength lies in their collective synergy. Organizations that would like to achieve long-term success cannot do so by choosing one or two of the elements and ignoring the rest; they have to vigorously pursue each of them without any compromise. There is no room for saying sorry. CII Institute of Logistics 7

8 1.3 Approaches and Philosophies in TQM Deming s Philosophy The Deming philosophy focuses on continual improvements in product and service quality by reducing uncertainty and variability in design, manufacturing and service processes, driven by the leadership of top management. Deming Chain Reaction Model The Deming "chain reaction" model is based on the conviction that, the only way to decrease cost is to improve quality of products and services. It states that by (a) improving quality, a firm can (b) decrease costs because of less rework, fewer mistakes, delays, and snags, and better use of time and materials, thus (c) improving productivity. The firm will therefore be able to (d) capture the ma rket with better quality at lower prices, and thus, not only (e) stay in business, but also (f) provide and create more jobs. (See Fig 1) CII Institute of Logistics 8

9 Deming s System of Profound Knowledge Deming's System of Profound Knowledge consists of four interrelated parts: (1) appreciation for a system; (2) understanding of variation; (3) theory of knowledge; and (4) psychology. Appreciating a system involves understanding how each component of the system works to produce the end product or service, and understanding how the system may be optimized for better or smoother performance. Understanding of variation involves knowing and anticipating factors (i.e. increasing personnel, the wearing out of tools) that may cause the system to change, for better or worse. Theory of knowledge involves understanding the system and current and possible variations within, to the point where past and present events and performances can suggest possible outcomes of future courses of action within the system. Psychology involves the understanding of what motivates people, including the facts such as, people must enjoy their work, be treated with respect, work within a system that promotes dignity and self-esteem, receive adequate recognition, not for just financial remuneration, and feel that they are part of a winning, high quality team that makes a difference. Deming s 14 Points-Principles for Transformation These famous 14 points are the basis for transformation of any industry into the TQM philosophy. It will not suffice merely to solve problems, big or little. Adoption and action on the 14 points are a signal that the management intends to stay in business and aim to protect investors and jobs. Such a system formed the basis for lessons for top management in Japan in 1950 and in subsequent years. The 14 point principles apply to all organizations irrespective of its size [small and large] and type [service industry and manufacturing]. They also apply to a division within a company. CII Institute of Logistics 9

10 Deming s 14 Points 1. Create constancy of purpose towards improvement of product and service, with the aim to become competitive; to stay in business; and to provide jobs. 2. Adopt the new philosophy. We are in a new economic age. Modern management must awaken to the challenge, must learn their responsibilities and take on leadership for change. 3. Cease dependence on inspection to achieve quality. Eliminate the need for inspection on a mass basis by building quality into the product in the first place. 4. End the practice of awarding business on the basis of price tag alone. Instead, minimize total cost. Move toward a single supplier for any one item. On a long-term relationship of loyalty and trust. 5. Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease costs. 6. Institute training on the job. 7. Institute leadership. The aim of supervision should be to help people, machines and gadgets to do a better job. 8. Drive out fear, so that everyone may work effectively for the company. 9. Break down barriers between departments. People in research, design, sales and production must work as a team to foresee problems of production and in use that may be encountered with the product or service. 10. Eliminate slogans, ehortations and targets for the work force asking for zero defects and new levels of productivity. Such ehortations only create adversarial relationships, as the bulk of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the work force. 11. Eliminate work standards (quotas) on the factory floor. Substitute leadership. Eliminate management by objectives. Eliminate management by numbers and numerical goals. Substitute leadership. 12. Remove barriers that rob the hourly worker of his right to pride of workmanship. The responsibility of supervisors must be changed from sheer CII Institute of Logistics 10

