7.5 Special topic: total quality management  (Page 3/3)

Internal failure costs are a third category of quality costs. This cost occurs when quality defects are discovered before they reach the customer. Examples of internal failure costs include scrapping a product, reworking the product, and lost productivity due to machine breakdowns or labor errors. Internal failure costs are typically more expensive than both prevention and appraisal costs because a great deal of material and labor often has been invested prior to the discovery of the defect. If a book publisher prints 10,000 books, then discovers that one of the chapters is missing from every copy, the cost of reworking or scrapping the books represents a major loss to the company. It would have been much cheaper to have procedures in place to prevent such a mistake from happening in the first place.

In the case of internal failure cost due to machine failures, FedEx, and other courier services cannot keep up with demand when a conveyor belt breaks down in the package distribution center. Major delays and costs occur when such incidents occur. Other examples include a road construction company having a road grader break down, a tool and die shop having a CNC machine break down, and a farmer having a combine break down during harvest time.

External failure costs are the fourth major cost of quality. External failure costs when the defect is discovered after it has reached the customer. This is the most expensive category of quality costs. Examples include product returns, repairs, warranty claims, lost reputation, and lost business. One spectacular example of external failure cost was when the Hubbell telescope was launched into space with mirrors that were ground improperly. When the telescope was turned on, instead of a magnificent view of stars, planets, and galaxies, the scientists could see only blurred images. The price of correcting the problem was over USD 1 billion.

External failure costs also occur when the wrong meal is delivered to a restaurant customer, when a computer breaks down shortly after it was purchased, when the wrong kidney is removed from a patient, and when a poorly designed automobile causes the death of drivers and passengers. Because of the enormous costs of internal and external failures, all companies should strive for zero defects. Successful TQM practice dictates that pursuing zero defects will result in the minimization of total quality costs by spending more on prevention and appraisal activities in order to reduce the much higher costs of internal and external failure.

Tqm’s seven basic elements

Successful practice of Total Quality Management involves both technical and people aspects that cover the entire organization and extend to relationships with suppliers and customers. Seven basic elements capture the essence of the TQM philosophy: customer focus, continuous improvement, employee empowerment, quality tools, product design, process management, and supplier quality.

• Customer focus : Decisions of how to organize resources to best serve customers starts with a clear understanding of customer needs and the measurement of customer satisfaction. For example, the Red Cross surveys its blood donors to determine how it can make the blood donation experience more pleasant and convenient. It collects information on the place, date and time donors came in, and asks donors questions of whether the donation time was convenient, whether they were treated with respect and gratitude, how long they had to wait to donate, and whether parking was adequate. By understanding donors’ needs and experiences, Red Cross managers can determine strengths and weaknesses of the donation service process and make adjustments if necessary.
• Continuous improvement : An organizational culture that promotes continuous learning and problem solving is essential in the pursuit of zero defects. The Toyota Production System (TPS) is a universal continuous improvement system that has been effectively applied to many different types of organizations, including the health care industry. Essential elements of the TPS culture include studying process flow, collecting data, driving out wasteful non-value-added activities, and making everyone responsible for quality improvement. In the case of health care, the TPS approach enabled one hospital to analyze the causes of patient infections from catheters and pneumonia in patients on ventilators. With simple changes in procedures that prevented patients from getting these secondary illnesses, the hospital was able to save USD 40,000 per patient in these cases.
• Employee involvement : Employees in a TQM environment have very different roles and responsibilities than in a traditional organization. They are given responsibility, training, and authority to measure and control the quality of the work they produce, they work together in teams to address quality issues, they are cross-trained to be able to perform multiple tasks and have a greater understanding of the total production process, and they have a more intimate understanding of the operation and maintenance of their equipment. Employees are essential to the building of a continuous improvement organization.
• Quality tools : Discussion of the details of quality tools extends beyond the scope of this chapter, but there are seven basic quality tools that are used by front-line workers and managers in monitoring quality performance and gathering data for quality improvement activities. These tools include: cause-and-effect (fishbone) diagrams, flowcharts, checklists, control charts, scatter diagrams, Pareto analysis, and histograms. The beauty of these tools is that they are easy to understand and apply in on-going quality efforts.
• Product design : Product design is a key activity to avoid costly internal and external failure costs. For example, when a dental office designs the service process, it might have patients fill out a form that covers important information on general health issues, allergies, and medications. This helps to avoid future complications and problems. Staff, hygienists, and dentists are highly trained to follow proper procedures, the facility is both functional and pleasant, and the equipment and tools are state of the art to ensure that the patient’s desired outcome is achieved. In a manufacturing setting, products should be designed to maximize product functionality, reliability, and manufacturability.
• Process management : “Quality at the Source” is an important concept in TQM. It means that managers and employees should be focused on the detailed activities in a process where good or bad quality is created. For example, in a Toyota plant in the United States in Georgetown, Kentucky, one of the work stations was responsible for installing seat belts and visors in every vehicle that came along the assembly line. There were 12 possible combinations of visors and seat belts that would go into any particular vehicle and the worker had to select the right combination and install the items in the vehicle in 55 seconds. Even the best workers made several errors during a shift on this activity. After studying the process, the workers came up with an idea to put all the items for a particular vehicle model in a blue plastic tote. With this change, the worker only had to make one decision per vehicle. Almost all the errors from the previous system were eliminated with this simple solution.
• Supplier quality : The focus on quality at the source extends to suppliers’ processes as well, since the quality of a finished product is only as good as the quality of its individual parts and components, regardless of whether they come from internal or external sources. Sharing your quality and engineering expertise with your suppliers, having a formal supplier certification program, and including your suppliers in the product design stage are important measures to take to ensure that quality at the source extends to the supplier network.

Quality awards and standards

There are several quality awards and standards that are available for organizations to access. The large majority of organizations that use these programs use them as tools to help improve their quality processes and move toward implementing and successfully practicing TQM. The Malcolm Baldrige Award is a United States quality award that covers an extensive list of criteria that are evaluated by independent judges if an organization chooses to compete for the award. In many cases, organizations use the Baldrige criteria as a guide for their internal quality efforts rather than compete directly for the award. The criteria can be accessed from the Internet at: (External Link) .

The International Organization for Standardization (ISO) sponsors a certification process for organizations that seek to learn and adopt superior methods for quality practice (ISO 9000) and environmentally responsible products and methods of production (ISO 14000). These certifications are increasingly used by organizations of all sizes to compete more effectively in a global marketplace due to the wide acceptance of ISO certification as a criterion for supplier selection. ISO 9000 and ISO 14000 are described on the ISO web page at: (External Link) .

“The ISO 9000 family addresses "quality management". This means what the organization does to fulfill:

the customer's quality requirements, and

applicable regulatory requirements, while aiming to

enhance customer satisfaction, and

achieve continual improvement of its performance in pursuit of these objectives.

The ISO 14000 family addresses "environmental management". This means what the organization does to:

minimize harmful effects on the environment caused by its activities, and to

achieve continual improvement of its environmental performance.”

Another popular quality award is the Deming Prize, which is a Japanese quality award for which organizations from any country can apply. The Deming Prize was named after W. Edwards Deming, an American statistician, author, and consultant who helped improve United States production capabilities during World War II, but is best known for his work in post-war Japan. He is widely credited with assisting the Japanese in rebuilding their nation’s production infrastructure in the areas of product design, product quality, and testing through the application of statistical methods. Florida Power and Electric was the first American company to win the Deming Prize, due to its meticulous use of formal approaches to quality improvement, data-based decision making, quality improvement teams, and the careful documentation of processes and procedures. More information on the Deming Prize can be found at:

(External Link)