Nigel S., Chambers S., Johnson R. Operations Management
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has no objective quantified measure. Yet operations with high customer contact, such as
airlines, place a great deal of importance on the need to ensure courtesy in their staff. In cases
like this, the operation will have to attempt to measure customer perceptions of courtesy.
Variables and attributes
The measures used by operations to describe quality characteristics are of two types:
variables and attributes. Variable measures are those that can be measured on a continu-
ously variable scale (for example, length, diameter, weight or time). Attributes are those
which are assessed by judgement and are dichotomous, i.e. have two states (for example,
right or wrong, works or does not work, looks OK or not OK). Table 17.2 categorizes some
of the measures which might be used for the quality characteristics of the car and the airline
journey.
Step 3 – Set quality standards
When operations managers have identified how any quality characteristic can be measured,
they need a quality standard against which it can be checked; otherwise they will not know
whether it indicates good or bad performance. The quality standard is that level of quality
which defines the boundary between acceptable and unacceptable. Such standards may well
be constrained by operational factors such as the state of technology in the factory, and the
cost limits of making the product. At the same time, however, they need to be appropriate to
the expectations of customers. But quality judgements can be difficult. If one airline passenger
out of every 10,000 complains about the food, is that good because 9,999 passengers out of
10,000 are satisfied? Or is it bad because, if one passenger complains, there must be others
who, although dissatisfied, did not bother to complain? And if that level of complaint is
similar for other airlines, should it regard its quality as satisfactory?
Variables
Attributes
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Table 17.2 Variable and attribute measures for quality characteristics
Quality
characteristic
Functionality
Appearance
Reliability
Durability
Recovery
Contact
Attribute
Was the food
acceptable?
Is the crew
dressed smartly?
Were there any
complaints?
Generally, is the
airline updating
its services in a
satisfactory
manner?
Do customers feel
that staff deal
satisfactorily with
complaints?
Did customers feel
that the staff were
helpful (yes or no)?
Airline journey
Variable
Number of journeys
which actually arrived
at the destination
(i.e. didn’t crash!)
Number of seats not
cleaned satisfactorily
Proportion of
journeys which
arrived on time
Number of times
service innovations
lagged competitors
Proportion of service
failures resolved
satisfactorily
The extent to which
customers feel well
treated by staff
(1 to 5 scale)
Attribute
Is the ride quality
satisfactory?
Is the colour to
specification?
Is the reliability
satisfactory?
Is the useful life as
predicted?
Is the serviceability
of the car
acceptable?
Did customers feel
well served (yes or
no)?
Car
Variable
Acceleration
and braking
characteristics
from test bed
Number of
blemishes
visible on car
Average time
between faults
Life of the car
Time from fault
discovered to
fault repaired
Level of help
provided by
sales staff
(1 to 5 scale)
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Step 4 – Control quality against those standards
After setting up appropriate standards the operation will then need to check that the pro-
ducts or services conform to those standards: doing things right, first time, every time. This
involves three decisions:
1 Where in the operation should they check that it is conforming to standards?
2 Should they check every product or service or take a sample?
3 How should the checks be performed?
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Starting with less than half a hectare of watercress beds,
Vitacress now has more than 300,000 sq m of growing
beds and employs over 1,000 full-time staff, with farms
in the south of the UK and in Portugal. The group is the
world’s leading watercress producer. Now owned by
RAR Group, a private Portuguese company, it supplies
baby leaf salads in the UK and is a major European
grower and packer of salads and speciality vegetables
for major supermarkets’ own-label products. Since
2003 it has also sold premium products under its own
‘Vitacress’ brand.
The market for pre-packed baby leaves is growing.
It is worth more than £500 million per year in the UK
alone and is forecast to continue expanding as the trend
for convenient and healthy foods continues. Consumers
are increasingly shunning the purchase of a single
whole-head lettuce and are instead buying a bag of mixed
baby leaves with a combination of different colours and
flavours. But the fresh salad market is a competitive one
with customers demanding the very highest quality, and
the quality control task is not straightforward with leaves
grown and harvested from locations across the world
to provide the supermarkets with fresh, bagged, salad
365 days of the year. So what does ‘quality’ mean for
Vitacress, and how does it go about delivering it?
