Unit I : QUALITY MANAGEMENT

Poor quality is a source of irritation and frustration leading to product recalls and lost
customers…Toyota, BP

Progress of nations are dependent on the quality of goods and services they produce. Indian BPOs…

“We’ve made dependence on the quality of our technology a part of our life”- Joseph Juran ,
Fortune 1999

DEFINING QUALITY

 No agreed definition. Not like Productivity; where Productivity=Output /Input

 People view quality subjectively.

 86 firms in US when asked defined quality as:

i. Perfection

ii. Consistency

iii. Eliminating waste

iv. Speed of delivery

v. Compliance with policies and procedures

vi. Providing a good, usable product

vii. Doing it right the first time

viii. Delighting or pleasing customers

ix. Total customer service & satisfaction

1. Transcedent (Judgemental) Perspective

 synonymous with superiority or excellence

 Quality is both absolute and universally recognizable, a mark of uncompromising standards

and high achievement.

 You just know it when you see it.

 Rolex watches, Mercedes

 Problem/Drawback: Excellence is subjective. Standards of excellence may vary

considerably among individuals. Railways

2. Product Perspective

 Quality is related to the quantity of some product attribute, such as the thread count of a
shirt or bed sheet, or the number of different features in an automobile or a cellphone.

 More features higher quality.

 Subjective – individual customers may want different number of features.

 Good marketing research is needed to understand what features customers want in a

product.
3. User Perspective

 Fitness for intended use

 Nissan/Datsun in US; cars for Indian market have higher ground clearance.

4. Value Perspective

 Value = Benefits / Price

 Consumers compare the quality of benefits with price and with competitive offerings.

 A quality product is one that provides similar benefits as competing products at a lower
price, or one that offers greater benefits at a comparable price.

5. Manufacturing Perspective

 Consumers and organizations want consistency in goods and services.

 Conformance to specifications

 McDonalds, Ritz-Carlton Hot

6. Customer Perspective

 Consumer and customer

 Meeting or exceeding customer expectations.

 Meeting the expectations of consumers is the ultimate goal of any business.

 Job of any employee is to satisfy the needs of their internal customers, or the entire system
can fail.

Integrating quality perspectives

 Customers generally view quality from either the transcendent or the product perspective.

 User perspective of quality is meaningful to people who work in marketing.

 Value perspective is important in product design.

 For production workers, quality is defined by manufacturing perspective.

 Customer perspective provides the basis for coordinating the entire value chain.

HISTORY OF QUALITY MANAGEMENT

 Evidence of measurement and inspection have been found in Egyptian paintings from around
1450 BC.

 Modern quality assurance methods actually began millennia ago in China during the Zhou
dynasty.

 Specific governmental departments (Production, Inventory, Distribution etc.) were created

and helped China establish central control over its production processes.

 Middle Ages (5th to 15th century): the skilled craftsman served both as manufacturer and
inspector.

 Middle of 18th century: Use of interchangeable parts (Eli Whitney) necessitated careful
control of quality.
  Early 1900s: Taylor separated planning and execution. Inspection gained importance and
became the primary means of quality control.

 Around same time Henry Ford developed many of the fundamentals of what we now call
“total quality practices”.

 1920s: Employees at the Western Electric developed new theories and methods of inspection
for improving and maintaining quality. Early pioneers of quality-Walter Shewhart, Harold
Dodge, George Edwards, Joseph Juran and W. Edwards Deming were members of this group.

 These pioneers coined the term quality assurance – which refers to any planned and
systematic activity directed toward providing consumers with products (goods and services)
of appropriate quality, along with the confidence that products meet consumers’ requirements.
Thus, quality became a technical discipline.

 Statistical Quality Control (SQC) was developed and widely used in World War II.

 1944: The discipline’s first quality journal, Industrial Quality Control was published.

 1946: American Society for Quality was founded to develop, promote, and apply quality
concepts.

 Post World War II: Japan rebuilds itself and is helped by Deming. Japanese integrated
quality throughout their organizations and developed a culture of continuous improvement.
By 1970s, Japanese products because of their higher quality levels had significantly
penetrated Western markets.

 1980s: Competition increased and businesses began to recognize that quality was vital to
their survival. Japan overtook America in quality. Various quality awards were established
including the prestigious Malcolm Balridge in 1987.

 1991: Rajiv Gandhi National Quality Award was established in India.

 Mid 1990s: American businesses regain the lost ground. Many books on quality were
written. Consulting and training in quality became widespread.

TOTAL QUALITY MANAGEMENT

 As organizations came to recognize the broad scope of quality, the concept of total quality
management (TQM), or simply total quality (TQ) emerged.

 In 1992, a definition of TQ was endorsed by the chairs and CEOs of nine major U.S.
corporations in cooperation with deans of business and engineering departments of major
universities, and recognized consultants.

 Total Quality (TQ) is a people-focused management system that aims at continual increase
in customer satisfaction at continually lower real cost. TQ is a total system approach (not a
separate area or program) and an integral part of high-level strategy; it works horizontally
across functions and departments, involves all employees, top to bottom, and extends
backward and forward to include the supply chain and the customer chain. TQ stresses
learning and adaptation to continual change as keys to organizational success.

