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BUSINESS BUSINESS ESSENTIALS

What Is Total Quality Management

(TQM), and Why Is It Important?
By THE INVESTOPEDIA TEAM Updated June 19, 2024

Reviewed by ROBERT C. KELLY

Fact checked by YARILET PEREZ

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What Is Total Quality Management (TQM)?

Total quality management (TQM) is the continual process of detecting and
reducing or eliminating errors in manufacturing. It streamlines supply chain
management, improves the customer experience, and ensures that employees
are up to speed with training.

Total quality management aims to hold all parties involved in the production
process accountable for the overall quality of the final product or service.

KEY TAKEAWAYS
Total quality management (TQM) is an ongoing process of detecting
and reducing or eliminating errors.
TQM is used to streamline supply chain management, improve
customer service, and ensure that employees are properly trained.
The focus is to improve the quality of an organization’s outputs,
including goods and services, through the continual improvement of
internal practices.
Total quality management aims to hold all parties involved in the
production process accountable for the overall quality of the final
product or service.
There are often eight guiding principles to TQM that range from
focusing on customers, to continually improving, and adhering to
processes.
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Katie Kerpel / Investopedia

Understanding Total Quality Management (TQM)

Total quality management is a structured approach to overall organizational
management. The focus of the process is to improve the quality of an
organization’s outputs, including goods and services, through the continual
improvement of internal practices. The standards set as part of the TQM
approach can reflect both internal priorities and any industry standards
currently in place.

Industry standards can be defined at multiple levels and may include

adherence to various laws and regulations governing the operation of a
particular business. Industry standards can also include the production of items
to an understood norm, even if the norm is not backed by official regulations.
Acceptance sampling might be used to check the progress toward the TQM goal.

Example of TQM
Perhaps the most famous example of TQM is Toyota’s implementation of
the kanban system. A kanban is a physical signal that creates a chain reaction,
resulting in a specific action. Toyota used this idea to implement its just-in-time
(JIT) inventory process. [1]

The company decided to keep just enough inventory on hand to fill customer
orders as they were generated to make its assembly line more efficient. All parts
of Toyota’s assembly line are therefore assigned a physical card that has an
associated inventory number.

The card is removed and moved up the supply chain right before a part is
installed in a car, effectively requesting another of the same part. This allows
the company to keep its inventory lean and not overstock unnecessary assets.
Effective quality management resulted in better automobiles that could be
produced at an affordable price.

History of TQM
 TQM’s history often dates back to the early 1900s, when Walter A. Shewhart
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introduced modern quality control. Shewhart produced a landmark piece of
TABLE OF CONTENTS industrial work titled “Economic Control of Quality of Manufactured Product” in
1931. This exposition is considered one of the founding and basic principles of
manufacturing quality control. [2]

Further developments in Shewhart’s work introduced new standards in quality

management decades later. Joseph M. Juran published a book called “What Is
Total Quality Control? The Japanese Way” in 1954. The work was based on
Juran’s experience of being invited to Japan by Japanese scientists and
engineers. Juran later co-authored “Quality Planning and Analysis,” another
bestseller in TQM. [3]

Another prominent figure in TQM history is W. Edwards Deming. Posted in

Japan after World War II, Deming became involved with the Union of Japanese
Scientists and Engineers (JUSE). His career work included several TQM
frameworks (Deming’s 14 Points, Deming’s Seven Deadly Diseases of
Management, and The Deming Wheel). [4]

Primary Principles of TQM

TQM is considered a customer-focused process that focuses on consistently
improving business operations management. It strives to ensure that all
associated employees work toward the common goals of improving product or
service quality, as well as improving the procedures that are in place for
production. Several guiding principles define TQM.

Focus on Customers
Under TQM, your customers define whether your products are high quality.
Customer input is highly valued because it allows a company to better
understand the needs and requirements in the manufacturing process.
Customer surveys may reveal insufficient durability of goods. This input is then
fed back into TQM systems to implement better raw material sourcing,
manufacturing processes, and quality control procedures.

Commitment by Employees
Employees must buy into the processes and system if TQM is going to be
successful. This includes clearly communicating across departments and
leaders what goals, expectations, needs, and constraints are in place. A
company adopting TQM principles must be willing to train employees and give
them sufficient resources to complete tasks successfully and on time. TQM also
strives to reduce attrition and maintain knowledgeable workers.

Improve Continuously
A company should gradually evolve and strive for incremental, small
improvements as it learns more about its customers, processes, and
competition. This concept of continuous improvement helps a company adapt
to changing market expectations. It allows for greater adaptability to different
products, markets, customers, or regions. Continuous improvement also drives
and widens the competitive advantage that a company has built over related
companies.

Adherence to Processes
TQM’s systematic approach relies heavily on process flowcharts, TQM diagrams,
visual action plans, and documented workflows. Every member engaged in the
process must be aware and educated on their part of the process to ensure
proper steps are taken at the right time of production. These processes are then
continually analyzed to better understand deficiencies in the process.

Strategic and Systematic Approach

 A company’s processes and procedures should be a direct reflection of the
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organization’s vision, mission, and long-term plan. TQM calls for a system
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integrating quality as its core component and making the appropriate financial
investments to make that happen.

Data Utilization
The systematic approach of TQM only works if feedback and input are given to
evaluate how the process flow is moving. Management must continually rely on
production, turnover, efficiency, and employee metrics to correlate the
anticipated outcomes with the actual results.

TQM relies heavily on documentation and planning, and only by utilizing and
analyzing data can management understand if those plans are being met.

Integrate Systems
One way to utilize data is to integrate systems. TQM strategies believe systems
should talk to each other, conveying useful information across departments
and making smart decisions.

When goods or inventory are used in one area, another department should
have immediate access to that enterprise resource planning (ERP) information.
TQM strives to allow everyone to be on the same page at the same time by
linking data sources and sharing information across systems.

Communication
Data may transfer between departments freely, but there is a human element to
coordinating processes and making sure an entire production line is operating
efficiently.

Effective communication plays a large part in TQM to motivate employees,

educate members along a process, and avoid process errors, whether it is
normal day-to-day operations or large organizational changes.

Important: Successful TQM requires a company-wide buy-in of every

principle. The benefits of TQM quickly diminish if a company does not
receive complete buy-in.

How to Implement TQM

TQM is a unique process. There is not a specific formula for implementing a
system that suits every business and each type of industry. But you can create a
checklist of issues that might suit your enterprise and proceed with them in
chronological order. Some may suit your business, while others will not. Select
those that you think will provide an advantage.

Identify your company’s existing culture, its core values, and its systems.
Use this information to create a system that will serve as your master plan.
Establish what your customers and clients want and what they expect from
your business. Determine how to best meet these expectations and needs.
Create a team of management and employees to guide and implement your
goals, and include these efforts in your daily business management process.
Consistently gather feedback from employees and customers to gauge your
progress.

Advantages and Disadvantages of TQM

TQM results in a company making a product for less when it’s implemented
correctly. Companies that engage in TQM provide more consistent products that
yield stronger customer loyalty when they emphasize quality and minimize
waste.