● ‘Total’ in TQM means 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, and getting things ‘right first time’;
● developing the systems and procedures which support quality and improvement;
● developing a continuous process of improvement.

CASE STUDY Turnround at the Preston plant13

Introduction
‘Before the crisis, production monitoring was done to please
the client, not for problem-solving. Data readouts were
brought to production meetings and we would all look at
then, but none of us were looking behind the data.’ (Chief
Operating Officer (COO), Preston plant)
The Preston plant was located in Preston, Vancouver.
Precision-coated papers for specialist printing uses
accounted for the majority of the plant’s output. The plant
used state-of-the-art coating machines that allowed very
precise coatings to be applied to bought-in rolls of paper.

Source: AL RF (PhotoDisc/Kim Steele)

After coating, the coated rolls were cut into standard sizes.

The curl problem

In the spring of 2008, Hewlett-Packard (the plant’s main
customer) informed the plant of problems it had encoun-
tered with paper curling under conditions of low humid-
ity. There had been no customer complaints. HP’s own
personnel had noticed the problem, but they took the
problem seriously. Over the next eight months the plant’s
Production staff worked to isolate the cause of the problem
and improve systems that monitored processing metrics. By
January 2009 the process was producing acceptable prod-
uct, yet it had not been a good year for the plant. Although
volumes were buoyant, the plant was making a loss of
around $10 million a year. In October 2008, Tom Branton
was appointed as COO.
Slipping out of control
Although the curl problem was solved, productivity, scrap
and re-work levels were poor. In response to this, opera-
tions managers increased the speed of the line in order to
raise productivity. ‘Looking back, changes were made with-
out any proper discipline, there was no real concept of con-
trol and the process was allowed to drift. Our culture said,
“If it’s within specification then it’s OK”, and we were very dili-
gent in making sure that the product which was shipped was
in specification. However, Hewlett-Packard gets “process data”
which enables them to see exactly what is happening right
inside your operation. We were also getting all the data but
none of it was being internalized. By contrast, HP has a “capa-
bility mentality”. They say, “You might be capable of making
this product but we are thinking two or three product genera-
tions forward and asking ourselves, do we want to invest in
this relationship for the future? ”’ (Tom Branton). The spring of
2009 was eventful. First, Hewlett-Packard asked the plant to
carry out preliminary work for a new paper to supply its next
generation of printers, known as the Viper project. Second,
the plant was acquired by the Rendall Group, who was not
impressed by what they found. The plant had been making
a loss for two years and had incurred HP’s disapproval over
the curl issue. They made it clear that, if the plant did not
get the Viper contract, its future looked bleak. Meanwhile, in
the plant, the chief concern was plant productivity, but also