11 numbers to quality. Remove barriers that rob people in management and in engineering of their right to pride of workmanship. 13. Institute a vigorous program of education and self-improvement. 14. Put everybody in the company to work to accomplish to transformation. The transformation is everybody s job. Adapted from Out of the Crisis -Dr. Deming Connection between 14 Points of Deming and his Systems of Profound Knowledge Under appreciation for a system, points 1, 2, 4, 5, 9, 13, and 14 are most oriented towards systems. Numbers 1 and 2, relating to vision, commitment, and development of a new philosophy of leadership require a big picture view of the organization and its place in business and society. Number 4 relates to the requirement that total costs, not incremental costs, must be optimized throughout an organizational system. Number 5 is a call to make improvements continuously throughout the system. Number 9 requires the development of teamwork and breaking down of artificial barriers between departments and organizational units. Number 13 relates to broad education to benefit both the organization and society, in the long run. Point 14 calls for a major cultural change within the organization, and is similar to point 2. To understand variation, Deming established points 3, 5, 10, and 11. Point 3 requires that everyone understand inspection and use it to understand variation by avoiding mass inspection. Point 5 advises to improve constantly and forever, thus eliminating the causes of ecessive variation and waste. Number 10 suggests that improvement does not take place by ehorting workers to do a better job, but by understanding the cause of poor quality and eliminating them. Point 11 makes a similar point that quotas and management by objectives are approaches that do not encourage improvement, but instead, create fear. When people don t understand the theory of knowledge, they don t know how to plan, accomplish learning, improve, change, or solve problems, despite their best efforts. Thus points 1, 2, 5, 6, and 13 may be seen as falling under theory of knowledge CII Institute of Logistics 11

12 category. Deming s concept in points 1 and 2 of constancy of purpose and learning his new philosophy are needed in order to effectively plan, learn and change. Point 5 relating to constant improvement is also essential to knowledge, as is point 6 on instituting training, so that workers will be able to understand their work processes, predict the result of changes, and actively participate in problem solving and improvement. Point 13 is related in that it advises that education and self-improvement will assist the organization in learning, changing, improving and reaching organizational goals. An understanding and appreciation of psychology is a requirement for points 7 through 13. Each of these has leadership and motivational characteristics that are essential to Deming s new philosophy and to improved quality and productivity. Numbers 7 and 11 are related to improving leadership; points 8, 9, 10, 11, and 12 advise removing barriers that keep workers from doing their best, most effective work; and number 13 advises that workers should be educated, not just trained. 1.4 Dr. Juran s Philosophy Juran's "Quality Trilogy," like most trilogies these days, consists of three parts: Quality planning--the process for preparing to meet quality goals; quality control--the process for meeting quality goals during operations; and quality improvement--the process for breaking through to unprecedented levels of performance. Quality planning begins with identifying customers, both eternal and internal, determining their needs, and developing product features that respond to customer needs. Quality goals are then established that meet the needs of customers and suppliers alike, and do so at a minimum combined cost. Quality control involves determining what to control, establishing units of measurement so that data may be objectively evaluated, establishing standards of performance, CII Institute of Logistics 12

13 measuring actual performance, interpreting the difference between actual performance and the standard, and taking action on the difference. Juran specifies a program for quality improvement which involves proving the need for improvement, identifying specific projects for improvement, organizing guidance for the projects, diagnosing the causes, providing remedies for the causes, proving that the remedies are effective under operating conditions, and providing control to maintain improvements. Like Deming, Juran advocated company-wide quality management, with a neverending process of quality improvement, involving such activities as market research, product development, production process control, inspection and testing, and customer feedback. He emphasized the need for management commitment to quality improvement, and the need for training of all employees in quality techniques. Juran also asked workers to get to know their eternal and internal customers, and to identify and reduce causes of variation by determining the difference between standard and actual performance and taking action on the difference. Unlike Deming, Juran did not propose major cultural changes in the organization, but sought to improve quality within the system familiar to U.S. managers. His detailed plan was based on identifying areas for improvement and acting accordingly. Juran also recognized the different "languages," or trains of thought, which occupy different levels of an organization, and advocated communication between these "languages," where Deming proposed that statistics should be shared as a common language. CII Institute of Logistics 13

