OlinSchoolofBusinessWashingtonUniversityPanosKouvelisManufacturingManagement1TotalQualityManagementPart0:WhatisQuality?Part1:EconomicsofQualityPart2:TQM:PrinciplesandManagerialMethodsPart3:TQM:ImprovementToolsOlinSchoolofBusinessWashingtonUniversityPanosKouvelisManufacturingManagement2Principalobjectivesofthelecture•Whatisquality?•Theeconomicsofquality:Whatistherelationshipof:•QualityandCost•QualityandProductivity•QualityandProfitability•Whatistotalqualitymanagement?OlinSchoolofBusinessWashingtonUniversityPanosKouvelisManufacturingManagement3WhatisQuality?OlinSchoolofBusinessWashingtonUniversityPanosKouvelisManufacturingManagement4Fivedefinitionsofquality-Garvin•Transcendent•Product-based•User-based•Manufacturing-based•Value-basedOlinSchoolofBusinessWashingtonUniversityPanosKouvelisManufacturingManagement5Transcendent“Qualityisneithermindnormatter,butathirdentityindependentofthetwo…Eventhoughqualitycannotbedefined,youknowwhatitis.”-RobertM.PirsigOlinSchoolofBusinessWashingtonUniversityPanosKouvelisManufacturingManagement6Product-based“Differencesinqualityamounttodifferencesinthequantityofsomedesiredingredientorattribute.”-LawrenceAbbotOlinSchoolofBusinessWashingtonUniversityPanosKouvelisManufacturingManagement7User-based“Qualityisfitnessforuse.”-JosephM.JuranOlinSchoolofBusinessWashingtonUniversityPanosKouvelisManufacturingManagement8Manufacturing-based“Qualityisthedegreetowhichaspecificproductconformstoadesignorspecification.”-HaroldL.Gilmore“Qualityisproductuniformityaroundthetarget.”-GenichiTaguchiOlinSchoolofBusinessWashingtonUniversityPanosKouvelisManufacturingManagement9Value-based“Qualityisthedegreeofexcellenceatanacceptablepriceandthecontrolofvariabilityatanacceptablecost.”-RobertA.BrohOlinSchoolofBusinessWashingtonUniversityPanosKouvelisManufacturingManagement10Dimensionsofquality•Performance(primaryproductcharacteristics)•Features(“bellsandwhistles”)•Reliability(frequencyoffieldfailures)•Conformance(matchwithspecifications)•Durability(productlife)•Serviceability(speed,courtesy,orcompetenceofrepair)•Aesthetics(“fitsandfinishes”)•Perceivedquality(reputationandintangibles)OlinSchoolofBusinessWashingtonUniversityPanosKouvelisManufacturingManagement11DimensionProductExample:ServiceExample:StereoAmplifierCheckingAccountatBankPerformanceSignal-to-noiseratio,powerTimetoprocesscustomerrequestsFeaturesRemotecontrolAutomaticbillpayingReliabilityMeantime-tofailureVariabilityoftimetoprocessrequestsDurabilityUsefullife(withrepair)KeepingpacewithindustrytrendsServiceabilityEaseofrepairResolutionoferrorsCourtesyofdealerCourtesyoftellerEstheticsOak-finishedcabinetAppearanceofbanklobbyReputationConsumerReportsrankingAdviceoffriends,yearsinbusinessSource:ModifiedfromPaulE.Plsek,“DefiningQualityattheMarketing/DevelopmentInterface.”QualityProgress,June1987,pp.28-36.OlinSchoolofBusinessWashingtonUniversityPanosKouvelisManufacturingManagement12QualitySpecifications•Designquality–inherentvalueoftheproductorserviceinthemarketplace•Conformancequality–degreetowhichtheproductorservicedesignspecificationsaremetDesignQualityConformanceQualityFitnessofUseFitnessofusedegreetowhichthefinalproductorservicemeetsthecustomer’sobjectivesOlinSchoolofBusinessWashingtonUniversityPanosKouvelisManufacturingManagement13EconomicsofQualityQualityCostProductivityProfitabilityOlinSchoolofBusinessWashingtonUniversityPanosKouvelisManufacturingManagement14Traditionalcost/qualitytradeoffCostQualityOlinSchoolofBusinessWashingtonUniversityPanosKouvelisManufacturingManagement15Qualityandcost•Unavoidablecosts•(PriceofConformance=POC)–Appraisal–Prevention•Avoidablecosts•(PriceofNonconformance=PONC)–Internalfailure–ExternalfailureOlinSchoolofBusinessWashingtonUniversityPanosKouvelisManufacturingManagement16Appraisalcosts•Testandinspectionmaterialsandservices•Wagesofinspectionpersonnel•Productqualityaudits•Maintenanceoftestequipment•Customersatisfactionaudits•Supplierappraisals•Employeesurveys•MysteryshopperprogramOlinSchoolofBusinessWashingtonUniversityPanosKouvelisManufacturingManagement17Preventioncosts•Qualityplanning•Processcontrol•Educationandtraining•Preventivemaintenance•Suppliertraining/certification•Failureanalysis•Customerrelationshipmanagement•QualitysystemsdevelopmentOlinSchoolofBusinessWashingtonUniversityPanosKouvelisManufacturingManagement18Internalfailurecosts•Scrap•Rework•Downtime/overtime•Downgrading/disposition•Analysisofscrap/rework•Accidents/injuries•Employeeturnover•Lossofmorale•HandlinggrievancesOlinSchoolofBusinessWashingtonUniversityPanosKouvelisManufacturingManagement19Externalfailurecosts•Complaintsprocessing•Warranty•Productrecall•Productliability•Fieldservice•Repair•AdministrativecostsOlinSchoolofBusinessWashingtonUniversityPanosKouvelisManufacturingManagement20PONCestimatesCOMPANYYEARPONCaspercentageofsalesIBM198015-40Motorola198613Heinz1989($350-400Million)Motorola19898($800Million)OlinSchoolofBusinessWashingtonUniversityPanosKouvelisManufacturingManagement21GeneralelectricestimatesSTAGECostperdefectperproductSupplierinsp