 The foundation of total quality is philosophical: the scientific method. TQ includes systems,
methods and tools. The systems permit change; the philosophy stays the same. TQ is
anchored in values that stress the dignity of the individual and the power of community
action.
QUALITY IN MANUFACTURING

 Marketing: Product features that consumers want and knowing the prices that consumers are
willing to pay for them.

 Sales: Salespeople can help to obtain feedback (because they directly come in contact with
consumers) on product performance from customers and convey this information to product
designers and engineers for further improvements.

 Product Design and Engineering: Over-engineered and underengineered products will fail.

 Purchasing and Receiving: Selecting quality-conscious suppliers, supplier development etc.

Delivered items are of the quality as mentioned on PO.

 Production Planning and Scheduling: The correct materials, tools, and equipment must be
available at the proper time and in the proper places in order to maintain a smooth flow of
production.

 Manufacturing and Assembly: Ensure that the product is made correctly. Manufacturing and
design are closely linked.

 Tool Engineering: The tool engineering function is responsible for designing and
maintaining the tools used in manufacturing and inspection.

 Industrial Engineering and Process Design: Work with product design engineers to develop
realistic specifications. Design facilities.

 Finished goods inspection and Testing: Inspection should be unnecessary except for
auditing purposes and functional testing. Inspection should be used as a means of gathering
information that can be used to improve quality.

 Packaging, Shipping and Warehousing: These are the functions that protect quality after
goods are produced.

 Installation and Service: Users must understand a product and have adequate instructions for
proper installation and service. For any problems, customer satisfaction depends on good
after-the-sale service.

QUALITY IN SERVICE ORGANIZATIONS (CHALLENGES)

 Difficult to build a culture of quality because of high turnover of employees.

 High degree of customization; doctors, lawyers have to treat each customer differently.

 Manufacturing quality can be assessed against firm design specifications (eg: depth of cut
should be 0.125 inch), but service quality can only be assessed against customers’
subjective expectations.

 Manufactured goods can be recalled or replaced by the manufacturer, but poor service can
only be followed by apologies and reparations.

 The quality of human interaction is a vital factor for services that involve human contact.
Hence, the behaviour and morale of service employees is critical in delivering a quality
service experience.

 Many service organizations (banks, ecommerce etc.) must handle large numbers of
customer transactions. Such large volumes increase the opportunity for error.
COMPONENTS OF SERVICE QUALITY

 The two most important drivers of service quality are people and technology.

 Many organizations rely on call centres as their primary means of customer contact.

 Customers evaluate a service primarily by the quality of the human contact.

 In many companies, unfortunately, the front-line workers-salesclerks, receptionists, delivery

personnel, and so on, who have the most contact with customers-receive the lowest pay,
minimal training, little decision –making authority, and little responsibility.

 Many service industries exploit information technology to achieve high customer service.

 FedEx’s handheld “SuperTracker” scans packages’ bar codes every time packages change
hands between pickup and delivery. The RitzCarlton Hotel Company exploits information
technology to remember each of its 800,000+ customers.

 The largest impact of information technology for service has been in e-commerce.

QUALITY IN BUSINESS SUPPORT FUNCTIONS

 In addition to manufacturing and service activities, other business support activities are
necessary for achieving quality.

 Finance and Accounting

 Legal Services

 Quality Assurance – assist managers in performing statistical tests, data analyses.

 A customer-driven quality focus must involve every function in the organization, including
manufacturing, service, and business support functions. QUALITY IS INDEED
EVERYONE’S RESPONSIBILITY.

DR. W EDWARDS DEMING (1900 – 1993)

 Most influence on quality management.

 Ph.D. in Physics and was trained as a statistician.

 Deming worked for Western Electric during its pioneering era of statistical quality control
in the 1920s and 1930s.

 Deming recognized the importance of viewing management process statistically.

 Deming taught quality control courses during World War II as part of the U.S. national
defense effort.

 Deming’s efforts to convey the message of quality to upper-level managers in the United
States were ignored.

 After World War II, Deming was invited to Japan to help the country take a census.

 Deming preached the importance of top management leadership, customer/supplier

partnerships, and continuous improvement in product development and manufacturing
processes.

 Deming’s influence on Japanese industry was so great that the Union of Japanese Scientists
and Engineers established the Deming Application Prize in 1951 to recognize companies
that show a high level of achievement in quality practices.
  Deming was virtually unknown in the US until 1980, when NBC telecast a program entitled
“If Japan Can…Why Can’t We?”

 Ford, GM and P&G invited him to work with them to improve their quality.

 Deming never defined or described quality precisely.

 “A product or a service possesses quality if it helps somebody and enjoys a good and
sustainable market.” – Deming in his last book

 In Deming’s view, variation is the chief culprit of poor quality.

 Example of variation in manufacturing: Variations from specifications for part dimensions

lead to inconsistent performance and premature wear and failure.

 Example of variation in service: Inconsistencies in human behaviour frustrate customers and

damage company’s reputation.

 To reduce variation, Deming advocated a never-ending cycle of continuous improvement

supported by statistical analysis.

THE DEMING CHAIN REACTION

 Improve quality

 Costs decrease because of less rework, fewer mistakes, fewer delays and snags, and better
use of time and materials.

 Productivity improves

 Capture the market with better quality and lower price.

 Stay in business

 Provide jobs and more jobs.

Deming’s 14 Points

 Deming’s 14 points appeared in his book Out of the Crisis in 1982.