14 1.5 Philip Crosby s Philosophy The Central Idea of Crosby Quality is free. It s not a gift, but it is free. What costs money are the unquality things -- all the actions that involve not doing jobs right the first time. The famous absolutes of quality management enunciated by Crosby are delineated below: (1) Quality means conformance to requirements, not elegance. Crosby sees requirements as being ironclad; they are communication devices which must be clearly stated so that they cannot be misunderstood. Once this is done, a company can take measurements to determine conformance to those requirements. (2) Crosby maintains there is no such thing as a quality problem. Those individuals or departments that cause them, so there are accounting problems, manufacturing problems, logic problems, etc, must identify problems. (3) There is no such thing as the economics of quality; it is always cheaper to do the job right the first time. Most of us will remember this one as a frequent and sometime annoying aiom, used by our mothers every time we had to perform some complicated chore. Crosby supports the premise that "economics of quality" has no meaning. Quality is free. What costs money are all actions that involve not doing jobs right the first time. (4) The only performance measurement is the cost of quality. The cost of quality is the epense of nonconformance. Crosby's program calls for measuring and publicizing the cost of poor quality. (5) The only performance standard is "Zero Defects." Zero Defects is a performance standard, NOT a motivational program. The idea behind ZD is to do it right the first time, to concentrate on preventing defects rather than just finding and fiing them. Please remember that you should do the right thing right, first time every time. CII Institute of Logistics 14

15 (6) People are conditioned to believe that error is inevitable; thus they not only accept error, they anticipate it. Each of us has limits within which we can accept errors. Eventually we reach a point where the errors are unacceptable. This usually occurs when the errors affect us personally, such as when you discover that your bank has made a $100 error in your account, in their favor. Crosby's Basic Elements of Improvement include determination, education, and implementation. According to Crosby, most human error is caused by lack of attention rather than lack of knowledge. Lack of attention is created when we assume that error is inevitable. By determination, Crosby means that top management must be serious about quality improvement. Everyone must understand the Absolutes; this can be accomplished only through education. Finally, every member of the management team must understand the implementation process. Like Deming, Crosby advocated interior searches by individual departments (i.e. manufacturing, accounting) within a firm for sources of negative variation and acting to reduce these. He also advocated the policy of doing the job right the first time. Unlike Deming, Crosby's plan focuses on managerial thinking, calling for change within the current system, holding employees, as well as management accountable for reducing defects, and not requiring a complete organizational overhaul. 1.6 Philosophy and Frameworks of Other Key People A.V. Feigenbaum is primarily known for three contributions to quality -- his international promotion of the quality ethic, his development of the concept of total quality control, and his development of the quality cost classification. Kaoru Ishikawa was instrumental in the development of the broad outlines of Japanese quality strategy, the concept of CWQC, the audit process used for determining whether CII Institute of Logistics 15

16 a company will be selected to receive the Deming award, the quality control circle, and cause-and-effect diagrams--a principle tool for quality management. Taguchi s contributions were centered on eplaining the economic value of reducing variation. He maintained that the manufacturing-based definition of quality as conformance to specification limits is inherently flawed. He also contributed to improving engineering approaches to product design. By designing a product that is insensitive to variation in manufacture, specification limits become meaningless. Taguchi advocated certain techniques of eperimental design to identify the most important design variables in order to minimize the effects of uncontrollable factors on product variation. Thus, his approaches attacked quality problems early in the design stage rather than react to problems that might arise later in production. Taguchi measured quality as the variation from the target value of a design specification, and then translated that variation into an economic "loss function" that epresses the cost of variation in monetary terms. In doing this, Taguchi offered a method of measuring the monetary loss resulting from creation of products or services that do not conform to quality standards. This method was used by Deming to compare the decreased costs of producing products or services with quality values closer to those of standard quality specifications. CII Institute of Logistics 16