Both taste and appearance are important to
consumers, as they are to Vitacress’s retail customers,
who also want the product to maintain its nutrient levels
and healthy leaf appearance throughout its shelf life.
The challenge facing Vitacress is that baby salad leaves
are a highly delicate and perishable commodity, with
damage to the leaves giving rise to an increased rate of
breakdown and a reduced shelf life of the product. The
leaves are subjected to potential damage at all stages
in the processing chain from field to supermarket shelf,
including washing, drying and packing. Understanding
the science that underlies the growing, harvesting,
packing, transportation and storage of their products
is fundamental to maintaining quality levels. This is
why Vitacress cooperates in university-based research
projects that could impact final quality levels. For
example, in one study supported by Vitacress, it
Short case
Quality is vital at Vitacress
8
was found that baby salad leaves had an increased
post-harvest shelf life of from 1 to 6 days (depending
on the variety), when harvested at the end of the day
compared with leaves harvested at the start of the day.
In another project, the effect of environmental legislation
that reduced residual pesticide levels in fresh food
posed a potential problem if insects or foreign bodies
found their way into the final product. Mike Rushworth,
Operations Director at Vitacress, contacted the
University of Bath’s Faculty of Engineering Design
for advice on improving their washing and inspection
process. A new inspection system was designed that
included devices to separate leaves without manual
handling. The project also evaluated the leaf washing
system, by introducing artificial ‘bugs’ to provide a
continual check on the effectiveness of this system.
The bugs contained transponders to transmit signals
if they make it through the washing and inspection
without being extracted.
Yet any natural food product will deteriorate over time,
and no matter how inventive Vitacress are in processing
their leaves, unless the product reaches the supermarket
shelves soon after harvesting its effective ‘quality life’ will
be truncated. This is why Vitacress takes only 24 hours
to get salad goods from the field to the supermarket,
chilling the crops within 60 minutes of harvesting to
ensure maximum freshness. The company uses vacuum
coolers on all its farms and speedy supply chains so
products reach customers as fast as possible, an
achievement recognized when Vitacress picked up
the Zurich Best Factory of the Year award for good
manufacturing practices at its Andover, UK plant.
Source: Alamy Images
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Where should the checks take place?
At the start of the process incoming resources may be inspected to make sure that they are to
the correct specification. For example, a car manufacturer will check that components are
of the right specification. A university will screen applicants to try to ensure that they have a
high chance of getting through the programme. During the process checks may take place
before a particularly costly process, prior to ‘difficult to check’, immediately after a process
with a high defective rate, before potential damage or distress might be caused, and so on.
Checks may also take place after the process itself to ensure that customers do not experience
non-conformance.
Check every product and service or take a sample?
While it might seem ideal to check every single product or service, a sample may be more
practical for a number of reasons.
● It might be dangerous to inspect everything. A doctor, for example, checks just a small
sample of blood rather than taking all of a patient’s blood! The characteristics of this
sample are taken to represent those of the rest of the patient’s blood.
● Checking everything might destroy the product or interfere with the service. Not every
light bulb is checked for how long it lasts – it would destroy every bulb. Waiters do not
check that customers are enjoying the meal every 30 seconds.
● Checking everything can be time-consuming and costly. It may not be feasible to check
all output from a high-volume machine or to check the feelings of every bus commuter
every day.
Also 100 per cent checking may not guarantee that all defects will be identified. Sometimes it
is intrinsically difficult. For example, although a physician may undertake the correct testing
procedure, he or she may not necessarily diagnose a (real) disease. Nor is it easy to notice
everything. For example, try counting the number of ‘e’s on this page. Count them again and
see if you get the same score.
Type I and type II errors
Although it reduces checking time, using a sample to make a decision about quality does
have its own inherent problems. Like any decision activity, we may get the decision wrong.
Take the example of a pedestrian waiting to cross a street. He or she has two main decisions:
whether to continue waiting or to cross. If there is a satisfactory break in the traffic and the
pedestrian crosses then a correct decision has been made. Similarly, if that person continues
to wait because the traffic is too dense then he or she has again made a correct decision.
There are two types of incorrect decisions or errors, however. One incorrect decision would
be if he or she decides to cross when there is not an adequate break in the traffic, resulting
in an accident – this is referred to as a type I error. Another incorrect decision would occur
if he or she decides not to cross even though there was an adequate gap in the traffic – this
is called a type II error. In crossing the road, therefore, there are four outcomes, which are
summarized in Table 17.3.