 The 14 points apply anywhere, to small organizations as well as to large ones, to the service
industry as well as to manufacturing. They apply to a division within a company.

 Deming proposed the 14 points for achieving quality excellence.

 The 14 points still convey important insights and provide guidance for managing effective
organizations.

Point 1: Create a Vision and Demonstrate Commitment

 An organization must define its values, mission and vision to provide longterm direction for
its management and employees.

 Deming believed that businesses should not exist simply for profit; they are social entities
whose basic purpose is to serve their customers and employees.

 Businesses must take a long-term view, invest in innovation, education, and training, and
take responsibility for providing jobs and improving a firm’s competitive position.

 The responsibility lies with top management.

 Commitment to quality is still difficult because managers do not effectively follow up on

opportunities.
Point 2: Learn the New Philosophy

 Historical ways of managing such as numerical quotas or motivational slogans will not
work in today’s global business environment.

 People and organizations need to continually renew themselves to learn new approaches and
relearn many older ones. This is called “organizational learning”.

Point 3: Understand Inspection

 Deming encouraged workers to take responsibility for their work, rather than leave the
problems for someone else down the production line.

 He advocated more in-process inspection (control charts) and the use of statistical tools that
would help to eliminate post-production inspection.

 By reducing variation, inspection can be reduced.

 TODAY, this new role of inspection has been integrated into the quality management
practices of most companies.

Point 4: Stop Making Decisions Purely on the Basis of Cost

 “Price has no meaning without quality”. – Walter Shewhart in 1931 Think about the value
based definition of quality from previous class.

 A reduced supply base decreases the variation coming into the process, thus reducing scrap,
rework.

 TODAY, SCM focuses heavily on a system’s view of the supply chain with the objective of
minimizing total supply chain costs and developing stronger partnerships with suppliers.

 Point 5: Improve constantly and forever

 Improvements are necessary in both design and operations.

 Improved design of goods and services comes from understanding customer needs, market
surveys and other sources of feedback.

 Improvements in operations are achieved by reducing the causes and impacts of variation,
and engaging all employees to innovate and seek ways of doing their jobs more efficiently
and effectively.

 TODAY, continuous improvement is a necessary tool.

Point 6: Institute training

 People are an organization’s most valuable resource; they want to do a good job and require
training to do it well.

 Training improves quality and productivity and it also adds to worker morale.

 TODAY, companies have excellent training programmes.

Point 7: Institute Leadership

 The job of management is leadership; not supervision.

 Supervision is simply overseeing and directing work; leadership means providing guidance
to help employees perform better.

 This point of Deming will always be relevant to organizations.

Point 8: Drive out fear

 Fear is manifested in many ways: fear of reprisal, fear of failure, fear of the unknown, fear
of change.
  No system can work without the mutual respect of managers and workers.

 Creating a culture of fear is a slow process but can be destroyed in an instant with a
transition of leadership and a change of corporate policies.

Point 9: Optimize the efforts of teams

 Teamwork helps to break down barriers between departments and individuals.

 People in research, design, sales, and production must work as a team, to foresee problems
of production and in use that may be encountered with the product or service.

Point 10: Eliminate Exhortations

 Many early attempts to improve quality focussed solely on behavioural change.

 Eliminate slogans, exhortations, and targets for the workforce asking for zero defects and
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.

Point 11: Eliminate Numerical Quotas and Management by Objective (MBO)

 Many organizations manage by goals and arbitrary objectives.

 Workers may short-cut quality to reach the goal, and this still happens more than you might
think.

 Arbitrary goals, such as increasing sales by 5 percent next year or decreasing costs next
quarter by 10 percent, have no meaning without a method to achieve them.

 Deming acknowledged that goals are useful, but numerical goals set for others without
incorporating a method to reach the goal generate frustration and resentment.

Point 12: Remove Barriers to pride in workmanship

 Effective organizations need to understand the factors that motivate and engage workers and
build an environment in which workers take pride in what they do, understand the meaning
of their work, and are rewarded for their accomplishments.

Point 13: Encourage Education and selfimprovement

 Point 6 refers to training in specific jobskills; this point refers to continuing, broad
education for self-development.

 Developing the worth of an individual is a powerful motivation method.

 TODAY, companies are paying for their employee’s higher education.

Point 14: Take Action

 Any cultural change begins with top management and includes everyone.
Deming’s System of Profound Knowledge

1. Appreciation for a system

2. Understanding variation

3. Theory of knowledge

4. Psychology

1. Appreciation for a system

 A system is a set of functions or activities within an organization that work together for the
aim of the organization.

 For example, a McDonald’s restaurant is a system that includes the order-taker/cashier

subsystem, grill and food preparation subsystem, drive-through subsystem, and order
fulfillment subsystem.

 Suboptimization (doing the best for individual components) results in losses to everybody
in the system. For example, to purchase materials at the lowest price will often result in
excessive costs in scrap and repair during manufacturing and increase overall costs.

2. Understanding Variation

 The second part of Profound Knowledge is a basic understanding of statistical theory and
variation. We see variation everywhere, from hitting golf balls to the meals and service in a
restaurant.

 A device called quincunx illustrates a natural process of variation.

 Common causes of variation: Individual sources (materials, tools, methods, machines,

environment...) cannot be identified or explained. However their combined effect is stable
and can usually be predicted statistically. 80 to 95 percent of the observed variation.