17 1.7 Quality and Competitiveness Attempt to Define and Delineate Quality Webster's definition of quality is vague and simplistic. "(Quality is) that which makes something what it is; characteristic element." The ANSI/ASQ definition states quality is "the totality of features and characteristics of a product or service that bears on its ability to satisfy given needs." No single definition is adequate because customer needs are constantly changing and because quality is "situational" -- e.g. a good design for one purpose, and in the eyes of one set of customers, may represent a poor design for another use or another set of customers. Reliance on a single definition of quality is frequently a source of problems. Formal definitions of quality followed by distilled practitioners are given in the following table: Popular Quality Definitions Transcendent definition: Ecellence Product-based definition: Quantities of product attributes User-based definition: Fitness for intended use Value-based definition: Quality vs. price Manufacturing-based definition: Conformance to specifications Quality definitions, such as the user-based, value-based, and even manufacturingbased concepts are applicable both to products and services. For eample, in a university setting, fitness for intended use may be seen by the eample of a small liberal-arts college that provides an outstanding science curriculum for people who CII Institute of Logistics 17

18 wish to go to work in industry. This eample also can be related to the user-based definition, based on how well the product performs its intended function. Someone who chooses a respected regional university rather than attending an epensive nationally known private university, would be seen as applying the value-based definition, based on how well the selected university provides performance at an acceptable price or conformance to perceived quality standards at an acceptable cost. The manufacturing-based definition measures quality by the product's "conformance to specifications;" in other words, how much does the product resemble the perfected prototype when it rolls off the assembly line? Students may look at the catalog description or course syllabus, when doing a course evaluation, and make a judgment as to whether the resulting course conformed to specifications given in these documents. Quality Definition for a Hospital A particular hospital may like to differentiate itself by advertising its rating in a specialty, such as cardiac care, with an implied guarantee of better results, which is product-based claim. If the intended use for a patient were simply to treat a badly upset stomach, then a low-cost local emergency care clinic would be satisfactory. However, if the intended use is to have the best possible care, a person may want to go to the number one hospital in terms of the state of the art facilities. Money is no consideration. Quality of treatment is important. This is a classic value-based scenario. Finally, a manufacturing-based healthcare eperience would be one that conformed to specifications. Typically this would mean a general hospital with an emergency room that will take care of any sort of trauma injury, from automobile accidents to gunshot wounds, quickly and efficiently. CII Institute of Logistics 18

19 1.8 Competitiveness A firm's competitive advantage lies in its ability to achieve market superiority. It is a) driven by customer wants and needs; b) makes a significant contribution to the success of the organization; c) matches the organization s unique resources with opportunities in the environment; d) is durable, lasting, and difficult for competitors to copy; e) provides a basis for further improvement; and f) provides direction and motivation to the entire organization. Quality supports a firm's competitive advantage by providing for more efficient use of resources and production methods within the company, thus producing products or services that are superior to those of competitors. Point to Ponder Quality is not a Competitive Edge. It is the Competitive Edge! It is worth remembering Dr. Deming s chain reaction model, which emphatically declares that improvement in quality alone, will decrease the cost and that in turn will make a firm competitive in the market place. 1.9 Enhancing Customer Value through TQM CRM is the Key A firm that is market driven would ehibit several customer-focused characteristics that a marketing driven compa ny might not have. In fact, it would be rare for a marketing driven firm to pay much attention to developing a customer relationship management (CRM) system. This attention to customer needs would be more typical of a market driven firm. A CRM system requires that an organization establish effective strategies for listening to, and learning from, customers, as well as developing approaches to measure satisfaction relative to competitors. The system must also be designed to build relationships, in order to understand present and future customer needs, and keep pace with changing markets. The marketing driven firm may be CII Institute of Logistics 19

