‫المملكة العربية السعودية‬ ‫وزارة التعليم‬ ‫الجامعة السعودية اإللكترونية‬ Kingdom of Saudi Arabia Ministry of Education Saudi Electronic University College of Administrative and Financial Sciences Assignment 1 Quality Management (MGT 424) Due Date: 03/12/2022 @ 23:59 Course Name: Quality Management Student’s Name: Course Code: MGT424 Student’s ID Number: Semester: Second CRN: Academic Year:2021-22-2nd For Instructor’s Use only Instructor’s Name: Students’ Grade: --/Out of 10 Level of Marks: High/Middle/Low General Instructions – PLEASE READ THEM CAREFULLY • • • • • • • • The Assignment must be submitted on Blackboard (WORD format only) via allocated folder. Assignments submitted through email will not be accepted. Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page. Students must mention question number clearly in their answer. Late submission will NOT be accepted. Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions. All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism). Submissions without this cover page will NOT be accepted. Quality of Life program 2020 in Saudi Arabia – First Assignment In the first assignment for the Quality Management course, the students are required to choose a specific area from the subject and answer the questions given, upon successful completion of the assignment; the student should be able to achieve the following learning outcomes: Learning Outcomes: 1. Recognize the importance of quality management theory, principles, and practices applied in businesses on national and international levels. 2. Use quality improvement tools and practices for continuous improvement to achieve the organizational change and transformation. Quality of Life program in Saudi Arabia The Quality of Life Program is one of the 2030 vision - realization programs, it. was launched in 2018 to improve the quality of life of citizens and visitors The program main focus is to improve the lifestyle of individual, family and the society of Saudi Arabia as a whole, in addition to infrastructure development. Access the program page https://www.vision2030.gov.sa/v2030/vrps/qol/ , look into the information provided to familiarize yourself with the program aspects; you will notice that many projects related to the program are already in process. Finally, answer the following questions, be aware that there is no one right answer as long as you defend your opinion with critical analyses and use the materials covered in the class. Note: reading the Quality of Life Program Delivery Plan document is recommended. The assignment questions: 1. Choose one area from the quality program and provide general information ( transportation , housing , educational opportunities , social environment , healthcare , entertainment , culture , art , sport …etc) ( 100 – 150 words - 2 point ) 2. Highlight at least three plans that are positioned by the government to enhance the quality in the area chosen? ( 100 – 150 words - 2 point ) 3. Based on your understanding, what could be the most effective organizational structure (Hierarchical, matrix, cross-functional, product or process based structure) that can be used in order to organize the process of implementation, and why? ( 100 – 150 words - 2 point ) You are free to use more than one structure suggestion, however defend your answer with thoughtful reasons. 4. Using the quality planning functions that you have studied earlier this semester, who are the interned target in your chosen area (be specific), what are their needs? ( 100 – 150 words - 2 point ) 5. How does this program fulfill these needs ( relate your answer to one of the quality approaches discussed in the class) ( 100 – 150 words - 2 point ) Answers 1. Answer2. Answer3. Answer4. Answer5. Answer- The Handbook for Quality Management 00_Pyzdek_FM_pi-xii.indd 1 11/16/12 6:09 PM About the Authors Thomas Pyzdek is a Six Sigma consultant with more than 40 years of experience in the field. His clients include Ford, McDonald’s, Intuit, Boeing, Seagate, Avon Products, and many other companies. Mr. Pyzdek is a recipient of the American Society for Quality Edwards Medal for outstanding contributions to the practice of quality management and the E.L. Grant Medal for outstanding leadership in the development and presentation of meritorious educational programs in quality. He has also received a Lean Six Sigma Leadership award from the American Quality Institute. Paul Keller is president and chief operating officer with Quality America, Inc. He has developed and implemented successful Six Sigma and quality improvement programs in service and manufacturing environments. He is the author of several books, including The Six Sigma Handbook, Third Edition (coauthor), and Six Sigma Demystified. 00_Pyzdek_FM_pi-xii.indd 2 11/16/12 6:09 PM The Handbook for Quality Management A Complete Guide to Operational Excellence Thomas Pyzdek Paul Keller Second Edition New York Chicago San Francisco Lisbon London Madrid Mexico City Milan New Delhi San Juan Seoul Singapore Sydney Toronto 00_Pyzdek_FM_pi-xii.indd 3 11/16/12 6:09 PM Cataloging-in-Publication Data is on file with the Library of Congress. McGraw-Hill books are available at special quantity discounts to use as premiums and sales promotions, or for use in corporate training programs. To contact a representative please e-mail us at b ulksales@mcgraw-hill.com. The Handbook for Quality Management Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Printed in the United States of America. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a data base or retrieval system, without the prior written permission of the publisher. 1 2 3 4 5 6 7 8 9 0   DOC/DOC   1 9 8 7 6 5 4 3 2 ISBN 978-0-07-179924-9 MHID 0-07-179924-9 The pages within this book were printed on acid-free paper. Sponsoring Editor Judy Bass Acquisitions Coordinator Bridget Thoreson Editorial Supervisor David E. Fogarty Project Manager Vastavikta Sharma, Cenveo Publisher Services Copy Editor Kate Bresnahan Proofreader Surendra Nath Shivam, Cenveo Publisher Services Indexer ARC Films Inc. Production Supervisor Pamela A. Pelton Composition Cenveo Publisher Services Art Director, Cover Jeff Weeks Information contained in this work has been obtained by The McGraw-Hill Companies, Inc. (“McGraw-Hill”) from sources believed to be reliable. However, neither McGraw-Hill nor its authors guarantee the accuracy or completeness of any information published herein, and neither McGraw-Hill nor its authors shall be responsible for any errors, omissions, or damages arising out of use of this information. This work is published with the understanding that McGraw-Hill and its authors are supplying information but are not attempting to render engineering or other professional services. If such services are required, the assistance of an appropriate professional should be sought. 00_Pyzdek_FM_pi-xii.indd 4 11/16/12 6:09 PM Contents     Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi Part I Business-Integrated Quality Systems 1 Organizational Structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General Theory of Organization Structure . . . . . . . . . . . . . . . . . The Functional/Hierarchical Structure . . . . . . . . . . . . . . . . . . . . . Matrix Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cross-Functional Organization Structure . . . . . . . . . . . . . . . . . . Process- or Product-Based (Horizontal) Organization Structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forms of Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 5 6 8 9 10 12 2 The Quality Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Juran Trilogy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Related Business Functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Regulatory Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Product Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Environmental Issues Relating to the Quality Function . . . . . . . 15 17 23 23 24 24 28 3 Approaches to Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deming’s Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Quality Control in Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . ISO 9000 Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Malcolm Baldrige National Quality Award . . . . . . . . . . . . . . . . . Deming Prize . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . European Quality Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Quality Management (TQM) . . . . . . . . . . . . . . . . . . . . . . . . Six Sigma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 34 36 41 45 48 49 51 52 4 Customer-Focused Organizations . . . . . . . . . . . . . . . . . . . . . . . . 57 Strategic Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Organizational Vision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Strategy Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 67 69 Part II Integrated Planning 5 v 00_Pyzdek_FM_pi-xii.indd 5 11/16/12 6:09 PM vi Contents 6 Strategic Styles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Possibilities-Based Strategic Decisions . . . . . . . . . . . . . . . . . . . . . Strategic Development Using Constraint Theory . . . . . . . . . . . . The Systems Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Basic Constraint Management Principles and Concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tools of Constraint Management . . . . . . . . . . . . . . . . . . . . Constraint Management Measurements . . . . . . . . . . . . . . 71 72 74 75 78 87 98 Understanding Customer Expectations and Needs . . . . . . . . . Customer Classifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Customer Identification and Segmentation . . . . . . . . . . . . . . . . . Collecting Data on Customer Expectations and Needs . . . . . . . Customer Service and Support . . . . . . . . . . . . . . . . . . . . . . Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Focus Groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 108 110 113 114 117 127 7 Benchmarking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 Getting Started with Benchmarking . . . . . . . . . . . . . . . . . . . . . . . 132 Why Benchmarking Efforts Fail . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 8 Organizational Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assessing Quality Culture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Organizational Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost of Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 139 140 142 Part III Process Control 9 00_Pyzdek_FM_pi-xii.indd 6 Quantifying Process Variation . . . . . . . . . . . . . . . . . . . . . . . . . . . Descriptive Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Enumerative and Analytic Studies . . . . . . . . . . . . . . . . . . . . . . . . Acceptance Sampling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statistical Control Charts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Variable Control Charts . . . . . . . . . . . . . . . . . . . . . . . . . . . . Control Charts for Attributes Data . . . . . . . . . . . . . . . . . . . Control Chart Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Control Chart Interpretation . . . . . . . . . . . . . . . . . . . . . . . . Using Specifications for Process Control . . . . . . . . . . . . . . . . . . . Process Capability Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . How to Perform a Process Capability Study . . . . . . . . . . Statistical Analysis of Process Capability Data . . . . . . . . Interpreting Capability Indexes . . . . . . . . . . . . . . . . . . . . . 