 Common cause variation can only be reduced by redesigning product/service or process or

through training or technology.

 Assignable/Special causes of variation: Arise from external sources and are detectable
through statistical methods and economical to correct. Example: a new worker on a machine

 With less variation, both the consumer and producer benefit.

 Read Deming’s Red Bead and Funnel Experiments (not in syllabus).

3. Theory of Knowledge

 Managers need to understand how things work and why decisions that affect the future
should be effective.

 Understanding the assumptions and theory behind statistical tools and techniques is vital to
applying them correctly.

 Deming emphasized that knowledge is not possible without theory, and experience alone
does not establish a theory.

4. Psychology

 Psychology helps us understand people, interactions between people.

 Much of Deming’s philosophy is based on understanding human behaviour and treating

people fairly.

 Most managers operate under the assumption that all people are alike. However, people
differ from one another.
JOSEPH JURAN (1904-2008)

 Corporate Industrial Engineer

 He joined Western Electric in the 1920s as it pioneered in the development of statistical

methods for quality.

 Juran taught quality principles to the Japanese in the 1950s and was a principal force in their
quality reorganization.

 Juran echoed Deming’s conclusion that US businesses faced a major crisis in quality due to
the huge costs of poor quality and the loss of sales to foreign competition.

 Unlike Deming, however, Juran did not propose a major cultural change in the organization,
but rather sought to improve quality by working within the system familiar to managers.

 He argued that employees at different levels of an organization speak in their own

“languages.”

 Top management speaks in the language of dollars; workers speak in the language of things;
and middle management must be able to speak both languages and translate between dollars
and things.

 Juran advocated the use of quality cost accounting and analysis to focus attention on quality
problems.

 Juran believed that Deming was wrong to tell management to drive out fear; he noted: “Fear
can bring out the best in people.”

Juran’s Quality Trilogy

 Quality planning: Quality planning begins with identifying customer needs, setting quality
goals that meet the needs at minimum cost, designing process that meets the goals.

 Quality control: The process of meeting quality goals during operations.

 Quality improvement: Juran specified a detailed program for quality improvement which he
formalized as the breakthrough sequence.

Breakthrough sequence

 Proof of the Need: Through data collection efforts, information on poor quality, low
productivity, or poor service can be translated into the language of money-the universal
language of top management-to justify a request for resources to implement a quality
improvement program.

 Project Identification: By taking a project approach, management provides a forum for

converting an atmosphere of defensiveness or blame into one of constructive action.

 Organization for Breakthrough: Organization for improvement requires a clear

responsibility for guiding the project.

 Diagnostic Journey (symptom to cause): Diagnosticians skilled in data collection, statistics,

and other problem solving tools are needed at this stage.

 Remedial Journey (cause to remedy): This involves choosing an alternative that optimizes
total cost, implementing remedial action, and dealing with resistance to change.

 Holding the Gains: This final step involves establishing the new standards and procedures,
training the workforce, and instituting controls to make sure that the breakthrough does not
die over time.
PHILIP CROSBY (1926-2001)

 Served for 14 years as VP Quality at International Telephone and Telegraph.

 Established Philip Crosby Associates in 1979 to develop and offer training programs.

 The essence of Crosby’s quality philosophy is embodied in what he calls the Absolutes of
Quality Management.

Quality means conformance to requirements, not elegance

 Crosby’s definition of quality is similar to the manufacturing perspective that we discussed

earlier.

 Quality is judged solely on whether requirements have been met; nonconformance is the
absence of quality.

 Setting requirements is the responsibility of management.

There is no such thing as a quality problem

 In Crosby’s view, functional departments are responsible for solving their problems.

 The role of the quality department should be to measure conformance, report results, and
provide leadership and support to drive quality improvement.

 This Absolute is similar to Deming’s third Point.

There is no such thing as the economics of quality; doing the job right the first time is always
cheaper.

Quality is free; what costs money are all actions that involve not doing jobs right the first time.

The only performance measurement is the cost of quality, which is the expense of non-
conformance

Crosby suggested that organizations measure and publicize the cost of poor quality. This helps to
call problems to management’s attention, to select opportunities for corrective action, and to track
quality improvement over time.

The only performance is Zero Defects (ZD)

 The theme of ZD is do it right the first time.

 “People are conditioned to believe that error is inevitable; thus they not only accept error,
they anticipate it. It does not bother us to make a few errors in our work…to err is human.

 We do not maintain these standards, however, when it comes to our personal life. We have a
dual standard: one for ourselves and one for our work.

 Most human error is caused by lack of attention rather than lack of knowledge. Lack of
attention is created when we assume that error is

 inevitable. If we consider this condition carefully, and pledge

 ourselves to make a constant conscious effort to do our jobs right the first time, we will take
a giant step toward eliminating the waste of rework, scrap, and repair that increases cost and
reduces individual opportunity.”
UNIT II : CUSTOMER FOCUS
 Customer focus might be the most important principle (foundation) of quality management.
 ISO requires that organizations must establish procedures for communicating with
customers, for obtaining feedback, including complaints.

CUSTOMER SATISFACTION

 The result of delivering a product or service that meets customer requirements.