20 much more focused on selling the customer a product that may or may not meet the customer s needs. Quality is directly related to market share and to profitability. Quite a few studies have shown that people are willing to pay more for products that they perceive as having high quality. Thus, without high quality, good marketing of products and services would appear to be impossible, since salespeople would have little to sell that would meet the needs of their customer. However, without good marketing, where salespeople listen and respond to the needs of customers, even the best-designed products will remain unsold. CRM at Amazon.com Amazon s CRM software helps in multiple ways to gain market share and maintain competitive advantage over their rivals. The list of the characteristics that make up their vision of customer service points to numerous features that are hard to duplicate in conventional websites or store chains. For instance, Amazon: has deep selection that is unconstrained by shelf space. turns their inventory 19 times in a year. personalizes the store for every customer. trades real estate for technology displays customer reviews critical of their products. allows customers can make a purchase with a few seconds and one click. puts used products net to new ones so customers can choose. shares their prime real estate, their product detail pages, with third parties, and, if they can offer better value, they let them adopts leading-edge technology for the company s website has served customer needs by being one of the early pioneers to develop software for collaborative filtering of customer data Advantages of CRM Approach to Amazon Segmenting markets based on demographic and behavioral characteristics, Tracking sales trends and advertising effectiveness by customer and market segment, CII Institute of Logistics 20

21 Identifying which customers should be the focus of targeted marketing initiatives with predicted high customer response rates, Forecasting customer retention (and defection) rates and provides feedback as to why customers leave a company, Studying which goods and services are purchased together, leading to good ways to bundle them, and Studying and predicting what Web characteristics are most attractive to customers and how the Web site might be improved. The capabilities of its high-tech warehouses, such as its nearly perfect process for sorting multiple item orders Customer Focus Delineations The Importance of Customers Organizations only continue to eist because of their ability to meet their eternal customer requirement. The needs of eternal customers must drive all the internal processes within the organization. It is no good continuously improving the effectiveness of the internal processes if, at the end of the day, they are not producing the outputs which the customer requires. It is essential that organizations understand: i. Who are their eternal customers and what are their requirements? ii. Who are the internal processes, which produce the service or product required by the eternal customer? iii. Their customers perceptions of current performance iv. How performance can be improved? When implementing a Quality Improvement Program [QIP], it is easy to fall into the trap of becoming focused internally; concentrating resource on improving internal CII Institute of Logistics 21

22 processes and reducing costs at the epense of the needs of eternal customers. Understanding customer requirements is an essential part of any QIP. Understanding the Customer It is essential that a comprehensive picture of customer requirements is determined. This is not restricted to the product or service delivered to the customer, but covers the total service required from the organization as a supplier. There may be a number of different customers to consider, even within the same organization. The person who places the order has requirements; the receiving department where goods are delivered has requirements; the person who pays the invoice has requirements. A company, which wishes to succeed, must be aware of all these requirements and constantly improve its ability to meet them. There are a number of sources of information on customer requirements. Eamples include: Customer surveys Trade surveys Working with selected customers Competitor analysis Focus groups Benchmarking Customer complaints Legal and guideline standards (for eample, ISO 9000) Informal customer, or potential customer comments received from sources such as: the sales force after customer visits; feedback from other employees and comments heard at conferences, training courses and trade ehibitions Every contact with an eisting, or potential, customer at any level in the organization is an opportunity to learn more about their requirements. It is important that this CII Institute of Logistics 22