CHAPTER 17 QUALITY MANAGEMENT 557

HP was starting to make complaints about quality levels. Yet
HP’s attitude caused bewilderment in the production team.
‘When HP asked questions about our process the operations
guys would say, “Look we’re making roll after roll of paper, it’s
within specification and we’ve got 97 per cent up-time. What’s
the problem?”’ (COO, Preston Plant). But it was not until sum-
mer that the full extent of HP’s disquiet was made clear. ‘I will
never forget that day in June of 2009. I was with HP in Chicago
and during the meeting one of their engineers handed me
some of the process data that we had to supply with every
batch of product, and said, “Here’s your latest data. We think
you’re out of control and you don’t know that you’re out of
control and we think that HP is looking at this data more than
you are.” He was absolutely right.’ (Tom Branton)
The crisis
Tom immediately set about the task of bringing the plant
back under control. They first of all decided to go back
to the conditions which the monitoring system indicated
had prevailed in January, when the curl problem had been
solved and before productivity pressures had caused
the process to be adjusted. At the same time, production
worked on ways of implementing unambiguous ‘shut-down
rules’ which would indicate to operators when a line should
be halted if they were in doubt about operating quality.
‘At one point in May of 2009 we had to throw away 64
jumbo rolls of out-of-specification product. That’s over $400,000
of product scrapped in one run. That was because operators had
been afraid to shut the line down. Either that or they had tried
to tweak the line while it was running to get rid of the defect.
The shut-down system says, “We are not going to operate when
we are not in a state of control.” Prior to that, our operators just
couldn’t win. If they failed to keep the process running we would
say, “You’ve got to keep productivity up.” If they kept the machines
running but had quality problems as a result, we criticized
them for making garbage. Now you get into far more trouble
for violating process procedures than for not meeting produc-
tivity targets. We did two further things. First, each production
team started holding daily reviews of processing data and some
“first pass” analysis of the data. Second, one day a month we
brought all three shifts together, looked at the processing data
and debated the implications of production data. Some people
got nervous because we were not producing anything. But for
the first time you got operators from the three shifts, together
with the production team, talking about operating issues.
We also invited HP up to attend these meetings. Remember
these weren’t staged meetings; it was the first time these guys
had met together and there was plenty of heated discussion,
all of which the Hewlett-Packard representatives witnessed.’
(Engineer, Preston plant)
In spite of the changes, morale on the shop floor was good.
At last something positive was happening. By September
2009 the process was coming under control, the efficiency of
the plant was improving, as was its outgoing quality level, its
on-time delivery and its responsiveness to customer orders
and its inventory levels. Yet the Preston team did not have
558  PART THREE  DELIVER – PLANNING ANd CONTROLLING OPERATIONS
time to enjoy their emerging success. In September of 2009
Hewlett-Packard announced that the plant would not get
the Viper project because of their discomfort about qual-
ity levels, and Rendall formally made their decision on the
future of the plant. ‘We lost 10 million dollars in 2009. We had
also lost the Viper project. It was no surprise when they made
the decision to shut the plant down. I told the senior manage-
ment team that we would announce it, in April of 2010. The
irony was that we knew that we had already turned the corner.
It would take perhaps three or four months, but we were con-
vinced that we would become profitable.’ (Tom Branton)
Convincing the rest of the world
Notwithstanding the closure decision, the management
team in Preston set about the task of convincing both HP
and Rendall that the plant could be viable. They figured it
would take three things. First, it was vital that they continue
to improve quality. Second, costs had to be brought down
further. Third, the plant had to create a portfolio of new
product ideas.
Improving quality further involved establishing full sta-
tistical process analysis into the process monitoring sys-
tem. It also meant establishing quality consciousness and
­problem-solving tools throughout the plant. ‘We had people
out there, technologists and managers, who saw themselves as
concerned with investment projects rather than the processes
that were affected. But taking time out and discussing process
performance and improvement, we got used to discussing the
basic capabilities that we needed to improve.’ (Tom Branton)
Working on cost reduction was inevitably going to be
painful. The first task was to get an understanding of what
should be an appropriate level of operating costs.
‘We went through a zero-based assessment to decide what
ideal processes would look like. By the way, in hindsight, cut-
ting numbers had a greater impact on cost than the payroll
saving figures seem to suggest. If you really understand your
process, when you cut people it cuts complexity and makes
things clearer to understand. Although most staff had not been
told of the closure decision, they were left in no doubt that the
plant had its back to the wall. We were careful to be very trans-
parent. We made sure that everyone knew whether they would
be affected or not. I did lots of walking around explaining the
company’s position. There were tensions and some negative
reactions from the people who had to leave. Yet most accepted
the business logic of what we were doing.’ (Tom Branton)
By December of 2009 there were 40 per cent fewer peo-
ple in the plant than 2 months earlier. All departments were
affected. Surprisingly the quality department shrank more
than most, moving from 22 people down to 9. ‘When the
plant was considering downsizing they asked me, “How can
we run a lab with 6 technicians?” Remember that at this time
we had 22 technicians. I said, “Easy. We get production to
make good product in the first place, and then we don’t have
to control all the garbage.”’ (Quality Manager, Preston plant)
Several new product ideas were investigated, includ-
ing some that were only possible because of the plant’s
enhanced capability. The most important of these became
known as ‘Ecowrap’, a recyclable protective wrap aimed
at the Japanese market. It was technically difficult, but the
plant’s new capabilities allowed it to develop appropriate
coatings at a cost that made the product attractive.
Out of the crisis
In spite of their trauma in the fall, the plant’s management
team faced Christmas of 2009 with increasing satisfaction,
if not optimism, for the plant’s future. In December they
made an operational profit for the first time for over two
years. By spring of 2010 even HP, at a corporate level, were
starting to look more favourably on the Preston plant. More
significantly, HP had asked the plant to start work on trials
for a new product – ‘heavyweight’ paper. April 2010 was a
good month for the plant. It had chalked up three months
of profitability and HP formally gave the heavyweight ink-jet
paper contract to Preston, and were generally more upbeat
about the future. At the end of April, Rendall reversed their
decision to close the plant.
The future
The year 2010 was a profitable one for the plant, by the end
of which they had captured 75 per cent of Hewlett-Packard’s
US-printing-paper business and were being asked to work
on several other large projects. ‘Hewlett-Packard now seems
very keen to work with us. It has helped us with our own sup-
pliers also. We have already given considerable assistance to
our main paper supplier to improve their own internal process
control procedures. Recently we were in a meeting with people
from all different parts of HP. There was all kinds of confi-
dential information going around. But you could never tell
that there was an outsider (us) in the room. They were hav-
ing arguments amongst themselves about certain issues and
no one could have been there without feeling that basically
we were a part of that company. In the past they’ve always
been very close with some information. Basically the change
is all down to their new-found trust in our capabilities.’ (Tom
Branton)
QUESTIONS
1 What are the most significant events in the story of
how the plant survived because of its adoption of
quality-based principles?
2 The plant’s processes eventually were brought under
control. What were the main benefits of this?
3 SPC is an operational level technique for ensuring quality
conformance. How many of the benefits of bringing the
plant under control would you class as strategic?

PROBLEMS AND APPLICATIONS

These problems and applications will help to improve your analysis of operations. You can find more
practice problems as well as worked examples and guided solutions on MyOMLab at www.myomlab.com.

(Read the supplement on statistical process control before attempting these problems.)

1 A call centre for a bank answers customers’ queries about their loan arrangements. All calls
are automatically timed by the call centre’s information system and the mean and standard
deviation of call lengths is monitored periodically. The bank have decided that only on very
rare occasions should calls be less than 0.5 minutes because customers would think this was
impolite, even if the query was so simple that it could be answered in this time. Also, the bank
reckoned that it was unlikely that any query should ever take more than 7 minutes to answer
satisfactorily. The figures for last week’s calls show that the mean of all call lengths was 3.02
minutes and the standard deviation was 1.58 minutes. Calculate the Cp and the Cpk for the call
centre process.

