DEMINGâ€™S PHILOSOPHY AND 14 POINTS FOR MANAGEMENT:The cost of quality

<< TOTAL QUALITY MANAGEMENT THEORIES EDWARD DEMINGâ€™S SYSTEM OF PROFOUND KNOWLEDGE

DEMING CYCLE AND QUALITY TRILOGY:Juranâ€™s Three Basic Steps to Progress >>

Total Quality Management MGT510

Lesson # 14

DEMING'S PHILOSOPHY AND 14 POINTS FOR MANAGEMENT

End Price Tag Decisions Purchasing decisions traditionally have been driven by cost through

competitive bidding, not by quality. Costs due to inferior materials and components increase

costs in later stages of production and can far exceed the "savings" realized through competitive

bidding. The purchasing department is a supplier to the production department and must

understand its new role. Suppliers themselves are part of the whole system.

Improve constantly Western management has typically thought of improvement in the

context of large, expensive innovations such as robotics and computer-integrated

manufacturing. The success of Japanese manufacturers, however, is due primarily to

continuous, small, incremental improvements in design and production. Improved design results

from understanding customer needs and from continual market surveys and other sources of

feedback. Improved production is achieved by reducing the causes of variation in order to

establish a stable, predictable production process. Statistical methods provide one means for

doing this. Improvement should go beyond production, encompassing transportation,

engineering, maintenance, sales, service, and administration all areas of the organization.

Institute Training Employees need the proper tools and knowledge to do a good job, and it is

management's responsibility to provide these. In addition to specific job skill, all employees

should be trained in statistical tools for quality problem solving and continuous improvement.

Training not only improves quality and productivity, but also enhances workers' morale by

showing them that the company is dedicated to helping them and is investing in their future.

Deming notes that in Japan, entry-level managers spend 4 to 12 years on the factory floor and in

other activities to learn the problems of production. At Honda f America in Maryville, Ohio, all

employees start out on the production floor regardless of their job classification.

Institute Leadership The job of management is leadership and guidance, not supervision and

work direction. Supervisors should be coaches, not policemen, and supervision should provide

the link between management and the workforce. Leadership can help to eliminate fear and

encourage teamwork.

Drive out Fear Fear in work manifests in many ways: fear of reprisal, fear of failure, fear of

the unknown, fear of change. Many workers fear punishment or reprisals for not meeting quotas

and for problems of the system that are beyond their control. Managers compete against each

other to protect their own jobs or to receive higher performance ratings. Fear encourages

short0term, selfish thinking, not long-term improvement for the benefit of all.

Optimize Team Efforts Barriers between individuals and departments lead to poor quality,

because "customers" do not receive what they need from their "suppliers." This is often the

result of internal competition for raises or performance ratings. Teamwork helps to break down

barriers between internal customers and suppliers. The focus should be on meeting customer

needs and improving processes. Teamwork is an important means of achieving a company's

goals.

10.

Eliminate Exhortations Motivation can be better achieved through trust and leadership than

slogans. Slogans calling for improved quality usually assume that poor quality results from a

lack of motivation. Workers cannot improve solely through motivational methods when the

system in which they work constrains their performance. On the contrary, they will become

frustrated and their performance will decrease further.

11.

Eliminate Quotas and MBO Numerical quotas reflect short-term perspectives and do not

encourage long-term improvement, particularly if rewards or performance appraisals are tied to

meeting quotas. Workers may shortcut quality to reach the goal. If the quota is met, they have

Total Quality Management MGT510

no incentive to continue production or to improve quality. Arbitrary management goals without

a method for achieving them have no meaning. Further, variation in the system makes year-to-

year or quarter-to-quarter comparisons meaningless. The typical American MBO system

focuses on results, not process, and encourages short-term behavior. Management must

understand the system and the variation within it and seek to improve it in the long term.

12.

Remove Barriers to Pride in Workmanship The Taylor system has promulgated the view of

workers as a "commodity." Factory workers are given monotonous tasks, provided with inferior

machines, tools, or materials, told to run defective items to meet sales pressures, and report to

supervisors who know nothing about the job.