23 information is tapped and used to improve the ability of the business to meet customer requirements. Internal Processes An eternal customer requirement can only be met if internal processes within an organization are set up effectively to deliver the requirement. A breakdown in the internal supply chain often results in failure to meet eternal customer requirements. An important part of Quality Improvement is the analysis of the whole organization to ensure that it is set up effectively to meet the requirements of its customers. The following steps are useful guide to achieve this: Identify the basic purpose and objectives of the business. What customer requirements does it eist to fulfill? Identify eisting and potential future customers of the business. Tap as many sources as possible to ensure their requirements are understood. This includes understanding why potential customers are not actual customers! Identify the overall role each department plays in meeting customer requirements and business objectives. This may reveal that changes are required in the roles of departments within the organization Identify the internal processes, which link together to meet the eternal customer requirements. Ensure the eternal customer requirements flow back through the supply chain to determine the customer requirements for each internal process. Only by doing this at each stage in the supply chain can the eternal customer requirements are met? Measure overall performance for each process Introduce improvements to each process to improve performance CII Institute of Logistics 23

24 Customer Service Dimensions 1) Tangibles Appearance of physical facilities, equipment, personnel, and communication materials. Eamples of Specific Questions Raised by Customers Are the bank's facilities attractive? Is my stockbroker dressed appropriately? Is my credit card statement easy to understand? Do the tools used by the repair person look modern? 2) Reliability Ability to perform the promised service dependably and accurately Eamples of Specific Questions Raised by Customers When a loan officer says she will call me back in 15 minutes, does she do so? Does the stockbroker follow my eact instructions to buy or sell? Is my credit card statement free of errors? Is my washing machine repaired right the first time? 3) Responsiveness Willingness to help customers and provide prompt service Eamples of Specific Questions Raised by Customers When there is a problem with my bank statement, does the bank resolve the problem quickly? Is my stockbroker willing to answer my questions? Are charges for returned merchandise credited to my account promptly? Is the repair firm willing to give me a specific time when the repair person will show up? CII Institute of Logistics 24

25 4) Competence Possession of the required skills and knowledge to perform the service Eamples of Specific Questions Raised by Customers Is the bank teller able to process my transactions without fumbling around? Does my brokerage firm have the research capabilities to accurately track market developments? When I call my credit card company, is the person at the other end able to answer my questions? Does the repairperson appear to know what he is doing? 5) Courtesy Politeness, respect, consideration, and friendliness of contact-personnel Eamples of Specific Questions Raised by Customers Does the bank teller have a pleasant demeanor? Does my broker refrain from acting busy or being rude when I ask questions? Are the telephone operators in the credit card company consistently polite when answering my calls? Does the repairperson take off his muddy shoes before stepping on my carpet? 6) Credibility Trustworthiness, believability, honesty of the service provider Eamples of Specific Questions Raised by Customers Does the bank have a good reputation? Does the broker refrain from pressuring me to buy? Are the interest rates/fees charged by my credit card company consistent with the services provided? Does the repair firm guarantee its services? CII Institute of Logistics 25

26 7) Security Freedom from danger, risks, or doubt Eamples of Specific Questions Raised by Customers Is it safe for me to use the bank's automatic teller machine? Does my brokerage firm know where my stock certificate is? Is my credit card safe from unauthorized use? Can I be confident that the repair job was done properly? 8) Access Approachability and ease of contact Eamples of Specific Questions Raised by Customers How easy is it for me to talk to senior bank officials when I have a problem? Is it easy to get through to my broker over the telephone? Does the credit card company have a 24-hour, toll-free telephone number? Is the repair service facility conveniently located? 9) Communication Keeping customers informed in language they can understand and listening to them Eamples of Specific Questions Raised by Customers Can the loan officer eplain clearly the various charges related to the mortgage loan? Does my broker avoid using technical jargon? When I call my credit card company, are they willing to listen to me? Does the repair firm call when they are unable to keep a scheduled repair appointment? 10) Understanding the Customer Making the effort to know customers and their needs Eamples of Specific Questions Raised by Customers CII Institute of Logistics 26