Type I errors are those which occur when a decision was made to do something and the
situation did not warrant it. Type II errors are those which occur when nothing was done,
yet a decision to do something should have been taken as the situation did indeed warrant it.
For example, if a school’s inspector checks the work of a sample of 20 out of 1,000 pupils and
Quality sampling
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Table 17.3 Type I and type II errors for a pedestrian crossing the road
Road conditions
Decision Unsafe Safe
Cross Type I error Correct decision
Wait Correct decision Type II error
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all 20 of the pupils in the sample have failed, the inspector might draw the conclusion that all
the pupils have failed. In fact, the sample just happened to contain 20 out of the 50 students
who had failed the course. The inspector, by assuming a high fail rate would be making a
type I error. Alternatively, if the inspector checked 20 pieces of work all of which were of a
high standard, he or she might conclude that all the pupils’ work was good despite having
been given, or having chosen, the only pieces of good work in the whole school. This would
be a type II error. Although these situations are not likely, they are possible. Therefore any
sampling procedure has to be aware of these risks (see the short case on, ‘Surgical statistics’).
How should the checks be performed?
In practice most operations will use some form of sampling to check the quality of their
products or services. The decision then is what kind of sample procedure to adopt. There
are two different methods in common use for checking the quality of a sample product or
service so as to make inferences about all the output from an operation. Both methods take
into account the statistical risks involved in sampling. The first, and by far the best known,
is the procedure called statistical process control (SPC). SPC is concerned with sampling the
process during the production of the goods or the delivery of service. Based on this sample,
decisions are made as to whether the process is ‘in control’, that is, operating as it should be.
The second method is called acceptance sampling and is more concerned with whether to
regard an incoming or outgoing batch of materials or customers as acceptable or not. Both
of these approaches are explained in the supplement to this chapter.
Steps 5 and 6 – Find and correct causes of poor quality and
continue to make improvements
The final two steps in our list of quality management activities are, in some ways, the most
important yet also the most difficult. They also blend into the general area of operations
improvement. The material covered in Chapters 18, 19 and 20 all has contributions to make
Statistical process
control
Acceptance sampling
Chapter 17 Quality management
507
Understanding the nature of type I and type II errors is an
essential part of any surgeon’s quality planning. Take the
well-known appendectomy operation, for example. This is
the removal of the appendix when it becomes infected or
inflamed. Removal is necessary because of the risk of the
appendix bursting and causing peritonitis, a potentially
fatal poisoning of the blood. The surgical procedure
itself is a relatively simple operation with expected good
results but there is always a small risk associated with
any invasive surgery needing a general anaesthetic. In
addition, like any surgical procedure, it is expensive.
The cost of the USA’s approximately quarter-of-a-million
appendectomies averages out to around $4,500 per
operation. Unfortunately, appendicitis is difficult to
diagnose accurately. Using standard X-ray procedures a
definite diagnosis can only be obtained about 10 per cent
of the time. But now a new technique, developed in
the Massachusetts General Hospital in Boston, claims
to be able to identify 100 per cent of true appendicitis
cases before surgery is carried out. The new technique
Short case
Surgical statistics
9
(Focused Appendix Computed Tomography) uses spiral
X-ray images together with a special dye. It scans only
the relevant part of the body, so exposure to radiation
is not as major an issue as with conventional X-ray
techniques. The technique can also help in providing
an alternative diagnosis when an appendectomy is not
needed. Most significantly, the potential cost savings
are very great. The test itself costs less than $250,
which means that one single avoided surgery pays for
around 20 tests.
Source: Corbis/Robert Llewelly
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to these two steps. Nevertheless, there is an aspect of quality management that has been par-
ticularly important in shaping how quality is improved and the improvement activity made
self-sustaining. This is total quality management (TQM). The remainder of the main body of
this chapter is devoted to TQM.
Total quality management (TQM)
Total quality management (TQM) was one of the earliest of the current wave of management
‘fashions’. Its peak of popularity was in the late 1980s and early 1990s. As such it has suffered
from something of a backlash in recent years and there is little doubt that many companies
adopted TQM in the simplistic belief that it would transform their operations performance
overnight. Yet the general precepts and principles that constitute TQM are still the dominant
mode of organizing operations improvement. The approach we take here is to stress the import-
ance of the ‘total’ in total quality management and how it can guide the agenda for improvement.