 Customer satisfaction drives profitability. About two-thirds of business comes from existing
customers.
 Organizations need to look beyond customer satisfaction.
 Avoid creating dissatisfied customers.
 Build loyal customers. Loyal customers will go the extra mile…

AMERICAN CUSTOMER SATISFACTION INDEX (ACSI)

 ACSI measures customer satisfaction at the national level.

 Data is collected through 46,000 telephonic interviews. An econometric model is used.
 The 1994 ACSI results provided a baseline against which customer satisfaction levels can
be tracked over time.
 The model is used to compute four levels of indexes: a national customer satisfaction index
and indexes for seven industrial sectors, 40 specific industries, and 203 organizations and
agencies within those industries.
 Organizations can use the data to assess customer loyalty, identify potential barriers to entry
within markets, predict return on investments, and pinpoint areas in which customer
expectations are not being satisfied.
 Indian Customer Satisfaction Index (ICSI) started by Hexagon Consulting.

IDENTIFYING CUSTOMERS

 The first step in being customer focused is to understand who your customers are.
 Consumers – end users
 Internal customer – The recipient (employee, department, process) of product, service or
information within a department.
 External customer – Fall between the organization and consumer. Example: Car dealers are
the external customers of the auto manufacturers.

CUSTOMER SEGMENTATION

 There are many ways to approach customer segmentation. Customer segmentation might be
based on geography, demographic factors, ways in which products are used, volumes, or
expected levels of service.
 Net present value of the customer (NPVC): NPVC is the total profits discounted over time.
 Firms can also use NPVC to eliminate customers with low or negative values that represent
a financial liability and vice versa.

UNDERSTANDING CUSTOMER NEEDS

David A. Garvin suggested that products have multiple dimensions of quality:

1. Performance : A product’s primary operating characteristic. Example – for an ac the
cooling time, noise etc.
2. Features : The “bells and whistles” of a product.
3. Reliability : The probability of a product’s surviving over a specified period of time
under stated conditions of use.
4. Conformance : The degree to which physical and performance characteristics of a
product match pre-established standards.
5. Durability: The amount of use one gets from a product before it physically deteriorates
or until replacement is preferable.
 6. Serviceability: The speed, courtesy, and competence of repair work.
7. Aesthetics: How a product looks, feels, sounds, tastes, or smells.

Services have five dimensions that contribute to customer perceptions of quality:

1. Reliability: The ability to provide what was promised, dependably and accurately. Example
– customer service representatives responding in the promised time.
2. Assurance: The knowledge and courtesy of employees, and their ability to convey trust and
confidence. Example – ability to answer questions.
3. Tangibles: The physical facilities and equipment, and the appearance of personnel.
4. Empathy: The degree of caring and individual attention provided to customers. Example –
explaining technical jargon in layperson’s language.
5. Responsiveness: The willingness to help customers and provide prompt service. Example –
acting quickly to resolve problems.

THE KANO MODEL OF CUSTOMER REQUIREMENTS

 Noriaki Kano suggested segmenting customer requirements into three groups:

 Dissatisfiers (must haves): Basic requirements that customers expected in a product or
service. If these features are not present, the customer is dissatisfied.
 Satisfiers (wants): These requirements are generally not expected, but fulfilling them creates
satisfaction.
 Exciters/delighters (never thought of): New or innovative features that customers do not
expect, but love once they have them.
 Providing dissatisfiers and satisfiers is often considered the minimum required to stay in
business.
 To be competitive, organizations must surprise and delight customers.
 Exciters/delighters soon become satisfiers.
 Dissatisfiers and satisfiers are easy to determine through routine marketing research.
 Exciters/delighters are difficult to come up with.

GATHERING THE VOICE OF THE CUSTOMER

 Customer requirements, as expressed in the customer’s own terms, are called the voice of
the customer.
 Approaches for gathering customer information include:
 Comment Cards and Formal Surveys
 Focus Groups: A focus group is a panel of individuals (customers or non-customers) who
answer questions about a company’s products and services as well as those of competitors.
In depth probe is possible through this approach. Focus groups offer a substantial advantage
by providing the direct voice of the customer to an organization.
 Direct Customer Contact: In customer-driven organizations, top executives commonly visit
with customers personally.
 Field Intelligence: Through contact with customers, employees can obtain lot of
information.
 Complaints: Complaints can be a key source of customer information.
 Internet and Social Media Monitoring: The cost of monitoring Internet conversations is
minimal compared to the costs of other types of survey approaches, and customers are not
biased by any questions that may be asked.
 Many leading organizations use a combination of multiple listening posts to gather customer
information.
 Besides consumers, organizations must also pay attention to the needs of external
customers.
 Understanding the needs of internal customers is as important as understanding those of
consumers and external customers.
ANALYZING VOICE OF THE CUSTOMER DATA

 Affinity Diagram: Tool for organizing large volumes of information efficiently and
identifying natural patterns or groupings in the information.
 Affinity diagrams can be used for many other applications.
 Modern methods of business analytics such as text analytics allows users to break down
sentences linguistically and extract meaningful data that can be searched, summed, counted,
and otherwise statistically analysed.

BUILDING A CUSTOMER-FOCUSED ORGANIZATION

 Customer-focused organizations focus on four key processes.
 Making sincere commitments to customers
 Ensuring quality customer contact
 Selecting and developing customer contact employees
 Managing complaints and service recovery

MAKING SINCERE COMMITMENTS TO CUSTOMERS

 Organizations that truly believe in the quality of their products make sincere commitments
to their customers.
 Effective commitments address the principal concerns of customers, are free from
conditions that might weaken customer’s trust and confidence, and are communicated
clearly and simply to customers.
 Many commitments take the form of explicit guarantees and warranties.

