text: 1 QUALITY MANAGEMENT MBA 453 2 PAPER 453 : QUALITY MANAGEMENT Unit – 1 Concept of Quality – Quality as customer delight – Quality as meeting standards – Actual vs Perceived quality – Concept of total quality – Design, inputs, process and output – Need for Quantity – Function of quality – Philosophy of quality – Old vs new – Quality as a problem and as a challenge – 6 sigma concept. Unit – 2 Quality Management : Fundamentals evolution and objectives – Planning for quality – Quality process – Statistical Process Control – (SPC) and acceptance sampling – Quality assurance – Total quality management. Unit – 3 Quality and Productivity – Quality and cost – Is quality of cost – Benefits of quality – Competition in quality – Role of MNCs in emergence of global quality. Unit – 4 Quality System – Total quality control system vs total quality management system – Total Quality Control (TQC) in Japan, US, Europe – Elements of TQC – Just in time, quality circles, quality teams. Unit – 5 Total Quality Management (TQM) – Elements – TQM in global perspective – Global bench marketing – Business Reengineering – Global standards – ISO 900 series – quality manual – Barriers to TQM. Unit – 6 Total Quality Management and Leadership – Implementing TQM – Market choices – Marketing customer requirements – Maintaining competitive advantage - Core competence and strategic alliances for ensuring quality – Quality review, recognition and reward – Quality awards. 3 QUALITY MANAGEMENT UNIT – 1 1.1 Quality Quality, cost and productivity are still fundamental concerns for management worldwide. The concept of quality has been around us for a vary long time. The characters for quality appear in ancient Chinese and Indian writings. Quality is the vary essence of humanity. The concept of cost too has been around us for at least 10,000 years. Its beginning can be traced to the commencement of trade activities and bartering. Productivity, however, has been around us for only the past 200 years, with its beginnings, identified with the industrial revolution and reinforced with the advent of the Taylor system. A new awareness of quality has dawned in the Indian economy. Quality of both products and services in organizations is being felt as the need of the hour. This is more so with greater thrust on exports and liberalization in Indian economy. Secondly, quality practices are coming to the fore. There is a missionary zeal in implementing TQM and getting ISO 9000 certification. Competitive environment demands a better quality of product or service at lower rates. Only those organizations which manage productivity and quality on a continuous basis are in a position to compete in increasingly competitive global marketplace. The impact of poor quality on any organisation leads to: (i) low customer satisfaction and low market share; (ii) low productivity, revenue and profit; (iii) low morale of workforce; (iv) more rework, material and labour costs; (v) poor quality of goods and services; (vi) high inspection cost; (vii) high process bottlenecks and delay in product shipment; (viii) higher work-in-progress inventory; (ix) high analysis and repair costs; and (x) high material wastage and scarp. Quality is a customer's determination and is certainly not a manufacturer's determination. The modern view of quality is that products should totally satisfy the customer's needs and expectations on a continuous basis. This new concept of quality calls for : (i) well designed products with functional perfection – right the first time (ii) prompt satisfaction of customer's expectations, (iii) excellence in service4 and (iv) absolute empathy with customers. 1.2 HISTORICAL DEVELOPMENT The development of quality activities has spanned over the entire twentieth century. Curiously, significant changes in the approach to quality activities have taken place almost every 20 years. Quality activities have traversed a long path from operator's inspection (1990s) to verification of quality by supervisors (1920) to establishment of quality control departments and 100 per cent inspection (1940s) to statistical quality control (1960s) to TQC with statistical control (1980s) to TQM and statistical problem solving (1990s) to self-managed teams and innovation (late 1990s). This historical development of the quality concepts is shown in Table – 1.1 TABLE : 1.1 QUALITY – HISTORICAL DEVELOPMENTS S. No. Evolving Quality Activities Period in Years 1 Operator inspection 1870 - 1890 2 Foreman verification 1890 – 1920 3 QC Department and 100 per inspection 1920 – 1940 4 QC Department and Statistical Quality Control (SQC) 1940 – 1960 5 Quality Assurance (QA) Department and Statistical Process 1960 – 1980 Control (SPC) 6 TQM, QA Department, Statistical problem solving and 1990 onwards Statistical Process Control (SPC) 1.3 DEFINITION OF QUALITY A number of definitions of quality have been propounded by experts. Some of these, given by quality ‗Gurus', are widely recognized as these have been evolved over a period of time. These are as follows: Quality is fitness for use or purpose - Joseph M. Juran 4 Quality is conformance to requirements – Philip B. Crosby A predictable degree of uniformity an dependability at low cost and suited to market. – W. Edwards Deming ….. development, manufacture, administration and distribution of consistently low cost products and services that customers need and want. - Bill Conway. Total composite of product and service characteristics of marketing, engineering, manufacturing and maintenance through which the product and service in use will meet the expectations of the customer – Armand V. Feigenbaum. Quality is the degree of excellence at an acceptable price and control of variability at an acceptable cost – Broth. The totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs of customers – ISO 8402: Quality Vocabulary. None of the above definitions construed quality as synonymous with prestige or preciousness associated with quality of gem stones, for example. The well-worm analogy of he Rools-Royce and Maruti Esteem as both being cars is worth reiterating to differentiable the terms. A Rolls Royce is a motor car which meets a customer's requirements for transporting people from one location to another but in a luxurious comfort arid in such a way so as to impress people on the way. A Maruti Esteem is no less a ‗quality' car. Its purpose is to transport people from one location to another gut in as cost-effective manner as possible. Other factors such as reliability and safety, for example, are the characteristics which apply to both cars and are shared requirement of their respective customers. Thus most of the above given quality definitions (propounded by quality Gurus, pioneers or specialists in the field of total quality and quality standards) are combinations of the two themes – customer satisfaction and economic cost as explained In cars' example. Since the advent of industrial society, the term ‗quality' has in part related to ‗adequacy' as in conforming adequately to expectations and requirements of use. Generally, an engineer created a set of specifications and if a production crew met these engineering specifications, a ‗quality' product is said to be delivered. For a long time, producing quality products meant making sure that the product conformed to its specifications. This had some degree of credibility – the products were greatly fit for use and the customers were usually more or less satisfied. For our purpose, let us use the definition of quality as: Quality is one which satisfied customers needs and continuously keeps on performing its functions as desired by the customers as per specific standards. Quality is neither a topic of recent interest nor a fashion. It is, and has always been a problem of interest, essential for a firm's and to a nation's competitiveness. Colbert, the famed Minister of Louis the XIV, already in 1664 stated: If our factories will impose through repeated efforts, the superior quality of their products, foreigners will find it advantageous to supplying themselves in France and their wealth will flow to the Kingdom of France. This is one example of many. The ‗American Industrial Way' has traditionally been based on excellence in manufacturing product innovation and a sensitivity to consumers. The test of the market, which brings some firms to profitability and others to oblivion, is also a pervasive part of the American scene. It is these same market tests, expanded by a globalization of business, manufacturing technology and competition, that have raise4d the priority of quality in industrial business strategies. In this chapter we shall be concerned with the definition of the concept of quality. Such definitions are important, for it may mean different things to different things to different people in various circumstances. The industrial notions of quality, although clear and well stated, need not be true measures of quality. Although they are important and serve many purposes, the are only part of a larger picture. The concept of quality 5 Quality can be several things at the same time a may have various meanings, according to the person, the measures applied and the context within which it is considered. Below, we shall consider below, several dimensions and approaches along which quality could be defined. Those are based on both objective and subjective notions of quality, with both tangible and intangible characteristics. "Quality is the search for excellence" ‗Citius, Altius, Fortius meaning ‗Faster, Higher, Stronger', engraved on Olympic medals, symbolized the spirit of competition, seeking and ever greater excellence in man's achievements. The ‗search for excellence' is not new, however; it is inbred in a Darwinian philosophy for the survival of the fittest. Quality is thus an expression of this excellence, which leads one firm's product to dominate another, and to guarantee its survival by establishing a new standard of quality. Over time, excellence creates an image of quality. This is how English clothes, German cameras, French wines and cheeses, and so on, have become marks of excellence. In this context, quality is a perpetual challenge which results both from a process of perpetual improvement and a domination over other, similar products. Of course, new technology can alter such domination. American cars, once an image of excellence, have been gradually been replaced by Japanese cars; for some in the TJS, French wine is gradually being replaced by Californian wine, etc. in this sense, quality is a mark of excellence, persistent and maintained over long periods of time. Such excellence is, of course, a function of habits, culture and values, and may thus vary from person to person and from time to time. "Anything you can do, I can do better" Are Japanese cars better than American? Do blades produced by Gillette last longer than Wilkinson's? Such questions, although hard to answer, may in some cases be dealt with an apparent sense of objectivity. In other words, quality is defined by implication in terms of attributes and some scales used to measure and combine these attributes. In some cases, these attributed may be observed and measured precisely, but they can also be difficult to observe directly and impossible to measure with precision. ‗These situations are some of the ingredients that make quality the intangible variable that firms have difficulties dealing with. Nevertheless, a combination of such attributes, in ‗various proportions' can lead to the definition of a concept of quality. In this sense, quality is defined relative to available alternatives, and can be measured and valued by some imputation associated with these alternatives. "Quality is in the eye of the beholder" Do French perfumes have a better smell than American? Is French Chablis of a better quality than California Chablis? Is French cheese tastier than comparable cheeses produced in the US? Of course, tins is a matter of smell and taste! Quality is then in the eye of the beholden, established over long periods of time by habits, culture and customs which have created ‗standards of quality'. In this case, quality is not what we think it is, but what the customer says it is. J.F.A. Sloet, President of KLM, while addressing the European Council for Quality stated that the essentials of quality is to do what you promised It is not relevant what we think quality is. The only quality that matters… is what our clients think. Peter Drucker, put it in the same terms by stating that it is not what the ‗supplier' puts in, but what the consumer takes out and is willing to pay for. This ‗downstream' view of quality, emphasizing a sensitivity to consumers is in sharp contrast with the traditional ‗upstream' conception of quality. In the early 1980s, for example, American car manufacturers were satisfied that they were producing quality cars, only to see consumers turn towards Japanese made cars. Similarly, at Renault, great efforts were put into developing more efficient engines, while consumers were valuing attributes to which Renault designers were oblivious. Of course, American and European car manufactures have since learned that in an open world, with global competition, quality cannot be poor long. "Quality is the "Proof of he pudding" Quality is what the market says it is. In this sense, quality is only a term that we can define a posteriori, once consumers choices have been expressed relative to a range of potential and competing products. Of course, there may be many reasons for these choices, including each and all of the reasons stated above. Nevertheless, the underlying fact is that we cannot apriori say what quality is. The best of intentions to produce quality products or 6 deliver quality services can falter. In this sense, quality is a variable which can at best be guessed apriori and, perhaps, through successive experimentation, learning and adaptation, it can be refined and improved. "Quality is Value Added" Business preoccupation to measure and value its product and services leads to another view of quality. This view defines quality as value added. It is both what the consumer wants and is willing to pay for. Such views are, of course, motivated by the need to value quality so that sensible decisions regarding a firm's quality supply can be reached. For example, how much is a firm willing to pay for shorter and more reliable supply delays of materials it uses is manufacturing processes? This is, of course measure by what added the buyer gets by such a supply quality. Although difficult to assess, it might be possible to do so in some cases, Inventory stocks, reduced administration costs and smoother production flows may be only a few of the many facets the buyer may consider to value shorter and more reliable delays. The value added in consuming well known label goods compared to unlabelled ones, although much more difficult to measure and define, do exist, since there is clearly a market for ‗overpriced' goods whose essential characteristic is their label. How else could we explain a Chevignon Jacket or Hermes scarf costing three times the price of the same jacket and scarf without the label! As a result, quality is not a term that can be defined simply. Rather, it is composite terms, expressed in terms of attributes which define quality by implication. These attributes express: The relative desirable of products, items, services. The potential for substitutions and product differentiation, both objection and subjective. In this sense, the concept of quality is both objective and subjective, and is based on product and service differentiation, on substitution, as well as on buyer perception and heterogeneity. Substitution combined with subjective (or objective) differentiation thus provides some means that we can use in appreciating and valuing quality if it can be measured or estimated directly or indirectly in terms of other variables. If products are not substituted (meaning that they are not comparable), then quality as a variable used to compare these products is not relevant. Differentiation of products can be subjective, perceived differently by consumers. Beauty, taste, smell are perceived differently by buyers. In this sense, quality is a concept expressed by a consumer population's heterogeneity, as we pointed out earlier. Thus, heterogeneity induces an unequal assessment of what is quality. If consumers are the same' in terms of how they value and assess characteristics associated with a product, then they may be considered homogeneous, and the concept of quality would be well defined in terms of ‗agreed on' properties. For example, the number of shaves one can have with a Gillette sensor blade compared to a standard one, the temperature tolerance of Titanium (needed to fabricate jet engines) compared to some other materials, the hardness of graphite steel compared to other types of steel, are all objective dimensions along which quality is measured. 