TQM as an extension of previous practice
TQM can be viewed as a logical extension of the way in which quality-related practice has pro-
gressed (see Fig. 17.6). Originally quality was achieved by inspection – screening out defects
before they were noticed by customers. The quality control (QC) concept developed a more
systematic approach to not only detecting, but also treating quality problems. Quality assurance
(QA) widened the responsibility for quality to include functions other than direct operations.
It also made increasing use of more sophisticated statistical quality techniques. TQM included
much of what went before but developed its own distinctive themes. We will use some of these
themes to describe how TQM represents a clear shift from traditional approaches to quality.
What is TQM?
TQM is ‘an effective system for integrating the quality development, quality maintenance
and quality improvement efforts of the various groups in an organization so as to enable
production and service at the most economical levels which allow for full customer satisfac-
tion’.
10
However, it was the Japanese who first made the concept work on a wide scale and
subsequently popularized the approach and the term ‘TQM’. It was then developed further
by several, so-called, ‘quality gurus’. Each ‘guru’ stressed a different set of issues, from
which emerged the TQM approach. It is best thought of as a philosophy of how to approach
quality improvement. This philosophy, above everything, stresses the ‘total’ of TQM. It is
an approach that puts quality at the heart of everything that is done by an operation and
including all activities within an operation. This totality can be summarized by the way TQM
lays particular stress on the following:
● meeting the needs and expectations of customers;
● covering all parts of the organization;
● including every person in the organization;
● examining all costs which are related to quality, especially failure costs and getting things
‘right first time’;
● developing the systems and procedures which support quality and improvement;
● developing a continuous process of improvement (this will be treated in the broader
context of improvement, in Chapter 18).
TQM means meeting the needs and expectations of customers
Earlier in this chapter we defined quality as ‘consistent conformance to customers’ expectations’.
Therefore any approach to quality management must necessarily include the customer
perspective. In TQM this customer perspective is particularly important. It may be referred
Total quality
management
TQM is a philosophy of
how to approach the
organization of quality
improvement
M17A_SLAC0460_06_SE_C17A.QXD 10/20/09 9:51 Page 508
to as ‘customer-centricity’ (discussed briefly in Chapter 18) or the ‘voice of the customer’.
However it is called, TQM stresses the importance of starting with an insight into customer
needs, wants, perceptions and preferences. This can then be translated into quality objectives
and used to drive quality improvement.
TQM means covering all parts of the organization
For an organization to be truly effective, every single part of it, each department, each
activity, and each person and each level, must work properly together, because every person
and every activity affects and in turn is affected by others. One of the most powerful con-
cepts that has emerged from various improvement approaches is the concept of the internal
customer or supplier. This is recognition that everyone is a customer within the organization
and consumes goods or services provided by other internal suppliers, and everyone is also
an internal supplier of goods and services for other internal customers. The implication of
this is that errors in the service provided within an organization will eventually affect the
product or service which reaches the external customer.
Service-level agreements
Some organizations bring a degree of formality to the internal customer concept by encour-
aging (or requiring) different parts of the operation to agree service-level agreements (SLAs)
Chapter 17 Quality management
509
Figure 17.6 TQM as an extension
Service-level agreements
Internal customer or
supplier
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with each other. SLAs are formal definitions of the dimensions of service and the relationship
between two parts of an organization. The type of issues which would be covered by such an
agreement could include response times, the range of services, dependability of service supply,
and so on. Boundaries of responsibility and appropriate performance measures could also be
agreed. For example, an SLA between an information systems support unit and a research
unit in the laboratories of a large company could define such performance measures as:
● the types of information network services which may be provided as ‘standard’;
● the range of special information services which may be available at different periods of
the day;
● the minimum ‘up-time’, i.e. the proportion of time the system will be available at different
periods of the day;
● the maximum response time and average response time to get the system fully operational
should it fail;
● the maximum response time to provide ‘special’ services, and so on.