2 In the above call centre, if the mean call length changes to 3.2 minutes and the standard
deviation to 0.9 minutes, how does this affect the Cp and Cpk? Do you think this is an appropri-
ate way for the bank to monitor its call centre performance?

3 A vaccine production company has invested in an automatic tester to monitor the impurity
levels in its vaccines. Previously all testing was done by hand on a sample of batches of serum.
According to the company’s specifications, all vaccine must have impurity levels of less than
0.03 milligrams per 1,000 litres. In order to test the effectiveness of its new automatic sampling

CHAPTER 17 QUALITY MANAGEMENT 559

 Chapter Nine  Management of Quality 411

  5. Suppose that a table lamp fails to light when turned on. Prepare a simple cause-and-effect diagram
to analyze possible causes.
  6. Prepare a cause-and-effect diagram to analyze the possible causes of late delivery of parts ordered
from a supplier.
  7. Prepare a cause-and-effect diagram to analyze why a machine has produced a large run of defective parts.
  8. Prepare a scatter diagram for each of these data sets and then express in words the apparent rela-
tionship between the two variables. Put the first variable on the horizontal axis and the second
variable on the vertical axis.
a.
Age 24 30 22 25 33 27 36 58 37 47 54 28 42 55
Absenteeism rate 6 5 7 6 4 5 4 1 3 2 2 5 3 1
b. Temperature (°F) 65 63 72 66 82 58 75 86 77 65 79
Error rate 1 2 0 0 3 3 1 5 2 1 3
  9. Prepare a flowchart that describes going to the library to study for an exam. Your flowchart should
include these items: finding a place at the library to study; checking to see if you have your book, paper,
highlighter, and so forth; traveling to the library; and the possibility of moving to another location if the
place you chose to study starts to get crowded.
10. College students trying to register for a course sometimes find that the course has been closed, or the sec-
tion they want has been closed. Prepare a cause-and-effect diagram for this problem.
11. The county sheriff’s department responded to an unusually large number of vehicular accidents along a
quarter-mile stretch of highway in recent months. Prepare a cause-and-effect diagram for this problem.
12. Suppose you are going to have a prescription filled at a local pharmacy. Referring to the dimensions of
service quality for each dimension, give an example of how you would judge the quality of the service.

CASE CHICK-N-GRAVY DINNER LINE

The operations manager of a firm that produces frozen dinners
had received numerous complaints from supermarkets about
the firm’s Chick-n-Gravy dinners. The manager then asked
her assistant, Ann, to investigate the matter and to report her
recommendations.
Ann’s first task was to determine what problems were generat-
ing the complaints. The majority of complaints centered on five
defects: underfilled packages, a missing label, spills/mixed items,
unacceptable taste, and improperly sealed packages.
Next, she took samples of dinners from the two production
lines and examined each sample, making note of any defects that
she found. A summary of those results is shown in the table.
The data resulted from inspecting approximately 800 frozen
dinners. What should Ann recommend to the manager?

DEFECT OBSERVED

Missing Spill/ Unacceptable Improperly

Date Time Line Underfilled Label Mixed Taste Sealed

5/12 0900 1 ✓✓ ✓ ✓✓✓

5/12 1330 2 ✓✓ ✓✓
5/13 1000 2 ✓ ✓✓✓
5/13 1345 1 ✓✓ ✓✓
5/13 1530 2 ✓✓ ✓✓✓ ✓
5/14 0830 1 ✓✓✓ ✓✓✓
5/14 1100 2 ✓ ✓ ✓✓
5/14 1400 1 ✓ ✓
5/15 1030 1 ✓✓✓ ✓✓✓✓✓
(continued)
412 Chapter Nine  Management of Quality

(concluded)
DEFECT OBSERVED

Missing Spill/ Unacceptable Improperly

Date Time Line Underfilled Label Mixed Taste Sealed
5/15 1145 2 ✓ ✓✓
5/15 1500 1 ✓ ✓
5/16 0845 2 ✓✓ ✓✓
5/16 1030 1 ✓✓✓ ✓ ✓✓✓
5/16 1400 1
5/16 1545 2 ✓ ✓✓✓✓ ✓ ✓ ✓✓

CASE TIP TOP MARKETS

Tip Top Markets is a regional chain of supermarkets located in the cause-and-effect diagram for the leading category on your Pareto
southeastern United States. Karen Martin, manager of one of the stores, diagram.
was disturbed by the large number of complaints from customers at her On July 15, changes were implemented to reduce out-of-stock
store, particularly on Tuesdays, so she obtained complaint records from complaints, improve store maintenance, and reduce checkout
the store’s customer service desk for the last nine Tuesdays. lines/pricing problems. Do the results of the last two weeks reflect
Assume you have been asked to help analyze the data and to improvement?
make recommendations for improvement. Analyze the data using Based on your analysis, prepare a list of recommendations that
a check sheet, a Pareto diagram, and run charts. Then construct a will address customer complaints.
June 1 June 8
out of orange yogurt produce not fresh fish smelled funny undercharged
bread stale lemon yogurt past sell date out of diet bread out of roses
checkout lines too long couldn’t find rice dented can meat spoiled
overcharged milk past sell date out of hamburger rolls overcharged on two items
double charged stock clerk rude fish not fresh store too warm
meat smelled strange cashier not friendly cashier not helpful out of ice
charged for item not purchased out of maple walnut ice cream meat tasted bad telephone out of order
couldn’t find the sponges something green in meat ATM ate card overcharged
meat tasted strange didn’t like music slippery floor rolls stale
store too cold checkout lines too slow music too loud bread past sale date
light out in parking lot