ENSURING QUALITY CUSTOMER CONTACT

 Moment of truth: The interaction between a customer and the organization; face-to-face or
online is called a moment of truth.
 Customer satisfaction or dissatisfaction takes place during moments of truth.
 Quality is at test during moments of truth.

SELECTING AND DEVELOPING CUSTOMER CONTACT EMPLOYEES

 Customer-contact employees are particularly important in creating customer satisfaction as

they often are the only means by which a customer interacts with an organization.
 Businesses must carefully select customer contact employees, train them well, and empower
them to meet and exceed customer expectations.
 Excellent interpersonal and communication skills, strong problemsolving and analytical
skills, assertiveness, stress tolerance, patience and empathy, accuracy and attention to detail,
and computer literacy.

MANAGING COMPLAINTS AND SERVICE RECOVERY

 Despite all efforts to satisfy customers, every business experiences unhappy customers.
 Customer-focused organizations consider complaints as opportunities for improvement.
 Many organizations have well-defined processes for dealing with complaints. Example –
Cargill Corn Milling
 Starbuck’s Service Recovery process is Listen, Acknowledge, Take action, Thank the
person, and Encourage to return (LATTE).

MEASURING CUSTOMER SATISFACTION AND ENGAGEMENT

 Benefits of measurement:
1. It tells the organization how well it is meeting customer needs.
2. The performance of the competitors can also be known.
3. Causes of dissatisfaction and well as drivers of delight can be identified.
4. Track trends to determine whether changes actually result in improvement.
 Customer satisfaction is a psychological attitude, it is not easy to measure.
 Customer satisfaction measures may include product attributes such as product quality,
product performance, usability, and maintainability; service attributes such as attitude,
 service time, ontime delivery, exception handling, accountability, and technical support;
image attributes such as reliability and price; and overall satisfaction measures.

DESIGNING SATISFACTION SURVEYS

Step 1: A customer satisfaction survey’s purpose is first determined. The survey results must
provide the information needed to make decisions.

Step 2: The next step is to decide who should conduct the survey. Third party surveys are more
credible.

Step 3: Define the target group from which the sample is chosen.
Maybe the entire customer base or a specific segment.

Step 4: Select the appropriate survey instrument.

 Formal written surveys by mail or e-mail are most common.

Advantages – low data collection costs, easy analysis. Disadvantages – high

nonresponse bias, require large sample sizes, measure predetermined perceptions of
what is important to customers.

 Face-to-face interviews and focus groups require much smaller sample sizes and can
generate a significant amount of qualitative information.
 Telephone interviews fall somewhere in between.
 AVOID leading questions, compound questions, ambiguous questions, acronyms,
double negatives.
 Open-ended questions often provide useful information.
 A “Likert” scale is commonly used to measure the response.
 Five-point scales have been shown to have good reliability and are often used.
 These scales exhibit response bias; that is, people tend to give either high or low values.

Step 5: The final task is to design the reporting format and the data entry methods. Modern
technology assists in tracking customer satisfaction and provides information for continuous
improvement.

ANALYZING AND USING CUSTOMER FEEDBACK

Many businesses tie manager’s annual bonuses to customer satisfaction results.

One way to evaluate customer satisfaction and use it effectively is to collect information on both the
importance and the performance of key quality characteristics.
Evaluation of such data can be accomplished using a grid on which mean performance and
importance scores for individual attributes are plotted.
A firm ideally wants to achieve high performance on important characteristics, and not to waste
resources on characteristics of low importance.
UNIT III : PROCESS IMPROVEMENT AND SIX SIGMA
 Improving processes takes a lot of work.

 Numerous methodologies for improvement have been proposed over the years, and different
organizations use different approaches.

SIX SIGMA

 Six Sigma can be described as a business improvement approach that seeks to find and
eliminate causes of defects and errors in manufacturing and service processes by focusing
on outputs that are critical to customers and a clear financial return for the organization.

 The term six sigma is based on a statistical measure that equates to

 3.4 or fewer errors or defects per million opportunities (dpmo).

 “six sigma” will be used to refer to the statistical measure in this presentation. “Six Sigma”
to refer to the management philosophy.

EVOLUTION OF Six Sigma

 Bill Smith, a reliability engineer at Motorola, is credited with originating the concept during
the mid-1980s.

 General Electric driven by former CEO Jack Welch, brought significant media attention to
the concept and made Six Sigma a popular approach to quality improvement.

 Organizations such as Texas Instruments, Allied Signal, Boeing, 3M, Caterpillar, IBM,
Xerox, Citibank have embraced Six Sigma.k

Sigma Level Dpmo (defects per million)

3.0 66807.2

3.5 22750.1

4.0 6209.7

4.5 1349.9

5.0 232.6

5.5 31.7

6.0 3.4
Which sigma level?

 All processes need not operate at a six sigma level.

 The appropriate level should depend on the strategic importance of the process and the cost
of improvement relative to the benefit.

 It is generally easy to move from a two or three sigma level to a four sigma level, but
moving beyond that requires much more effort.

