7.5 Special topic: total quality management

Total Quality Management (TQM) is the organization-wide management of quality that includes facilities, equipment, labor, suppliers, customers, policies, and procedures. TQM promotes the view that quality improvement never ends, quality provides a strategic advantage to the organization, and zero defects is the quality goal that will minimize total quality costs. While this special topic on TQM is not a comprehensive discussion of all aspects of TQM, several key concepts will be discussed.

Quality costs

An important basis for justifying TQM practice is understanding its impact on total quality costs. TQM is rooted in the belief that preventing defects is cheaper than dealing with the costs of quality failures. In other words, total quality costs are minimized when managers strive to reach zero defects in the organization. The four major types of quality costs are prevention, appraisal, internal failure, and external failure.

Prevention costs are the costs created from the effort to reduce poor quality. Examples are designing the products so that they will be durable, training employees so they do a good job, certifying suppliers to ensure that suppliers provide quality in products and services, conducting preventive maintenance on equipment, and documenting quality procedures and improvements. In a traditional organization that does not practice TQM, prevention costs typically comprise the smallest percentage of total quality costs.

A good example of good product design occurs in all Honda products. Honda produces a wide variety of items including automobiles, ATVs, engines, generators, motorcycles, outboard motors, snow blowers, lawn and garden equipment, and even more items. To say the least, Honda engines last a long time. For example, Honda Accords typically run for well over 200,000 miles.

Employee training is also a very important prevention cost. For instance, employees in a vegetable/fruit packaging warehouse need to know what a bad vegetable/fruit looks like, since customers will not want to find spoiled produce in the store. Lifeguards at a swimming pool must know proper procedures for keeping swimmers safe. In many circumstances in both manufacturing and service businesses, the training of employees can make an enormous difference in preventing defects.