27 Does someone in my bank recognize me as a regular customer? Does my broker try to determine what my specific financial objectives are? Is the credit limit set by my credit card company consistent with what I can afford (i.e., neither too high nor too low)? Is the repair firm willing to be fleible enough to accommodate my schedule? The ultimate five dimensions of service quality are Reliability, Responsiveness, Assurance, Empathy, and Tangibles in the order of importance. The contribution made by these five dimensions is succinctly given in the following visual (Fig 2). Fig 2: Contribution By ServQual Dimensions 11% 16% 19% 22% 32% Reliabilty Responsiveness Assurance Empathy Tangibles Please note that Reliability, Responsiveness, and Tangibles are independent dimensions. Assurance is obtained by collapsing Competence, Courtesy, Credibility, and Security of the original Servqual dimensions. Likewise, Empathy is an amalgamation of Access, Communication, and Understanding the Customer of the original Servqual dimensions. (Source: Delivering Quality Service by Dr. Parasuraman) CII Institute of Logistics 27

28 1.11 Strategic Planning for Quality Strategy A strategy is a pattern or plan that integrates an organization's major goals, policies and action sequences into a cohesive whole. Formal strategies contain three elements: 1. Goals to be achieved. 2. Policies that guide or limit action. 3. Action sequences, or programs, that accomplish the goals. The leading practices for firms that do effective strategic planning include: Both top management and employees actively participate in the planning process. They use customer wants and needs to drive the strategy. They involve suppliers in the strategic planning process. They have well-established feedback systems for continuous measurement and re-evaluation of the planning process. Steps in Strategic Planning The steps in the strategic planning process are shown in Figure 3. Once the company's mission, vision, and guiding principles have been determined, the organization must assess the gap as to where it is now, and where it wants to be as described in its vision. Using this assessment, it must then develop goals, strategies, and objectives that will enable it to bridge this gap. CII Institute of Logistics 28

29 Fig 3 The purpose, or mission, of the organization is a statement of "why the organization is in business" In the past, the purpose of the organization was frequently stated in terms of products or services produced or profitability to stockholders. TQ-focused firms are now stating their purpose in terms of their customer focus and their commitment to strive for higher levels of quality. The vision statement is a statement of guiding values, principles, and direction of epected growth of an organization or some segment of it, and is generally developed by key managers and others who are responsible for planning and carrying out that vision. Vision statements may be developed at any level within the organizational hierarchy from top to bottom. This is a worthwhile activity, as long as the statements are coordinated so as to fit with those of the net higher level and the overall organization's vision. Values, or guiding principles, guide the journey to that vision by defining attitudes and policies for all employees, that are reinforced through conscious and subconscious CII Institute of Logistics 29

30 behavior at all levels of the organization. The mission, vision, and guiding principles serve as the foundation for strategic planning. Top management and others who lead, especially the CEO, must articulate them. They also have to be transmitted, practiced, and reinforced through symbolic and real action before they become "real" to the employees, and the people, groups, and organizations in the eternal environment that do business with the firm. Hoshin kanri, known as policy deployment or management by planning in the U.S.A., is the Japanese process of deploying management strategy. Various companies have various definitions for policy deployment. In all cases, it emphasizes organization-wide planning and setting of priorities, provides resources to meet objectives, and measures performance as a basis for improving performance. Essentially, it is a TQ-based approach to eecuting a strategy. Catchball is the term for the negotiating process used within an organization to determine long- and short-term quality objectives. Leaders communicate mid-term objectives and measures to middle managers who develop short-term objectives and recommend necessary resources, targets, and roles/responsibilities. Catchball is not an autocratic, top-down management style. It marshals the collective epertise of the whole organization and results in realistic and achievable objectives that do not conflict. Policy deployment is a planning and implementation method that ties improvement activities to long-term strategies of the organization. It is driven by data, supported by documentation, emphasizes company-wide planning, and includes setting of priorities for improvement. It is somewhat similar to MBO, but has a different focus. First, MBO focuses on the performance of the individual employee, while policy deployment focuses on the organization as a whole. Objectives in MBO are tied to performance evaluation and rewards. Second, MBO objectives do not support the company's objectives, but are set independently. Third, the focus of MBO is as a control CII Institute of Logistics 30