153 155 155 158 160 165 176 189 190 196 200 200 202 205 11/16/12 6:09 PM Contents 10 Quality Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Types of Quality Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Product Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Process Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Systems Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Internal Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Two-Party Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Third-Party Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Desk Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Planning and Conducting the Audit . . . . . . . . . . . . . . . . . . . . . . . Auditor Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Internal Quality Surveys as Preparation . . . . . . . . . . . . . . Steps in Conducting an Audit . . . . . . . . . . . . . . . . . . . . . . Audit Reporting Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . Post-Audit Activities (Corrective Action, Verification) . . . . Product, Process, and Materials Control . . . . . . . . . . . . . . . . . . . Work Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Classification of Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . Identification of Materials and Status . . . . . . . . . . . . . . . . Purchased Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Customer-Supplied Materials . . . . . . . . . . . . . . . . . . . . . . . Work-in-Process (WIP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finished Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lot Traceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Materials Segregation Practices . . . . . . . . . . . . . . . . . . . . . Configuration Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deviations and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209 212 212 214 214 215 215 215 216 216 217 218 218 219 220 221 221 223 224 224 224 224 225 225 225 225 226 11 Supply Chain Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scope of Vendor Quality Control . . . . . . . . . . . . . . . . . . . . . . . . . . Evaluating Vendor Quality Capability . . . . . . . . . . . . . . . . . . . . . Vendor Quality Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Post-Award Surveillance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vendor Rating Schemes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Special Processes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Partnership and Alliances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227 230 230 233 234 235 236 237 vii Part IV Continuous Improvement 12 00_Pyzdek_FM_pi-xii.indd 7 Effective Change Management . . . . . . . . . . . . . . . . . . . . . . . . . . . 243 Roles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246 Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247 11/16/12 6:09 PM viii Contents Mechanisms Used by Change Agents . . . . . . . . . . . . . . . . . . . . . . Building Buy-in . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Project Deployment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selecting Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DMAIC/DMADV Methodology . . . . . . . . . . . . . . . . . . . . 248 248 254 254 262 Define Stage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Project Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Work Breakdown Structure . . . . . . . . . . . . . . . . . . . . . . . . . Pareto Diagrams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Project Charters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Top-Level Process Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Team Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Team Dynamics Management, Including Conflict Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stages in Group Development . . . . . . . . . . . . . . . . . . . . . . . Common Team Problems . . . . . . . . . . . . . . . . . . . . . . . . . . Productive Group Roles . . . . . . . . . . . . . . . . . . . . . . . . . . . Counterproductive Group Roles . . . . . . . . . . . . . . . . . . . . Management’s Role . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265 267 268 269 270 281 285 285 287 288 289 289 290 292 14 Measure Stage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Process Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Metric Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Establishing Process Baselines . . . . . . . . . . . . . . . . . . . . . . . . . . . . Measurement Systems Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . Levels of Measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293 295 296 297 298 298 301 15 Analyze Stage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Value Stream Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Analyze Sources of Process Variation . . . . . . . . . . . . . . . . . . . . . . Quality Function Deployment . . . . . . . . . . . . . . . . . . . . . . . Cause-and-Effect Diagrams . . . . . . . . . . . . . . . . . . . . . . . . Scatter Diagrams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Determine Process Drivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Correlation and Regression Analysis . . . . . . . . . . . . . . . . . Least-Squares Fit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interpretation of Computer Output for Regression Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305 307 314 315 318 319 324 324 326 13 00_Pyzdek_FM_pi-xii.indd 8 328 11/16/12 6:09 PM Contents ix Analysis of Residuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330 Designed Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331 16 Improve/Design Stage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Define New Operating/Design Conditions . . . . . . . . . . . . . . . . . Define and Mitigate Failure Modes . . . . . . . . . . . . . . . . . . . . . . . . Process Decision Program Chart . . . . . . . . . . . . . . . . . . . . Preventing Failures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Failure Mode and Effects Analysis . . . . . . . . . . . . . . . . . . . 335 337 340 340 340 344 17 Control / Verify Stage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Performance Evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recognition and Reward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Principles of Effective Reward Systems . . . . . . . . . . . . . . Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Job Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Developing a Structured OJT Program . . . . . . . . . . . . . . . Instructional Games, Simulations, and Role-Plays . . . . . . 349 352 353 355 356 357 358 359 Part V Management of Human Resources 18 Motivation Theories and Principles . . . . . . . . . . . . . . . . . . . . . . Maslow’s Hierarchy of Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . Herzberg’s Hygiene Theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Theories X, Y, and Z . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367 369 370 370 19 Management Styles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Judgmental Management Style . . . . . . . . . . . . . . . . . . . . . . . . . . . Data-Based Management Style . . . . . . . . . . . . . . . . . . . . . . . . . . . Combination Data-Based/Judgment Management Style . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Participatory Management Style . . . . . . . . . . . . . . . . . . . . . . . . . . Autocratic Management Style . . . . . . . . . . . . . . . . . . . . . . . . . . . . Management by Wandering Around . . . . . . . . . . . . . . . . . . . . . . Fourth Generation Management . . . . . . . . . . . . . . . . . . . . . . . . . . The Fifth Discipline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 373 375 375 Resource Requirements to Manage the Quality Function . . . Performance Evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Traditional Performance Appraisals . . . . . . . . . . . . . . . . . Criticisms of Traditional Employee Appraisals . . . . . . . . Alternatives to Traditional Appraisals . . . . . . . . . . . . . . . 381 385 385 386 388 20 00_Pyzdek_FM_pi-xii.indd 9 376 376 377 377 378 379 11/16/12 6:09 PM x Contents Professional Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Credentials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Professional Certification . . . . . . . . . . . . . . . . . . . . . . . . . . Professional Development Courses . . . . . . . . . . . . . . . . . . Achieving the Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Coaching . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Situations That Require Coaching to Improve Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forms of Coaching . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 393 393 393 394 395 395 396 397 A Control Chart Constants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399 B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 403 Control Chart Equations C Area under the Standard Normal Curve D Simulated Certification Exam Questions . . . . . . . . . . . . . . . . . . . 407 . . . . . . . . . . . . . . . . . . 413 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 455 Index 00_Pyzdek_FM_pi-xii.indd 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 465 11/16/12 6:09 PM Preface Thank you for your interest in McGraw Hill’s The Handbook for Quality Management. The original version of the text, first released in 1996 by Quality Publishing, was written exclusively by Tom Pyzdek. I had the pleasure of editing a revision released in 2000, which included Six Sigma and Lean method chapters (written by myself), as well as Bill Dettmer’s Constraint Management material, which is repeated in this edition. The early editions sold several thousand copies by the end of 2000, establishing the Handbook as an essential desktop reference for the quality professional. The earlier versions relied heavily on the American Society for Quality (ASQ) body of knowledge for quality managers, even to the extent that the chapter headings and sub-headings matched those in the body of knowledge. Although this may have helped those seeking to check off items they learned, it tended to disrupt the flow of the topics. A main objective of this edition was the reorganization of the material into more naturally flowing discussions of the concepts and methods essential to quality management and operational excellence. For those who want to use this as a reference for the ASQ CMQ/OE exam, the information is still in the book, with sample questions at the back, and answers available on the affiliated website: www.mhprofessional.com/HQM2 The essential body of knowledge for achieving operational excellence is heavily influenced by the works of Deming and Juran, most of which date from the period of 1950 through the mid 1980s. These authors spent their careers advocating a scientific approach to quality, displacing the widely held notion that quality assurance inspections prevalent in the post-war era were sufficient or even credible approaches to achieving quality. Over the last 40 years, the quality management discipline has undergone steady evolution from internally focused command-and-control to more proactive, customer-focused functions. The market certainly encouraged that, as economies shifted from dominance of product-based manufacturers xi 00_Pyzdek_FM_pi-xii.indd 11 11/22/12 9:43 AM xii Preface to more heavily depend on service-based solution providers. It seems reasonable that service economies will naturally tend toward customerfocus, since much of the service involves direct customer contact. Feedback can be bitterly honest, yet also quickly addressed (compared with poor manufacturing quality). Aspects of quality management are becoming integral to business operations; quality ratings and awards are a competition, and success is marketed as a sign of commitment to the customer; innovation is a constant refrain in business journals and even advertisements; customer surveys are endemic; data is rampant, so