June 15 June 22
wanted smaller size overcharged on special milk past sales date couldn’t find oatmeal
too cold in store couldn’t find aspirin store too warm out of Bounty paper towels
out of Wheaties undercharged foreign object in meat overcharged on orange juice
out of Minute Rice checkout lines too long store too cold lines too long at checkout
cashier rude out of diet cola eggs cracked couldn’t find shoelaces
fish tasted fishy meat smelled bad couldn’t find lard out of Smucker’s strawberry jam
ice cream thawed overcharged on eggs out of 42 oz. Tide out of Frosty Flakes cereal
double charged on hard rolls bread not fresh fish really bad out of Thomas’ English Muffins
long wait at checkout didn’t like music windows dirty
wrong price on item lost wallet
overcharged overcharged on bread
fish didn’t smell right
(continued)
 Chapter Nine  Management of Quality 413

(concluded)

June 29 July 6
checkout line too long restroom not clean out of straws store too warm
out of Dove soap couldn’t find sponges out of bird food price not as advertised
out of Bisquick checkout lines slow overcharged on butter need to open more checkouts
eggs cracked out of 18 oz. Tide out of masking tape shopping carts hard to steer
store not clean out of Campbell’s turkey soup stockboy was not helpful debris in aisles
store too cold out of pepperoni sticks lost child out of Drano
cashier too slow checkout lines too long meat looked bad out of Chinese cabbage
out of skim milk meat not fresh overcharged on butter store too warm
charged wrong price overcharged on melon out of Swiss chard floors dirty and sticky
too many people in store out of Diamond chopped walnuts
out of bubble bath
out of Dial soap

July 13 July 20
wrong price on spaghetti undercharged out of cucumbers out of Tip Top toilet paper
water on floor out of brown rice checkout lines too slow out of red peppers
store looked messy out of mushrooms found keys in parking lot out of Tip Top napkins
store too warm overcharged lost keys out of apricots
checkout lines too long checkout wait too long wrong price on sale item telephone out of order
cashier not friendly shopping cart broken overcharged on corn out of cocktail sauce
out of Cheese Doodles couldn’t find aspirin wrong price on baby food water on floor
triple charged out of Tip Top lunch bags out of 18 oz. Tide out of onions
out of Saran Wrap out of Tip Top straws out of Tip Top tissues out of squash
out of Dove Bars checkout lines too long out of iceberg lettuce
out of romaine lettuce out of Tip Top paper towels