31 mechanism between supervisors and subordinates. Fourth, MBO objectives usually are not emphasized in daily work, but are brought out only at performance review time. Key business factors in the environmental assessment include: the nature of a company's products and services, its principal customers, major markets, and key customer quality requirements position in market and competitive environment facilities and technologies suppliers other factors, such as the regulatory environment, industry changes, etc. Strategic plans must be consistent with the important business factors of the company. For eample, plans for a company in a highly competitive, fast-changing market might include fast cycle time and more attention to understanding emerging customer needs than plans for a company with a low-cost focus on a mature market The Seven Management Planning Tools 1. Affinity diagrams--this is a tool for organizing a large number of ideas, opinions, and facts relating to a broad problem or subject area, i.e. a vision statement. 2. Interrelationship digraphs--identifies and eplores casual relationships among related concepts or ideas. It shows that every idea can be logically linked with more than one idea at a time, and allows for "lateral thinking" rather than "linear thinking." 3. Tree diagram--maps out the paths and tasks necessary to complete a specific project or reach a specified goal. 4. Matri diagrams--these are "spreadsheets" that graphically display relationships between ideas, activities, or other dimensions in such a way as to provide logical connecting points between each item. 5. Matri data analysis--takes data and arranges it to display quantitative relationships among variables to make them more easily understood and analyzed. CII Institute of Logistics 31

32 6. Process decision program chart--a method for mapping out every conceivable event and contingency that can occur when moving from a problem statement to possible solutions. 7 Arrow diagrams-- Arrow diagrams are another name for PERT/CPM project planning diagrams. Students who have had a basic operations management course may be familiar with the term network diagram 1.12 Structure and Strategy The implications for quality are that the quality philosophy, systems, procedures, and people must be aligned with the organization structure and vice-versa. It has been said that structure follows strategy, so, the quality strategy will ideally drive the development of a structure in order to carry it out. In reality, structures that have been in place for a long time are often difficult to change when the strategy changes, which creates significant misalignment and organizational stress. For eample, when a highly regulated industry, such as telecommunications or electric power is deregulated, then the need for customer focus, increased service quality, and organizational structural change becomes painfully apparent, but difficult to accomplish. Many variations of organization structure eist, but they are commonly based on one of the following three forms: 1) line organization, 2) line and staff organization, or 3) matri organization forms. The line organization is a simple form that is most successful in small firms. It is not generally used in large organizations, where the line and staff structure is most prevalent. Neither the pure line organization nor line and staff organization works very well where the environment of the firm and its industry is changing very rapidly. That is because these types of organizations tend to be rigidly structured. The matri organizational form is better suited to rapidly changing environments, but it is more difficult to develop effective control of outcomes in order to meet goals using this form of organization. CII Institute of Logistics 32

33 TQ focused organizations are often taking a process view of organization. Therefore, they are increasingly structuring their organization around functional or crossfunctional teams. To carry out the work, high performance teams that focus on core processes, quality improvement or other targets are often formed. These are frequently coordinated through cross-functional coordinating committees, management (or quality management) councils, etc. to overcome the problems of lack of control and accountability inherent in such matri-form organizations. Essence of Strategic Planning Strategic Planning focuses on drivers of customer satisfaction, customer retention, and market share that lead to higher competitiveness, profitability, and business success. The category is divided into two sections, labeled as Strategy Development and Strategy Deployment. Strategy Development requires applicants to outline how they create a view of the future that takes into account the market factors in which they compete and the process of how they compete. Strategy Deployment seeks information about specific action plans that a company develops, how they are deployed, and a projection of performance. The Strategic Planning category requirements are intended to encourage strategic thinking and action, but do not imply that formalized plans or planning systems must be developed. CII Institute of Logistics 33