differentiating between real change and random variation becomes a core competency; and so on. The cost of poor quality is realized in real time as loss of market share or profitability. This latest edition expands on the historical notions of Juran’s quality trilogy to describe business transformation through innovative customer-driven strategy, meaningful process control using statistics, and management-sponsored, focused improvements in core products and services. Deming’s teachings on management responsibilities and systems are integrated throughout. The manager in today’s world must implement cost-reducing quality initiatives that increase market share in spite of competitive forces. This text seeks to demystify the science of quality management for effective use and benefit across the organization. We hope you enjoy it. Paul Keller 00_Pyzdek_FM_pi-xii.indd 12 11/22/12 9:43 AM PART Business-Integrated Quality Systems M I CHapter 1 Organizational Structures CHapter 2 The Quality Function CHapter 3 Approaches to Quality CHapter 4 Customer-Focused Organizations odern organizations trace their roots to the Industrial Revolution, which provided the impetus for movement from a tradition of craftsmen to that of mechanized industries. Rapid advances in mobile power sources, such as the steam engine, improved transportation, gas lighting, advances in metallurgical and chemical processing, and so on led to both supply of material, methods, and infrastructure and a demand for business innovation to meet the needs of a growing market. As businesses grew, smaller (often family-run) businesses were replaced by larger corporations, who could raise the capital necessary to grow rapidly. In industrialized countries, organizations changed completely, giving rise to the bureaucratic form of organiÂ�zation. This organizational form is characterized by the division of activities and responsibilities into departments managed by full-time management proÂ�fessionals who had no other source of livelihood other than the organization. 01_Pyzdek_Ch01_p001-014.indd 1 11/21/12 3:34 PM 01_Pyzdek_Ch01_p001-014.indd 2 26/10/12 3:09 PM CHAPTER 1 Organizational Structures 01_Pyzdek_Ch01_p001-014.indd 3 26/10/12 3:09 PM 01_Pyzdek_Ch01_p001-014.indd 4 26/10/12 3:09 PM O rganizations exist because they serve a useful purpose. The transaction-cost theory of a firm (Coase, 1937) postulates that there are costs associated with market transactions, and organizations prosper only when they provide a cost advantage. Examples of these costs include the cost of discovering market prices, negotiation and contracting costs, sales taxes and other taxes on exchanges between firms, cost of regulation of transactions between firms, and so on. Transaction-cost theory offers a framework for understanding limits on the size of a firm. As firms grow, it becomes more costly to organize additional transactions within the firm, called “decreasing returns to management.” When the cost of organizing an additional transaction equals the cost of carrying out the transaction in the open market, growth of the firm will cease. Of course, these costs are also affected by technology: facsimile machines (in their day), satellites, computers, and more recently the Internet each altered the cost of organization, impacting the optimal size of the firm accordingly. Such inventions simultaneously impact the cost of using external markets, so the relative impact of the technology on market costs and organization costs determines the overall impact on the organization. Clearly, the ability to efficiently carry out market transactions, with minimal bureaucratic overhead, impacts an organization’s usefulness to the market, and its prosperity and eventual life span. General Theory of Organization Structure Organizations consist of systems of relationships that direct and allocate resources; therefore the purpose of organization structure is to develop relationships that perform these functions well. There are several possible ways in which these relationships can be viewed. The most common is the reporting relationship view. Here the organization is viewed as an entity consisting of people who have the authority to direct other people, their “reports.” In this view the organization appears as a stratified triangle, with the positions higher in a given strata of the triangle having the authority to direct the lower positions. In modern organizations, the authority to set policy and plan strategic direction is vested in the highest level of the 5 01_Pyzdek_Ch01_p001-014.indd 5 26/10/12 3:09 PM 6 Business-Integrated Quality Systems Figure 1.1 The six basic parts of the organization (Mintzberg and Quinn, 1991). structure: the strategic apex. The middle line consists of management personnel who deploy the policy and plan to the operating core (at the bottom of the structure). Technological expertise and support are provided by groups of professionals not directly involved in operations. The entire organization is held together by a common set of beliefs and shared values known as the organization’s ideology. Figure 1.1 illustrates these ideas. The Functional/Hierarchical Structure The traditional organization that results from the above view of the organization is the functional/hierarchical structure. This is a command and control structure with ancient military origins. In this type of organization, work is divided according to function, for example, marketing, engineering, finance, manufacturing, etc. A stratum within the organization is given responsibility for a particular function. Work is delegated from top to bottom within the stratum to personnel who specialize in the function. An example of the traditional functional hierarchical organization chart is shown in Fig. 1.2. A key component of the hierarchal structure is its command and control elements, facilitated by the theories of scientific management developed by Frederick Taylor. Taylor believed that management could never effective­ly control the workplace unless it controlled the work itself, that is, the specific 01_Pyzdek_Ch01_p001-014.indd 6 26/10/12 3:09 PM Organizational Structures 7 Top boss Staff assistant Top boss of accounting Top boss of engineering Boss of division A engineering Division A engineer #1 Figure 1.2 Top boss of quality Boss of division B engineering Division A engineer #2 Functional/hierarchical organization chart. tasks performed by the workers to get the job done. Management could improve the efficiency of work, to the benefit of both management and workers, by applying the methods of science in (1) selecting the individuals best suited to a particular job and (2) identifying the optimal way in which the jobs could be performed. Henry Ford further advanced this de-skilling of the workforce through production mechanization. In spite of resis­tance from craftsmen and machinists, who understood the value of their knowledge and skill in terms of monetary rewards and job securi­ty, the reduction of work to a series of simple tasks done with relatively small investment in training is one of the major results of scientific management. The ramifications of these efforts includes better management oversight, reduced investment in worker training, and easier replacement of those who did unsatisfactory work (with employee incen­ tives to improve performance). Unfortunately, the de-skilled work is usually far more boring, leading to a variety of problems such as high levels of stress and employee turnover. The legacy of de-skilling is that the workforce is less able to change as new conditions arise. Whereas a machinist could work for any number of compa­nies in many industries, machine loaders had limited mobility outside their current employer, thus increasing worker demands for job security. In the modern era, lack of generalized employee skills can be a major impediment to a quick reaction to rapidly changing market conditions. When rapid change creates new tasks, the workers’ previous experience does not help them adapt to the new circumstance; they must be constantly “retrained.” Organizationally, the introduction of scientific management perpetuated the growth of the bureaucratic form, and increasingly led to larger and larger organizational support structures. On the technical side, organiza­tional units were formed to codify the detailed knowledge of necessary work practices, including manufacturing engineering, industrial 01_Pyzdek_Ch01_p001-014.indd 7 26/10/12 3:09 PM 8 Business-Integrated Quality Systems engineering, quality control, human resources, and cost accounting. This de-skilling of the workforce creates an increasingly large number of transactions to manage, which leads in turn to larger bureaucracies and decreasing returns to management, an issue described earlier by Coase. The traditional organization structure has come under pressure in recent years. One problem with the structure is that it tends to produce a “silo mentality” among those who work in a particular stratum: they tend to see the company from the perspective of an “accountant” or an “engineer” rather than from a companywide perspective. This produces a tendency to optimize their function without regard for the effect on the rest of the organization—a tendency that produces markedly suboptimal results when viewed from a holistic perspective. Cooperation is discouraged in such an organization. In these structures, employees tend to think of their superiors as their “customers.” The focus becomes pleasing one’s boss rather than pleasing the external customer. Finally, the top-down arrangement often results in resource allocation that does not optimally meet the needs of external customers, who are generally served by processes that cut across several different functions. Given these problems, one might wonder why such organizations still dominate the business scene. There are several reasons, chief among them the comfort level employees have with this model: this has been the dominant model for decades, so there is an organizational resistance to change. Furthermore, such organizations maximize the development and utilization of specialized skills. They produce a cost-effective division of labor within the subprocess (but not necessarily across the system). In many organizations, particularly larger ones, the functional/hierarchical structure provides economies of scale for specialized activities. Finally, these organizations provide clear career paths for specialists. A case in point is the quality function, where one can enter into the specialty out of high school and potentially advance to progressively higher positions throughout one’s career. Matrix Organizations In a matrix organization the functional hierarchy remains intact but a horizontal cross-functional team structure is superimposed on the functional hierarchy. The matrix form is depicted in Fig. 1.3. The matrix form was used extensively in the 1970s as a general method of organizing work. Most businesses concluded that organizing routine work in this way was impractical. Still, because of this experience, the matrix structure is well understood. Also, the matrix did prove to be useful as a method of conducting large, cross-functional projects. To an extent, the matrix form overcomes the “silo” mentality of the functional hierarchy by creating cross-functional teams. When used for projects, the matrix approach creates structures that are focused (on the project) and can exist temporarily. In fact, most large, 01_Pyzdek_Ch01_p001-014.indd 8 26/10/12 3:09 PM Organizational Structures A B C 9 D Project A B C Figure 1.3 Matrix organization structure. multifunctional quality improvement projects are organized using the matrix form. This approach to project management organization is discussed in greater detail in Chap. 15. Cross-Functional Organization Structure As discussed earlier, a major problem with the functional/hierarchical structure is the proliferation of focused, departmental perspectives. This invariably results in neglect of company-wide issues. Cross-functional structures provide a way of breaking down this mind-set. Figure 1.4 shows the basic layout of a cross-functional organization structure. Note that the appearance Function executive Area of concern Function A Function B Function C Function D Quality Cost Cycle time Figure 1.4 01_Pyzdek_Ch01_p001-014.indd 9 Cross-functional organization structure. 