July 27
out of bananas
reported accident in parking lot
wrong price on cranapple juice
out of carrots
out of fresh figs
out of Tip Top napkins
out of Tip Top straws
windows dirty
out of iceberg lettuce
dislike store decorations
out of Tip Top lunch bags
out of vanilla soy milk
wanted to know who won the lottery
store too warm
oatmeal spilled in bulk section
telephone out of order
out of Tip Top tissues
water on floor
out of Tip Top paper towels
out of Tip Top toilet paper
spaghetti sauce on floor
out of Peter Pan crunchy peanut
butter
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104 Part 1 • Operations Management
Input (X) Variables Output (Y) Variables
Sort laundry Clothes clean
Cycle Clothes not damaged
Wash temperature Colors okay
Rinse temperature Lint free
Stain treatment Stains removed
Load size Smell fresh/no odors
Fabric softener
Detergent
Bleach
Type of washer
Develop a cause-and-effect diagram for this process of
washing clothes. Next develop a cause-and-effect matrix
and use your own insight and judgment about the process
to rank and weight the output (Y ) variables, assign a
numerical score to each X-Y combination, develop overall
scores for each X variable, and then rank the X variables in
terms of importance.
2-16. A retail Web site sells a variety of products including
clothes, electronics, furniture, sporting goods, books, video
CASE PROBLEM 2.1
Designing a Quality-Management Program for the Internet
at D4Q
Design for Quality (D4Q) is a consulting firm that special-
izes in the design and implementation of quality manage-
ment programs for service companies and organizations.
It has had success designing quality programs for retail
stores and catalogue order services. Recently D4Q was
approached by a catalogue order company, BookTek
Media, Inc., with the offer of a job. BookTek sells books,
CDs, DVDs, and videos through its mail-order catalogue
operation. BookTek has decided to expand its service to
the Internet. BookTek is experienced in catalogue tele-
phone sales and has a successful quality-management
program in place. Thus, the company is confident that
it can process orders and make deliveries on time with
virtually no errors.
A key characteristic of BookTek’s quality management
program is the company’s helpful, courteous, and informa-
tive phone representatives. These operators can answer
virtually any customer question about BookTek’s products,
with the help of an information system. Their demeanor
toward customers is constantly monitored and graded.
Their telephone system is so quick that customers rarely
have to wait for a representative to assist them. However,
the proposed Internet ordering system virtually eliminates
games, CDs and DVDs, among other items. An average
customer order is $47. Weekly total variable costs are
$365,000 and weekly fixed costs are $85,000. The com-
pany averages 18,400 orders per week and 12% of all or-
ders are returned for a variety of reasons besides the
customer not liking the product, including product misin-
formation on the Web site, errors in fulfilling the order,
incomplete orders, defective product, breakage, etc. Thirty
percent of all returned orders are turned around and refilled
correctly per the customer’s desire, but at a cost (for han-
dling, packaging, and mailing) of $8 per order, while the
remaining 70% of returned orders are lost. In addition, it is
estimated that half of the customers associated with lost or-
ders will not return to the Web site at a cost of $15 per
order. Determine the weekly cost of poor quality for the
Web site. The company can implement a quality improve-
ment program for $800,000 a year that will reduce the per-
centage of returned orders to 2%; should the company
invest in the program? How should the company address
its quality problem, i.e., what processes does it likely need
to improve? Why would zero defects not eliminate
returned orders?
direct human contact with the customer. Since there will
be no human contact, BookTek is concerned about how it
will be able to make customers feel that they are receiving
high-quality service. Furthermore, the company is unsure
how its employees can monitor and evaluate the service to
know if the customer thinks it is good or poor. The primary
concern is how to make customers feel good about the
company in such an impersonal, segregated environment.
At this point BookTek is unconcerned with costs; manage-
ment simply wants to develop the highest-quality, friend-
liest Web site possible.
D4Q indicated that it would like to take on the job, but
while it is familiar with BookTek’s type of catalogue
order system, it is relatively unfamiliar with how things
are ordered on the Internet for this kind of retail book
business. It suggested that its first order of business
might be to investigate what other companies were doing
on the Internet.
Help D4Q develop a quality management plan for
BookTek. Include in your plan the quality dimensions and
characteristics of an Internet ordering system specifi-
cally for BookTek’s products, suggestions for achieving
customer satisfaction, ways to measure defective service,
and how to evaluate the success of the order system in
terms of quality.
E1C02.qxd 8/4/10 11:30 AM Page 105
CASE PROBLEM 2.2
Quality Management at State University
As a result of several years of severe cuts to its operating
budget by the state legislature, the administration at State
University has raised tuition annually for the past five
years. Five years ago getting an education at State was a
bargain for both in-state and out-of-state students; now it
is one of the more expensive state universities. An imme-
diate repercussion has been a decline in applications for
admission. Since a portion of state funding is tied to enroll-
ments, State has kept its enrollments up at a constant
level by going deeper into its pool of applications, taking
some less-qualified students.
The increase in the cost of a State degree has also
caused legislators, parents, and students to be more con-
scious of the value of a State education—that is, the value
parents and students are receiving for their money. This
increased scrutiny has been fueled by numerous media re-
ports about the decreased emphasis on teaching in univer-
sities, low teaching loads by faculty, and the large number
of courses taught by graduate students. This, in turn, has
led the state legislature committee on higher education to
call for an “outcomes assessment program” to determine
how well State University is achieving its mission of pro-
ducing high-quality graduates.
On top of those problems, a substantial increase in the
college-age population is expected this decade, resulting
from a “baby boom” during the 1990s. Key members of
the state legislature have told the university administra-
tion that they will be expected to absorb their share of the
additional students during the next decade. However, be-
cause of the budget situation, they should not expect any
CASE PROBLEM 2.3
Quality Problems at the Tech Bookstores
Tech is a major state university located in a small, rural
college town. Tech Services is an incorporated university
entity that operates two bookstores, one on campus and
one off campus at a nearby mall. The on-campus store
sells school supplies, textbooks, and school-licensed ap-
parel and gifts and it has a large computer department.
The off-campus store sells textbooks, school supplies, and
licensed apparel and gifts and it has a large trade book de-
partment. The on-campus store has very limited parking,
but it is within easy walking distance of the downtown
area, all dormitories, and the football stadium and basket-
ball arena. The off-campus store has plenty of parking, but
it is not within walking distance of campus, although it is
Chapter 2 • Quality Management 105
funding increases for additional facilities, classrooms,
dormitory rooms, or faculty. In effect, they will be ex-
pected to do more with their existing resources. State al-
ready faces a classroom deficit, and faculty have teaching
loads above the average of its peer institutions. Legisla-
tors are fond of citing a study that shows that if the uni-
versity simply gets all the students to graduate within a
four-year period or reduces the number of hours re-
quired for graduation, they can accommodate the extra
students.
This entire scenario has made the university presi-
dent, Fred McMahan, consider retirement. He has sum-
marized the problems to his administration staff as
“having to do more, better, with less.” One of the first
things he did to address these problems was to set up a
number of task forces made up of faculty and administra-
tors to brainstorm a variety of topics. Among the topics
and problems these task forces addressed were quality in
education, educational success, graduation rates, suc-
cess rates in courses (i.e., the percentage of students
passing), teaching, the time to graduation, faculty issues,
student issues, facilities, class scheduling, admissions,
and classroom space.
Several of the task forces included faculty from engi-
neering and business. These individuals noted that many
of the problems the university faced would benefit from
the principles and practices of a quality management ap-
proach. This recommendation appealed to Fred McMahan
and the academic vice president, Anne Baker.
Discuss in general terms how a quality philosophy and
practices might be instituted at State University.
on the town bus line. Both stores compete with several
other independent and national chain college bookstores
in the town plus several school supply stores, apparel
stores, computer stores, and trade bookstores. The town
and university have been growing steadily over the past
decade, and the football team has been highly ranked and
gone to a bowl for eight straight seasons.
The Tech bookstores have a long-standing policy of
selling textbooks with a very small markup (just above
cost), which causes competing stores to follow suit. How-
ever, because textbooks are so expensive anyway most
students believe the Tech bookstores gouge them on text-
book prices. In order to offset the lack of profit on text-
books, the Tech bookstores sell all other products at a
(Continued)
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106 Part 1 • Operations Management