1.4 WHO IS THE CUSTOMER? For an organisation seeking major improvement, the customer is the primary driving force. Obvously, the external customer who pays for the service is important for the reasons outlined above in winning and losing customers. But who he or she? Which one? Do we respond to the needs of the big customer or the small one?.... the demanding one or the passive one?... the immediate purchaser or the consumer? The reality is we will be dealing with many customers on continuous basis and they are all important. In a Quality organisatoin, the must have a customer – a person to tell us whether we have got it right or not. Without an identified customer, we should why we are doing this activity. With an identified customer, we can find out what is needed, if everyone is thinking ‗customer' in this way, a strong movement for improvement is created. At the beginning of a Quality process, many companies define categories of customer to help people understand the need for customer-orientation. Distinctions are made between internal customers and external and sometimes between customers and consumers if both are supplied, e.g. a PC manufacturer who sells to the public as well as through dealers. Ultimately though the same generic concept applies throughout – my customer is the person receiving this service which I am providing now. Ian Valiance, Chairman of BT, thinks of his customers as constituents'' including the government, the public (he receives 20,000 letters a month), industrial users and the people reporting to him. They are all his customers and he ruthlessly manages his time to devote appropriate attention to all of them. 7 In fact, most managers and also staff have complex constituents like Ian Valiance. We will find that we can categorise them as we under stand their needs better. For example, until the Quality movement hit the airlines, passengers were just passengers; now there are many subdivisions such as business travelers, vacationers, family visitors, children travelling without parents. Such categorization provides crucial focus on the differing needs and enabled British Airways, early on in their Quality process, to provide directly for each group, with, for example, the Young Fliers programme. Identifying market segments from which distinct customer requirements can be characterized moves the supplier further away from ‗product-out' thinking, where it is up to the customer to adjust his needs around our offering. Each customer category is still a compromise though and the smaller and more sharply defined the grouping, the closer we are able to match each customer's need. The customer concept can be used to challenge each business unit, each work team and each person in a Quality organisation to make the focus tighter and tighter until, ultimately, it is one person – the person being served now. As such, the customer concept, as with Quality itself, if both strategic and tactical. We need strategic customer focus in order to design the products to attract customer interest and also to create the processes to deliver to their needs. But to really satisfy customers we have to be albe to adjust tactically too. When it comes down to winning or losing customers, service is personal – one to one. The customer has no interest at all in our other customers. John Mitchell's customer felt as if there was no one more important to him than her and the stained dress. However both our company is, that is the feeling we should be giving each customer. 1.5 WINNING CUSTOMERS We do not sell to customers today; they buy. that is, they call the tune; they have the choice and will only buy from us if we make it easy for them or special for them. This applies whether they are existing customers or new ones. Customers buy on the value to them. The value is a perceived balance of features against cost. The customer is buying for a need, which might be to fulfill the requirements of another customer, to make life easier or more interesting, to counter a concern. The need is what determines the judgment of value of hence the attractiveness of particular features. The need may well be as much emotional as physical. Thus the judgment of value is a complex one going way beyond point-in-time product or service attributes. The cost element of value is not simply the price tag either. The customer may well be weighing up the cost of use as well as purchase and the cost of doing business with us as opposed to someone else. Value is an individual judgment. What is important to one customer may be less so to another. Velcro USA President, Theodor Krantz, discovered this from Velcro's better understanding of their customers' needs as their Quality process took hold: ‗Quality is not absolute, it depends on the customer's perception and requirements. For textile customers, appearances are important, whereas in the medical business the concern is cleanliness. The auto makers want durability, reliability and capability. With government, the specifications are all-important.' FIGURE: 1.1 VALUE vs. DISTINCTION Page No. 10 Value is also a relative judgment. ‗In the shoe industry, the hook and loop on a pair of kids sneakers is not especially important since the goods are barely used for three months. But with a $600 knee brace, the quality of the hook and loop closure is very important.' Relative value is equally influenced by competitive offerings and novelty. For this reason alone, we have to continually upgrade our products and services. For many years, reliability has been a top factor in car buying. Today, most cars (not all) are very reliable and this factor is beginning to be taken for granted. 8 Like safety in airline travel. Car makers have to retain reliability because to lose it would be disastrous, but have to provide many more new features as well. For US discovered this a few years ago. They had spend many years of an intense Quality programme concentrating on the vital need to raise reliability. Somewhat to their surprise, when they launched their highly successful Taurus, customers rated them pretty average on reliability but very god on extra thoughtful features. In fact, Ford had put a lot more effort into listening to what customers wanted and had built in some 1,200 items from a customers – wish list. These were quite mundane thins like cup holders or quiet door-closing but they made a noticeable difference. Ford describe this success as focusing on ‗the things that go right' as well as ‗the things that go wrong'. Value is perishable and has to be renewed. When it comes to attracting new customers as opposed to retaining existing ones, the supplier has to work even harder. Customers have the power to switch and may do so without compunction when persuaded, but they are also lazy. They are not going to seek you out; you have to attract them. This requires a distinctive offering in the market place to stand out from all the others. Again this factor is perishable; what is distinctive one year is ordinary the next unless it is continually upgraded. 1.6 DELIGHTING THE CUSTOMER Of course, we should be waiting for our problems to trigger our ability to impress the customer. If we4 are really managing our customer, we are watching for his problems and using our talents to help. This brings us into that rarefied area of customer delight: doing something that feels special to the customer – exceeding his expectations. Not necessarily surprising the customer, this can backfire, not going over the top, this may be impossible to repeat, but simply doing that little bit better. Richard Branson's dream was not really to run a world-beating record business, that was merely something he was good at; his real ambition was to run airline. Before starting Virgin Atlantic, he knew he would have to do that little bit better. He knew all about Laker and People's Express, independent players who were unable to withstand the muscle of the airline giants. His first service across the Atlantic was indeed very similar to Laker, offering cut-price tickets which the majors followed. Gradually, Branson worked out a different strategy, adding entertainment (imported fro his record business) for his young adult customer base. This led him to his major break though, a superior service for business travelers. Business trade is the lucrative end of airline revenue because of the high and non-discounted ticket prices. Branson talked and listened to business travelers (literally, by regularly traveling himself and getting to know his fellow passengers) and built up a picture of the regular businessman's likes and dislikes about air travel. Form this picture, he created Virgin Upper Class. Upper Class was the first with individual video players, something all the major airlines are copying – slowly because of the huge installation tasks for the big fleets. He set a style of service which was personal, empowering cabin crew to care for passengers in their own way, rather than to over-standardized patterns, again an advantage of being smaller and focused. He added neck massages and aromatherapy kits because his passengers were concerned about the effect of air travel on their bodies. He looked after his passengers way beyond the terminal, sending limousines to collect and deliver door to door. Richard Branson introduced all these features ahead of his big established competitors; indeed he did the whole thing a little better. As a result, he delighted his customers. They told others and Virgin Atlantic's success was assumed. In the early nineties, Upper Class is the service the other North Atlantic carries are striving to better. Customer delight is a wonderful thing to achieve. The customer does the reverse of spreading the bad news and tells his friends of his good judgment in finding this special service (as we've seen he won't tell quite as many; good news doesn't travel as far as bad but the good feeling may last). The supplier and his team feel good about their work being valued. But it is a very delicate emotion. He cannot be thrilled every time, but he will miss it if we revert to ordinary service. We have raised his expecte4atoin and we have no choice but so set our sights higher and do something better. This is the true power of customer-orientation: to please the customer, continuous improvement is mandatory. 1.7 STANDARDS Standards crystallize past experience and knowledge. It would be no exaggeration to say that industrial production efficiency depends on the number of effective standards set and utilized. However, some people 9 believe that standards are enslaving and stifle creativity. To set effective standards, it is first necessary to understand correctly what standards actually are. Standards based on scientific laws, versus business contracts The basic requirement of industrial production is to manufacture, as cheaply as possible, products that satisfy consumer demand. Ways of reducing costs include purchasing materials cheaply and making use of cheap labor. These are management devices, not technical ones. Technical measures might include lowering materials consumption per product unit or raising per-capita value-adding productivity. Raising productivity through technology basically involved using scientific laws and principles in the production process. Modern industry is based on scientific progress, and the application of science to manufacturing has enabled the mass production of sophisticated products that were previously unimaginable. Industrial production is achieved through a wide-ranging application of known scientific laws and principles in such diverse fields as mechanics, thermodynamics, strength of materials, electro-magnetic, vibration science, metallurgy, chemistry, biology, and so on. Industrial production efficiency is determined by how skillfully these laws and principles are applied to achieving specific objectives. Technical standards embody the most efficient methods from all those methods technically feasible at any given time. Although they may change when a more efficient method is discovered, until this happens they represent the best methods known. Although work can still be accomplished even without adhering to standards, failure to do so inevitably leads to lowered efficiency. Trying to maintain efficiency also has an effect on quality. A technical standards enshrines current best practices; deviation from it can cause either a drop in efficiency or deterioration in quality. Thus, work must be carried out in accordance with the standards if the specified quality at maximum efficiency is to be produced. Although human beings can discover and make use of the laws of nature, they cannot invent or change them. Utilizing natural laws in industry therefore means manufacturing in accordance with these laws. Work that fails to take them into account is bound to result in harm. The process of manufacturing a given product inevitably defines itself in the course of pursuing greater efficiency. A process created in this way when becomes a standard, and many standards relating to design, manufacturing technology, and production are of this type. While standards based on scientific laws a principles are naturally be fined by the pursuit of quality and efficiency, some standards are artificial conventions deliberately imposed by human beings. There is no natural law that makes such standards mandatory; people formulate and enforce them because they find it convenient to do so for social or business reasons. For example, it really does not matter whether people drive on the right or left side of the road, but there would be trouble if this was used as a reason for not stipulating which side people have to drive on. One side or the other must be specified. Various system of weights and measures also exist, such as the metric, imperial, and ancient Japanese systems. It would be convenient if the same system was used all over the world, and most countries have adopted the metric system as a standard. It would also be convenient if electricity supplies all over the world used the same voltage and frequency. Standards constituting social or business conventions are imposed for reasons of convenience or safety. Depending on what they cover, they are prescribed in the form of national, industrial, company, and divisional standards. Unlike standards based on natural lay, they are not absolute; with this type of standard, people are free to choose what is specified. The appropriateness of a standard of this type can be verified by weighing up the social disadvantages that would arise if it did not exist. If dispensing with such a standard would cause no problems, it is probably an meaningless restriction and ought to be abolished. Interchangeability The biggest advantage of standardization is interchangeability. When part of a system break down, it is extremely economical if the malfunctioning part can be replaced without having to renew the whole system. Interchangeability also makes dividsion of labour possible. For example, since the dimensions of light fittings are standardized, light-bulb manufactures can concentrate on makin light bulbs wile socked manufactures can specialize in making sockets, independently of each other. Nor are the benefits of interchangeability limited to material objects; when work is performed in accordance with design standards, operating standards and so on. 10 The result is the same whoever is doing the job. This normally insulates an organization from the effect of changes in its personnel. Artistic creation is a strong expression of individuality, and it has a different purpose form economic manufacturing. In industrial production, people can not be allowed to disobey standards at a whim, Tape-recorder manufactures must conduct research into tape standards, and light-club manufactures can not ignore the standards for light-bulb fittings. Less time spent on thinking and communicating Formulas used in mathematics, physics and other sciences are a type of standard. For example, if the correct formula is known, a problem in dynamics can be solved even without understanding the underlying principles. If a standard drafting practice if prescribed, a draftsperson does not need to think about what drawing method to use. If strength calculations are performed by applying a fixed formula, an engineer does not have to solve differential equation each time. When standard parts are used their reliability is known without having to test them. Thus, much design and development work can be dispensed with and this permits designers to design highly-reliable products by concentrating their efforts on new, untried parts and the interfaces between these and standard parts. There is also no need to show standard parts in drawings, because simply specifying the part number is sufficient. Likewise, if srandard test methods exist, this means that there is no need to think about the test