TQM means including every person in the organization
Every person in the organization has the potential to contribute to quality. Although it
may be necessary to develop some specialists to assist with maintaining quality levels, TQM
was amongst the first approaches to stress the centrality of harnessing everyone’s impact on
quality and therefore their potential contribution to quality. There is scope for creativity and
innovation even in relatively routine activities, claim TQM proponents. The shift in attitude
which is needed to view employees as the most valuable intellectual and creative resource
which the organization possesses can still prove difficult for some organizations. When TQM
practices first began to migrate from Japan in the late 1970s, the ideas seemed even more
radical. Some Japanese industrialists even thought (mistakenly) that companies in Western
economies would never manage to change. Take, for example, a statement by Konosuke
Matsushito which attracted considerable publicity:
‘We are going to win and the industrial West is going to lose out – there is nothing much
you can do about it, because the reasons for your failure are within yourselves. For you, the
essence of management is getting the ideas out of the heads of bosses into the hands of labour.
For us, the core of management is precisely the art of mobilizing and pulling together the intel-
lectual resources of all employees in the service of the firm. Only by drawing on the combined
brainpower of all its employees can a firm face up to the turbulence and constraints of today’s
environment. That is why our large companies give their employees three to four times more
training than yours. This is why they foster within the firm such intensive exchange and com-
munication. This is why they seek constantly everybody’s suggestions and why they demand
from the educational system increasing numbers of graduates as well as bright and well-
educated generalists, because these people are the lifeblood of industry.’
11
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510
While some see the strength of SLAs as the degree of formality they bring to customer–
supplier relationships, there are also some clear drawbacks. The first is that the ‘pseudo-
contractual’ nature of the formal relationship can work against building partnerships
(see Chapter 13). This is especially true if the SLA includes penalties for deviation from
service standards. Indeed, the effect can sometimes be to inhibit rather than encourage
joint improvement. The second, and related, problem is that SLAs, again because of their
formal documented nature, tend to emphasize the ‘hard’ and measurable aspects of per-
formance rather than the ‘softer’ but often more important aspects. So a telephone may
be answered within four rings, but how the caller is treated, in terms of ‘friendliness’, may
be far more important.
Critical commentary
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TQM means all costs of quality are considered
The costs of controlling quality may not be small, whether the responsibility lies with each
individual or a dedicated quality control department. It is therefore necessary to examine
all the costs and benefits associated with quality (in fact ‘cost of quality’ is usually taken to
refer to both costs and benefits of quality). These costs of quality are usually categorized as
prevention costs, appraisal costs, internal failure costs and external failure costs.
Prevention costs are those costs incurred in trying to prevent problems, failures and errors
from occurring in the first place. They include such things as:
● identifying potential problems and putting the process right before poor quality occurs;
● designing and improving the design of products and services and processes to reduce
quality problems;
● training and development of personnel in the best way to perform their jobs;
● process control through SPC.
Appraisal costs are those costs associated with controlling quality to check to see if problems
or errors have occurred during and after the creation of the product or service. They might
include such things as:
● the setting up of statistical acceptance sampling plans;
● the time and effort required to inspect inputs, processes and outputs;
● obtaining processing inspection and test data;
● investigating quality problems and providing quality reports;
● conducting customer surveys and quality audits.
Internal failure costs are failure costs associated with errors which are dealt with inside the
operation. These costs might include such things as:
● the cost of scrapped parts and material;
● reworked parts and materials;
● the lost production time as a result of coping with errors;
● lack of concentration due to time spent troubleshooting rather than improvement.
External failure costs are those which are associated with an error going out of the operation
to a customer. These costs include such things as:
● loss of customer goodwill affecting future business;
● aggrieved customers who may take up time;
● litigation (or payments to avoid litigation);
● guarantee and warranty costs;
● the cost to the company of providing excessive capability (too much coffee in the pack or
too much information to a client).