26/10/12 3:09 PM 10 Business-Integrated Quality Systems is similar to that of the matrix structure. However, there are a number of important differences between matrix and cross-functional structures: • Scope. Cross-functional organizations deal with company-wide issues, while matrix organizations focus on specific tasks, goals, or projects. • Duration. Matrix organizations are temporary, while cross-functional organiza-tions are often permanent. • Focus. Cross-functional organizations often deal with external groups such as customers, society at large, or regulators. Matrix organizations are typically focused on internal concerns. • Membership. Membership in cross-functional organizations typically consists of high-level functional executives. Membership in matrix organizations usually consists of personnel with technical skills needed to complete a specific task. Compared with traditional organizations, cross-functional organizations offer better coordination and integration of work, faster response times, simplified cost controls, greater use of creativity, and higher job satisfaction. It should be noted that cross-functional organizations are an addition to, rather than a replacement for, traditional organizations. Process- or Product-Based (Horizontal) Organization Structures Process-based and product-based “horizontal organizations” present an entirely different focus than traditional organizations. The basis of this organizational structure is the goal of the work being organized, that is, the product or service being created. This differs markedly from the traditional structure, which is based on reporting relationships. An example of a customer process–focused organization structure is shown in Fig. 1.5, which is a “patient-focused” labor and delivery process in a hospital. External suppliers Internal customers and suppliers External Customers Pastoral services Environmental services Nurse Billing Nurse Referral Physician Patient Family Mother and baby Pharmaceutical supplier Clergy Doula OB/GYN Lab services Transportation Support group 3rd-party payer Figure 1.5 01_Pyzdek_Ch01_p001-014.indd 10 Patient-focused care-organization structure. 26/10/12 3:09 PM Organizational Structures 11 The knowledgeable quality manager will immediately recognize the similarity of Fig. 1.5 to the cause-and-effect diagram. This is a useful analogy. The “effects” being sought must be clearly defined before the design of this type of organization can proceed. The “causes” are built into the organization such that the desired effects can be consistently and economically produced. Note that the design can accommodate multiple customers, suppliers, and internal subprocesses; in this example the mother and baby are the primary customers. The scope is neither internal nor external: it embraces the entire process. Also noteworthy is the complete absence of reporting relationships. The foundation of this type of organization is work flow, not authority. In effect, everyone “reports” to the customer. This blurring of lines of authority is a characteristic of this type of organization, which can be a source of discomfort for those accustomed to the clear chain of command inherent in traditional organizations. Clearly this involves a significant cultural change. Another cultural change is the obliteration of the professional reference group. In functional organizations, professionals (e.g., accountants, nurses, doctors, engineers) report to and work with others in the same profession and are often more loyal to their profession than to their employer. This is changed dramatically in horizontal organizations. The transition from a traditional management approach to a horizontal structure must deal explicitly with the cultural aspects of the change. Horizontal organizations maximize core competencies, rather than suboptimizing quasi-independent functions. For example, in the patientfocused-care example several support activities are involved in the delivery of care (lab services, transportation, etc.). In a traditional organization there would be a tendency for the laboratory manager to optimize the laboratory, the transportation manager to optimize transportation, etc. However, in the horizontal organization the optimization is focused on delivery of care. This may well result in a perceived “suboptimal” performance of support activities, if each are (inappropriately) viewed in isolation. Experience has shown that horizontal organizations have achieved dramatically improved efficiencies, compared to traditional hierarchal organizations. One reason is in the intelligent reintegration of work to correct the disintegrated work practices advocated by Taylor’s scientific management theories. This segregation of work was done partly in response to conditions that no longer exist: a better-educated workforce combined with modern technology makes it possible to design integrated processes that combine related tasks and bring the needed resources under local control. In addition to improved efficiencies, the new approach to work creates other welcome results, notably: improved employee morale, increased customer satisfaction, and greater supplier loyalty and cooperation. Table 1.1 summarizes the changing pattern of the marketplace. In some ways the changing business environment involves a return to the 01_Pyzdek_Ch01_p001-014.indd 11 26/10/12 3:09 PM 12 Business-Integrated Quality Systems Was Is National markets International markets National competition International competition Control the business environment Adapt to the environment rapidly Homogeneous product Customized product De-skilled jobs Complex jobs Product-specific capital Flexible systems Maintain status quo Continuous improvement Management by control Management by planning Table 1.1 The Changing Business Environment craftsman era of the past: more complex jobs with the resulting need for workers with a broader reper­toire of skills. Other tendencies are continuations of past trends: internation­al markets are the next logical step after moving from local markets to national markets. In other ways the new world of business is simply different: modern flexible systems diverge in fundamental ways from previous systems. It follows that yesterday’s organizations, which evolved in response to the realities of the past, might not be suited to the changing reality. In fact, there is strong evidence to suggest that organizations that do not adapt will simply disappear. Over 40 percent of the 1979 list of the Fortune 500 had disappeared by 1990 (Peters, 1990). The organizations that have managed to progress have not stood still. Forms of Organization In addition to describing organizations in terms of their structures, Mintzberg (1994) also describes them in terms of forms. Mintzberg proposes a framework of five basic forms of organization: 1. The Machine Organization. Classic bureaucracy, highly formalized, specialized, and centralized, and dependent largely on the standardization of work processes for coordination. Common in stable and mature industries with mostly rationalized, repetitive operating work (as in airlines, automobile companies, retail banks). 2. The Entrepreneurial Organization. Nonelaborated, flexible structure, closely and personally controlled by the chief executive, who coordinates by direct supervision. Common in start-up and turnaround situations as well as in small business. 3. The Professional Organization. Organized to carry out the expert work in relatively stable settings, hence emphasizing the standardization 01_Pyzdek_Ch01_p001-014.indd 12 26/10/12 3:09 PM Organizational Structures 13 of skills and the pigeonholing of services to be carried out by rather autonomous and influential specialists, with the administrators serving for support more than exercising control; common in hospitals, universities, and other skilled and craft services. 4. The Adhocracy Organization. Organized to carry out expert work in highly dynamic settings, where the experts must work cooperatively in project teams, coordinating the activities by mutual adjustment, in flexible, usually matrix forms of structure; found in “high technology” industries such as aerospace and in project work such as filmmaking, as well as in organizations that have to truncate their more machinelike mature operations in order to concentrate on product development. 5. The Diversified Organization. Any organization split into semi-autonomous divisions to serve a diversity of markets, with the “headquarters” relying on financial control systems to standardize the outputs of the divisions, which tend to take on the machine form. 01_Pyzdek_Ch01_p001-014.indd 13 26/10/12 3:09 PM 01_Pyzdek_Ch01_p001-014.indd 14 26/10/12 3:09 PM CHAPTER 2 The Quality Function 02_Pyzdek_Ch02_p015-030.indd 15 11/16/12 4:46 PM 02_Pyzdek_Ch02_p015-030.indd 16 11/16/12 4:46 PM A s discussed in Chap. 1, organizations are traditionally structured according to functional specializations, for instance, marketing, engineering, purchasing, manufacturing. Conceptually, each function performs an activity essential in delivering value to the customer. In the past, these activi­ties were performed sequentially. As shown in Fig. 2.1, Shewhart, Deming, and Juran all depict these activities as forming a circle or a spiral, where each cycle incorporates information and knowledge acquired during the previous cycle. Juran Trilogy Juran and Gryna (1988, p. 2.6) define the quality function as “the entire collection of activities through which we achieve fitness for use, no matter where these activities are performed.” Quality is thus influenced by, if not the responsibility of, many different departments. In most cases, the quality department serves a secondary, supporting role. While the quality department is a specialized function, quality activities are dispersed throughout the orga­nization. The term “quality function” applies to those activities, departmental and companywide, that collectively result in product or service quality. An analogy can be made with the finance department. Even though many spe­cialized finance and accounting functions are managed by the finance depart­ment, every employee in the organization is expected to practice responsible management of his or her budgets and expenditures. Juran and Gryna (1988) grouped quality activities into three categories, sometimes referred to as the Juran trilogy: plan­ning, control, and improvement. Quality planning is the activity of developing the products and processes required to meet customers’ needs. It involves a number of universal steps (Juran and DeFeo, 2010): • Define the customers. • Determine the customer needs. • Develop product and service features to meet customer needs. • Develop processes to deliver the product and service features. • Transfer the resulting plans to operational personnel. 17 02_Pyzdek_Ch02_p015-030.indd 17 11/16/12 4:46 PM 18 Business-Integrated Quality Systems Figure 2.1 (a) Representation of quality activities in the organization (Shewhart, 1939). (b) Deming’s wheel of quality control (1986). (c) Juran’s spiral of progress in quality (Juran and Gryna, 1988). 