Total Quality Management

Introduction

Total quality management can be defined as "management psychology that seeks to integrate all organizational functions such as marketing, finance, design, engineering, production, customers satisfaction to focus on meeting customer needs and organizational objectives" (Besterfield et al., 2002). Today, in a growing global competition, quality has become an important factor in achieving higher quality and meeting customer needs. Implementing TQM requires from the management of an organization to take initiative in improving processes, products and services as well as the culture of the company. The scope of this report will include a theoretical overview of TQM, a presentation of two major companies that employ TQM, as well as an in-depth analysis of the successes and possible failures of this quality-based management approach.

Topic Overview

In the late 20th century, a new phase of quality control and management emerged in Japan, also known as Total Quality Management. Having observed Japan’s success in employing quality issues, western companies began to introduce their own quality initiatives. In competitive markets, this modern approach to quality management can provide an advantage to those who implement it.

Total Quality Management implies that an important aspect of achieving success is accomplished through the delivery of quality products and services to customers. In such a way, quality focus must exist throughout all areas of an organization. The TQM approach has many elements that involve different stakeholders of a company. Examples of these elements include:

• Developing long-term relationships with suppliers

In terms of producing quality products, quality inputs are necessary; additionally, inputs must be delivered on time in order to shorten the customer-response time. For this reason, working closely with suppliers is a sure way of monitoring the inputs that go into production. In parallel, by entering long-term contracts, companies and suppliers can identify ways of reducing costs that are beneficial to both parties.

• Employee empowerment, turnover, satisfaction, and training

In order to ensure quality in all processes, organizations must be trustworthy of their employees. TQM requires that employees receive training that will enable them to be their own quality controllers and make decisions without the obligation of consulting their superiors. The freedom to find their own solutions to problems within the organization increases employee satisfaction and, in turn, reduces employee turnover. This results in increased quality in all areas of the company through more experienced and knowledgeable workers.

• Customer involvement and satisfaction.

The customer perspective of quality involves being mindful of what consumers look for in a product, and delivering it to them in a cost-effective way. TQM in customer service involves the actual performance of a product meeting the product design specifications. Consequently, the product design specifications must be met in order for customer satisfaction to occur. In such a way, firms eliminate items that are not of quality to customers and focus on those that are.

Through the elements explored above, it is obvious that TQM is largely a production-based approach. TQM brings improvements to processes within the manufacturing cycle as well as to the production of products. It provides a smoother flow of operations as each step is monitored closely, which ultimately results in fewer defective products. However, it is important to note that TQM is a concept that must be embraced in all departments and activities of an organization, such as in the after-sales service that must be of high quality in order to attract customers. The implementation of TQM involves costs of quality which are incurred in order to prevent and fix the production of a low-quality product (Horngren & Brawn, n.d.). Such costs include:

• Prevention of quality problems by changing equipment and providing training to employees

• Appraisal of products such as the inspection of products to detect defects

• Amending defective products (spoilage, rework) before they are shipped to customers

• Amending defective products and customer relationships after they are shipped to customers through refunds and warranties

The financial performance measures for TQM involve the changes in the aforementioned costs. Furthermore, qualitative measures of customer satisfaction include the number of customer complaints and the customer-response time. The defect and rework rates are additional non-financial performance measures of the business process under TQM. With such measures, the impact on profit can be easily determined and changes in the negatively affected areas can be promptly implemented.

Company overview – Toyota Motor Corporation

Toyota Motor Corporation, the leader of Japanese auto industry, has built up a reputation for manufacturing quality cars at a low price. Established in 1933 by Japanese manufacturer Toyoda Sakichi as a division of the Toyoda Automatic Loom Works, Ltd., this company gifted many quality innovations throughout its history. Toyota’s world leading management system turned the world's automotive industry on its ear. Being faced with a difficult economic situation after WWII in the 1950s, Toyota Motor Company, Ltd. began a careful study of the American automobile industry, including Ford’s Rouge plant in Detroit, due to their latest automobile manufacturing technology. Surprised with the potential of large-volume production and eventual export to the U.S., Toyota’s production genius focused on making many cars in small batches. This in turn resulted in the implementation of the lean production method in Toyota’s production process, yielding an immediate increase in efficiency. From 1956 onward, Toyota began expanding its facilities and was able to produce a high number of vehicles. By the 1970s, quality management was common in Japanese companies. Nowadays, Toyota is one of the world’s largest automakers. In fiscal year 2017, the company’s consolidated vehicle sales stood at 9.0 million units, 3.3% higher than the 8.7 million units sold in fiscal 2016. Net revenue in its fiscal year was reported at 27.6 trillion Japanese yen (Market Realist, 2017).

Total Production System Concept

Toyota Motor Corporation’s vehicle production system is referred to as a lean manufacturing system that is