conditions each time. Another form of standard is a design manual, which is a distillation of the expertise of all pervious designers. It contains more technical experience than any individual designer could use in a lifetime. Production of more reliable products Novel products and processes are beset with reliability problems. Even Japan's famous Bullet Train network, which operated without serious mishap for 30 years after its inauguration, is no exception just after its inauguration, it was discovered that when it traveled in deep snow at the speed of 200 kilometers per hour. Problems occurred with the carriage wheels. The design engineers, renowned for their technical prowess and cautious approach, had failed to take into account he effects of deep snow at high speeds. Even trying to think hard of everything is sometimes less effective than conducting a single experiment. Standardized parts and processes are the fruits of past experience, and they are less likely to cause problems though type may appear old-fashioned and unexciting. The greater the number of standardized parts and processes used, the fewer new ones are needed. This enables designers, engineers, and others to concentrate on carefully testing the reliability of the new elements of products, permitting them to develop novel products with high overall reliability. Management by Standards When a fault appears in a product it is vital to trace its cause in order to prevent its recurrence. From the standardization viewpoint, there are three main causes of product malfunction: 1) No standards were set; 2) Standards were set, but they were inadequate; 3) Standards were set, but they were not obeyed. When a product made to standards runs into trouble, something is wrong with the standard. Investingating a problem enables a better standard to be created. A company's technology is supported by its engineers and its standards;' as an organisation, its technology is stored within its written standards. An organisation cannot make technical progress if mistakes result in no more than are working of the faulty product or a learning experience for an individual engineer; improvement takes place and technical levels rise when standards are revised as a result of mistakes. Although standardization is so important, some companies and divisions are slow to practice it. Preparing effective standards takes a certain amount of time, and it is difficult for people to find that time when they are fully occupied with the work at hand. Like planning, standardization is work for the future, but many managers are so engrossed in solving their present problems that they show little interest in standardization. When trouble occurs, they 11 immediately ask, ―Whose fault is it?‖ rather than, ―What caused it?‖, searching for a scapegoat instead of the cause. They then come down hard on whoever they think is to blame. In this situation, the managers' subordinates give them distorted information the situation is incorrectly assessed, mistaken judgments are made, and one problem leads to another. It is vital management task to set and revise standards and ensure that the work is performed in accordance with them. This must be done in order to stop fresh trouble in its tracks and prevent problems that do occur from cropping up again in the future. Management by standards means constantly referring back to the standards. 1.7 WHAT IS TOTAL QUALITY? In order to analyze and fully understand the term total quality, we may discuss some popular definitions in the succeeding text. Total quality is defined as the mobilization of the whole organisation to achieve quality continuously, economically and in entirety. According to Atkinson (1993) total quality is a strategic approach to product the best product and service possible—through constant innovation. Concentration should not be only on the production side but also on the service side of a business. General perception is that improvement in quality is possible only during production but total quality cannot be achieved without significant improvement in purchasing, marketing after sales service and a host of other areas of business. Many companies may produce ‗zero defect' products but the company's quality still is not right. There are other functions which can let the company down. The right product delivered at the wrong time can have catastrophic impact on both buyer and seller. A research report found that 95 percent of companies deliver their products late. This late delivery can have just as bad impact upon future buying decision as can increasing the price of the product by 50 percent. Invoicing can also crate problems. Delivering the right product but invoicing incorrectly can delay payment to the supplier for as much as 3 months or longer. Salesman promising the earth in back-up can leave the disappointed customer cold and indifferent to further trading with the company. Thus quality has to be 100 (not even 99.999…) percent and is the responsibility of everybody. This quality with 100 percent utilization of all resources is what we call total quality. Total quality not only satisfies but delights the customers by offering attractive features in products and services. Total quality is needed to be supplied to customers by the Indian companies in their products and services. 1.8 Design The complexity of business problems, organizations, operational and service systems, the number of variables they involve, as well as the often chaotic environment to which they are subjected make it difficult to use prior knowledge (in the form of mathematical models for example) to construct and calibrate these systems. In these cases, experimentation is an important approach to generate knowledge which can be used for effective analysis an decision making. When a product is put to use, the number of intervening variables may be too large, some of which may also be uncontrollable. Further, experiments are usually costly: there nay be many variables and potentially a great deal of experimental variation and errors, making the experimental results obtained difficult to compare and analyze in a statistically acceptable manner. For such situations, experimental design, when it is properly used, provides a set of consistent procedures and principles for collecting data so that an estimate of relationships between one set of variables, called explanatory a variables, and another, called dependent variables, can be performed (even if there are experimental errors). For example, we might seek to build a relationship between supply delay (the dependent variable) and a number explanatory variables such as the number of transport trucks ( which can be controlled), weather conditions and traffic intensity (which cannot be controlled). When variables can be controlled, this can be used to reduce the amount of experimental variation. In other cases, selection of the levels associated with these variables might be desired and valued in terms of some objectives function. ‗The selection of variables' levels is a design problem which we will consider at the end of this chapter. Both the experimental and design problems are extremely important and useful. For example, to test a production process in a factor, it might be possible to limit the number of variables (i.e. maintain them in control) which affect a product's or a process' performance by controlling some of the variables (e.g. the pressure, the temperature used in the process, and so on). Of course, experimental designs are not an end but a means to generate information analyze data a make decisions. Even when such decisions are reached, they are based on forecasts, which are in the best of circumstances only forecasts. There may be surprise4s and deviations from standards operating conditions. These deviations can be 12 controlled through inspection and control charts. Alternatively, it might be possible to design products or process (or both) which would be insensitive to unexpected variations and perform equally well under a broad set of conditions which we might not be able to control. When a product (or process) can perform in such a manner over a large set of variations, it is said to be robust. Robust design then consists of selecting controllable parameters which achieve a robust function (at a possibly lower cost). A robust design implies ‗fitness to use', even when there can be many unpredictable variations. In this sense, robustness is an essential feature of the design process, product or service, and seeks to ‗build quality in the product'. For this reason, robust design in often associated with ‗off-line quality control'. This means that control is not performed on-line but off-line. To use experimental and robust design we require first that: (a) We define what we mean by quality in precise and operational terms; (b) We use TQM tools (such as Pareto charts, brainstorming, fishbone or cause – effect diagrams, data analysis techniques and other tools) to select the ‗vital few' variables (which we will call factors, and that we will use in our experimental and robust design) which are most pertinent to our problem, both form economic and explanatory points of views. (c) We apply experimental design techniques to gather data which will be meaningful both statistically and economically. This data will be called experimental response. (d) Estimate a relationship between the response and the experimental factors (the independent variables). (e) Optimize the controllable parameters (i.e. the design factors) such that the system, the product or the production process being designed conforms to agreed upon desirable operating conditions and over a broad range of environmental and uncontrollable conditions. (f) Finally, we test, inspect and verify the product or process performance to ensure that it is operating in conformance to the defined standards, and leads to a business process optimization (measured in terms of profits, consumers satisfaction and their variability) Definition of quality Planning of Factors experiments definition Statistical analysis Economics criteria Design and Robust design robustness engineering efficiency Tests, SPC/ SQC, controls FIGURE : 1.2 THE CONCERNS OF QUALITY MANAGEMENT In figure: 1.2, we summarize the concern for quality and the intensive use it makes of TQM tools, experimental design, statistical analysis, applying economic and robust design and, finally, inspecting and testing to verify that the results conform to the design intentions. To achieve meaningful experimental results, experimental design reduces experimental errors through a choice of experimental plans, the control of factors (by blocking them to specific values) and the application of statistical techniques such as randomization, confounding and replication. 13 1.10 Attributes of a Good Design A good design reflect an optimal trade-off between cost and performance. A good design is one which as: Cheap; Operates well over a large range; Compatible with related precuts; Cheap and Simple It is easy to make a design more complicated, but it take genius to simplify a design. The virtues of simplicity are many. Simple designs are cheaper to produce than complex designs, because complexity requires precisions, and high precision is more difficult to achieve than low precision. Simplicity means minimizing the number of parts In a product. The number of parts in new generation dishwashers, cars and watches have been reduced by up to two-thirds compared to old designs. Construction, too has been simplified. For example, instead of assembling parts with screws and fasteners, these can now be grouped into sub-assemblies and mounted upon molded frames that snap together. Costs are reduced as a result of: Fewer suppliers, less administration and supplier supervision and fewer supplier-related problems. Quicker assembly and production. Increased robustness Reduced cost as a result of 1,2 and 3 and the benefits of standardization. Greater customer satisfaction as a result of 1,2,3 and 4. Integration and process capability Good design requires not only a clear customer focus, but must integrate with the organization's technology, culture, market orientation, and so forth. Product design should be an opportunity for the organisation lead from strength. This means that designers must take into account the process capability of their organisation. Process capacity basically means: Can we do it? The time to discover whether capability exists is at the design stage. This is so obvious, and yet it is surprising just how many products and services are launched without the basic capability to pursue them. Process capability analysis must cover all aspects of an organization's activities. It is not only an organization's ability to produce a particular design which matters, but also whether It can distribute and market it. Where new products or services are envisaged the organization's skill and knowledge base are critical factors: such capability has to be cultivated like a garden. Money alone is insufficient, as the large investment houses discovered when they entered the financial services markets following liberalization during 90's. Investment houses tried to beat the competition by continuously poaching the ‗best' people and investing in computers, never acknowledging that no one really understood the new business. Instead of developing capability through training and on-the job experience, many investment houses spent years money to create incompetence. It is critically important that managers ensure that the necessary process capability exists or can be developed in time. Hard evidence is essential. A simple but powerful approach is to differentiate between the following three categories of information: 1. Known 2. Unclear 3. Assumed There is, for example, a difference between obtaining confirmation that the bank will lend money to finance a project and assuming that it will oblige in this way. Assumptions are often unavoidable in decisions about process capability, but they become dangerous when people treat them as ‗knows'. Exposing assumptions is one of the most valuable roles a manager can play in capability analysis as people so easily forget that their ‗knowledge' is 14 but an assumption. We ‗know' that the but will take us to Madras because it says ‗Madras' on the destination board. Yet we cannot be certain that it will do so again, however reasonable the assumptions. 1.11 ACHIEVING A ROBUST DESIGN The variations a product experience in manufacturing are negligible compared with the variation it is subjected to once it passes to the customer. Whereas the concept of zero defects is based upon the Idea that reduced variation in the manufacturing processes leads to reduced variation or failure in the field. Designing in order to reduce product failure in the field simultaneously reduces the likelihood of defects in the manufacturing process. The logic of the argument is as follows. The zero defects approach focuses managerial attention upon ensuring that processes are within acceptable deviations from targets, for example, plus or minus 0.001 millimeter thickness. Any departure from the nominal value means a loss. A bar of chocolate which is slightly below the target value started on the wrapper results in a loss to the purchaser. The manufacturer too may suffer a loss. For instance, the cumulative effect of so many underweight bars may mean boxes cannot be packed as tightly as they should be, resulting in damage in transit. Loss is also incurred if the bars are slightly above the mid-value. For instance, a surplus of three grams multiplied by 1,00,000 bars in 3 kilos of raw material, plus additional handling costs. the customer too may suffer a loss. Taguchi, for instance, quotes the case of the person on a diet eating a product which is a three grams heavier than anticipated. Likewise, is some of the components of a car are above the mid-value the increased weight may result in greater fuel costs. The real weakness of the zero defects approach, however, is that in any batch of products, a significant number will be close to the outer limits of the tolerance levels. Further, many of the other components which comprise the finished product will be in a similar state. This can play havoc with quality. The consequences of variation in a system are potentially catarascopic. A jet aircraft manufactured within the tolerance limits might contain a large proportion of components which are virtually defective. The result is known as ‗tolerance stack-up'. Consistency reduces the probability of catastrophe ‗stack-up' because components all vary. In the same way, even if they are all off-target. Conversely a product which conforms to plus or minus specifications is less robust, because the deviations are random and therefore unpredictable. 