relatively high price. All “profits” from the stores are used
to fund student-related projects such as new athletic fields
and student center enhancements.
Tech Services has a Board of Directors made up of fac-
ulty, administrators, and students. The executive direc-
tor, Mr. David Watson, reports to the Board of Directors
and oversees the operation of the bookstores (plus all
on-campus vending and athletic event vending). His office
is in the on-campus store. Both bookstores have a store
manager and an assistant store manager. There is one
textbook manager for both stores, a trade book manager,
a single school supplies and apparel manager, and a
computer department manager, as well as a number of
staff people, including a computer director and staff, a
marketing director, a finance staff, a personnel director,
a warehouse manager and secretaries. Almost all of the
floor employees including cash register operators, sales
clerks, stock people, delivery truck drivers, and ware-
house workers, are part-time Tech students. Hiring Tech
students has been a long-standing university policy in
order to provide students with employment opportuni-
ties. The bookstores have a high rate of turnover among
the student employees, as would be expected.
Several incidents have occurred at the off-campus
store that have caused the Tech Services Board of Direc-
tors concern. In one incident a student employee was ar-
rested for drug possession. In another incident a faculty
customer and student employee got into a shouting
match when the employee could not locate a well-known
book on the bookstore computer system and the faculty
member got frustrated over the time it was taking. In still
another incident an alumnus who had visited the store
after a football game sent a letter to the university presi-
dent indicating that a student employee had been rude to
him when he asked a question about the return policy for
an apparel item he had purchased on the bookstore’s
Web site. When the student did not know the return pol-
icy, he told the customer in a condescending manner to
come back later. The last incident was an offhand remark
made by a local town resident to a Board member at a
party about the difficulty she had completing a purchase
at the mall store because the registers were unmanned,
although she could see several employees talking to-
gether in the store.
Although sales and profits at the bookstore have been
satisfactory and steady over the past few years, the Board
of Directors is extremely sensitive to criticism about any-
thing that might have the potential to embarrass the uni-
versity. The Board of Directors suggested to Mr. Watson
that he might consider some type of assessment of the
service at the bookstores to see if there was a problem.
Mr. Watson initially attempted to make random, surprise
visits to the bookstores to see if he could detect any prob-
lems; however, there seemed to be a jungle telegraph
system that alerted his employees whenever he entered
a store, so he abandoned that idea. Next he decided to try
two other things. First he conducted a customer survey
during a two-week period in the middle of the semester
at both stores. As customers left the store, he had em-
ployees ask them to respond to a brief questionnaire.
Second, he hired several graduate students to pose as
customers and make purchases and ask specific ques-
tions of sales clerks, and report on their experiences.
Selected results from the customer survey are on the
table below.
The only consistent responses from the graduate stu-
dents posing as customers were that the student employ-
ees were sometimes not that familiar with store policies,
how to operate the store computer systems, what prod-
ucts were available, and where products were located in
the stores. When they didn’t know something they some-
times got defensive. A few also said that students some-
times appeared lackadaisical and bored.
Using observations of the operation of your own col-
lege bookstores to assist you, answer the following
questions.
a. Why do you think Mr. Watson organized the
customer survey the way he did? What other

CAMPUS STORE OFF-CAMPUS STORE

Student Nonstudent Student Nonstudent
Yes No Yes No Yes No Yes No
Were employees courteous and friendly? 572 93 286 147 341 114 172 156
Were employees knowledgeable and helpful? 522 143 231 212 350 105 135 193
Was the overall service good? 569 96 278 165 322 133 180 148
Did you have to wait long for service? 74 591 200 243 51 404 150 178
Did you have to wait long to check out? 81 584 203 240 72 383 147 181
Was the item you wanted available? 602 63 371 72 407 48 296 32
Was the cost of your purchase(s) reasonable? 385 280 398 45 275 180 301 27
Have you visited the store’s Web site? 335 330 52 391 262 193 17 311

(Continued)
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Chapter 2 • Quality Management 107

things do you think he might have done to
analyze the stores’ quality problems?
b. Develop Pareto charts to help analyze the
survey results.
c. How would you define quality at the bookstores?
d. Discuss what you believe are the quality prob-
lems the bookstores have?
e. What are the bookstores’ costs of poor quality?
f. What actions or programs would you propose
to improve quality at the bookstores?
g. What obstacles do you perceive might exist to
hinder changes at the bookstores and quality
improvement?
h. What benefits do you think would result from
quality improvement at the bookstores?

