MODULE-1 Quality, Strategic Planning and Competitive Advantage

1. Total Quality Management: In a growing market there are many competitions for that
we need to implement TQM in the organization. If company implemented TQM it can
meet the customer expectation.
 Total - Involvement and input of every one from top management to employees.
 Quality –Fully meeting customer needs and requirement in all the time.
 Management – The way we act, handle, operate and control it. Training and
instruction to the employees.
1.1. Definition of TQM: TQM is a management philosophy that seeks to all organizational
function such as marketing, finance, engineering, customer service, focus on meeting the
customer needs and organizational objectives.

Basic approach to TQM

6 factors that are necessary for the basic approach to TQM. They are

1. A committed and dedicated management to provide a long term, top to bottom

organization support.
2. A fixed and rigid focus on customer within the organization and also external to the
organization.
3. Effective utilization and involvement of entire work force and human resource.
4. Continuous improvement of the business and production process
5. Treating vendor as partner.
6. Establish performance measures for the process.

Quality Guru’s:

1. Walter A.Shewart: Developed the control chart theory, control limits, assignable and
chance causes of variation and rational subgroups.
2. W.Edward Deming: His 14 points on quality management provide theory for
management to improve quality, productivity and achieve competitive position in the
market.
3. Joseph M.Juran: He taught quality principles to Japanese. He is a corporate industrial
engineer engaged in writing, editing and publishing handbook on quality control
4. Armond V.Feiganbaum : He is best known for coining the phrase Total quality control
which he defined as „ an effective system for integrating the quality maintenance and
quality improvement efforts of the various groups in the organization which enable
production and services at most economical way
5. Kooru Ishikawa : He is responsible for introducing total quality control for Japanese. He
developed cause and effect diagram is also referred as Ishikawa Diagram.

Dpt. of Mechanical Engineering, GITAM UNIVERSITY , B’lore TQM

 6. Phillip B.Crosby : He is largely responsible for bringing quality to the attention of top
corporate manger. According to him “ Doing it right the first time” is less expensive than
the cost of detecting and correcting non conformities
7. Genichi Taguchi : Taguchi was a Japanese engineer contributed for improving
engineering approaches to product design. He recommended certain techniques of
experimental design to identify the most important design parameters.

What is Quality?

Quality has many definitions. It means

 Degree of Excellence
 Attribute
 Relative nature, Character or Properties.
 Quality is Conformance to requirement or specifications ( Crosby)
 Quality is fitness for use (Juran)
 According to ISO 9000:2000 – Quality degree to which set of inherent characteristics
fulfills the requirements. ( The term Quality can be used with the objectives such as
Good, Poor or Excellence)& ( Inherent means existing in something especially as a
permanent characteristics)
 According to American Society of Quality: The totality of features and characteristics
of a product or service that bears on its ability to satisfy stated or implied needs of the
customer.
 Modern Definition of Quality: Quality is inversely proportional to variability. Q =1/S.

 Besterfield a researcher define the quality as, ratio of performance to expectation.

Q= P/E. If the ratio is 1 customer will be satisfied,> 1 customer will be delighted and <1
customer will be dissatisfied.