02_Pyzdek_Ch02_p015-030.indd 18 11/16/12 4:46 PM Retailing Wholesaling 02_Pyzdek_Ch02_p015-030.indd 19 in M a et rk p ns ec I ti ; on g Ma res rket ear ch t s te M an pl ufac an tu ni ri ng ng k bac M re ar se ke ar t ch d Fee de Prod ve lop uct me nt Pr o de du sig ct Sp n ec ific Pu at rc io ha n sin g pr Pro oc d es uc s tio co n; nt ro l Use Cu se stom rv ice er The Quality Function S p up 19 lie rs (c) Figure 2.1 (Continued) 11/16/12 4:46 PM 20 Business-Integrated Quality Systems Quality control is the process used by operational personnel to ensure that their processes meet the product and service requirements (defined during the planning stage). It is based on the feedback loop and con­sists of the following steps: • Evaluate actual operating performance. • Compare actual performance with goals. • Act on the difference. Quality improvement aims to attain levels of performance that are unprecedented—levels that are significantly better than any past level. The methodologies recommended for quality improvement efforts utilize Six Sigma project teams, as described in Part IV. Notably, whereas earlier version of Juran’s Quality Handbook did not specifically advocate crossfunctional project-based teams for quality improvement efforts, the most recent sixth edition (2010) clearly prescribes their use. The mission of the quality function is company-wide quality management. Quality management is the process of identifying and administering the activ­ities necessary to achieve the organization’s quality objectives. These activities will fall into one of the three categories in Juran’s trilogy. Since the quality function transcends any specialized quality department, extending to all of the activities throughout the company that affect quality, the primary role in managing the quality function is exercised by senior leadership. Only senior leadership can effectively manage the necessary cross-functional activities. As the importance of quality has increased, the quality func­tion has gained prominence within the organizational hierarchy. Figure 2.2 presents President VP marketing VP finance VP quality VP engineering VP production Reliability engineering QC engineering Quality assurance Inspection and test Supplier quality control Figure 2.2 Quality within a traditional organization chart. 02_Pyzdek_Ch02_p015-030.indd 20 11/16/12 4:46 PM The Quality Function 21 a prototypical modern organization chart for a hypothet­ical large manufacturing organization. In this traditional structure, the quality specialists have no more than a secondary responsibility for most of the important tasks that impact quality. Table 2.1 lists the major work elements normally per­formed by these specialized departments. Because the tradi­tional, functionally specialized hierarchy creates a “silo mentality,” each func­tional area tends to focus on its own function, often to the detriment of cross-functional concerns like quality. This is not a failing of the workforce, but a predictable result of the system in which these people work. The situation will not be corrected by exhortations to think or act differently. It can only be changed by modifying the system itself. Several alter­native organizational approaches to deal with the problems created by the traditional structure have already been discussed. The cross-functional organization is, as of this writing, the most widespread alternative structure. Quality “councils” or “steering committees” are crossfunctional teams that set quality policy and, to a great extent, determine the role of the quality specialists in achieving the policy goals. The steering committee makes decisions regarding the totality of company resources (including those assigned to other functional areas) to be devoted to quality planning, improvement, and control. Quality con­cerns must be balanced with other organizational concerns, such as market share, profitability, and development of new products and Reliability Engineering Establish reliability goals; Reliability apportionment; Stress analysis; Identification of critical parts; Failure Modes & Effects Analysis (FMEA); Reliability prediction; Design review; Supplier selection; Control of reliability during manufacturing; Reliability testing; Failure reporting and corrective action system Quality Engineering Process capability analysis; Quality planning; Establishing quality standards; Test equipment and gage design; Quality troubleshooting; Analysis of rejected or returned material; Special studies (measurement error, etc.) Quality Assurance Write quality procedures; Maintain quality manual; Perform quality audits; Quality information systems; Quality certification; Training; Quality cost systems Inspection & Test In-process inspection and test; Final product inspection and test; Receiving inspection; Maintenance of inspection records; Gauge calibration Vendor Quality Preaward vendor surveys; Vendor quality information systems; Vendor surveillance; Source inspection Table 2.1 Quality Work Elements 02_Pyzdek_Ch02_p015-030.indd 21 11/16/12 4:46 PM 22 Business-Integrated Quality Systems services. Customer concerns must be balanced with the concerns of investors and employees. The senior leadership, consisting of top management and the board of directors, must weigh all of these concerns and arrive at a resource allocation plan that meets the needs of all stakeholders in the organization. The unifying principle for all stakeholders is the organization’s purpose. There are two basic ways to become (or remain) competitive: achieve superior perceived quality by developing a set of product specifications and service standards that more closely meet customer needs than competitors; and achieve superi­or conformance quality by being more effective than your competitors in con­forming to the appropriate product specifications and service standards. These are not mutually exclusive; excellent companies do both simultaneously. Research findings indicate that achieving superior perceived quality (that is, as per­ceived by customers), provides three options to a business— all of which are favorable to its competitiveness (Buzzell and Gale, 1987): • You can charge a higher price for your superior quality and thus increase profitability. • You can charge a higher price and invest the premium in R&D, thus ensuring higher perceived quality and greater market share in the future. • You can charge the same price as your competitor for your superior product, building market share. Increased market share, in turn, means volume growth and rising capacity utilization (or capacity expansion), allowing you to lower costs (or increase profit). Research also suggests additional benefits to companies that provide superior perceived quality, including higher customer loyalty; more repeat purchases; and lower marketing costs. Achieving superior conformance quality provides two key benefits: • Lower cost of quality than competitors, which translates to lower over­all cost. • Since conformance quality is a factor in achieving perceived quality, it leads to the perceived quality benefits listed above. Customer “satisfaction” does not simply happen; it is an effect. Quality is one important cause of the customer satisfaction effect, along with price, convenience, service, and a host of other variables. Quality and customer satisfaction are not synonyms; the former causes the latter. Generally businesses do not seek customer satisfaction as an end in itself. The presumption is that increased customer satisfaction will lead to higher revenues and higher profits, at least in the long term. This presumption has been validated by numerous studies, including the Profit Impact of 02_Pyzdek_Ch02_p015-030.indd 22 11/16/12 4:46 PM The Quality Function 23 % Who will recommend 100 80 60 40 20 0 Figure 2.3 Excellent Good Fair Poor Customer satisfaction and sales. Market Strategy (PIMS) studies (Buzzell and Gale, 1987). Since 1972 the PIMS Program, working with a database of 450 companies and 3000 business units, has developed a set of principles for business strategy based on the actual experiences of businesses. The principles drawn from this database provide a foundation for situation-specific analysis that managers perform to arrive at good decisions. The PIMS research indicates that quality is the major driver behind customer satisfaction, which in turn impacts a wide variety of other measures of organizational success. Figure 2.3, based on actual customer data, illustrates one important relationship: the percentage of customers who recommend the purchase of the firm’s products or services to others. Based on data such as these, and the relationships between such data and other measures of business success, the PIMS authors concluded: “The Customer is KING!” To best serve customers, the successful quality program will apply specific principles, techniques, and tools to better understand and serve their firm’s royalty—the customer. Related Business Functions There are many related business functions within the organization that involve the quality mission in a significant capacity but which are not properly considered “quality functions.” Safety A safety problem arises when a product, through use or foreseeable misuse, poses a hazard to the user or others. Clearly, the optimal approach to address safety issues is through prevention. Product and process-design review activities should include safety as a primary focus. Safety is quite 02_Pyzdek_Ch02_p015-030.indd 23 11/16/12 4:46 PM 24 Business-Integrated Quality Systems simply a conformance requirement. The quality professional’s primary role is the creation of systems for the prevention and detection of safety prob­lems caused by nonconformance to established requirements, and development of systems for controlling the traceability of products that may have latent safety problems that might be discovered at a future date, or that may develop these problems as the result of unanticipated product usage. There are a myriad of government agencies that are primarily concerned with safety, including the Consumer Product Safety Commission (CPSC), which deals with the safety of consumer products; the Defense Nuclear Facilities Safety Board Office of Environment, Safety, and Health; the Center for Food Safety and Applied Nutrition; the Mine Safety and Health Administration; the Occupational Safety and Health Administration (OSHA); the Office of System Safety; and the Defense Nuclear Facilities Safety Board, among others. Regulatory Issues For many years the fastest growing “industry” in the United States has been federal regulation of business. The U.S. Small Business Administration estimated that compliance with federal regulations alone con­sumed $1.75 trillion dollars in 2008 (Crain and Crain, 2010), or approximately 13 percent of 2008 GDP. Each year over 150,000 pages of new regulations are issued by government agencies. The quality manager will almost certainly be faced with regulatory compliance issues in his or her job. In some industries, compliance may be the major component of the quality manager’s job. Product Liability The subject of quality and the law is also known as product liability. While the quality manager isn’t expected to be an expert in the subject, the quality activities bear directly on an organization’s product liability exposure and deserve the quality manager’s attention. To understand product liability, one must first grasp the vocabulary of the subject. Table 2.2 presents the basic terminology (Thorpe and Middendorf, pp. 20–21). There are three legal theories involved in product liability: breach of war­ranty, strict liability in tort, and negligence. Two branches of law deal with these areas, contract law and tort law. A contract is a binding agreement for whose breach the law provides