CASE PROBLEM 2.4

Product Yield at Continental Luggage Company retaining its shape and an attractive appearance and pro-
The Continental Luggage Company manufactures several tecting the clothing and personal items inside the bag.
different styles of soft- and hardcover luggage, briefcases, They also prefer the bag to be lightweight and not cum-
hanging bags, and purses. Their best-selling item is a line bersome. Furthermore, customers expect the latches
of hardcover luggage called the Trotter. It is produced in a and locks to work properly over an extended period of
basic five-stage assembly process that can accommodate time. Another key factor in sales is that the luggage must
several different outer coverings and colors. The assembly be stylish and visually appealing.
process includes constructing a heavy-duty plastic and Because of the importance of quality, company man-
metal frame; attaching the outer covering; joining the top agement has established a process control procedure that
and bottom and attaching the hinge mechanism; attaching includes inspection at each stage of the five major stages
the latches, lock, and handle; and doing the finishing work, of the assembly process. The following table shows the
including the luggage lining. percentage of good-quality units yielded at each stage of
The market for luggage is extremely competitive, and the assembly process and the percentage of bad units that
product quality is a very important component in product can be reworked, on average.
sales and market share. Customers normally expect lug- The first stage of the process is construction of the
gage to be able to withstand rough handling while frame, and it is very difficult to rework the frame if an
item is defective, which is reflected in the low percentage
of reworked items.
Average Average
Five hundred new pieces of luggage of a particular style
Assembly Percentage Percentage and color are initiated through the assembly process each
Stage Good Quality Reworked week. The company would like to know the weekly product
1 0.94 0.23 yield and the number of input units that would be required
2 0.96 0.91 to achieve a weekly yield of 500 units. Furthermore, the
3 0.95 0.67 company would like to know the impact on product yield
4 0.97 0.89 (given 500 initial starting units) if a quality-improvement
5 0.98 0.72 program were introduced that would increase the average
percentage of good-quality units at each stage by 1%.

REFERENCES

Crosby, P. B. Quality is Free. New York: McGraw-Hill, 1979.
Deming, W. E. Out of the Crisis. Cambridge, MA: MIT Center
for Advanced Engineering Study, 1986.
Evans, J. R., and W. M. Lindsay. The Management and Control of
Quality. 3rd ed. St. Paul, MN: West, 1996.
Feigenbaum, A. V. Total Quality Control. 3rd ed. New York:
McGraw-Hill, 1983.
Garvin, D. A. Managing Quality. New York: Free Press/Macmillan,
1988.
Ishikawa, K. Guide to Quality Control. 2nd ed. White Plains, NY:
Kraus International Publications, 1986.
Juran, J. M. Juran on Planning for Quality. New York: Free
Press/ Macmillan, 1988.
Juran, J. M., and F. M. Gryna, Jr. Quality Planning and Analysis.
2nd ed. New York: McGraw-Hill, 1980.
Montgomery, D. C. Introduction to Statistical Quality Control.
2nd ed. New York: John Wiley, 1991.
Taguchi, G. Introduction to Quality Engineering. Tokyo: Asian
Productivity Organization, 1986.

7. An LCD projector in an office has a main light bulb with a
reliability of 0.90 and a backup bulb, the reliability of which is
0.80. The system looks as follows:
0.80
0.90
What is the reliability of the system?
8. A university Web server has five main components, each
with the same reliability. All five components must work for the
server to function as intended. If the university wants to have a
95 percent reliability, what must be the reliability of each of the
components?
CASE: Gold Coast Advertising (GCA)
George Stein sat in his large office overlooking Chicago’s Michi-
gan Avenue. As CEO of Gold Coast Advertising, he seemed to al-
ways be confronted with one problem or another. Today was no
exception. George had just come out of a long meeting with Jim
Gerard, head of the board for the small advertising agency. Jim
was concerned about a growing problem with lowered sales ex-
pectations and a decreasing customer base. Jim warned George
that something had to be done quickly or Jim would have to go
to the board for action. George acknowledged that sales were
down but attributed this to general economic conditions. He as-
sured Jim that the problems would be addressed immediately.
As George pondered his next course of action, he admitted to
himself that the customer base of GCA was slowly decreasing. The
agency did not quite understand the reason for this decrease.
Many regular customers were not coming back, and the rate of
new customers seemed to be slowly declining. GCA’s competitors
seemed to be doing well. George did not understand the problem.
What Do Customers Want?
GCA was a Chicago-based advertising agency that developed
campaigns and promotions for small and medium-sized firms.
CASE: Delta Plastics, Inc. (A)
Company Background
Delta Plastics, Inc. specialized in the design and manufacture of
plastic containers, primarily for kitchen and household use. Its
products were sold through merchandise retailers and were rec-
ognized for high quality. Delta also had an active R&D group
that was continuously working to develop new plastic materials
and new product designs. Delta was a recognized industry leader
CASE: DELTA PLASTICS, INC. (A) • 179
9. BioTech Research Center is working to develop a new vac-
cine for the West Nile Virus. The project is so important that the
firm has created three teams of experts to work on the project
from different perspectives. Team 1 has a 90 percent chance of
success, team 2 an 85 percent chance of success, and team 3 a 70
percent chance. What is the probability that BioTech will develop
the vaccine?
10. The following system of components has been proposed
for a new product. Determine the reliability of the system.
R ⫽ 0.85 R ⫽ 0.90
R ⫽ 0.90 R ⫽ 0.85 R ⫽ 0.90 R ⫽ 0.95
Its expertise was in the retail area, but it worked with a wide
range of firms from the food service industry to the medical
field. GCA competed on price and speed of product develop-
ment. Advertising in the retail area was competitive, and price
had always been important. Also, since retail fashions change
rapidly, speed in advertising development was thought to be
critical.
George reminded himself that price and speed had always
been what customers wanted. Now he felt confused that he re-
ally didn’t know his customers. This was just another crisis
that would pass, he told himself. But he needed to deal with it
immediately.
Case Questions
1. What is wrong with how Gold Coast Advertising mea-
sures its quality? Explain why Gold Coast should ask its cus-
tomers about how they define quality.
2. Offer suggestions to George Stein on ways of identifying
quality dimensions GCA’s customers consider important.
3. Develop a short questionnaire to be filled out by GCA’s
customers that evaluates how customers define quality.
and was aggressively looking to increase brand recognition and
market share.
Delta’s R&D group had recently developed a new plastic ma-
terial that tolerates rapid changes in temperature, from heating
to deep cooling. This material could be used to make containers
for kitchen use that could immediately be moved from the oven
to the refrigerator. Unlike glass containers with this capability,
reid_c05_149-182hr.qxd 9/3/09 5:16 PM Page 180
180 • CHAPTER 5 TOTAL QUALITY MANAGEMENT
the plastic containers would not break or chip. Delta’s marketing
group was eager to promote sales of containers made with the
new material. Marketing believed the new material could revo-
lutionize the industry, so it pushed for rapid production, argu-
ing that the sooner the new products were available to customers,
the sooner the company could corner the market.
The Decision
The decision whether to initiate production or continue with
material testing was made during a heated meeting on April 28.
Isabelle Harrison, director of R&D, stated that more product
testing was needed in order to fine-tune the characteristics of
the new material. Although there was no question regarding
product safety, she wanted to refine the material to make sure
that no unexpected defects occurred during production. Jose De
Costa, director of manufacturing, supported this position, stat-
ing that the new material might be susceptible to cracking.
However, George Chadwick, director of marketing, countered
that millions of dollars had already been spent on design and
testing. He argued that production needed to be as rapid as pos-
sible before a competitor came out with a similar design. At one
point George looked at Isabelle and asked: “Are you certain that
the product is safe?” She replied that it was. “Then” he said,
“conducting more testing is unnecessary.”
The final decision came from Jonathan Fine, Delta’s CEO. He
agreed with George. “If product safety is guaranteed, small prob-
lems in production should not be a big deal. Let’s initiate pro-
duction as soon as possible.”
The Problem
On June 15, exactly one month after production began, Jose De
Costa sat at his desk looking at the latest production quality re-
port. The report showed weekly defects for products made with
the new material (dubbed by marketing as “super plastic”) versus
the standard material. Jose knew he needed to conduct a better
analysis of the data to see whether there were indeed differences in
defects between the two materials. Jose was nervous. Even if there
were differences in quality, he was not sure what actions to take.