Quality in Manufacturing and Service system

For the growth of modern quality management we need

1. Service Quality
2. Performance excellence.
3. Improved product design
4. Manufacturing Quality.
 Quality in manufacturing system
1. Marketing and sales: Responsible for meeting the customer needs and expectation.
2. Product Design and Engineering: Responsible for developing technical specification
for product and Production process to meet the requirement determined by marketing
function.
3. Purchasing and Receiving: Purchasing agent should not be Responsible for lower cost
procurement but should maintain a clear focus on quality of purchased goods and
material.
4. Production Planning and scheduling: Responsible for specifying long term and short
term production requirement for filling customer order and meeting anticipated demand.
Poor quality often resulting from time pressure caused by insufficient planning and
scheduling.
5. Manufacturing and Assembly: Responsible for designing and maintaining tools used in
manufacturing inspection. Both technology and people are essential to high quality
manufacturing
6. Industrial engineering and process Design: responsible for working with product
design engineers to develop realistic specification, appropriate technologies, equipment,
work methods and smooth flow of production. Manufacturing processes must be capable
of producing output that meets specification consistently.
7. Finished goods inspection and test: judge the quality of manufacturing. The purpose of
final product inspection are to judge the quality of manufacturing to discover and help to
resolve the production problem that may arise, and to ensure that no defective items reach
the customer
8. Packing, shipping and warehousing: responsible for protecting the quality of goods
after manufacturing.
9. Installation and Service: Service after the sale is one of the most important factor in
establishing customer perception of quality and customer loyalty.

Quality in service system:

Service can be defined as a social act which takes place in direct contact between the customer
and representatives of the same service company.

Type of services: Core services and Facilitating services.

Core services: primary means of creating customer satisfaction.

Facilitating services: Enhancing the value of core services.

 Quality and Price
When different qualities of the product are important, price can only be used as a measure of the quality
desired by the market. In other words, a consumer can only use price as a measure of quality if the
consumer's values are reflected by other consumers in the market

Consumers should use a product's price to determine if the product is affordable. However,
consumers also appear to use a product's price as a measure of the product's quality. Some of the
consumers in this market are not concerned with this quality of the product. These consumers are
very price sensitive. They will buy the lowest priced product regardless of the level of the
quality. These consumers are called type 1 consumers. Type 2 consumers are very quality
sensitive. However, type 2 consumers are insensitive to price. They will buy more of the product
as the quality of the product increases regardless of the product's price.

Prices reflect levels of quality even with limited competition. The quality-price relationship is
non-linear. Prices reflect levels of quality even when some consumers do not behave in a rational
economic manner. Consumers using price as a surrogate measure of quality encourage
companies to raise the level of product quality. Competition does not destroy the relationship
between price and quality. Companies with high quality products spend more on advertising than
companies offering lower quality products

When different qualities of the product are important, price can only be used as a measure of the
quality desired by the market. In other words, a consumer can only use price as a measure of
quality if the consumer's values are reflected by other consumers in the market.

Quality and Market share

Market share is one profitability indicator for businesses, and therefore many companies position “market
share maximization” as their competition strategy. In strategy management, many companies believe an
enlarged market share will increase company reputation and thus augment profits by economies of scale,
enhance competitive advantages, and increase customer‟s quality perception altogether with. Take Ford
Motor Company for example. They provide favorable discount in America to maintain Taurus superiority
to Honda Accord and keep number one sales in the market. Yet it is not necessarily true that big market
share pertains high quality perception from customer.
 Dimensions of Quality:
Quality is of the features and characteristics of a product or service that contribute to the satisfaction of
customer needs. Gravin identifies eight such features and characteristics and call them as “ Dimensions of
quality”.

1. Performance (will the product do the intended job?)

Potential customer usually evaluate a product to determine if it will perform certain
specific functions and determine how well it perform them.
2. Reliability (how often does the product fail?)
Complex products require occasional repair, if that is frequent product is unreliable
3. Durability (how long the product last?)
This is the effective service life of the product. Customer expects products to perform its
intended function satisfactorily over a long period of time.
4. Serviceability (how easy is to repair the product?)
Quality is also a function of how quickly and economically a repair or routine
maintenance activity can be accomplished.
5. Aesthetics (how does the product look like?)
This is the visual appeal of the product, often taking in to account factor such as style,
color, shape, packing, tactile characteristics and other sensory features.
6. Features (what does the product do?)
Customer associate high quality with the products that have added features
7. Perceived quality (What is the reputation of the company or its product?)
In many cases, customers rely on the past reputation of the company concerning quality
of its products.
8. Conformance to standards (is the product made exactly as the designer intended?)
High quality product is the one that exactly meets the requirements placed on it.