a rem­edy. Key concepts of contract law relating to product liability are those of breach of warranty and privity of con­tract. Breach of warranty can occur from either an express warranty or an implied warranty. An express warranty is a part of the basis for a sale: the buyer agreed to the purchase on the reasonable assumption that the prod­uct would perform in the manner described by the seller. The seller’s 02_Pyzdek_Ch02_p015-030.indd 24 11/16/12 4:46 PM The Quality Function Assumption of risk Contributory negligence Deposition Discovery Duty of care Express warranty Foreseeability Great care Implied warranty Liability Negligence Obvious peril Prima facie Privity Proximate cause Reasonable care Res ipsa loquitur 25 The legal theory that a person who is aware of a danger and its extent and knowingly exposes himself to it assumes all risks and cannot recover damages, even though he is injured through no fault of his own. Negligence of the plaintiff that contributes to his injury and at common law ordinarily bars him from recovery from the defendant although the defendant may have been more negligent than the plaintiff. The testimony of a witness taken out of court before a person authorized to administer oaths. Procedures for ascertaining facts prior to the time of trial in order to eliminate the element of surprise in litigation. The legal duty of every person to exercise due care for the safety of others and to avoid injury to others whenever possible. A statement by a manufacturer or seller, either in writing or orally, that his product is suitable for a specific use and will perform in a specific way. The legal theory that a person may be held liable for actions that result in injury or damage only when he was able to foresee dangers and risks that could reasonably be anticipated. The high degree of care that a very prudent and cautious person would undertake for the safety of others. Airlines, railroads, and buses typically must exercise great care. An automatic warranty, implied by law, that a manufacturer’s or dealer’s product is suitable for either ordinary or specific purposes and is reason­ably safe for use. An obligation to rectify or recompense for any injury or damage for which the liable person has been held responsible or for failure of a product to meet a warranty. Failure to exercise a reasonable amount of care or to carry out a legal duty that results in injury or property damage to another. The legal theory that a manufacturer is not required to warn prospec­tive users of products whose use involves an obvious peril, especially those that are well-known to the general public and that generally cannot be designed out of the product. Such evidence as by itself would establish the claim or defense of the party if the evidence were believed. A direct contractual relationship between a seller and a buyer. If A manufactures a product that is sold to dealer B, who sells it to consumer C, privity exists between A and B and between B and C, but not between A and C. The act that is the natural and reasonably foreseeable cause of the harm or event that occurs and injures the plaintiff. The degree of care exercised by a prudent person in observance of his legal duties toward others. The permissible inference that the defendant was negligent in that “the thing speaks for itself” when the circumstances are such that ordinarily the plaintiff could not have been injured had the defendant not been at fault. Table 2.2 Fundamental Legal Terminology 02_Pyzdek_Ch02_p015-030.indd 25 11/16/12 4:46 PM 26 Business-Integrated Quality Systems Standard of reasonable prudence Strict liability in tort Subrogation Tort The legal theory that a person who owes a legal duty must exercise the same care that a reasonably prudent person would observe under similar circumstances. The legal theory that a manufacturer of a product is liable for injuries due to product defects, without the necessity of showing negligence of the manufacturer. The right of a party secondarily liable to stand in the place of the creditor after he has made payment to the creditor and to enforce the creditor’s right against the party primarily liable in order to obtain indemnity from him. A wrongful act or failure to exercise due care, from which a civil legal action may result. Table 2.2 Fundamental Legal Terminology (Continued) state­ment need not be written for the warranty to be an express warranty; his mere statement of fact is sufficient. An implied warranty is a warranty not stated by the seller, but implied by law. Certain warranties result from the simple fact that a sale has been made. One of the most important of the attributes guar­anteed by an implied warranty is that of fitness for normal use. The warranty is that the product is reasonably safe. Privity of contract means that a direct relationship exists between two par­ties, typically buyer and seller. At one time manufacturers were not held liable for products purchased from vendors or sold to a consumer through a chain of wholesalers, dealers, etc. Manufacturers were treated as third-party assignees and said to be not in privity with the end user. This concept began to deteriorate in 1905 when courts began to permit lawsuits against sellers of unwholesome food, whether or not they were negligent, and against original manufacturers, whether or not they were in privity with the consumers. The first recognition of strict liability for an express warranty without regard to privity was enunci­ated by a Washington court in 1932 in a case involving a Ford Motor Company express warranty that their windshields were “shatterproof.” When the windshield shattered and injured a consumer, the court allowed the suit against Ford, ruling that even without privity the manufacturer was respon­sible for the misrepresentation, even if the misrepresentation was done inno­cently. Under the rule of strict liability an innocent consumer who knows nothing about disclaimers and the requirement of giving notice to a manufacturer with whom he did not deal cannot be prevented from suing. The rule avoids the technical limits of privity, which can create a chain of lawsuits back to the party that originally put the defective product into the stream of commerce. The seller (whether a salesman or manufacturer) is liable even though he has been careful in handling the product and even if the consumer did not deal directly with him. 02_Pyzdek_Ch02_p015-030.indd 26 11/16/12 4:46 PM The Quality Function 27 The first case to apply this modern rule was Greenman vs. Yuba Power Products, Inc., in California in 1963. A party, Mr. Greenman, was injured when a work piece flew from a combination power tool purchased for him by his wife two years prior to the injury. He sued the manufacturer and produced witnesses to prove that the machine was designed with inadequate set screws. The manufacturer, who had advertised the power tool as having “rugged construction” and “positive locks that hold through rough or precision work” claimed that it should not have to pay money damages because the plaintiff had not given it notice of breach of warranty within a reasonable time as required. Furthermore, a long line of California cases had held that a plaintiff could not sue someone not in privity with him unless the defective product was food. The court replied that this was not a warranty case but a strict liability case. The decision stated that any “manufacturer is strictly liable … when an arti­cle he placed on the market, knowing that it is to be used without inspection for defects, proves to have a defect that causes injury to a human being.” The concept of strict liability was a turning point for both the consumer movement and quality control. The use of effective, modern quality control methods became a matter of paramount importance. The concept is also called strict liability in tort, which is virtually synonymous with the common usage of the term “product liability.” A tort is a wrongful act or failure to exer­cise due care resulting in an injury, from which civil legal action may result. Tort law seeks to provide compensation to people who suffer loss because of the dangerous or unreasonable actions of others. A related concept is that of negligence. Negligence occurs when one person fails to fulfill a duty owed to another or fails to act with due care. There are two elements necessary to establish negligence: a standard of care recognized by law, and a breach of the duty or requisite care. Also, the breach of duty must be the proximate cause of the harm or injury. The accepted standard of care is that of the “reasonable person.” The court must measure the action of the parties involved relative to the actions expected from an imaginary reasonable person. To muddy the waters further, the court must weigh the risk or danger of the situation against the concept of “reasonable risk.” Clearly, these concepts are far from cut and dried. The case cited above, and many other developments since, have resulted in a feature that is unique to product liability law: namely, the conduct of the manufacturer is irrelevant. The plaintiff in a product liability suit need not prove that the manufac­ turer failed to exercise due care; he need show only that the product was the proximate cause of harm, and that it was either defective or unreasonably dan­gerous. This is what is meant by “strict liability.” In a sense, it is 02_Pyzdek_Ch02_p015-030.indd 27 11/16/12 4:46 PM 28 Business-Integrated Quality Systems the product that is on trial and not the manufacturer. There are several areas in which engineering and management are vulnera­ble, including design; manufacturing and materials; packaging, installation, and application; and warnings and labels. Designs that create hidden dangers to the user, designs that fail to comply with accepted standards, designs that exclude necessary safety features or devices, or designs that don’t properly allow for possible unsafe misuse or abuse that is reasonably foreseeable to the designer are all suspect. Quality control includes design review as one of its major elements, and all designs should be carefully evaluated for these shortcomings. As always, the concept of reason­ableness applies in all its ambiguity. The application of quality control principles to manufacturing, materials, packaging, and shipping is probably the best protection possible against future litigation. Defect prevention is the primary objective of quality control and the defect that isn’t made will never result in loss or injury. Bear in mind, how­ever, a defect in quality control is usually defined as a non-conformance to requirements. There is no such definition in the law. Legal definitions of a defect are based on the concept of reasonableness and the need to consider the use of the product. Environmental Issues Relating to the Quality Function The primary connection between environmental issues and the quality function is the ISO 14000 standard, which covers six areas: 1. Environmental management systems 2. Environmental auditing 3. Environmental performance evaluation 4. Environmental labeling 5. Life-cycle assessment 6. Environmental aspects in product standards The 14000 series standard mirrors the ISO 9001 quality standard in requiring a policy statement, top-down management com­mitment, document control, training, corrective action, management review, and continual improvement. Plans call for integrating ISO 9000 and ISO 14000 into one management standard that will also include health and safety. It is possible that eventually a single audit will cover both ISO 9000 and ISO 14000. ISO 14001—the environmental management system (EMS) specifica­tion— is intended to be the only standard establishing requirements against which companies will be audited for certification. The standard does not set requirements for results, only for the continuous improvement of a 02_Pyzdek_Ch02_p015-030.indd 28 11/16/12 4:46 PM The Quality Function 29 company’s EMS. ISO 14001 is not a requirement; it is voluntary. ISO 14001 is a systems-based standard that gives companies a blueprint for man­ aging their impact on the environment. The requirements fall into five main areas: • Senior management shall articulate the company’s environmental policy. The policy will include commitments toward pollution preven­tion and continuous improvement of the EMS. The policy will be avail­able to the public. • Consistent with the environmental policy, you shall establish and main­tain procedures to identify significant environmental aspects and their associated impacts. Procedures should include legal and other require­ments. Objectives and targets will also be documented, including continual improvement and pollution prevention. • Each employee’s role and position must be clearly defined, and all employees must be aware of the impact of their work on the environ­ment. Employees shall be adequately trained. • The EMS should be set up to facilitate internal communication. To that end, all relevant documentation should be easily available and usable, in either print or electronic form. • Organizations must continually monitor and document their environ­mental effects and periodically review them to ensure continual improvement and the effectiveness of the EMS. Management is respon­sible for an internal review of the EMS on a regular basis. 