1.12 SPEEDING UP THE DESIGN PROCESS The Pressure : Product obsolescence is a major problem for many organizations. The enormous pressure to innovate and market new products quickly means that the danger of Ill-consisdered designs passing into production is high. The problem is exacerbated in a phenomenon known as escalation. As Figure – 1.3 shows, costs increase exponentially once a product passes from the design phase into testing and production. The whole organisation becomes involved\, finance is raised, advertising campaigns are planned equipment is purchased, advance orders are taken, and so on. The process is extremely difficult to reverse and the longer it continues the greater the probability of bad designs becomes bad products. The problem for organisatoins, therefore, is how to innovate quickly but soundly. COS T Conce R&D Pre- Product DURING ion FIGURE 1.3 COST BEHAVIOURProducer DESIGN AND PRODUCTION ptual Phase Phase Phase Phase 15 Marketing haste slowly Exhorting designers to work faster or to cut corners is counter productive. Although a ‗ramped up' organizational culture may help, the real solution is to recognize that whilst some parts of the design process can be speeded up, other parts need to be given more time. Concept design is the most important phase and the one which is least amenable to pressure, at it requires originality and fresh thinking. They should be encouraged to feed their intellect and imagination by undertaking travel, study visits and so forth, without the expectation of an immediate payback. Further, they need to work in an atmosphere where mistakes are regarded as progressive and where painstaking, high-quality work is valued. The research and development phase focuses upon new materials and new processes required to translate the design concept and ambitions into a workable model Product design involves translating the model into detailed specifications and drawings. These latter phases of the design process can be speeded up by; Integration Removing sources of delay Concurrent planning Each these is now discussed in turn. Integration Integration involves the creation of interdisciplinary terms encompassing design, manufacturing and marketing staffs. Engineers would develop the basic product. Once this was complete, designers then added the so- called ‗wrap-round'. Then the manufacturing section had to work out how to product it. Incorporating these three functions in one departments and carrying them out simultaneously has reduced the lead time for new products by over one year. Removing sources of delay Over-control is a major source of delay, so: Keep the brief clear and simple. Minimize the amount of detail in design specifications Ensure designers understand customer needs and production capabilities. The purpose of a design brief should be to liberate designers. It should therefore be confined to essentials, i.e. specifying a maximum of three or four variables. Concurrent planning Quality requires attention to all aspects of a product. Design must therefore consider a wide range of issues, including: Customer performance specifications Design specifications Manufacturing specifications Sales specifications These, too, should concentrate on essentials, those features which are important to the customer. Beware of specifying even essentials too tightly. Fine tolerances are rarely necessary and only make the problem of controlling variability needlessly difficult. Aim for ‗loose tolerances tightly enforced', rather than ‗tight tolerances loosely enforced'. If a customer insist upon tight tolerances, ask why he needs them. Rapid specifications are often a power ploy by which to ‗screw down' the supplier. 16 1.13 THE WORK PROCESS SYSTEM CONCEPT Production is carried out by a multitude of work process system. Figure- 1.4 schematically describers such a system with inflowing resources, transformation processes, and out flowing products and services. Any productive system is embedded in an economic and social environment with which it constantly interacts. In this context quality assurance has to be named as one of the man subsystems of a process system. Other subsystems are the capital and cash flow system, manpower planning, management information, and decision making systems. These subsystems are conceptually and practically interdependent and interactive. One can also distinguish work process systems with reference to the managerial levels of responsibility in a corporate production system in which the plants, branches and individuals jobs and operational systems are subordinated and integrated. Work process systems are not restricted to manufacturing industries, where materials, parts and suppliers are transformed into higher values goods. Practically any business or enterprise uses various resources in order to sell its products and services in the market. Therefore, retail stores, theaters, insurance agencies, and so on, are all to be considered as productive systems. PROCESS OUTPUT INPUT FIGURE : 1.4 WORK PROCESS SYSTEMS 1.14 CATEGORIES FOR WORK PROCESS SYSTEMS Categories for work process systems that aid their conceptualization and design are, for instance: 1. Custom built: One in which customers place their order with the producer or supplier before actual production. This enables both partners to specify quality and other conditions, to meet the customer's particular requirements. 2. Repeat orders: One in which customers place an order ‗for an Item that is already produced or fully designed and standardized. 3. Mass production: Product with standardized items differing form job shop production or production of custom – made items that use intermittent production processes. 4. Projects: They describe production of large items with considerable complexity and uniqueness. 5. Services: Production (provision) of services, normally with direct customer contact before and during production. Such services industries include transportation, public services, insurance, professional services, and the like. These are the main types of productive systems as they occur in reality. Other differentiations can be made such as between small and large businesses. Each type of system has certain aspects in common, and these help to plan products and production more adequately. Managers can orient themselves by common aspects of relevant types and thus simplify their planning. Once the overall production has been properly established, the design of a suitable quality assurance system is also greatly enhanced. Table 1.2 gives some examples of work process systems quite familiar to us. 17 TABLE : 1.2 EXAMPLES OF WORK PROCESS SYSTEM Work Process Systems Major Inputs Assembly Major output Electronic assembly Components, Sub- Assembly T V set assembltes Printing Original Copy Editing, Proof, printing Book Management in general Corporate goals Planning, supervising, Directives, decisions, recoding, analyzing reports, information Quality assurance Quality specification; Designing inspecting, Satisfactory quality standards training audit image 1.15 PLANNING AND CONTROL OF WORK PROCESS The planning and control work process more through the phases similar to those described for planning cycles. The main phases are the system design, the startup, the maintenance, and the termination. These phases describe the life cycle of a productive system. If the productive system is associated with one particular product, as is usually the case in project type productions, then the product life directly determines the productive system's existence. If, for instance, the quality of a directly determines the productive system's existence. If, for instance, the quality of a product builds a sound quality image in the market, then the supporting productive system and its quality assurance subsystem are strengthened as well. Effectiveness of planning and control enhances growth and length of life. In order to plan and control a productive system, each case must be clearly defined and delineated. A useful starting point is to determine the output (current or expected), because the purpose and objective define the productive system. For instance, if the purpose is to assure the quality of a computer chip, the product would have to be specified with regard to application, design criteria, and so forth, along with quantity, delivery mode and timing, location of market, and production and resource bases. By clarifying the output in terms of the material, time, and place dimensions, process capacities and inputs can then also be determined. Once the work process is conceptualized in general aggregate terms, the various subsystems, such as the quality assurance system can be designed. Various aspects, such as the management system, subsystem, plants, departments, and specific markets or customers, each having a direct relationship to the expected output, help to define the quality assurance system under consideration. There one can see that the systems view is a powerful management aid and basic for any systematic planning and control of production and output quality. Each phase of the system life demands specific planning and control activities and management involvements. Forecasts of developments and control information induce frequent review and correction in design, startup and other aspects of production. These phases can have a multitude of complex detailed planning objects and problems. When phrase as questions, problems are more easily understood. Actually asking the right question at the right time to the right person, makes a manager and planner proficient. 1.16 SIGNIFICANCE OF QUALITY Quality of a product or service to an organisation is as important as sound health to a human-being. If a person is not feeling well, it will affect the human-body. Similarly, the quality is a vital factor in shaping the future – well being of an organisatoin. The quality of a product affects an organization's reputation and image, productivity, costs, profitability and its liability to the customers. These factors are discussed as follows: (I) Reputation and Image: Consumer is the king of the market. He will decide the fate, future of the organisatoins. Consumers always desire qualitative products at a reasonable price prices. If an organisation manufactures products as per the expectations of the customers, the quality of the products will infuse image and reputation on the organisatoin. Therefore, the organisation has to devote adequate attention to quality of the products will infuse image and reputation on the organisation. Therefore, the organisation has to devote adequate attention to quality of its products and services, a failure in this regard can damage the organisatoin image and perhaps lead to a decreased share of the market in 18 case of a profit making organizations or increased criticism or controls in the case of a government agency or non profit making organisation. (II) Costs Quality of a product or service is generally associated with the costs incurred by the organisation. Cost is also an important factor to increase the reputation, image and market share of the organisation. Poor quality increases certain costs like scrap and rework costs, replacement and repair costs after purchase, warranty costs, inspection costs, transportation costs, payments to customers and discounts offered to customers to offset the inferior quality. Thus costs are important factors affecting quality of a product or service. (III) Productivity Productivity generally refers to the relationship between and input and output. Productivity and quality are often closely associated. Poor quality can adversely affect productivity during the manufacturing process if parts are defective and have to be reworked, or if an assembler has to try a number of parts before finding one that fits properly. Similarly, poor quality in tools and equipment can lead to injuries and defective output which must be reworked or scraped, thereby reducing the amount of usable output for a given amount of input. (IV) Organization"s Liability Organisation is liable to the customers for the quality of it's product or service. Organisatoin must pay special attention to their potential liability due to damages or injuries resulting fro either faulty design or poor workmanship. Thus, a poorly designed or improper assembly of steering arm on a car might cause the driver to loose control of the car. The organisatoin liability costs can often be substantial, especially if large numbers of items are involved, as in case in the automobile industry. The above factors indicates the importance of quality. Therefore the management has to devote adequate attention in designing the quality of the product, conformance of the product to the plan and so on. If he organisation fails to do so, the poor quality of a product and service will adversely affect the costs of products, reputation and image of the organisation, productivity and profitability and the liability to the customers. 1.17 QUALITY OBJECTIVES An objective is a statement of the desired result to be achieved within a specified time. Whereas policies provide broad guidelines on company affairs, objectives define specific goals. These goals then from the basis of detailed planning of activities. Objectives can be short range (say, 1 year) or long range (say 5 years). The concept of management by objectives is widespread. Under this concept, managers participate in establishing objectives, which are then reduced to writing and become the basis planning for results. Objectives may be created for breakthrough or control. There are many reasons why companies create objectives for breakthrough: 1. They wish to attain or hold quality leadership. 2. They have identified some opportunities to improve income through superior fitness for use. 3. They are losing market share through lack of competitiveness. 4. They have too many field troubles – failures, complaints, returns – and wish to reduce these as well as cutting the external costs resulting form guarantee charges, investigation expense, product discounts etc. 5. They have identified some projects which offer internal cost-reduction opportunities, e.g. improvement of process yields or reduction or scrap, rework, inspection, or testing. 6. They have a poor image with customers, vendors, the public, or other groups of outsiders. 7. To improve motivation and morale among the employees. 1.18 SETTING OF OBJECTIVES Objectives serve as a guide for the decisions and actions necessary for their accomplishment. They are further described in the form of sub goals and subtasks. At the same time, objectives themselves are decisions arrived at after careful consideration of the need, desirability, and feasibility for them in the given context. 19 Some questions to be answered are the following: 1. What should the elements in such a program be? 2. What published quality program standard should be complied with? 3. Should the program include design assurance or should it just be a defect-corrective inspection system? 4. Should the program involve a radical change in current control practices and procedure (a breakthrough), or a more gradual change and improvement? 5. What individual projects and project goals would lead to development and implementation of such a quality control program? 6. Who should be in charge of such projects and who should participate? 7. What deadlines should be set for the accomplishment of the quality control program and for the individual milestones leading up to it? All these questions and many more, require answers that will lead to the formulation of instrumental goals and task assignments. The quality related hierarchy of objectives, goals, and tasks will follow the sequences. This kind of structuring provides for systematic delegation of responsibilities from the top down to the operational functions in a company, and thus for wide participation in determining tasks and responsibilities, and for constructive communication and rational decision making. Objectives for better quality and quality assurance can readily be understood by the company staff, particularly when the need is obvious and the possibility of blaming others no longer exists. Corporate and senior management can use quality assurance objectives for the purpose of achieving general improvement in operations and staff cooperation. The new and innovative quality control program will require major changes in production planning and control, new purchasing procedures, introduction of quality and operation- related audits, and other measures that will have impact on the general work life in the company. Major Principles There are may principles that should be observed when setting quality assurance objectives: 1. The need for greater quality assurance efforts should be convincingly demonstrated and analyzed. Otherwise, objectives will not be perceived as important challenges arid the probability for optimal attainment will be reduced. 