Quality Cost: Quality cost are those categories of cost that are associated with
the efforts made in producing products of acceptable quality level and identifying,
avoiding, repairing products that do not meet requirements. Organizations use 4
categories of quality cost
1. Prevention cost: Those cost associated with efforts in design and manufacturing
that are directed towards the prevention of nonconformance. Broadly speaking prevention
cost are all those cost incurred in an effort to “make it right the first time”. It involves
Quality Planning and Engineering: Cost associated with the creation of the overall quality
plan, the reliability plan, the data system and all specialized plans and activities of the
quality assurance function. The preparation of manuals and procedure used to
communicate the quality plan and cost of auditing system.
  New product review: Cost of the preparation of bid proposals, evaluation of
new design from quality view point, the preparation of test and experimental
programs to evaluate the performance of new product and other quality activities
during the development and preproduction stages of new product or design.
 Process Control: The cost of process control techniques such as control chart
that monitor the manufacturing process in an effort to reduce variation and build
the quality in to the product.
 Burn-in: The cost of pre-shipment operation of the product to prevent early life
failures in the field.
 Training: The cost of developing, preparing, implementing, operating and
maintaining formal training programs for quality.
 Quality data acquisition and analysis: The cost of running the quality
data system to acquire data on product and process performance also the cost of
analyzing these data to identify problems. It includes the work of summarizing
and publishing quality information management.

2. Appraisal cost: Appraisal costs are those cost associated with measuring,
evaluating or auditing products, components, and purchased materials to ensuring
conformance to the standard that have been imposed. Those cost are incurred to
determine the condition of the product from a quality view point and ensure that it
conforms to specification. This includes
 Inspection and test of incoming material: cost associated with the
inspection and testing of all vendor supplied material. This subcategory includes
receiving inspection and test, evaluation at the vendor‟s facility.
 Product inspection and test: the cost of checking the conformance of the
product throughout its various stages of manufacturing includes final acceptance
testing, packing and shipping checks and any test done at the customer facilities.
 Material and service consumed: the cost of material and products
consumed in a destructive test.
 Maintaining accuracy of test equipment: The cost of operating a system
that keeps the measuring instrument and equipment in calibration.

3. Internal failure cost: Internal failure cost are incurred when products, component,
materials and services fails to meet quality requirement and this failure is discovered
prior to delivery of the product to the customer.
 Scrap: The net loss of labor, material and overhead resulting from defective
product that cannot economically be repaired or used.
  Rework: The cost of correcting nonconformance units so that they meet
specification.
 Retest: The cost of re-inspection and retesting of products that have undergone
rework or other modification.
 Failure Analysis: The cost incurred to determine the causes of the product
failure.
 Downtime: The cost of idle production facilities that result from
nonconformance to requirements.
 Yield losses: The cost of process yield that lower than might be attained by
improved controls.
 Downgrading: The difference between normal selling price and reduced price
due to quality reasons.
4. External failure cost: External failure cost occur when the product does not
perform satisfactorily after it is supplied to the customer.
 Complaint adjustment: All cost of investigation and adjustment of justified
complaints attributable to nonconforming product.
 Returned product/ material: All cost associated with receipt, handling
and complaints attributable to nonconforming product.
 Warranty charges: All cost involved in service to customer under warranty
contracts.
 Liability costs: cost incurred as a result of product liability litigation.

ISO 9000: International organization for standard

As quality became a major issue of business throughout the world, various organization
developed standards and guidelines of their own. Terms such as quality management,
quality control, quality system and quality assurance acquired different meaning in
different country and different organization. To standardize quality requirement a
common organization called “International organization for standard” was founded in
1946 in Geneva, Switzerland.

