IMPLEMENTING INITIATIVES ON QUALITY: AN INTRODUCTION TO THE SPECIAL ISSUE ON TOTAL QUALITY MANAGEMENT

In the early 1980s, companies around the world, learning from the Japanese experience, saw that they could address their severe competitive problems related to productivity and quality only by looking at the entire set of processes and organizational relationships in the context of the customer's needs. This approach was termed total quality management (TQM). As companies pursue quality-related initiatives, they must deal with a number of issues; some of these issues are addressed here: measurement of benefits, feedback and recognition, work-teams, teaching continuous improvement, and enhancing the effectiveness of statistical process control charts.     

DEVELOPING SOPHISTICATED QUALITY IMPROVEMENT APPROACHES THROUGH BUSINESS-ACADEME COLLABORATIONS: INTRODUCTION TO THE SPECIAL ISSUE

The pursuit of better performance has led to a number of business-academe collaborations. These collaborators have developed a number of sophisticated approaches that go far beyond such traditional simple methods as benchmarking against the best company, Ishikawa diagrams on feedback and control, Pareto diagrams, incentive systems based solely on output or quality, standard process control charts, and separate treatment of control charts and product inspection. The authors in this special issue report on approaches like benchmarking industrial performance through industry studies; the use of an artificial-intelligence statistical-tree growing method to analyze complex customer service data; an incentive system based on the total quality management (TQM) concepts of continuous improvement, teamwork, adaptation to change, and a focus on customer satisfaction; and integration of product inspection and process control. Because of the continuing widespread interest in TQM, there is an opportunity to take stock of how successful TQM initiatives have been and how we should consolidate and further extend the knowledge in TQM. Two of the papers report on the gap between what organizations espouse as TQM and what they actually implement and on the literature on TQM.     

Education DEVELOPMENT AND VALIDATION OF A TOOL FOR ASSIGNING STUDENTS TO GROUPS FOR CLASS PROJECTS*

Group project work is an integral part of many university courses. Assigning students to project groups can be difficult because of the students' diverse backgrounds. Many instructors therefore decide not to assign group projects. This paper develops and validates an instrument that assigns both experienced and inexperienced students to different project groups, thereby creating a balanced, fair environment. The instrument is checked for reliability and validity and then is used to assign students to different project groups. Based on group performance, the end-of-the-semester results also are provided. Path analysis is used to test a causal model. Conclusions and implications for future research are presented.     

LEARNING TO REOPTIMIZE CONSUMPTION AT NEW INCOME LEVELS: A RATIONALE FOR PROSPECT THEORY

This paper provides a theoretical rationale for three experimental results of Prospect Theory: risk preferences are over gains and losses, loss aversion, and diminishing sensitivity. We consider a (boundedly rational) decision maker who does not find her new optimal consumption bundle with certainty when she is faced with a new income level. This alters her indirect utility function and makes her more risk averse at her current reference income level and less risk averse for a range of incomes below her reference income level. (JEL: D11)     

A PROFIT-MAXIMIZATION MODEL FOR A RETAILER'S STOCKING DECISIONS ON PRODUCTS SUBJECT TO SUDDEN OBSOLESCENCE

A product has been formally denned as being subject to sudden obsolescence if its lifetime is negative exponentially distributed. Using an approximate model, Masters suggested that the traditional method of incorporating obsolescence cost as a component of inventory holding costs in the economic order quantity (EOQ) model was appropriate-for products subject to sudden obsolescence, provided that the obsolescence cost component was computed properly. Unfortunately, current practice of the EOQ model seriously underestimates the costs of sudden obsolescence. An exact model demonstrating that Masters' model also underestimated true lifetime costs and overestimated the optimal order quantity has been presented. Neither of these models addressed quantity discounts. Furthermore, with their cost-minimization focus, these models fail to identify situations when minimized costs exceed expected revenues. We extend Joglekar and Lee's model to focus on maximizing profits, rather than minimizing costs. This model answers such questions as whether to stock the product at all, whether to accept a quantity discount offer, and what order quantity to use. Numerical examples and sensitivity analyses suggest that Masters' model provides a significant improvement over the traditional model in moving toward true optimality. However, they also illustrate situations where both the traditional and the Masters' model accept a quantity discount that deserves to be rejected and stock a product that should not be stocked. In such situations, it seems important that a retailer uses the profit-maximization model presented here.