2. Objectives must be realistic in view of the financial and human capacity of the company. Ends and means need to be tested as conflicts between them usually create frustration and disharmony. In working for quality assurance, such adversity can very quickly become counter – productive. 3. Objectives must be clear, acceptable, and aligned with policy statements. Visible management input and approval must exist at all times together and in compliance with: Existing codes and standards Facilitation of wide participation of all Allowance for independent decisions and partial goals setting Coordination of objectives, goals, and individual tasks for quality assurance. Translation of goals and tasks into fair and workable performance standards. Visible and meaningful recognition for goal achievement Fair and sufficient support in case of difficulties. Possible revision of tasks and goals and Adaptability 20 Rules and Procedures Most of the rules for sound goal setting seem to be common sense, although their violation frequently leads to just [conditions in a company that breed poor workmanship and poor quality, The style of goal setting for quality assurance, as well as for other outcomes and achievements, depends on senior management policies arid the personalities involved. A chief executive officer must see to it that laws, codes, regulations, and directives horn government sources are complied with. On the other hand, they must also represent the interests of the company and thus actively contribute to quality assurance, not only internally, but also externally. For instance, many major customers impose compliance with published quality assurance standards, such as ISO-9000, ISI and so on. Corporate officers have ample opportunity to participate in the writing of these standards and to participate in setting quality assurance objectives in their industry. Methods and Practice Methods for goal setting range from independent conception, formulation, and communication by the boss to more participatory approaches. The latter type of approach involves the operational staff by the use of quality circles or the more conventional project treams. Through such dynamic goal setting at the grass roots levels, many problems obstructing proper task achievement and workmanship can be overcome without direct senior management involvement. At the same time, more serious and general problems and opportunities for improvement in current quality assurance can be monitored and brought to the attention of supervisory management. Active and comprehensive goal setting for better quality assurance should proceed from the top to the bottom and, to be realistic, also in the reverse order. The recently developed and most frequently applied institutional arrangement is the formation of project teams, each having been assigned specific goals and tasks. Such project teams allow direct input and participations of senior, as well as other, managerial and operational levels of staff. Depending upon the need and the environment, the formation and execution of critical projects becomes a significant milestone in the improvement of quality. In many cases, special tailor-made planning is needed for each key project. The exact form of such a project is decided upon by a combination of the following: 1. Assessing the status quo. 2. Analyzing customers' complaints 3. Analysis of major failures and defects, using histograms, and other similar methods. 4. Base line audits to determine strengths, weaknesses, and voids in current programmes. 5. Comparing the existing program with generic standards. 6. Deriving goals form existing corporate objectives and policies 7. Considering the setting of tasks and methods at the operator level. 1.19 QUALITY AND UNCERTAINTY Uncertainty has several and simultaneous on quality, as will be studied later. Obviously, if value added is quality, and if its is well defined, the measure of that value is what makes it possible to distinguish between various qualities. When value added is uncertain or intangible, its measurement is more difficult, and therefore quality is harder to express. In this sense, uncertainty has an important effect on the definition, measurement and management of quality. How does uncertainty affect? First, a consumer may not be able to observe directly and clearly the attributes of a product. And, if and when he does so, this information is not always fully known, nor true. Misinformation through false advertising, the unfortunate acquisition of faulty products, and poor experience in product consumption are some of the problems that may beset an uninformed consumer. Similarly, some manufactures, although well informed of their products' attributes, may not always fully control the production of their products. Some items may be faulty, the outcome of a manufacturing process' complexity and the inherent difficulties in controls. As a result, uncertainty regarding a product's qualities induces a risk which is imposed on both the firm-producer and the buyer- consumer. This risk has a direct effect on the valued added of quality, and is of course, a function of the presumed attitude towards risk. The approaches used to manage these risks, both for the firm-producer and the consumer-buyer, 21 and how to share these risks, both for the firm-producer and the consumer-buyers, and how to share these risks, is particularly important. Warranty contracts, services contracts, liability laws and the statistical control of quality in a factory are some of the means available to manage these risks, as we shall see throughout this book. Perceived risk has been envisioned as consisting of two essential components: consequences and uncertainty, for a consumer, uncertainty can be viewed as the ‗subjectively measured probability of adverse consequences'. As such, we can postulate that the quality of a product is inversely related to its risk. A non-risky product, meaning a product having desirable consequences with large subjective probabilities, is a quality product. For example, if we buy a part from some supplier, what would we consider quality? It may be several things, but generally it will be defined in terms of an attribute of a part with desirable consequences, and little variation (i.e. high probability). Why were Japanese and European cars at one time considered quality product? Buyers had the subjective estimation that these cars would not fail and require repairs, and with a high probability! In this sense, quality is consistent with an inductive reasoning which is reinforced once consumption experience of the product is registered. For example, Jacoby and Kaplan attempted to measure quality by asking ‗What is the likelihood that there will be something wrong with an unfamiliar brand of XXXX or that it will not work properly?' Quality was meant then to be a perceptive attribute which can, or course, be influenced by the marketing mix, good management of the factory, post sales attention and services. Ingene and Hughes claims that a brand is perceived as being risky and thereby of lower quality) by a consumer if an only if that consumer is uncertain as to what level (of at least one attribute about which he/she is concerned) will be obtained if the product is purchased) Uncertainty regarding product quality has led to intensive legislation on product labeling which seeks to protect consumers on the one band and to convey information on the other. There are a number of important questions which may be raised by buyers and seller alike, for example, the fat content of cheeses and hamburgers sold in supermarkets, the alcohol in wine as we4ll as the origin of products. These do not always indicate quality. Some wine growers believe that the alcohol content should not be put on the wine label. By doing so, alcohol is given an importance and a relevance to wine quality which it does not, in their opinion, have. Cheeses, of all sorts, vary over the year and, therefore, the fat content of the mild is really a relative measure (to the time of the year in which it was produced as well as relative to the origin of the mild used in its production). In the case of Normandy Camembert, there is further confusion since there are not enough cows in Normally to produce even a fraction of the Camembert sold tinder this label! In other words, even a label of origin can be misleading. In the early 1950, for example, some Japanese products, suffering from a poor reputation, had a label of made in USA, meaning the Japanese products, suffering from a poor reputation, had a label of made in USA, meaning the Japanese city of USA. To simplify the labeling of products, colored labels are also used. A red label for chickens in a supermarket is a mark of quality, but under such labels there can be wide variety of chickens which need not have a uniform quality (even though they are all labeled with the same color). In fact, a chicken ‗color' may stand for similar origins, similar growing or feeding conditions, or perhaps just cooperative marketing. Although uncertainty is not a property which defines quality, the measurement and perception of quality are directly affected by uncertainty, for this reason, an operational and economic definition of quality (which is the relevant one for businesses) is necessarily sensitive to uncertainty. Due to the importance of this topic, we shall return to it subsequently. Next, we consider manufacturing quality, which seeks to define the attributes of quality by the manufacturing processes. Such characterization is essential to appreciate the potential and the limits of quality control in industrial and operations management. 1.20 QUALITY IN MANUFACTURING Manufacturing quality, unlike the general concept of quality we sought to define above, is well defined in terms of attributes which are associated to and required by a manufacturing process to operate without any fault. In this sense, quality is a characteristic and a requirement of the industrial apparatus. For example, a factory floor with machines that break down often, machinery that is unable to operate at the required levels of precision, or uniformity of operations, arid general manufacturing systems with a propensity to produce highly heterogeneous quality products are an expression of a manufacturing unquality. Management of operations and quality control are thus the means used to ‗produce' and control quality in manufacturing. 22 There may be several dimensions along which such manufacturing quality may be defined, including: 1. The propensity to maintain the manufacturing process in control, i.e. operating according to agreed on standards of manufacture. 2. The propensity of the manufacturing process to produce items or product faultlessly. 3. The propensity to maintain (and or reduce) the manufacturing process variability, i.e. limit process instabilities by maintaining the process repetitively. Thus, agreed on standards, faultless production and repetitively and control of variations are used to define manufactured quality, in practice, manufacturing quality is easier to measure ‗negatively'. In other words, it is a reflection of a negative performance (rather than a positive one, which is, or should have been, the standard). As a result, the ideas underlying the management of quality in manufacturing relate to the management of the process and not to the design of the product. This measure of quality is defined in terms of characteristics which are important and related to the management of the manufacturing process. In this sense, the measurement of quality is also an incentive for the control of quality. Or course it is possible, through appropriate integration of both product design and the manufacturing process, to let one facet of quality management (its conception and design) affect the other (the process of manufacturing the product). Although this is increasingly recognized as an important activity known as ‗predictability', or ‗concurrent engineering', is has not yet fully matured (albeit, it is the topic of intensive research today). In a conventional sense, a process in control would evidently results in products of a better quality than a process which is not control. As a result, by improving the controls, we will be able to increase the propensity to manufacture products of better quality. For example, in the manufacturing of certain high precision metallic items, there may be many objective attributes which could be measured and tested for deviations from acceptable manufacturing standards. These may include the location of holes, their sizes (which often require extremely high precision), concentricity, symmetry, and so on. These attributes are measured for the purpose of controlling the processes which are used in making up a product! In other words, measurements (tests) are made to detect causes of malfunction needed to control the manufacturing process. For these metallic parts, there may be many cause which contribute both to defective manufacturing or to excessive variations from manufacturing standards. Lack of geometric perfection, stress factors, materials stability, the ambient temperature, lack of perfect rigidity, etc. may be some of these factors. The measurement and detection of the sub-standard performance provides the incentive for control and correction. Thus, just as conceptual or design quality, manufacturing quality is a complex concept which should be clearly understood before trying to manage it. A comparison of several aspects of quality are given in Table: 1.3 to provide some further comparisons between manufacturing and design quality. TALE 1.3 DESIGN AND MANUFACTURING QUALITY Design quality Manufacturing quality Durability Reliability Esthetics Conformance to standards Attributes' desirability Process variability Objective performance Consistency Intangibles Tangibles A manufacturer concerned with the production of quality products or services uses various tools, statistical and otherwise, as we shall see later on. Statistical tools are used in particular when uncertainty has an important effect on the manufacture of quality in such cases, poor quality is usually produced due to variations and uncertainties regarding the process operations and performance. When performance variations are totally random, unaccounted fro by any malfunction or cause, they reflect a characteristic of the manufacturing process, the type of materials 23 used and the process at hand. When product quality or their attributers to not deviate from a purely random pattern, the manufacturing process is said to be out of control. In this sense, the management of quality in manufacturing consists of determining departures from a state of perfect randomness. The techniques called Statistical Quality Control (SQC) and Statistical Process Control (SPC) are used to elaborate and apply tests of randomness of various sorts to measure and predict departments from this state of perfect randomness. The increased need to control statistical variations, and thereby the need to control a manufacturing process and its environment, have been ushered in by production concepts developed in the first industrial revolution. These concepts, although complex and numerous, presume that production standards and producing up to these standards ore essential to guarantee the substitutability of ports used in a moss production system. Taking responsibility away from workers and their alienation at the beginning of the century in particular has led to the necessity to control their work through work sampling and other methods used to predict and manage the statistical variations which occur in manufacturing. These basic tenets of quality management have recently been subject to scrutiny, motivated by a concern for a broader view of quality management, a view which takes account of the whole manufacturing system, distribution, service and business processes, and seeks to produce quality rather than to control some process variations (although this is also an important part of this broader view). This emerging approach is called Total Quality Management. In addition, and more recently, a ‗quality trauma' has been ushered in by the increased power of consumers, and by the fact that there can not longer be any justification economic. Managerial and technological for producing poor quality. Japanese inroads into quality control techniques made in the last two decades have been an example to this effect and it has led firms to re asses their priorities in terms of the control and management of quality. Based on such premises, we can appreciate the inroads made towards improved quality by corporate boards, and its integration into business strategies. Quality is Free (Crosby) and Quality on the Line (Garvin) are samples of work which highlights a growing concern for re- valuing and re-evaluating the place and contribution of quality in manufacturing and its control. As a result, basic and past tenets regarding quality in manufacturing have been