02_Pyzdek_Ch02_p015-030.indd 29 11/16/12 4:46 PM 02_Pyzdek_Ch02_p015-030.indd 30 11/16/12 4:46 PM CHAPTER 3 Approaches to Quality 03_Pyzdek_Ch03_p031-056.indd 31 10/29/12 5:56 PM 03_Pyzdek_Ch03_p031-056.indd 32 10/29/12 5:56 PM T raditional quality programs for the most of the twentieth century were focused on the command and control aspects inherent to the functional hierarchy organizational structure. The efforts of Taylor to both standardize and simplify work at least made this possible, if not enforced its legitimacy. In the aftermath of WWII, American business had extended control backward to the sources of supply and forward to the distribution and merchandising. To the extent that organizations succeeded in this endeavor, they reduced uncertainty in their environments and gained control over critical elements of their business. Internal quality practices were largely associated with off-line inspection by trained quality inspectors, assigned to a Quality Control department. Operational personnel were responsible for their assigned functions, such as production; inspectors were responsible for ensuring conformance of the product to the customer requirement, usually just before the product was shipped to the customer. Although Shewhart had developed the statistical control chart in the 1920s, its use in industry was dwarfed by inspection sampling plans that better fit this organizational model. These sampling plans had become established as MIL-STD 105, a requirement of military suppliers, which had made them the de facto standard throughout the war years for all suppliers. Unlike that of most of the industrialized world, the American infrastructure was undamaged by the war. While the rest of the world rebuilt, shortages were endemic, and American suppliers ramped up production to fill the void, resulting in a period of prosperity and profitability that further enforced the perception of well-designed, or at least adequate, systems. In reality, quality levels were poor, as is often the case during shortages (Juran, 1995). By the late 1970s, however, market influences emerged to challenge the status quo, including (Juran, 1995): · The growth of consumerism · The growth of litigation over quality · The growth of government regulation of quality · The Japanese quality revolution 33 03_Pyzdek_Ch03_p031-056.indd 33 10/29/12 5:56 PM 34 Business-Integrated Quality Systems Deming’s Approach Deming is probably best known for his theory of management as embodied in his 14 points. According to Deming, “The 14 points all have one aim: to make it possible for people to work with joy.” The 14 points are: 1. Create constancy of purpose for the improvement of product and service, with the aim to become competitive, stay in business, and provide jobs. 2. Adopt the new philosophy of cooperation (win-win) in which everybody wins. Put it into practice and teach it to employees, customers, and suppliers. 3. Cease dependence on mass inspection to achieve quality. Improve the process and build 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 in the long run. 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, service, planning, or any activity. This will improve quality and productivity and thus constantly decrease costs. 6. Institute training for skills. 7. Adopt and institute leadership for the management of people, recognizing their different abilities, capabilities, and aspirations. The aim of leadership should be to help people, machines, and gadgets do a better job. Leadership of management is in need of overhaul, as well as leadership of production workers. 8. Eliminate fear and build trust so that everyone can work effectively. 9. Break down barriers between departments. Abolish competition and build a win-win system of cooperation within the organization. People in research, design, sales, and production must work as a team to foresee problems of production and use that might be encountered with the product or service. 10. Eliminate slogans, exhortations, and targets asking for zero defects or new levels of productivity. Such exhortations 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 workforce. 11. Eliminate numerical goals, numerical quotas, and management by objectives. Substitute leadership. 03_Pyzdek_Ch03_p031-056.indd 34 10/29/12 5:56 PM Approaches to Quality 35 12. Remove barriers that rob people of joy in their work. This will mean abolishing the annual rating or merit system that ranks people and creates competition and conflict. 13. Institute a vigorous program of education and self-improvement. 14. Put everybody in the company to work to accomplish the transformation. The transformation is everybody’s job. These principles clearly define responsibilities for management, many of which were contradicted by the traditional functional hierarchy structure, as well as its command and control tendencies. Deming also described a system of “profound knowledge.” Deming’s system of profound knowledge consists of four parts: appreciation for a system, knowledge about variation, theory of knowledge, and psychology. A system is a network of interdependent components that work together to accomplish the aim of the system. The system of profound knowledge is itself a system. The parts are interrelated and cannot be completely understood when separated from one another. Systems must be managed. The greater the interdependence of the various system components, the greater the need for management. In addition, systems should be globally optimized; global optimization cannot be achieved by optimizing each component independent of the rest of the system. Systems can be thought of as networks of intentional cause-and-effect relationships. However, most systems also produce unintended effects. Identifying the causes of the effects produced by systems requires understanding of variation—part 2 of Deming’s system of profound knowledge. Without knowledge of variation people are unable to learn from experience. There are two basic mistakes made when dealing with variation: (1) reacting to an outcome as if it were produced by a special cause, when it actually came from a common cause, and (2) reacting to an outcome as if it were produced by a common cause, when it actually came from a special cause. The terms special cause and common cause are operationally defined by the statistical control chart, discussed in detail in Chap. 9. Deming’s theory of profound knowledge is based on the premise that management is prediction. Deming, following the teachings of the philosopher C. I. Lewis (1929), believed that prediction is not possible without theory. Deming points out that knowledge is acquired as one makes a rational prediction based on theory, then revises the theory based on comparison of prediction with observation. Knowledge is reflected in the new theory. Without theory, there is nothing to revise, that is, there can be no new knowledge, no learning. The process of learning is operationalized by Deming’s Plan-Do-Study-Act cycle (a modification of Shewhart’s PlanDo-Check-Act cycle). It is important to note that information is not knowledge. Mere “facts” in and of themselves are not knowledge. Knowing 03_Pyzdek_Ch03_p031-056.indd 35 10/29/12 5:56 PM 36 Business-Integrated Quality Systems what the Dow Jones Industrial Average is right now, or what it has been for the last 100 years, is not enough to tell us what it will be tomorrow. Psychology is the science that deals with mental processes and behavior. In Deming’s system of profound knowledge, psychology is important because it provides a theoretical framework for understanding the differences between people, and provides guidance in the proper ways to motivate them. Total Quality Control In Japan Japan is well-known for replacing its old reputation for terrible quality with a new reputation for excellence. The system they employed to accomplish this impressive feat is a uniquely Japanese version of a system that originated in America known as total quality control (TQC). TQC is a system of specialized quality control activities initially developed by Feigenbaum (1951, 1983). The Japanese took Feigenbaum’s American version of quality control (which was very much a continuation of the scientific management approach) and made it their own. The Japanese rendition of TQC is described by Ishikawa (1985) as a “thought revolution in management,” drawing heavily on contributions of American quality experts, especially Walter A. Shewhart, W. Edwards Deming, and Joseph M. Juran. However, there are some elements of the Japanese system that are purely Japanese in character. The thought revolution involves a transformation in six categories (Ishikawa, 1985): 1. Quality first—not short-term profit first. Management that stresses “quality first” can gain customer confidence step-by-step, resulting in a gradual increase in company sales with longer-term improvement to profitability and management stability. A company following the principle of “profit first,” may obtain a quicker profit but will be unable to sustain competitiveness for longer periods of time. 2. Consumer orientation—not producer orientation. Ishikawa stressed thinking in terms of another party’s position: listen to their opinions and act in a way respectful to their views. 3. The next process is your customer—breaking down the barrier of sectionalism. Especially within highly structured (functionally based) organizations, this approach is needed to drive company-wide quality and overcome silo-based mentality (i.e., each department looking after its own best interests). The company as a whole must look at its processes for delivering customer value, rather than a department or section separately. 4. Using facts and data to make presentations—utilization of statistical methods. 03_Pyzdek_Ch03_p031-056.indd 36 11/21/12 3:53 PM Approaches to Quality 37 The importance of facts must be clearly recognized. Facts, in contrast to opinions, can be translated into data. If data are accurate, they can be analyzed using statistical methods and engineering or management models. This, in turn, forms the basis of decisions. Such decisions will, in the long run, prove to be better than decisions made without this process, that is, the decisions will produce results that more closely match management’s goals. 