Case Questions
1. Identify the different costs of quality described in the case.
Explain the trade-offs between the costs of quality that Delta
made in its decision. Was George Chadwick correct that con-
ducting more tests was unnecessary?
INTERACTIVE CASE Virtual Company
On-line Case: Cruise International, Inc.
Assignment: Total Quality Management (TQM) at Cruising In-
ternational, Inc. For this assignment, you will work again with
Meghan Willoughby, Chief Purser aboard the Friendly Seas I. You
know the assignment has something to do with quality, but you
aren’t quite sure what. You meet Meghan aboard the ship. She
greets you and says, “Let me tell you a bit about what you’ll be
doing for us. We’ve been working on quality measures for several
years, and now must focus on quality even more as our industry
becomes more competitive. We need to make sure that our
guests receive quality service from beginning to end. We need
your help in bringing ideas together on how to measure quality
in a service organization.” This assignment will enhance your
INTERNET CHALLENGE Snyder Bakeries
You have recently taken a position with Snyder Bakeries, a pro-
ducer of a variety of different types of baked goods that are
packaged and sold directly to grocery chains. Snyder Bakeries
has been in business since 1978. It is a small company with 95
employees, earning roughly $2.5 million annually. Competition
in the baked goods market has been increasing steadily, and
Snyder Bakeries is being forced to look at its operations. In ad-
dition, turnover and dissatisfaction among Snyder employees
have been high. Mr. Lowell Snyder, President of Snyder Bak-
eries, is looking to you for help in redesigning the company’s
quality program. He would like you to focus on helping Snyder
INTERNET CHALLENGE SNYDER BAKERIES • 181
2. Use one of the quality tools described in the chapter to
analyze the defects in the case. How do the quality dimensions
differ between the two materials? Are there more defects associ-
ated with the super plastic versus the standard material?
3. Given your findings, what should Jose do?
www.wiley.com/college/reid
knowledge of the material in Chapter 5 of your textbook while
preparing you for your future assignments.
To access the Web site:
• Go to www.wiley.com/college/reid
• Click Student Companion Site
• Click Virtual Company
• Click Consulting Assignments
• Click Total Quality Management at CII
Bakeries develop a team approach among its employees as part
of the implementing principles of total quality management.
To help Mr. Snyder, use the Internet as a source of informa-
tion. Perform an Internet search to identify at least two companies
that Snyder Bakeries can use as a benchmark for developing a
team approach among employees. Explain how each of these
competitors uses teams, how the teams are developed, how incen-
tives are provided, and how employees are motivated. Also iden-
tify the benefits these companies have gained from using the team
approach. Finally, outline a plan for Mr. Snyder based on the in-
formation you have gathered.