Question 5

Critically discuss the application of Total Quality Management (TQM) across the organization
(Marketing; HRM; Finance; Engineering; Accounting; Purchasing; Information Systems; and for the
function of Statistical Control).
(20 Marks)
Total Quality Management (TQM) Within OM: How It All Fits Together

Implementing total quality management requires broad and sweeping changes throughout a
company. It also affects all other decisions within operations management. The decision to
implement total quality management concepts throughout the company is strategic in
nature. It sets the direction for the firm and the level of commitment. For example, some
companies may choose to directly compete on quality, whereas others may just want to be
as good as the competition. It is operations strategy that then dictates how all other areas of
operations management will support this commitment.

The decision to implement TQM affects areas such as product design which needs to
incorporate customer-defined quality. Processes are then redesigned in order to produce
products with higher quality standards. Job design is affected, as workers need to be
trained in quality tools and become responsible for rooting out quality problems. Also,
supply chain management is affected as the commitment to quality translates into
partnering with suppliers. As you can see, virtually every aspect of the operations function
must change to support the commitment to total quality management.
Total Quality Management (TQM) Across The Organization

As we have seen, total quality management impacts every aspect of the organization. Every
person and every function is responsible for quality and is affected by poor quality. For
example, Motorola implemented its Six Sigma concept not only in the production process
but also in the accounting, finance, and administrative areas. Similarly, ISO 9000 standards
do not apply only to the production process— they apply equally to all departments of the
company. A company cannot achieve high quality if its accounting is inaccurate or the
marketing department is not working closely with customers. TQM requires the close
cooperation of different functions in order to be successful. In this section we look at the
involvement of these other functions in TQM.

Marketing plays a critical role in the TQM process by providing key inputs that make TQM a
success. The goal of TQM is to satisfy customer needs by producing the exact product that
customers want. Marketing's role is to understand the changing needs and wants of
customers by working closely with them. This requires a solid identification of target markets
and an understanding of whom the product is intended for. Sometimes, apparently small
differences in product features can result in large differences in customer appeal. Marketing
needs to accurately pass customer information along to operations, and operations needs
to include marketing in any planned product changes.
Finance is another major participant in the TQM process because of the great cost
consequences of poor quality. General definitions of quality need to be translated into
specific dollar terms. This serves as a baseline for monitoring the financial impact of quality
efforts and can be a great motivator. The four costs of quality discussed earlier. The first
two costs, prevention and appraisal, are preventive costs; they are intended to prevent
internal and external failure costs. Not investing enough in preventive costs can result in
failure costs, which can hurt the company. On the other hand, investing too much in
preventive costs may not yield added benefits.
Financial analysis of these costs is critical. You can see that finance plays a large role in
evaluating and monitoring the financial impact of managing the quality process. This
includes costs related to preventing and eliminating defects, training employees, reviewing
new products, and all other quality efforts.

Accounting is important in the TQM process because of the need for exact costing. TQM
efforts cannot be accurately monitored and their financial contribution assessed if the
company does not have accurate costing methods.

Engineering efforts are critical in TQM because of the need to properly translate customer
requirements into specific engineering terms. The process we followed in developing quality
function deployment (QFD). It was not easy to translate a customer requirement such as “a
good-looking backpack” into specific terms such as materials, weight, colour grade, size,
and number of zippers. We depend on engineering to use general customer requirements in
developing technical specifications, identifying specific parts and materials needed, and
identifying equipment that should be used.

Purchasing is another important part of the TQM process. Whereas marketing is busy
identifying what the customers want and engineering is busy translating that information into
technical specifications, purchasing is responsible for acquiring the materials needed to
make the product. Purchasing must locate sources of supply, ensure that the parts and
materials needed are of sufficiently high quality, and negotiate a purchase price that meets
the company's budget as identified by finance.

Human resources is critical to the effort to hire employees with the skills necessary to work
in a TQM environment. That environment includes a high degree of teamwork, cooperation,
dedication, and customer commitment. Human resources is also faced with challenges
relating to reward and incentive systems. In TQM, rewards and incentives are different from
those found in traditional environments that focus on rewarding individuals rather than
teams.

Information systems (IS) is highly important in TQM because of the increased need for
information accessible to teams throughout the organization. IS should work closely with a
company's TQM development program in order to understand exactly the type of
information system best suited for the firm, including the form of the data, the summary
statistics available, and the frequency of updating.
Statistical quality control (SQC) is the term used to describe the set of statistical tools
used by quality professionals. Statistical quality control (SQC) refers to statistical tools that
can be used by quality professionals. Statistical quality control can be divided into three
broad categories: descriptive statistics, acceptance sampling, and statistical process control
(SPC).
Descriptive statistics are used to describe quality characteristics, such as the mean, range,
and variance. Acceptance sampling is the process of randomly inspecting a sample of
goods and deciding whether to accept or reject the entire lot. Statistical process control
(SPC) involves inspecting a random sample of output from a process and deciding whether
the process is producing products with characteristics that fall within preset specifications.

All three of these statistical quality control categories are helpful in measuring and
evaluating the quality of products or services. However, statistical process control (SPC)
tools are used most frequently because they identify quality problems during the production
process. For this reason, we will devote most of the chapter to this category of tools. The
quality control tools we will be learning about do not only measure the value of a quality
characteristic; they also help us identify a change or variation in some quality characteristic
of the product or process. We will first see what types of variation we can observe when
measuring quality. Then we will be able to identify the specific tools to use for measuring
this variation.
Six Sigma Quality
The term Six Sigma® was coined by the Motorola Corporation in the 1980s to describe the
high level of quality the company was striving to achieve. Sigma (σ) stands for the number
of standard deviations of the process. Recall that ±3 sigma (σ) means that 2600 ppm are
defective. The level of defects associated with Six Sigma is approximately 3.4 ppm. Figure
6-10 shows a process distribution with quality levels of ±3 sigma (σ) and ±6 sigma (σ). You
can see the difference in the number of defects produced.