Total Quality Management (TQM)

Quality management is the study of improving the quality of a company's products and services. Total quality management (TQM) promotes the importance of improving quality on a continuous basis. TQM asserts that quality improvement is a consistent source of strategic advantage because it eliminates waste and creates higher consistency. TQM involves all levels of staff and management as well as facilities, equipment, labor, supplies, customers, policies, and procedures.

Cost-Benefit Analysis

An important basis for justifying TQM is its impact on total quality costs. TQM is rooted in the belief that preventing defects is cheaper than fixing them. 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 include:

• Prevention costs are costs created from the effort to reduce poor quality. For instance, a company may train its employees to do an effective job the first time or conduct preventive maintenance on its equipment.
• Appraisal costs include costs associated with conducting quality audits and the inspection and testing of raw materials, work-in-process, and finished goods.
• Internal failure costs include the lost productivity and waste associated with having to scrap or rework a product.
• Finally, external failure costs occur when the defect occurs after the product has reached the customer. This is the most expensive category of quality cost as it results in returns, repairs, warranty claims, and potentially lost business.

The Seven Basic Elements of TQM

These seven elements of TQM are:

1. Customer focus: Identifying customer needs and measuring customer satisfaction are key first steps for any business. Managing quality begins with delivering precisely what the customer wants.
2. Continuous improvement: There is no perfect system. Process improvements must be continuous. Constantly identifying and improving on processes to increase quality and/or lower costs is a primary responsibility of operations teams.
3. Employee empowerment: Employees are observers: ensuring familiarity with the individual components and the broader process as a whole is integral in empowering effective operations professionals.
4. Quality tools: Quality tools are mostly model-based (i.e., flowcharts, cause and effect diagrams, scatter plots, etc.) and involve manipulating output data to identify weaknesses and/or areas for improvement.
5. Product design: Design and delivery of a product is also an evolving process where product design can substantially impact costs and customer satisfaction. Operations professionals are in an ideal position to suggest design changes that will improve quality.
6. Process management: This is often seen as a the heart of TQM because improving the process itself is a goal everyone in operations should be working towards all the time. Simple process improvements like enhancing the organization of inputs or the design of the plant can have enormous cost implications.
7. Supplier quality: Finally, most companies are also customers. This means that many of the inputs for a given good will be coming in as goods themselves. Who organizations buy from significantly impacts costs and quality. This makes supplier management is a complex and highly relevant component of TQM.

All of these elements emphasize the importance of improving quality by empowering employees, providing adequate training, and building a continuous organizational culture of improvement. The idea here is to improve while continuing to fulfill customer needs through effective use of internal resources and process management.

Quality Awards Associated with TQM

There are several quality awards and standards for organizations to strive towards. Most of the organizations involved in these programs see them as tools to help improve their quality processes and move toward implementing successful TQM. Two examples are:

• The Malcolm Baldrige Award is a United States quality award that covers an extensive list of criteria evaluated by independent judges. In many cases, organizations use the Baldrige criteria as a guide for their internal quality efforts rather than competing directly for the award.
• 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.