questioned and revised. For example, it is currently believed that: Quality is not only a cost, it is also a potential benefit, a value added to the manufacturer which can be translated into added sales and profitability. There are, however, still difficulties in measuring the potential benefits of quality which are essential in including managers to take the proper courses of action to improve quality. Quality is not only process-specific but is total concept, involving everybody! This is the message of Total Quality Control (TQC). In other words, the problem is not only the control of statistical variations in a manufacturing process, but the basic question of producing quality in its broadest sense. In other words, the re-evaluation of quality in terms of its costs, tractability and integration has created an opportunity to re-design and reposition quality, quality improvement and control where they were always supposed to be this transformation has of course brought quality to people to the organisatoin, to processes, to services and, in the process, it is transforming production management both in design objectives and in operational procedures. For example, from a ‗robotics notion of people to one based far more on motivation. For example, from ‗robotics notion of people to one based far more on motivation and incentives to perform from de-responsibilization to responsabilization. A reminder from Michelin's workers' book on profit sharing: The care brought by each worker in his work is the essential capital of the factory: Implies and recognizes (already prior to the turn of this last century) that quality is a function of a worker's involvement in the work process and the responsibility he is assuming, not only with respect to his own work (i.e. his auto-control), but also with respect to the collective (i.e. Total Control). In a practical sense, the reconciliation concordance and coherence of ‗auto and collective controls' underlie approaches to the control of quality. The emerging re-definitions of quality are of course leading to new objectives in process and product design. Terms such as robustness are also becoming much more fashionable and appropriate. A robust design will, for example, safeguard a standard operating performance against departures from pre-specified conditions. In this vein, a product's quality cannot be assessed in terms of its performance in a laboratory 24 environment, but in the ‗real world', while it is being used by people who may or may not how best how to use the product. Then, robustness is a measures of the latitude of conformance of the product to the user and not to that of the process. For these reasons quality in manufacturing is a fast changing concept which today seeks greater robustness in the definition of what we ought to look for to improve and produce quality products and services. The broader view of quality and the complexity of modern firms, combined with a commensurate need to define measures of quality, have of course led to an expansion of the dimensions along which the manufacture of quality ought to be considered. Presenting an integrated view, Garvin suggests eight dimensions: Product performance, Product Features, Reliability, Conformance, Durability, Serviceability, aesthetics and Perceived quality. For the management of quality it is essential to translate these dimensions into economic values and Costs of Quality (COQ). These will include direct and indirect effects. Some internal costs we might consider include: Planning and Training quality programmes; Inspection and Testing; Failure and Scrap and Rework-Repair; Inventory added due to poor quality; Process and delay costs due to stoppages, Capacity losses; Human relations related costs, External costs might include: Warranty and liability costs; Servicing; Goodwill and sales; and finally, Costs due to regulatory agencies interventions. These costs, properly assessed and combined with the operational costs of manufacture and the potential contributions of quality to the firm competitiveness, provide notions of manufacture quality which must be understood and valued. In is through such comprehension and valuation that we can affect every facet of the firm and thereby make it possible for quality to become strategic and he managed. These problems are of immense importance, so we shall return to their study in far greater detail in subsequent chapters. 1.21 QUALITY AND SERVICES Quality in services exhibit special characteristics. Some of these characteristics include: The quality of service generally involves not one but multiple services. For example, a gas station provides several services beyond the supply (usually at a regulated price) of fuel. Hotels provide a room and various associated services. Services are mostly intangible, often subjective, and are therefore difficult to define. Unlike quality in manufacturing, the quality of services depends both on the ‗server' and the ‗serviced'. Poor service is usually defined by the dissatisfaction of the latter. Further, service delivery, either good or faulty, need not be consistent. Comparable notions of server breakdowns in industry such as machine breakdown or improperly performed functions (and the storability of poorly performed operations) are not applicable in services, as the former is tangible, expressed in some characteristics which are measurable objectively. The quality of service and its measurements are dependent. A server who is inspected might improve the quality of service delivery, for example, while a server who feels there are no controls might provide poor service. Such behaviour introduces a natural bias in the measurement of service efficiency and its quality. A service is not storable, unlike products that can be sampled and tested for quality. For these reasons, the definition of service quality is elusive. There are several approaches, as we shall see next. The American Society for Logistics (ASLOG) suggests that service quality be defined in terms of Communication, Time, Organisation, Flexibility, Reliability and Post Sales Service. Communication might be measured byt eh opportunity for errors, document errors, billing, client follow through and information exchange. Time relates to delays of various sorts (supply responses, routing, conformance and distribution). Organisation includes the range of services delivered and agreed upon, security in transport and stocking, as well as organizational forms such as subcontracting and franchises. Flexibility is the potential to meet demands under various circumstances and to adapt to a broad range of operational and service conditions. Reliability refers to the consistency of the service supplied, its timing and so forth. Finally, Post Sales Service applies to maintainability, repairability, service proximity and availability as well as response time to post sales failures. 25 Reliability Post sales Flexibility Quality of Communication service Organization Claim FIGURE : 1.4 DIMENSIONS OF SERVICES QUALITY Using a large number of post-consumption evaluation studies, perception and expectation of the service have been identified as essential factors that define the quality of service. In particular, Cronroos (1983) points out that it seems reasonable to state that the perceived quality of a given service will be the outcome of an evaluation process where consumers compare their expectations with the service they perceive they have got, i.e. they put the perceived service against the expected service. In this sense, a product or firm's image depends solely upon the consumers' perception. In the same spirit, and based on extensive statistical studies, Parasuraman, Zeitharni and Berry (1985) concluded that service quality as perceived by consumers results from a comparison of perceived service with expected service. Focus group interviews also revealed ten dimensions of service quality by which a consumer evaluates the quality of a service. These dimensions were later emprirically validated and reduced to five dimensions: Tangible, Reliability, Responsiveness, Assurance and Empathy. Although perceived quality' seems dominant in many marketing studies, there are difficulties in following such as approach. First, it only emphasizes the customer, regardless of what the objective of the service is. Second, competition and the competitive effects of quality are ignored. Third, service as well as customers are usually heterogeneous, therefore service quality should be much more difficult to pinpoint. Finally, while ‗perceived quality' overcomes the traditional marketing concern for ‗search quality' and ‗experience quality' in products (and predominant in services), it underplays the role of ‗credence quality'. By definitions, these qualities cannot be perceived by the customer; instead, the customer relies on indicators such as reputation, price and physical evidence. Referential Service Received Service Quality FIGURE: 1.6 EXPECTATIONS OF SERVICE AND QUALITY Following the definition of quality in business, in services quality is fitness to use. A deviation from that ‗standard' is an ‗uniquality'. Of course, it is possible to consider expectations as standards such that any deviation from an expectation is equivalent to a deviation from the standard. 26 A third approach is based on social psychological concepts, focusing on the interaction between the firm, its employees and its customers. Accordingly, service quality has different levels, comparable to Maslow's pyramid of needs: Congruence of employees' and customers' behaviour (interlocking behaviouirs), such as the proper degree of politeness, hand shaking and other ceremonial acts. Perceived degree of satisfaction combined with technical services which can be observed and measured objectively (such as an airlines' flights arriving on time). Degree of emotional satisfaction (such as a feeling of inclusion and belonging). Satisfaction Perception Congruence FIGURE : 1.7 LEVELS OF SERVICE QUALITY AWARENESS Similar to Maslow's hierarchy, higher levels of quality (emotional) can be achieved only if lower levels are satisfied first. The social-psychological approach, based on extensive ‗human relations' theories, has unfortunately been neglected in the management of quality, although in practice it is essential. For example, the buzz words ‗Moment of Truth', are evidence that success depends in many instances upon the moments when customers and employees interact (the moment of truth!) Below we consider two approaches to service quality, one based on logistical needs and the other on the needs for health care delivery. As we shall see, different needs will necessarily lead to widely differing views of what service quality may mean. 27 1.22 CONTROL CART Upper Control Limit (UCL) ±1 ±2 ±3 (68.27% (95.45% (99.73% Mean (X) ) ) ) Lower Control Limit (LCL) FIGURE : 1.8 CONTROL CHART As shown in Figures: 1.8 The control is built around the process mean. The one standard deviation on both sides of the mean (±2σ) covers 68.27 percent of the whole data under consideration. Similarly, ±2σ and ±3σ covers 95.45 percent and 99.73 of the whole data. Still, 0.27 percent of the data goes uncovered as it falls beyo0nd the ±3σ level. These variations are taken as a chance occurring and not considered in the control charts. Generally ±3σ limits are taken for plotting the control charts. The 3σ limits on both sides of the mean, which totals to 6σ is taken as the basic spread. In control charts: ±3σ level is taken as Upper Control Limit (UCL) and -3σ level is taken as Lower Control Limit. 1.23 SIX SIGMA Its genesis lies in a classic stretch target in 1981 by Motorola's CEO, Bob Galvin to his people: effect a ten fold improvement in product-failure levels over a 5 – years period. Bill smith, an engineer at a the company, realized that such results could not be achieved without going into the core of what caused defects in the first lace. So he conducted a statistical correlation between the field. – life of a product and the number of flaws that had been spotted – and corrected – while the product was being manufactured. The correlations, arrived at in 1985, turned pout to be positive. In other words, if a production had been found defective and corrected during the productions- process, chances were high that other defects had been missed, and would show up later during usage. On the other hand, error-free products rarely failed in the first 3 years of customer – usage. Evidently, the simplest way to prevent product – break downs was to ensure that the process prevented defect of any kind, making detection and repair redundant. External support for this argument came from the best-in-class bench marketing that Motorola had been conducting simultaneously. It showed that total quality companies were turning out products that had not been reworked at all. The question how could Motorola minimize – and, ideally, eliminate – defects from the manufacturing process? That was when another engineer, Mikel J. Harry, introduced the concept of Six Sigma to Motorola. The idea was to set a steep quantitative target for all process – and then. Parse each process into smaller and smaller sequences, 28 each of which could be examined for their potential for errors, and changed to eliminate that potential. Explains T. Ganguly, 61, Director, Crompton Greaves: ―Breaking down and studying processes is a key element of result- oriented quality programmes. This helps in tracking down the root – cause of defects‖. Until 1994, Six sigma remained a closely – guarded secret at Motorola. The outside world knew about it, but not how to use it. In 1995, however, CEO Gary: L.Tooker decided to throw open the source-code. One of the earliest to pick it up was Allied signal, where CEO Lawerance Bossidy led the conversion. But it wasn't until GE's, jack Welch, introduced Six Sigma across the length and breadth of his organisation that the tool grapped limelight – and stayed put. Four years after ―Neutron‖ Jack Pushed Six Sigma hard into the innards at GE, it contributes 20 percent to the conglomerate's earnings. That has spurred many others to follow suit. 29 UNIT – 2 2.1 QUALITY MANAGEMENT Quality Management refers to ―ensuring proper quality for a company's output‖. The responsibility of quality management is not just advising a sampling plan for the acceptance or rejection of the incoming materials and controlling manufacturing process conditions. Quality management is important not only for survival in the market, but also when the organisatoin desires to expand its market or wants to enter into a new-product-line and various other marketing ventures. If a company's products are to compete with the products in the international market, it is important that the quality of the exports should be better than that of the products from other nations. If not, on par with the products form other countries. For developing countries like India, Quality management assumes with established brand names and brand loyalties in the international markets. In fact, quality management is a job at very step of the company's activities. Thus, quality management became an important long-term ―marketing strategy‖ of corporation. For developing countries like, India, Quality Management assumes greater importance since they have to compete with products of developed countries with established brand names and brand loyalties in the international markets. 2.2 EVOLUTION OF QUALITY ACTIVITY FOCUS It is evident from Table: 2.1 that quality activity has evolved over the years in several phases and in a stepwise manner. This starts with inspection and moves to quality. TABLE: 2.1 QUALITY FOCUS OVER TIME Phase Focus Inspection Detection and segregation of defectives Sampling schemes Economy and efficiency Quality control Prevention of sub-standard and economic manufacture SPC Use of statistical concepts SQC Methods for efficiency and economy QC teams Investigation and resolution of quality problems Quality Assurance Customer satisfaction using system approach, quality policy, objectives planning and audit jointly in the case of organized/dominant customers Vendor Quality Assurance Ensuring manufacture and supply of required quality products Quality Engineering Robust products at commensurate cost through product design and process engineering TQC Coordination to make all functional groups of an organisatoin to discharge their responsibilities towards product quality Self-control Integration of quality related tasks with the jobs QC education & training Performance of the job right the first time and every time CWQC Consumer oriented quality control participation by employees at all levels of improvements Quality circles and Self- Participation of employee teams in improvement of quality, cost, directed Teams productivity, work life, etc. in their work areas. TQM Continuous improvement all around including environment, work life, quality, cost, schedules, etc. Steering Council Top managers leadership and participation Policy management/and Regular activities to reflect policies deployment QFD, Taguchi methods, and Customer delight to add value over and above consumer needs Design of Experiments HRD Enable employees perform their roles well in spite of swift changes taking place all around-technology organisatoin, environment, society, etc. Quality Audits Top management to gain first-hand knowledge of practices 30 2.3 QUALITY OBJECTIVES An objectives is a statement of the desired result to be achieved within a specified time. Whereas policies provide broad guidelines on company affairs, objectives define specific goals. These goals then form the basis of detailed planning of activities. Objectives can be short range (say, 1 year) or long range (say, 5 years). The concept of management by objectives is widespread. Under this concept managers participate in establishing objectives, which are then reduced to writing and become the basis of planning for results. Anderson describes the application of he MBO approach to quality. Objectives way be created for breakthrough or control. There are many reasons why companies create objectives for breakthrough: 1. They wish to attain or hold quality leadership. 