PROBLEM AND TYPES OF PROBLEM

A problem is a deviation between what should be happening and what actually is happening.

Quality problems fall into any one of the below five categories.

1. Conformance problems (solved through Six Sigma tools) :

Characterized by unsatisfactory performance that causes customer dissatisfaction, such as

high levels of defects, service failures, or customer complaints.

2. Efficiency problems (solved through lean tools) :

Characterized by unsatisfactory performance that causes dissatisfaction from the standpoint

of noncustomer stakeholders such as managers of supply chain functions. Typical examples
are high cost, excessive inventory, low productivity, and other process inefficiencies.

3. Unstructured performance problems (solved through creative approaches) :

Characterized by unsatisfactory performance by processes that are not well-specified or

understood.

4. Product design problems (solved through QFD) :

Involves designing new products or redesigning existing products to better satisfy customer
needs.

5. Process design problems (Mixed approach) :

Involves designing new processes or substantially revising existing processes.

Six Sigma Teams

 Teams are vital to Six Sigma projects because of the interdisciplinary nature of such
projects.

 Six Sigma projects require a diversity of skills that range from technical analysis, creative
solution development, and implementation.

 Six Sigma teams not only address immediate problems, but also provide an environment for
individual learning, management development, and career advancement.

 Six Sigma teams are comprised of several types of individuals.

1. Champions: Senior-level managers who promote and lead the deployment of Six Sigma
in a significant area of the business. Champions work toward removing barriers-
organizational, financial, personal-that might inhibit the successful implementation of a
Six Sigma project.

2. Master Black Belts: Master Black Belts are highly trained in how to use Six Sigma
tools. They work across the organization to develop and coach teams, conduct training,
and lead change, but are typically not members of Six Sigma project teams.
 3. Black Belts: Fully-trained Six Sigma experts with extensive technical training who
perform much of the technical analysis required in Six Sigma projects, usually on a full-
time basis. They have advanced knowledge of tools and DMAIC methods, and often act
as project team leaders.

4. Green Belts: Functional employees who are trained in introductory Six Sigma tools and
methodology and work on projects on a part-time basis assisting Black Belts while
developing their own knowledge and expertise.

5. Team Members: Individuals from various functional areas who support specific
projects.

SELECTING SIX SIGMA PROJECTS

1. Financial returns: Internal benefits (scrap, rework) and external benefits (increased revenues
due to improved quality and customer satisfaction) to be accounted for.

2. Probability of success: Projects chosen should have a high likelihood of success. At the
outset of a Six Sigma initiative, it is beneficial to pick projects that are easy to accomplish,
or even can be completed by a single individual in order to show early successes.

3. Impact on employees: Six Sigma projects should fit within the capabilities of the people and
teams that work on them. Six Sigma can do lot of impact---motivate employees to innovate
and improve their work environment, improve employee and organizational knowledge,
improve team and leadership skills.

4. Fit to strategy and competitive advantage: Six Sigma projects should support the
organization’s vision and competitive strategy.

 In many cases, project selection is often political in nature.

 Project selection decisions are taken by project steering committees.

DMAIC PROCESS

 DMAIC – define, measure, analyze, improve, and control is the process improvement
approach used in Six Sigma.

 Most of the tools used in DMAIC have been around for a long time.

 The Seven QC (quality control) Tools are: flowcharts, check sheets, histograms, Pareto
diagrams, cause-and-effect diagrams, run charts and control charts.

 The Seven QC tools have been used for decades.

 The Seven QC tools are simple and can be used by anyone. They are visual which enables
them to convey the information easily.

1. DEFINE

 After selection of a Six Sigma project, the first step is to clearly define the problem.

 Project selection generally responds to symptoms of a problem and usually results in a

rather vague problem statement.

 For example: A firm might have a history of poor reliability of electric motors it
manufactures, resulting in a Six Sigma project to improve motor reliability. Further
investigation tells that the problem is brush hardness variability. Thus, the problem
might be defined as “reduce the variability of brush hardness.”
  Pareto analysis is used to identify the most important issue among many symptoms.

 Pareto analysis clearly separates the vital few from the trivial many and provides
direction for selecting projects for improvement.

 SIPOC (Suppliers-Inputs-Process-Outputs-Customers) diagram is used in the Design

stage and helps in a fundamental understanding of the process.

 A project charter is also created in the Design stage. A project charter will typically
define the problem in a simple fashion, the project objective, the project team and
sponsor, the customers and CTQs on which the project focuses, existing measures and
performance benchmarks, expected benefits and financial justification, a project
timeline, and the resources needed to carry out the project.

2. MEASURE

 The measure phase of the DMAIC process focuses on understanding process

performance and collecting the data necessary for analysis.

 Y = f(X)

Where Y=Critical to quality characteristics (CTQs); Y might represent the time to

deliver bags from an airplane to baggage handling and the number of lost bags.

X=Critical input variables that influence Y; X might include the number of baggage
handlers, number of trucks, time they are dispatched, etc.

 Questions to be asked at this stage:

a) What questions are we trying to answer?

b) What type of data will we need to answer the question?

c) Where can we find the data?

d) Who can provide the data?

e) How can we collect the data with minimum effort and with minimum chance of error?

 Operational definitions are developed during this stage. What is ontime delivery? What
is an error?

 Check sheets are special types of data collection forms in which the results may be
interpreted on the form directly without additional processing.