Objectives of ISO:
1. To achieve, maintain and seek to continually improve product quality with reference
to the requirement.
2. To improve quality of operations and process to meet the customer stated implied
needs.
3. To provide confidence to internal management and employee of the organization.
4. To provide confidence to customer and stakeholder that quality requirement are
achieved in product delivered.
 5. To provide confidence that quality system requirement fulfilled.

ISO standard focus on developing, documenting and implementing the procedures to ensure that
consistency of operation and performance in production and service delivery processes, with the
aim of achieving continual quality improvement and supported by basic principle of total quality.
The standards consist of 3 documents. They are

1. ISO 9000: This deals with fundamental and vocabulary. This document provides
fundamental concept related to Quality management systems (QMS) and establishes
definitions of key terms used in the standards.
2. ISO 9001: This document provides the specific requirements for a quality management
system. The requirements provide a structure for basic quality assurance system. The
requirements are organized in to 4 major sections like Management Responsibility,
Resource management, Product realization and measurement analysis and improvement.
3. ISO 9004: This deals with guideline for performance improvement. Assist organization
in improving quality management beyond the minimum requirement in ISO 9001, but
does not specify any requirements that should be followed.
The ISO 9000 standards are intended to apply to all types of business immaterial of size,
Activity including manufacturing sectors and service sector such as health, education,
banking and transportation etc.
4. ISO 9000:2000 Quality management Principle: The following are the ISO 9000:2000
Quality management principle. Customer Focus, Leadership, Involvement of the people,
Process Approach, system approach to management, continual improvement, Factual
approach to decision making, Mutually beneficial supplier relationship.

Benefits:
1. Provides an opportunity to increase value to the activities of the organization.
2. Improve the performances of processes continually satisfaction of customer.
3. Attention to resource management.
4. Implementation of statutory and regulatory requirements related to products and
services
5. Better management control.

1.13 ISO 14000

After the success of the ISO9000 series of quality standards, the international standard
organization published a comprehensive set of standard for Environmental Management. This
series of standards is designed to cover the whole area of environmental issue for organization in
the global market place.
The ISO 14000 standards are a set of environmental standards designed and developed by the
international organization for standard to assure that businesses in the organization are
environmentally responsible.

The ISO 14000 standards includes guidelines for waste disposal, use of natural resources,
pollution control and environment responsibility. It also includes standard set for test and
measurement that assist organization and businesses measure the impact having on environment.

The tests and measured established are also adopted by many governments in developing
environmental policy, which would help them to control exploitation and overuse and misuse of
natural resources and pollution.

ISO 14000 is actually a series of international standard on environmental management. It

provides a frame work for the development of both the system and the supporting audit program.
There are 6 standards in the ISO 14000 family. They are

ISO 14001, ISO 14004, ISO 14010, ISO 14011, ISO 14012 and ISO 19011

The new series of ISO 14000 standards are designed to cover

1. Environment management system.

2. Environmental Auditing
3. Environmental performance evaluation.
4. Environmental labeling
5. Life cycle assessment
6. Environmental aspects in product standards

ISO 14000 provided a framework for a holistic, strategic approach to the organizations economic
policy, plans and actions.

ISO 14010 provides general principles of environmental auditing that are applicable to all types
of environmental audit reviews.

ISO 14011 establishes audit procedures that provide for the planning and conduct of an audit of
an environmental management system (EMS)

ISO 14012 Provides guidance on qualification, criteria for environmental auditors and lead
auditors.

ISO 19011 is a new environment management system standard. It provides guidelines for quality
and environmental management systems, auditing.
Advantages

1. Assist in waste control, pollution control and effective utilization of resources especially
natural resources.
2. Ensures organizations meet rigid environmental regulatory bodies requirement resulting
in smooth functioning of business.
3. Helps in Developing strategies for acquiring materials continuously as and we required.
Assuming natural resources not getting depleted.
Focusing for making business efficient, profitable and productive.
Psychological satisfaction contributing in saving the environment.
Gaining competitive market.
Increasing the image of the organization.