2. They have identified some opportunities to improve income through superior fitness for use. 3. They are losing share of market through lack of competitiveness. 4. They have too many field troubles – failures, complaints, returns—and with to reduce these as well as cutting the external costs resulting form guarantee charges, investigation expense, product discounts, etc. 5. They have identified some projects which offer internal cost-reduction opportunities, e.g., improvement of process yields or reduction of scrap, rework, inspection, or testing. 6. They have a poor image with customers, vendors, the public, or other groups of outsiders. 7. There is internal dissension and the need to improve motivation and morale. Objectives for breakthrough are not limited to ―hardware‖ or to maters that can be counted, e.g., income, cost. Objectives for breakthrough can include projects such as a reliability training program for designers, a vendor rating plan, a complaint investigation manual, a reorganization of he quality control staff, or a new executive report on quality. 2.4 COMPONENTS OF QUALITY MANAGEMENT Just as in general management process, quality management also has three main components such as quality planning, implementations, monitoring and control. The three components are discussed in the following lines: (i) Quality Planning Planning refers to the activity what to do? It is a blue print of future course of action. Quality planning refers to the designing the desired and deliverable quality standards. Quality planning includes the following aspects: (1) To set quality objectives and targets and take ‗into account consumer's needs and the marketability of the products etc. (2) To find out whether the company is capable of producing and marketing the products of certain quality. (3) To establish the relative importance of the quality characteristics and specification, and communicate of to the production line people as well as to the vendors supply the raw materials. (4) To look after various vendor quality control aspects like examining new vendor facilities, their procedures and systems, setting up of the vendor rating scales and periodic performance evaluation of the vendors. (5) To establish statistical control techniques, charts and sampling plans. (6) To establish training programmes for various personnel in the company so that quality consciousness gains a firm ground in the organisation. 31 ii) Quality implementation This stage of quality implementation process includes the following aspects: 1. Conducting laboratory tests and analysis on the raw materials, finished products and the semi-finished products for acceptance or rejection or for process control; 2. Maintaining quality control equipment and 3. Advising and providing assistance for the clarification and solution of quality management problems its manufacture. iii) Quality monitoring and control The third improvement component of quality management is quality monitoring and control. Control is conformation to plan. The monitoring and control function deals with the following: 1. Appraising the quality plan i.e. , the problems of production and the problems of vendor quality, so that appropriate action is taken to correct the initial planning errors. 2. Appraising the quality planning such as the actual quality of the product and the reactions of the customers regarding the quality of that product, and how such reactions can be set right by modifications to the original quality plan. And, 3. Besides the above, monitoring of the costs of quality and providing such information to the quality. Planning is very important, so that the planners take appropriate action for the future The organisatoin for quality should ensure that the planning, implementation, monitoring and control feed back cycle is properly facilitated. Since, quality control is everybody's business, it does not lead to a chaotic situation. In spite of the fact that many functional departments are involved in the maintenance of quality, the integrity of the management feedback cycle should be maintained for effective total quality management. 2.5 QUALITY ORGANISATION Since Quality control is everybody's business, every organisation has to maintain a separate functional department for quality management, with its top man ranking high in the hierarchy. The organisation for quality management should therefore, comprise a large-span of control and few levels of hierarchy. This is necessary to maintain quick feedback of information. In order to maintain high quality standards, it is necessary that quality management should have top management support. For good quality management, every organisation has to maintain the integrity of the planning implementing – monitoring and feedback, cycle. Wherever the responsibility of quality management is to be delegated to different departments, it should be done with many precautionary measures where by the monitoring and control is in the hands of the quality departments people. 2.6. QUALITY FUNCTION Achievement of fitness for the involves the performance of a number of separate deeds or activities in a logical progression. The principal activities are depicted in the spiral of ―Quality ensuring process‖. (Figure: 2.1) Figure : 2.1 Spiral Diagram : Page No. 54 32 It makes clear that the activities needed to achieve fitness for use are scattered among many persons in many departments. Thus, the attainment of quality in the entire collection of activities through which we achieve fitness for use, no matter where these activities are performed. 2.7 PROCESS DESIGN Designing for Quality Quality is a virtue of design Consumer satisfaction results from: Quality of design: Quality of conformation to design Conformance has received considerably more attention in the literature than the quality of design itself. This is surprising, because design is the most important of the two. This is because: design determines the product features which give satisfaction or dissatisfaction. Conformance is easier to achieve with a good design that with a bad one. The rationale for these two points will emerge as we processed. Here, it is sufficient, to say that no amount of care during production and delivery can compensate for a poor design. Many design faults are irremediable. Some models of car designed for left-hand drive, for example, are difficult to adapt to right-hand drive. One of the consequences of such 111 – conceived design is that the clutch cables on right-hand drive models are prone to breaking because of their tortuous routing through the engine compartment. Achieving an attractive good design on paper is one thing; translating it into reality is another. 2.8 QUALITY AND LOSS: THE STARTING POINTS OF GOOD DESIGN Quality design begins with minimizing loss. Taguchi defines quality as the loss imparted to society once a product is delivered.The aim of a good design is to minimize loss once the customer takes delivery of the product. 2.9 SOURCES OF LOSS The loss emanates from either functional variation, such as a train that falls in snow, or harmful effects such as, the side effects of a drug. Sources of loss include: 1. Power Consumption - The washing machine which is Rs. 200 cheaper to buy but uses 10 per cent more electricity imparts a greater loss in the long run than the apparently more expensive model. 2. Life Expectancy The pair of fashion boots which last for only one winter impart a greater loss than more robust footwear. 3. Maintenance, reliability and "trouble" – A council – owned housing estate where the landscape design incorporates shrubs and bushes imparts a greater financial loss than plain grassed areas, not only because of maintenance requirements but because shrubs and bushes act as litter traps which must be cleared periodically. When something breaks down there is not only the cost of repairs, but the cost of being without it. In some cases the latter can be many times more than the purchase price of he machinery. Moreover, the cause of a breakdown may be trivia! 4. Space requirements or occupation with volume – personal computers impart a greater loss than notebook computers because they cost more to house and their relative bulk restricts their use. 5. Positioning or set-up time – the time required, for example, to position a tin opener, to programme a video recorder, or to log in to a computer, counts as a loss. 33 Another way of conceptualizing loss is to calculate the total cost of a product. Figure – 2.2, for example, shows how this applies o car purchase. SERVICE 4 Others Insurance Purchase Price Fuel Depreciation FIGURE: 2.2 TOTAL COST OF BUYING A CAR The real cost of a product is not just the purchase price, but everything associated with it. In the case of a car this includes insurance, fuel consumption, depreciation and so on. This shows how quality is a means to an end: designing to reduce loss benefits both producer and customer. The benefits are two fold. First, reducing loss makes a producer more attractive, and therefore more competitive. Second, both parties experience a direct financial gain. 2.10 PROCESS DESIGN WITH IN-BUILT QUALITY Product quality, as one major dimension in product design, remains intimately intertwined with mere quantitative, timing and spatial (locational) product design problems. When large volumes of an item can be produced and sold, quality will be standardized and then marketed through various distribution channels. Of course, the timing is important as well, as the products do describe life cycles. The most suitable quality product can only be sold at a particular time and place. If one design does not please the customer, competitors might serve the customer better. Money may as well as spent or saved on substitutes or entirely different items. Quality assurance planning accompanies product design activities and decisions through al phases (figure: 2-3). New product ideas, market opportunities, new technologies, materials, skills, and competitors successes in the market are among the main factors that trigger product design procedures. Directly or indirectly, customers are initiating products and services. Careful analysis of ideas and product research leads to preliminary and final designs before senior management can approve actual production. 34 The Quality Engg. And Quality Management Interface Quality Engineering Quality Management Evaluation Technical Idea generation Assessment Screening Primary Spees Demand Process Capability Feasibility Analysis Financing Spees Market Testing Experimentation Price / cost Analyses Inspection, Test, Organizing Plans, Training Quality Program Start – UP (Manual) Launching Engineering Quality Audit Redesign Termination Figure: 2.3 Quality Assurance Planning Process Quality assurance remains involved with the design process. This helps to ensure the quality will be adequately specified from the consumers' point of view. Design engineers and other design specialists often tend to emphasize mere technological features, rather than actual consumer needs and perceptions. Moreover, quality assurance ensures that the final design allows proper inspection and verification of major quality characteristics. With the modern trend toward preventing defects as early as possible, participation of quality assurance experts in product design has become increasingly useful and important. Quality assurance of design can take many forms, ranging from simple practice in order processing to elaborate design assurance and reliability programmes. Product complexity and the quality impact of defects on performance dictate the degree of quality assurance during the design phase. However, in each case of product design, major quality characteristics should be carefully specified. This is the obvious prerequisite for conforming to such standards during production. Therefore, we shall describe quality specification first, before any other principles and steps in design assurance. 2.11 SPECIFICATION OF QUALITY Quality starts conceptually and practically with consumers. The designer translates consumer's needs and desires into a product design. Quality thus becomes defined, clarified, characterized, and adequately specified. Specifying quality means to establish the desired, measurable or assessable attributes of a product. This is a complex task as not only consumer requirements must be observed. Many legal, technical, and economical constraints must play an ever-increasing role. Special quality has become a difficult decision-making task in which many specialists must participate. The outcome and decisions should be a specification which is realistic and valid with regard to customer needs. 35 A useful quality specification entails all attributes and measurements that together define and describe the product in clear and unambiguous terms. A good product specification informs the consumer and the producer sufficiently about the product. Specification tend to fall three basic types: Type A – Individually specified, regardless of specification of the other units in the same product. Type B – Specified in terms of distribution, which the product as a whole must meet. Type C—Specified in terms of allowances for a certain percentage of units or lot of products submitted. For example, the tensile strength of steel rods shall not exceed 70 p.s.d. However, steel rods will be acceptable if say, only 5% of the samples tested exceeds this limit. 2.12 STATISTICAL PROCESS CONTROL Consistent performance of manufacturing and assembly processes, rather than extensive sorting and rework or scrap of defectives, can be achieved only by a process that is inherently capable of consistency in the long term. Any car manufacturer is aware of he fact that statistical techniques such as statistical process control (SPC) aims to achieve defect prevention and to pursue never ending improvement. It also reduces variability in delivery times, completion times, methods, attitudes, equipment and materials. Process capability is a measure of the variation of a process and its ability to produce components consistently within specification. Process capability can be defined only when a process is in statistical control, that is when it is being influenced by only common causes and special causes have been eliminated. Process capability is measured by the process capability index. Special cause is a source of variation that is unpredictable or intermittent. Statistical control chart literature calls this type of cause an assignable cause. It is signaled by a point beyond the control limits or a run or other non-random pattern of points within the control limits (Figure: 2.4). Usually special causes can be corrected at the process by the operator or superior. For example a broken tool, a change in the machine setting or a change in raw materials, or the errors of an inexperienced operator. Common cause is a source of variation that is always present – part of the random variation inherent in the process itself. The origin of this common cause can usually be tracked to an aspect of an aspect of the system which can be corrected only by management. For example, poor lighting, bad work station layout, old machines or badly maintained machines. It is management's job to improve process performance: FIGURE: 2.4 THE JURAN TRILOGY : Page No. 61 The process capability index (Cpk) is an index which measures the variability of the process relative to the specification and process setting. When Cpk is less than 1.00, a 100 per cent inspection must be implemented and action taken to increase Cpk value to a minimum of 1.00. A process is said to be operating in statistical control when the only source of variation is common causes. ‗But a state of statistical control is not a natural state for a manufacturing process', wrote Deming. ‗It is instead an achievement, arrived at by elimination, one by one. By determined effort, of special causes of excessive variation.' The initial function of any process control system is to give a statistical signal when special causes of variation are present and to avoid giving false signals when they are not present. Such a signaling system enables appropriate action that can eliminate those special causes and prevent their reappearance. 