Deming believed that one of the biggest barriers to pride in workmanship is performance

appraisal. Performance appraisals

Destroy teamwork by promoting competition among employees for limited resources;

Foster mediocrity since objectives typically are driven by numbers and what the boss wants;

Focus on short-term results and discourage risk taking; and

Are not focused on serving the customer.

Deming suggest that there are three categories of performance: the majority who work within

the system, those outside the system on the superior side, and those outside they system on the

inferior side. Statistical methods provide the means of making this classification. Superior

performers should be compensated specially; inferior performers need extra training or a

different job.

13.

Institute Education "Training" in number 6 refers to job skills; education refers to self-

development. Firms have a responsibility to develop the value and self-worth of the individual.

Investing in people is a powerful motivation method.

Take Action The TQM philosophy is a major cultural change and many firms find it difficult.

Top management must institute the process and include everyone in it.

T Continuous improvement is an ongoing effort to improve products, services or processes. These

efforts can seek "incremental" improvement over time or "breakthrough" improvement all at once.

Among the most widely used tools for continuous improvement is a four-step quality model--the plan-

do-check-act (PDCA) cycle, also known as Deming Cycle or Shewhart Cycle:

Plan: Identify an opportunity and plan for change.

Do: Implement the change on a small scale.

Check: Use data to analyze the results of the change and determine whether it made a

difference.

Act: If the change was successful, implement it on a wider scale and continuously assess your

results. If the change did not work, begin the cycle again.

Other widely used methods of continuous improvement -- such as Six Sigma, Lean, and Total Quality

Management -- emphasize employee involvement and teamwork; measuring and systematizing

processes; and reducing variation, defects and cycle times.

Continuous or Continual?

The terms continuous improvement and continual improvement are frequently used interchangeably. But

some quality practitioners make the following distinction:

Total Quality Management MGT510

Continual improvement: a broader term preferred by W. Edwards Deming to refer to general

processes of improvement and encompassing "discontinuous" improvements--that is, many

different approaches, covering different areas.

Continuous improvement: a subset of continual improvement, with a more specific focus on

linear, incremental improvement within an existing process. Some practitioners also associate

continuous improvement more closely with techniques of statistical process control.

The cost of quality

It's a term that's widely used and widely misunderstood.

The "cost of quality" isn't the price of creating a quality product or service. It's the cost of NOT

creating a quality product or service.

Every time work is redone, the cost of quality increases. Obvious examples include:

The reworking of a manufactured item.

The retesting of an assembly.

The rebuilding of a tool.

The correction of a bank statement.

The reworking of a service, such as the reprocessing of a loan operation or the replacement of a

food order in a restaurant.

In short, any cost that would not have been expended if quality were perfect contributes to the cost of

quality.

Total Quality Costs

As the figure below shows, quality costs are the total of the cost incurred by:

Investing in the prevention of nonconformance to requirements.

Appraising a product or service for conformance to requirements.

Failing to meet requirements.

Total Quality Management MGT510

Quality Costs--general description

Failure Costs

Prevention Costs

The costs resulting from products or services not

The costs of all activities specifically designed

conforming to requirements or customer/user needs.

to prevent poor quality in products or services.

Failure costs are divided into internal and external

Examples are the costs of:

failure categories.

New product review

Internal Failure Costs

Quality planning

Failure costs occurring prior to delivery or shipment

of the product, or the furnishing of a service, to the

Supplier capability surveys

customer.

Process capability evaluations

Examples are the costs of:

Quality improvement team meetings

Scrap

Quality improvement projects

Rework

Quality education and training

Re-inspection

Appraisal Costs

Re-testing

The costs associated with measuring, evaluating

Material review

or auditing products or services to assure

conformance to quality standards and

Downgrading

performance requirements.

External Failure Costs

These include the costs of:

Failure costs occurring after delivery or shipment of

Incoming and source inspection/test of

the product -- and during or after furnishing of a

purchased material

service -- to the customer.

In-process and final inspection/test

Examples are the costs of:

Product, process or service audits

Processing customer complaints

Calibration of measuring and test

Customer returns

equipment

Warranty claims

Associated supplies and materials

Product recalls

Total Quality Costs:

The sum of the above costs. This represents the difference between the actual cost of a product or

service and what the reduced cost would be if there were no possibility of substandard service, failure of

products or defects in their manufacture.

Table of Contents: