Presenters

Nikhil Kumar

Rajesh Piryani

South Asian University

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Introduction

Three Basic Principles

Customer Satisfaction

Quality Costing

Benchmarking

Leadership and Quality Motivation

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Literature on software industry indicates that software firms start

focusing on TQM since 1990 as the best managerial philosophy of

building self capacity and producing software with high quality, and to be

able to compete locally and internationally (Kan 1995).

The challenges in Quality Technology and Management are increasing

yearly.

In the 1990s, all organizations faced the issues of improving product and

service quality and enhance innovation.

The discipline of quality has evolved and expanded rapidly from

inspection to company-wide quality management.

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Three basic principles of TQM must be considered in order to achieve

excellence in software development.

Making Improvement : every person and every team has a common system for

solving problems.

Satisfying Customers : Every team in every department follows a common

system for working together to satisfy customers, employ new tools to

indentify customers needs and requirements.

Advancing the Organizations : Every manager and every team share a

common understanding of their organization’s goals and strategies.

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Study conducted by Kan and Baisli (1994), aimed to discuss quality of

software in the context of TQM, the most important elements that

researchers studied are the following:

Customer Focus in software Development

Process Improvement

Human Side of quality that includes factors such as total participation,

management commitment and leadership, employee-empowerment and other

social and cultural factors.

Focus on data, measurement, and model in software development.

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Many studies suggested that enhancing customer satisfaction is the bottomline of business success: Ever-increasing market competition

Only way to retain the Customers

To expand market share

To gain more profit

To enhance/ improve product satisfaction level

eg. 90% to 95%

Studies show that it is five times more costly to recruit a new customer than itis to keep an old customer:

Why is it costly?

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It is fact that dissatisfied customers tell

7 to 20 people about their experiences

While satisfied customers tell

Only 3 to 5 people

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Total customer satisfaction is the primary quality issue.

Customers are the only people who can determine total customer satisfaction.

To achieve total customer satisfaction, the organization must know the

customer, itself, its product, and its competition

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• Quality costs are real and estimated at:

– 25% of costs in manufacturing

– 35% of costs in service industry

• Quality costs can be categorised to enable better understanding

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Quality is to continuously satisfy customers’ expectations

Total quality – to achieve quality at low cost

TQM –to achieve total quality through everybody’s participation

Concept of total quality

Sum of failure costs, inspection/appraisal costs and prevention costs

Failure costs- Internal failure cost, external failure costs

In relation to TQM-level of quality improved by quality management cost,

consist of

Preventive Quality Cost – Prevent Quality defects and problems cropping up.

Aim of preventive activities – find and control the causes of quality defects and problems

Inspection/ Appraisal Cost- Aim is to find defects which have already occurred.

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Cost of Quality is recognised as a major tool used to quantify the

qualitative improvements of an organisation during the TQM

Implementation Process.

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Both Preventive and Appraisal Costs are known as the Costs of

Conformance.

i.e. : The cost of doing things right the first time.

Both Internal and External Failure Costs are known as the Costs of

Non-Conformance.

i.e. : The cost incurred as a result of things not being done right the first time.

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Quality planning costs costs of developing and

implementing quality management program

Product-design costs costs of designing products with

quality characteristics

Process costs costs expended to make sure

productive process conforms to quality specifications

Training costs

costs of developing and putting on quality training programs for employees and management

Information costs

costs of acquiring and maintaining data related to quality, and development of reports on quality performance

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Application screening

Capability studies

Controlled storage

Design review

Equipment maintenance & repair

Field testing

Fixture design and fabrication

Forecasting

Housekeeping

Job descriptions

Market analysis

Pilot projects

Procedure writing

Prototype testing

Procedure reviews

Quality incentives

Safety reviews

Time and motion studies

Survey

Quality training

salesperson evaluation and selection

Personnel reviews

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Inspection and testing costs of testing and inspecting materials, parts, and product at various stages and

at the end of a process

Test equipment costs costs of maintaining equipment used in testing quality characteristics of products

Operator costs costs of time spent by operators to gather data for testing product quality, to make

equipment adjustments to maintain quality, and to stop work to assess quality

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Audit

Document checking

Diagram checking

Equipment calibration

Final inspection

In-process inspection

Laboratory test

Personnel testing

Procedure testing

Prototype inspection

Receiving inspection

Shipping inspection

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Scrap costs costs of poor-quality

products that must be discarded, including labor, material, and indirect costs

Rework costs costs of fixing defective

products to conform to quality specifications

Process failure costs costs of determining why

production process is producing poor-quality products

Process downtime

costs

costs of shutting down

productive process to fix

problem

Price-downgrading

costs

costs of discounting poor-

quality products—that is,

selling products as

“seconds”

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Customer complaint costs costs of investigating and satisfactorily

responding to a customer complaint resulting from a poor-quality product

Product return costs costs of handling and replacing poor-quality

products returned by customer

Warranty claims costs costs of complying with product warranties

Product liability costs

litigation costs resulting from product liability and customer injury

Lost sales costs

costs incurred because customers are dissatisfied with poor quality products and do not make additional purchases

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Preventing Poor Quality (Comparison)

Failure Costs

• Internal

• ExternalFailure Costs

Repair Costs

Repair Costs

Appraisal Costs

Appraisal Costs

Prevention Costs

Prevention Costs$

Before Quality

Cost

Alignment

After Quality

Cost

Alignment

Benefit

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Customers will seek

out the highest quality

product.

Improved quality that exceeds

customer expectations will

generate more revenues that

exceed the cost of quality.

Therefore,

quality is

“free”.

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W. Edwards Deming proposed that

improving quality reduces cost and

improves profitability.

Quality can be and should be

improved continuously.

Quality

Tota

l Revenues &

Costs

Revenues

Cost

Max Profit

Max Quality

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Profit is maximized at the

optimum quality level.

The optimum quality level is always achieved

before maximum attainable profit is reached.

Quality

Tota

l Revenues &

Costs

Revenues

Cost

Max Profit

Optimum Quality

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The traditional method is to record costs as they arise (e.g. wage costs,material etc.)or are thought to arise (e.g. depreciations).

The method is as follows.

Let Pjt stand for the ordinary financial result of company j at time t, and

let Pjt/Nj stand for the ordinary financial result per employee.

Nj denotes the number of employees, converted to full-time employees, in company j.

Assume also that there are m comparable firms competing in the sameindustry/market.

Now let the m competing firms be ranked as follows: P1t/N1<P2t/N2<…<Pmt/Nm

Based on this ranking, the lower limit of company j’s total quality costs attime t can now be calculated:

Cjt=(Pmt/Nm–Pjt/Nj)×Nj=(Nj /Nm)×Pmt–Pjt (14.2)

The limit is a lower limit in the short term.

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We call this lower limit because the method build on the comparison

with the best company i.e

the company which has achieved the highest profits per employee.

This company is used as a benchmark for the other firms being

compared, a consequence of this approach being that its lower limit of

quality costs is zero.

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There is famous quotation:

We can not become what we want to be by remaining what we are. Shift from

the original status is the key for success.

So,

If a company is loosing the market (or) customers, the company has to realize

that somebody is doing well ahead.

So it is necessary to find out the ways to get their competitor’s level and have

to beat them to retain the market and customers.

Benchmarking is ideal tool to achieve this.

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Benchmarking is a systematic and continuous measurement process;

A process of continuously measuring and comparing an organization’s

business processes against business process leaders anywhere in the

world to gain information which will help the organization take action

to improve its performance.

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What is our

Performance level?

How do we do it?

What are others’

Performance levels?

How did they get there?

Breakthrough

Performance

Creative

Adaptation

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P-Plan, D-Do, C-Check, A-Act

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Plan Managers must evaluate the current process

make plans based on any problems they find

document all current procedures, collect data, and identify problems.

Do During the implementation process managers should document all

changes made and collect data for evaluation.

Study The third step is to study the data collected in the previous phase.

The data are evaluated to see whether the plan is achieving the goalsestablished in the plan phase.

Act to act on the basis of the results of the 3 phases.

The best way to accomplish this is to communicate the results to othermembers in the company and then implement the new procedure if ithas been successful.

the next step is to plan again. After we have acted.

CONTINUE EVALUATING THE PROCESS, PLANNING, AND REPEATING THECYCLE AGAIN.

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Decide what to benchmark

Understand current performance

Plan

Study others

Learn from the data

Use the findings

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Decide what to benchmark

Think about the critical success factors and the mission.

Which processes are causing the most trouble?

Which processes contribute most to customer satisfaction and which are notperforming up to expectations?

What are the competitive pressures impacting the organization the most?

What processes have the most potential for differentiating our organization fromthe competition?

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Critical Success Factors (CSFs) Are the Key Indicators That Inform

Us That a Particular Task, Activity, Process, Event, Function,

Service or Endeavour Is Successful

CSF’s Are a Feature of All Levels of Business Activity; From the

Company As a Whole Down to the Activities of Individuals in It

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Adopt, Adapt, and Advance: A well-designed performance measurement andbenchmark system is essential, but there are other critical success factors:

Senior management support;

Benchmarking training for the project team;

Useful information technology systems;

Cultural practices that encourage learning;

Resource dedication - especially in the form of time, funding, and usefulequipment.

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People are the key to quality.

If their actions and reactions become quality related,

then expensive failures and the accumulation of hidden costs may be reduced

to an acceptable minimum or even prevented altogether.

Total Quality is a holistic concept which requires quality motivation of

all people in an organization towards a common goal.

People alone are the creators of quality- People Makes Quality.

Belief:

People are well motivated then they can overcome any difficulties they

experience in solving their problem.

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Clear Leadership and vision are considered to be the most important

critical success factors of TQM.

Quality Motivation and Suggestion for improvement

In the TQM leadership model the aim of the Act phase is to create an

environment which motivates people for quality and which encourages them to

participate in making suggestions about quality improvement.

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This is a signal of increasing competition from the developing

countries.

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Some people believes that there is no basis for motivation

Because its only the frame of mind of an individual

It is true that – to deal with people’s minds and treat them fairly in order to

motivate them,

Nevertheless its difficult to believe that there is no basis for the development

of motivation theory.

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Books

Fundamentals of Total Quality Management- By Jens J.Dahlgaard

Total Quality Management in Software Development Process

Eldon Y. Li, California Polytechnic State University, USA

A core value model for implementing total quality management in small

organisations

By Jonas Hansson and Bengt Klefsjo¨

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