 Run chart displays the data over time, it is used for data such as production volume,
cost, and customer satisfaction indexes.

3. ANALYZE

 Detailed process mapping (expanding the SIPOC developed in the Define stage) is
done.

 Value stream mapping is also used. It identifies the value-added and non-value added
activities, time the activities take (from the Measure stage). Reliability, process
capability and other information may also be included.

 The Analyze phase focuses on why defects, errors, or excessive variation occur.

 A quality problem can occur for a variety of reasons, such as materials, machines,
methods, people, and measurement.
  Root cause analysis is an approach using statistical, quantitative, or qualitative tools to
identify and understand the root cause. A simple approach to identify the root cause is
the “5 Why technique”.

 A cause-and-effect diagram is a simple graphical method for presenting a chain of

causes and effects and for sorting out causes and organizing relationships between
variables. Constructed during brainstorming type of atmosphere.

4. IMPROVE

 Once the root cause of a problem is understood, the Six Sigma team needs to generate
ideas for resolving the problem and improve the performance measures and CTQs.

 This idea-gathering phase is a highly creative activity.

 Brainstorming is an effective approach used in this phase to generate ideas. No criticism

is allowed during brainstorming.

 After a set of ideas have been proposed, it is necessary to evaluate them and select the
most promising.

 Problem solutions often entail technical or organizational changes. Often some sort of
decision or scoring model is used to assess possible solutions against important criteria
such as cost, time, quality improvement potential, resources required, effect on
supervisors and workers etc.

5. CONTROL

 The Control phase focuses on how to maintain the improvements.

 Controls might be as simple as using checklists or periodic status reviews to ensure that
proper procedures are followed, or employing a control chart or a run chart to monitor
the performance of key measures.
UNIT IV : QUALITY MANAGEMENT

COSTS OF QUALITY
• Quality costs fall into two categories:

1. Cost of achieving good quality- costs incurred to achieve good quality and to satisfy the
customer.

2. Cost of poor quality- costs incurred when quality fails to satisfy the customer.

ISO requirement and Six Sigma implementation are making organizations pay heed to quality costs
measurement.

COST OF ACHIEVING GOOD QUALITY

 Prevention costs are the costs of trying to prevent poor-quality products from reaching the
customer. Prevention reflects the quality philosophy of “do it right the first time.” Examples
of prevention costs are:

 Quality planning costs: The costs of developing and implementing the quality management
program.

 Product-design costs: The costs of designing products with quality characteristics.

 Process costs: The costs expended to make sure the productive process conforms to quality
specifications.

 Training costs: The costs of developing and putting on quality training programs for
employees and management.

 Appraisal costs are the costs of measuring, testing, and analyzing materials, parts, products,
and the productive process to ensure that product-quality specifications are being met.
Examples of appraisal costs are:

 Inspection and testing: The costs of testing and inspecting materials, parts, and the product
at various stages and at the end of the process.

 Test equipment costs: The costs of maintaining equipment used in testing the quality
characteristics of products.

COST OF POOR QUALITY

Internal failure costs are incurred when poor-quality products are discovered before they are
delivered to the customer.

Examples of internal failure costs are:

 Scrap costs: The costs of poor-quality products that must be discarded, including labour,
material, and indirect costs.

 Rework costs: The costs of fixing defective products to conform to quality specifications.

 Process failure costs: The costs of determining why the production process is producing
poor-quality products.
  Process downtime costs: The costs of shutting down the productive process to fix the
problem.

 Price-downgrading costs: The costs of discounting poor-quality products. Example- selling

clothes as “seconds”.

 External failure costs are incurred after the customer has received a poor-quality product
and are primarily related to customer service. Examples of external failure costs are:

 Customer complaint costs: The costs of investigating and satisfactorily responding to a

customer complaint resulting from a poor-quality product.

 Product return costs: The costs of handling and replacing poorquality products returned by
the customer.

 Warranty claims costs: The costs of complying with product warranties.

 Product liability costs: The litigation costs resulting from product liability and customer
injury.

 Lost sales costs: The costs incurred because customers are dissatisfied with poor-quality
products and do not make additional purchases.

INTERNATIONAL ORGANIZATION FOR STANDARDIZATION (ISO)

 “ISO” derived from the Greek “isos” meaning “equal”.

 ISO is a non-governmental organization with a central secretariat in Geneva, Switzerland,

and represents a network of national standards organizations of 163 countries.

 Bureau of Indian Standards (BIS) is a member of ISO.

 ISO 9000 and ISO 9004 are two documents provided by ISO as guidance to organizations
for understanding various aspects of a good quality system.

ISO 9001:2015

 ISO certifies a company’s “quality management system.”

 A quality management system provides a framework for ensuring that the entire
organization is involved in ensuring quality in every sphere of activity.

 ISO 9001 is a standard that sets out the requirements for a quality management system. It
helps businesses and organizations be more efficient and improve customer satisfaction.

 ISO 9001 is suitable for organizations of all types, sizes and sectors.

CERTIFICATION & AUDIT

 ISO itself does not perform certification to its ISO 9001. There are around 750 certification
bodies worldwide that issue these certificates to the organizations after conducting proper
audit of their quality/environmental management systems.

 The quality system of the organization is audited against the 5 clauses of the standard. If no
non-conformances are found, certification is granted for 3 years.