Chapter 2

1. Chapter 2 Total Quality in Organizations

2. Performance excellence Service quality Improved product designs Manufacturing quality Growth of Modern Quality Management

3. Key Idea As consumer expectations have risen, a focus on quality has permeated other key sectors of the economy, most notably health care, education, not-for-profits, and government.

4. Systems • A system is a set of functions or activities within an organization that work together for the aim of the organization. • Subsystems of an organization are linked together as internal customers and suppliers. • A systems perspective acknowledges the importance of the interactions of subsystems, not the actions of them individually.

5. Key Idea Successful management relies on a systems perspective, one of the most important elements of total quality.

6. Manufacturing Systems (1 of 2) • Marketing and sales • Product design and engineering • Purchasing and receiving • Production planning and scheduling • Manufacturing and assembly • Tool engineering

7. Manufacturing Systems (2 of 2) • Industrial engineering and process design • Finished goods inspection and test • Packaging, shipping, and warehousing • Installation and service

8. Key Idea Traditional quality assurance systems in manufacturing focus primarily on technical issues such as equipment reliability, inspection, defect measurement, and process control.

9. Relationships in a Typical Manufacturing System (Fig.2.1)

10. Quality in Marketing Marketing and sales personnel are responsible for determining the needs and expectations of consumers.

11. Quality in Product Design Product design and engineering functions develop technical specifications for products and production processes to meet the requirements determined by the marketing function.

12. Quality in Purchasing A purchasing agent should not simply be responsible for low-cost procurement, but should maintain a clear focus on the quality of purchased goods and materials.

13. Quality in Production Planning & Scheduling Poor quality often results from time pressures caused by insufficient planning and scheduling.

14. Quality in Process Design Manufacturing processes must be capable of producing output that meets specifications consistently.

15. Quality in Manufacturingand Assembly Both technology and people are essential to high-quality manufacturing.

16. Quality in Finished Goods Inspection and Testing The purposes of final product inspection are to judge the quality of manufacturing, to discover and help to resolve production problems that may arise, and to ensure that no defective items reach the customer.

17. Quality in Installation and Service Service after the sale is one of the most important factors in establishing customer perception of quality and customer loyalty.

18. Quality in Business Support Functions for Manufacturing • Finance and accounting • Quality assurance • Legal services

19. Key Idea Every manager is responsible for studying and improving the quality of the process for which he or she is responsible; thus, every manager is a quality manager.

20. Quality in Services • Serviceis defined as “any primary or complementary activity that does not directly produce a physical product – that is, the non-goods part of the transaction between buyer (customer) and seller (provider).”

21. Key Idea The American Management Association estimates that the average company loses as many as 35 percent of its customers each year, and that about two-thirds of these are lost because of poor customer service.

22. Importance of Quality in Services Studies show that companies can boost their profits by almost 100% by retaining just 5% more of their customers than their competitors retain. That is because the cost of acquiring new customers is much higher than the costs associated with retaining customers.

23. Critical Differences Between Service and Manufacturing (1 of 2) • Output is intangible, quality measurement is more difficult and subjective • No inventory, services are produced and consumed simultaneously, customer is in the system, brings more variety • Customer needs and performance standards are more difficult to identify and measure

24. Critical Differences Between Service and Manufacturing (2 of 2) • Services requires a higher degree of customization • Customers are often involved in actual process • Services are more labor-intensive than manufacturing, interactions with customers are critical • Services handle large numbers of transactions

25. Key Idea These differences make it difficult for many service organizations to apply total quality principles, and foster misguided perceptions that quality management cannot be effectively accomplished in services.

26. Understanding Services • Degree of customer contact • Pure service vs. quasi-manufacturing

27. Components of Service System Quality • Employees • Information technology

28. Key Idea Researchers have repeatedly demonstrated that when service employee job satisfaction is high, customer satisfaction is high, and that when job satisfaction is low, customer satisfaction is low.

29. Key Idea Information technology is essential for quality in modern service organizations because of the high volumes of information they must process and because customers demand service at ever-increasing speeds.

30. Quality in Health Care • Joint Commission on Accreditation of Healthcare Organizations (JCAHO) • National Committee for Quality Assurance (NCQA) • Institute for Healthcare Improvement (IHI) • 1999 expansion of the Baldrige Award to nonprofit health care organizations

31. Quality Issues in Health Care • Avoidable errors • Underutilization of services • Overuse of services • Variation in services

32. Key Idea Although the national health care system as a whole may need a sweeping overhaul, many individual providers have turned toward quality as a means of achieving better performance and customer satisfaction.

33. Quality in Education • Koalaty Kid • Active involvement of whole school community • Committed leadership • System for continuous improvement • Environment that celebrates success

34. Quality in Higher Education Business plays an important role in fostering quality improvement efforts in higher education by transferring knowledge and expertise on quality processes and implementation practices.

35. Academic Quality Improvement Project (AQIP) AQIP criteria focuses on institutional practices for helping students learn, accomplishing other distinct objectives, understanding student and stakeholder needs, valuing people, leading and communicating, supporting institutional operations, measuring effectiveness, planning continuous improvement, and building collaborative relationships—all of which are key elements of TQ.

36. Quality in Small Business and Not-for-Profits • Slow to adopt quality approaches • General lack of understanding and knowledge about quality • Focus on sales and market growth, cash flow, and routine fire fighting • Lack of resources for formal quality systems

37. Key Idea Perhaps the most important factor in successful quality initiatives in small businesses is the recognition by the CEO or president that a quality focus can be beneficial and lead to achieving organizational goals.

38. Quality in the Public Sector • Quality in the Federal Government • Federal Quality Institute • President’s Quality Award • State and Local Quality Efforts

39. Key Idea Quality concepts and principles are universal and can be applied in all types of organizations. The difficulty, of course, is developing an infrastructure to make it happen and the discipline to sustain efforts over time.