The relationship between quality costs
In traditional quality management it was assumed that failure costs reduce as the money
spent on appraisal and prevention increases. Furthermore, it was assumed that there is
an optimum amount of quality effort to be applied in any situation, which minimizes the
total costs of quality. The argument is that there must be a point beyond which diminishing
returns set in – that is, the cost of improving quality gets larger than the benefits which it
brings. Figure 17.7(a) sums up this idea. As quality effort is increased, the costs of providing
the effort – through extra quality controllers, inspection procedures, and so on – increases
proportionally. At the same time, however, the cost of errors, faulty products, and so on,
decreases because there are fewer of them. However, TQM proponents believe that this logic
is flawed. First, it implies that failure and poor quality are acceptable. Why, TQM proponents
argue, should any operation accept the inevitability of errors? Some occupations seem to
be able to accept a zero-defect standard. No one accepts that pilots are allowed to crash a
certain proportion of their aircraft, or that nurses will drop a certain proportion of the babies
Prevention costs
Appraisal costs
Internal failure costs
External failure costs
Chapter 17 Quality management
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they deliver. Second, it assumes that costs are known and measurable. In fact putting realistic
figures to the cost of quality is not a straightforward matter. Third, it is argued that failure costs
in the traditional model are greatly underestimated. In particular, all the management time
wasted by failures and the loss of concentration it causes are rarely accounted for. Fourth, it
implies that prevention costs are inevitably high because it involves expensive inspection.
But why should not quality be an integral part of everyone’s work rather than employing
extra people to inspect. Finally, the ‘optimum-quality level’ approach, by accepting com-
promise, does little to challenge operations managers and staff to find ways of improving
quality. Put these corrections into the optimum-quality effort calculation and the picture
looks very different (see Fig. 17.7b). If there is an ‘optimum’, it is a lot further to the right, in
the direction of putting more effort (but not necessarily cost) into quality.
The TQM quality cost model
TQM rejects the optimum-quality level concept and strives to reduce all known and unknown
failure costs by preventing errors and failure taking place. Rather than looking for ‘optimum’
levels of quality effort, TQM stresses the relative balance between different types of quality
cost. Of the four cost categories, two (costs of prevention and costs of appraisal) are open
to managerial influence, while the other two (internal costs of failure and external costs of
Part Three Planning and control
512
Figure 17.7 (a) The traditional cost of quality model, and (b) the traditional cost of quality model with adjustments
to reflect TQM criticisms
A story which illustrates the difference in attitude
between a TQM and a non-TQM company has become
almost a legend among TQM proponents. It concerns a
plant in Ontario, Canada, of IBM, the computer company.
It ordered a batch of components from a Japanese
manufacturer and specified that the batch should have
Short case
Deliberate defectives
an acceptable quality level (AQL) of three defective
parts per thousand. When the parts arrived in Ontario
they were accompanied by a letter which expressed
the supplier’s bewilderment at being asked to supply
defective parts as well as good ones. The letter also
explained that they had found it difficult to make parts
which were defective, but had indeed managed it.
These three defective parts per thousand had been
included and were wrapped separately for the
convenience of the customer.
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failure) show the consequences of changes in the first two. So, rather than placing most
emphasis on appraisal (so that ‘bad products and service don’t get through to the customer’)
TQM emphasizes prevention (to stop errors happening in the first place). That is because the
more effort that is put into error prevention, the more internal and external failure costs are
reduced. Then, once confidence has been firmly established, appraisal costs can be reduced.
Eventually even prevention costs can be stepped down in absolute terms, though prevention
remains a significant cost in relative terms. Figure 17.8 illustrates this idea. Initially total
quality costs may rise as investment in some aspects of prevention – mainly training – is
increased. However, a reduction in total costs can quickly follow.
Getting things ‘right first time’
Accepting the relationships between categories of quality cost as illustrated in Figure 17.8 has
a particularly important implication for how quality is managed. It shifts the emphasis from
reactive (waiting for something to happen) to proactive (doing something before anything
happens). This change in the view of quality costs has come about with a movement from an
inspect-in (appraisal-driven) approach to a design-in (getting it right first time) approach.
Developing the systems and procedures which support quality
and improvement
The emphasis on highly formalized systems and procedures to support TQM has declined
in recent years, yet one aspect is still active for many companies. This is the adoption of the
ISO 9000 standard. And although ISO 9000 can be regarded as a stand-alone issue, it is very
closely associated with TQM.
The ISO 9000 approach
The ISO 9000 series is a set of worldwide standards that establishes requirements for com-
panies’ quality management systems. ISO 9000 is being used worldwide to provide a frame-
work for quality assurance. Registration requires a third-party assessment of a company’s
quality standards and procedures and regular audits are made to ensure that the systems do
Chapter 17 Quality management
513
Figure 17.8 Increasing the effort spent on preventing errors occurring in the first place
brings a more than equivalent reduction in other cost categories
Getting it right first time
ISO 9000
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