5. Respect for humanity as a management philosophy—full participatory management. When management decides to make companyÂ� wide quality its goal, it must standardize all processes and procedures and then boldly delegate authority to subordinates. The fundamental principle of successful management is to allow subÂ�ordinates to make full use of their ability. The term humanity implies autonomy and spontaneity. People are different from animals or machines. They have their own minds, and they are always thinking. Management based on humanity is a system of management that lets the unlimited potential of human beings blossom. 6. Cross-functional management. From the perspective of companywide goals, the main functions are quality assurance, cost control, quantity control, and personnel control. The company must establish cross-functional committees to address these section-spanning issues. The committee chair should be a senior managing director. Committee members are selected from among those who hold the rank of director or above. At the time, cross-functional management was a uniquely Japanese feature of quality management, requiring a fundamental modification of the bureaucratic (functional hierarchy) model of traditional organizations. It has long been known that this form of organization, sometimes called the “chimney stack model,” results in isolation of the various functions from one another. This in turn results in parochialism and other behavior that, while optimal for a given function, is detrimental to the system as a whole. Most business texts address this problem superficially at best. The Japanese developed a formal approach for dealing with it, which is often referred to as cross-functional management (GOAL/QPC, 1990). Another feature of the Japanese approach to management was the concentration on the “core business.” The core business is the essence of what the company does; for example, Toyota might identify their core as the production of personal transportation vehicles. The company strives to provide a sense of family and belonging for full-time core employees. Lifelong service to the employer is expected, and the employer demonstrates similar loyalty to the employee, for example by providing lifelong job security. 03_Pyzdek_Ch03_p031-056.indd 37 11/21/12 3:53 PM 38 Business-Integrated Quality Systems How is this possible? After all, the normal business cycle rises and falls periodically and a company that is adequately staffed for peak production is overstaffed when production downturns occur. The Japanese manage to provide security in good times and bad in a number of ways. One is by massive outsourcing of non-core business activities to suppliers. It is not unusual to find as much as 80 percent of the value of the finished product in purchased materials. Another is by making use of a large buffer of part-time employees. In some Japanese companies as many as 50 percent of their employees during peak production periods are part-time workers. Prevailing wisdom in America would suggest that this strategy would result in a great increase in uncertainty and an overall decline in quality. in Japan, however, suppliers are very tightly controlled using a system known as Keiretsu. Suppliers within the Keiretsu often have board members from the parent company, and from other members of the Keiretsu. Unlike American businesses, which tend to deal with their suppliers at arm’s length, parent companies play a very active role in the affairs of their suppliers. While in the USA a firm might regularly appraise the quality of the product delivered by a supplier, in Japan the parent would also carefully evaluate how the product was made. If appropriate, the parent would suggest better, more economical ways to produce the product. Parent companies provide larger, longer-term contracts than their American counterparts, and they often demand steady price decreases. The supplier might be expected to become “dedicated” to its parent, providing product only to the parent and not to competitors. Continuous improvement in quality, cost, and delivery is expected of all Japanese suppliers, just as it is expected from the employees. KAIZEN™ (a trademark of the KAIZEN Institute, Ltd.) is a philosophy of continuous improvement, a belief that all aspects of life should be constantly improved. In Japan, where the concept originated, KAIZEN applies to all aspects of life, not just the workplace. In America the term is usually applied to work processes. The KAIZEN approach focuses on ongoing incremental improvement that involves all stakeholders. Over time these small improvements produce changes every bit as dramatic as the “big project” approach. KAIZEN does not concern itself with changing fundamental systems, but seeks to optimize existing systems. All employees in an organization have responsibilities for two aspects of quality: process improvement and process control. Control involves taking action on deviations to maintain a given process state. In the absence of signals indicating that the process has gone astray, control is achieved by adhering to established standard operating procedures (SOPs). In contrast, improvement requires experimentally modifying the 03_Pyzdek_Ch03_p031-056.indd 38 10/29/12 5:56 PM Approaches to Quality Top management 39 Innovation Middle management Kaizen Supervisors Workers Maintenance Figure 3.1 Responsibility for KAIZEN and KAIZEN’s role in process improvement (Imai, 1986). process to produce better results through innovation and KAIZEN. When an improvement has been identified, the SOPs are changed to reflect the new way of doing things. Imai (1986) illustrates the job responsibilities as shown in Figure 3.1. The figure illustrates both the shared responsibility and the limited role of KAIZEN in excluding radical innovations (sometimes referred to as reengineering). More detailed responsibilities for KAIZEN are provided in Table 3.1. Another rather considerable contribution from post-war Japan is the set of lean practices documented by Taiichi Ohno of Toyota. The lean methods are sometimes referred to as the Toyota Production System (due to their origins), and include principles and methodologies for improving cycle times and quality through the elimination of waste (also known by its Japanese name of muda). Lean distinguishes between activities that create value, and those that don’t, with the objective to improve cycle times and efficiencies, reduce waste of resources, and increase value to the customer. Taiichi Ohno of Toyota defined the following five types of waste (Womack and Jones (1996) added the sixth): 1. Errors requiring rework. (Rework refers to any activity required to fix or repair the result of another process step. In service processes, management intervention to resolve a customer complaint may be considered rework.) 2. Work with no immediate customer, either internal or external, resulting in work in progress or finished goods inventory. 3. Unnecessary process steps. 4. Unnecessary movement of personnel or materials. 5. Waiting by employees as unfinished work in an upstream process is completed. 6. Design of product or processes that do not meet the customer’s needs. 03_Pyzdek_Ch03_p031-056.indd 39 10/29/12 5:56 PM 40 Business-Integrated Quality Systems Top management • Be determined to introduce KAIZEN as a corporate strategy • Provide support and direction for KAIZEN by allocating resources • Establish policy for KAIZEN and cross-functional goals • Realize KAIZEN goals through policy deployment and audits • Build systems, procedures, and structures conducive to KAIZEN Middle management and staff • Deploy and implement KAIZEN goals as directed by top management through policy deployment and cross-functional management • Use KAIZEN in functional capabilities • Establish, maintain, and upgrade standards • Make employees KAIZEN-conscious through intensive training programs • Help employees develop skills and tools for problem solving Supervisors • Use KAIZEN in functional roles • Formulate plans for KAIZEN and provide guidance to workers • Improve communication with workers and sustain high morale • Support small group activities (such as quality circles) and the individual suggestion system • Introduce discipline in the workshop • Provide KAIZEN suggestions Workers • Engage in KAIZEN through the suggestion system and small group activities • Practice discipline in the workshop • Engage in continuous self-development to become better problem solvers • Enhance skills and job performance expertise with crosseducation From Imai (1986). Table 3.1 Hierarchy of Kaizen Involvement Value is the opposite of waste, and may be identified by considering: 1. Is this something the customer is willing to pay for? 2. Does the step change form, fit, or function of the product? Stated differently, does it convert input to output? If the answer to both questions is “No,” then it’s likely the activity does not create value in the customer’s eyes, even if it is necessary to ensure quality in the current process. Inspection and review activities, such as monitoring of sales calls or management sign-offs on exceptions, are examples of a non–value added waste. They do nothing to change the product (or service), and are only necessary to address the poor quality 03_Pyzdek_Ch03_p031-056.indd 40 10/29/12 5:56 PM Approaches to Quality 41 associated with the underlying process. Unfortunately, if their removal would degrade the quality of the product or service, then they are Type I waste, sometimes called Business Value Added, that is necessary given the current state of the business processes. In many cases, it is beneficial to change the process to remove the waste. Lean thinking has been shown to reap dramatic benefits in organizations. Organizations are able to sustain production levels with half the manpower, improving quality and reducing cycle times from 50 to 90 percent (Womack and Jones, 1996). Several of the lean methods are fairly well known in and of themselves. Just in Time (JIT), for example, has been a buzzword within American manufacturing since the 1980s. Other well-known methods include Kanban (Japanese for cards) and 5S. Unfortunately, practitioners often find they are unable to experience significant advances in any of these areas individually if they do not embrace the complete principles of Lean. Furthermore, many of the methods must be undertaken in conjunction with, or after appreciating results from, rigorous quality improvement. It would perilous to implement JIT if the underlying processes were not in statistical control: without statistical control, the process is not stable or predictable, so cannot be balanced to achieve JIT performance. Although many of these techniques were initially applied to manufacturing applications, they are particularly well suited (and have broad usage) to address issues in transactional processes within service industries. Furthermore, they have origins and a strong track record in small job-shop type environments at Toyota and its suppliers, where production was often very low volume and far from mass production levels. ISO 9000 Series The best-known system of quality standards is the ISO 9000 series, published by ISO (the International Organization for Standardization). The standards were originally published in 1987 and subsequently updated in 1994, 2000, and 2008. The standard was initially based on the U.S. Department of Defense Mil-Q-9858, released in 1959. The use of ISO 9000 is extremely widespread, with over 1.1 million organizations certified to the standard (as of 2010); 86 percent of the registrations are in Europe and the Far Ea...
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