36 As long as process remains in statistical control, it will continue to be predictable with benefits in consistency of quality, productivity and cost. The process must first be brought into statistical control by detecting and eliminating special causes of variation. To help detect special causes control chart are employed. Once process performance is predictable, its capability to meet customer requirements can be determined. This is the basis for continuous improvement. Machine capability studies (at times referred to as process potential studies) assess the short-term influences on component dimensions emanating from the machine/operation/process alone when the study is performed; for example, when special causes are not identified. Usually consecutive components are measured and the results are analyzed using a suitable chart. It is therefore possible to calculate the machine's capability index. In these cases minimum machines capability index of 1.33 is required for approval of initial samples. Process capability is determined from control charts with the process operating under actual production conditions. When the process that will be used to produce a new component is essentially the same as that currently used for existing components. Cpk may be estimated from data from the current process. In this sense, process is the combinations of people, machine and equipment, materials and environment that produces a given product or service. The tools of SPC are of importance not in themselves but to further the efforts of continuous improvement by reducing variability. They help managers and workers alike to ask the basic question can the job be done more consistently? Far from being limited to production or operations, SPC is applicable to administration and service. It can be used effectively in sales and purchasing, invoicing and finance, distribution and after service, training and management development. 2.13 SPC Process control is concerned with assuring that future output is acceptable. Since, the responsibility for output lies with the production department, the responsibility for achieving the appropriate quality in the transformation process must also lie with production and operations. Statistical process control methods, supported by management commitments and good organisation, provide objective methods of process quality control is any transformation process, whether this is in the manufacture of goods or the provision of service. Statistical process control techniques may be used to measure the degree of conformance of purchased materials, services, processes and products to previously agreed specifications. In essence statistical process control techniques select a representative, simple, random sample from the population, or the process input or output. From an analysis of the sample, it is possible to make decision regarding the current performance of the processor, and its inputs or outputs. Numerical information or quality will arise either from: a) Counting (or) b) Measurement Data which arise from counting can only occur at definite points or in ‗discrete' from. This data is also called attributes. Data which arise from measurement can occur anywhere at all on a continuous scale and are called variable data. The measurement of the variables produces continuous data. 2.14 VARIATIONS AND PROCESS CONTROL All process which provide a product or service exhibit a certain amount of variation that is inherent in their output. The variations are sued due to the combined influences of countless minor factors, each one so unimportant that even if it could be identified and eliminated, the decrease in process variability cannot be reduced – the operations manager must learn to live with it. It is after referred to as random or chance variability. The amount of inherent variability differs from process to process. Some have more variability and some have less variability. Another type of variability is called assignable variation. Unlike inherent variation, the main sources of assignable variation can be identified and eliminated. In terms of quality control,. A process which shows only random variability is said to be statistically ―in control‖, whereas the process which exhibits non-random variations is said to be ―out of control‖. The purpose of quality control is to distinguish between the two kinds of variations so that appropriate remedial action can be taken when it is necessary to insure desirable future outputs. 37 2.15 Control charts Control charts are graphical tool that are used to differentiate between random and non random process output. A control chart is a form of traffic signal, the operation of which is based on evidence from the small samples taken at random during a process. A green light is give when the process should be allowed to run. The red light shows that the process should be stopped and corrected to prevent production of defective materials or the operation of an unsound process. There are different types of control charts for variables and attributes data. The most frequently used charts for variables are mean and range charts. The most commonly used charts for attributes are number defective or up charts, and production – defective or p charts. These are prepared for different situations. Each chart has a middle line which represents the process average, an upper and lower line. (control limits), which define the range of random output. Use of the charts involves taking periodic samples, computing the appropriate sample statistic and plotting that value on the chart. Values which fall within the control limit suggests that the process is ―in control‖, i.e., process variation are random), while one or more values on or outside of the control limits suggests the process is out of control, (i.e., process variations are non random). This can be explained in the following charts: The charts shows that the process is statistically stable Sample number : Page no. 64 The chart shows that one sample mean is beyond the upper control limit, which suggests that the process is but of control. Sample number : Page no. 65 2.16 CONTROL CHARTS FOR VARIABLES Mean and range charts are used to monitor variables. Control charts for means reflect the central tendency of a process, while control for the range reflect process dispersion: A) MEAN CHARTS: Mean charts (X) or x-bar charts are based on a normal distribution. The theoretical foundation for this chart is the central limit theorem. Accordingly, the distribution of sample means taken fro a process will be normal if the process distribution is normal and approximately normal even if the process distribution is non normal, if the sample size is large enough. In most cases, a sample size of 25 is large enough, and often sample sizes in the range of 10 to 20 observations will suffice. Not only is the sampling distribution normal, its variability is also less than the variability of the process being sampled. This can be shown in the following figure. Page no. 65 Control limits are based on the sampling distribution, and in effect, each sample mean potted on a control chart represents a test of whether the process mean has shifted or changed. 38 Chart for process control : Page no. 66 In selecting control limits, it is important to recognize that just because all observations are within the limits, this does not guarantee that assignable variations are not present, and that Just because an observation appears outside one of the control limits this does not guarantee that assignable variations are present. Thus, the selection of control limits involves \trade offs between two types of risks. With the first type, Alfa (α) called the Producer's risk or Type – I error, there is a possibility of concluding that the process is out of control when it is actually in a state of statistical control. This risk is reduced by using wide control limits. With the second type of risk beta (β) called the Consumer's risk or Type – II error, there is a possibility of concluding tht the process is in control when it is actually out of control. The consumers risk increases as the control limits are widened, and decreases as they are narrowed. Thus, in choosing control limits a manager must consider these risks and the costs associated with them. If the costs of undetected shifts are highly relative to the costs of correcting the process, narrow limits (Lower consumer risk) are appropriate. If he costs of restoring the process to the desired state are highly compared with the costs of producing defective output, wider limits (Lower producer's risk) are appropriate. 2.17 THE CONCEPT OF ACCEPTANCE SAMPLING Acceptance sampling is the process of evaluating a portion of the product in a lot for the purpose of accepting or rejecting the entire lot as either conforming or not conforming to a quality specification. The main advantage of sampling is economy. Despite some added costs to design and administer the sampling plans, the lower costs of inspecting only part of the lot result in an overall cost reduction. In addition to this main advantage, there are others: 1. The smaller inspection staff is less complex and less costly to administer. 2. There is less damage to the product; i.e., handling incidental to inspection is itself a source of defects. 3. The lot is disposed of in shorter (calendar) time so that scheduling and delivery are improved. 4. The problem of monotony and inspector error induced by 100 percent inspection is minimized. 5. Rejection (rather than sorting) of nonconforming lots tends to dramatize the quality deficiencies and to urge the organisation to look for preventive measures. 6. Proper design of the sampling plan commonly requires study of the actual level of quality required by the user. The resulting knowledge is a useful input to the overall quality planning. The disadvantages are sampling risks, administrative costs, and less information about the product than is provided by 100 percent inspection. Acceptance sampling is used (1) when the cost of inspection is high in relation to the damage Cost resulting from passing a defective, (2) when 100 percent inspection is monotonous and causing inspection errors, or (3) when the inspection is destructive. Acceptance samplings is most effective when it is preceded by a prevention program that achieves an acceptable level of quality of conformance. There is need to emphasize what acceptance sampling does not do. It does not provide refined estimates of lot quality. (It does determine, with specific risks, an acceptance or rejection decision on each lot.) Also, acceptance sampling does not provide judgments on whether or not rejected product is fit for use. (It does give a decision on a lot with respect to the defined quality specification). 39 2.18 QUALITY INDICES FOR ACCEPTANCE SAMPLING PLANS Many of the published plans can be categorized in terms of one of several quality indices: 1. Acceptable quality level (AQL): This is usually defined as the worst quality level that is still considered satisfactory. The units of quality level can be selected to meet the particular needs of a product. Thus, MIL- STD defines AQL as ―the maximum percent defective (or the maximum number of defects per hundred units) that, for purposes of sampling inspection, can be considered satisfactory as a process average.‖ If a unit of product can have a number of different defects of varying seriousness, then demerits can be assigned to each type of defect and product quality measured in terms of demerits. As an AQL is an acceptance level, the probability of acceptance for an AQL lot should be high (see Figure – 2.5) 2. Rejectable quality level (RQL): This is a definition of unsatisfactory quality Different titles are sometimes used to denote an RQL; or example, in the Dodge- Roming plans, the terms ―lot tolerance defective (LTPD‖ is used. AS an RQL is an unacceptable level, the probability of acceptance for an RQL lot should be low (see Figure). In some tables, this probability is known as the consumer's risk, is designated as P and has been standardized at 0.1. The consumer's risk is not the probability that the consumer will actually receive product at the RQL. The consumer will in fact not receive 1 lot in 10 at RQL fraction defective. What the consumer actually gets depends on actual quality in the lots before inspection, and on the probability of acceptance. 3. Indifference quality level (IQL): This is a quality level somewhere between the AQL and RQL. It is frequently defined as the quality level having a probability of acceptance of 0.50 for a given sampling plan (see Figure) Figure:2.5 Quality indices for sampling plans – Page no. 69 4. Average outgoing quality limit (AOQL): A relationship exists between the fraction defective in the material before inspection (incoming quality p) and the fraction defective remaining after inspection (outgoing quality AOQ): AOQ = P' When incoming quality is perfect, outgoing quality must also be perfect. However, when incoming quality is bad, outgoing quality will also be perfect. However, when incoming quality is bad, outgoing quality will also be perfect (assuming no inspection errors) because the sampling plan will cause all lots to be rejected and detail inspected. Thus at either extreme—incoming quality excellent or terrible—the outgoing quality will tend to be good. Between these extremes is the point at which the percent of defective in the outgoing materials will reach its maximum. This point is the average outgoing quality limit (AOQL). These indices primarily apply when production occurs in a continuing series of lots. For isolated lots, the RQL concept is recommended. The indices were originally developed by statisticians to help describe the characteristics of sampling plans. Misinterpretations are common (particularly of the AQL). For example, a sampling plan based on AQL will accept some lots having a quality level worse than the AQL. 2.19 TYPES OF SAMPLING PLANS Sampling plans are of two types: 1. Attributes plans: A random sample is taken from the lot and each unit classified as acceptable or defective. The number defective is then compared with the allowable number stated in the plan, and a decisions is made to accept or reject the lot. This chapter will illustrative attributes plans based on AQL, RQL and AOQL. 2. Variables plans: A sample is taken and a measurement of a specified quality characteristic is made on each unit. These measurements are then summarized into a simple statistic (e.g., sample average) and the observed 40 value compared with an allowable value defined in the plan. A decision is them made to accept or reject the lot. This chapter will describe an AQL variables plan. A comparison of attributes and variables sampling is given in Table: 2.2 The key advantage of a variables sampling plan is the additional information provided in each sample, which in turn results in smaller sample sizes as compared with an attributes plan having the same risks. However, if a product has several important quality characteristics, each must be evaluated against a separate variables acceptance criterion (e.g., obtain numerical values and calculate the average and standard deviation for each characteristic). In a corresponding attributes plan, the sample size required may be higher but the several characteristics could be treated as a group and evaluated against one set of acceptance criteria. Table : 2.2 Comparison of attributes and variables sampling plans Attributes Variables Type of inspection required for Ech item classified as Measurement must be taken each item defective or acceptable: go/no on each item: higher skill level go type of gages may be used of inspection required Size of sample Saving of at least 30% * in sample size (if only one characteristic must be measured on each item and if single sampling is used) Assumption of underlying None Some distribution must be distribution assumed (usually normal) Number of characteristics that Any number A separate sampling plan is can be reviewed in one sample required for each characteristic to be re-viewed Type of information provided Number of defectives (if Valuable information on the for use in correcting process go/no go gages are used) process average and variation is available to indicate type of process correction required. 2.20 SAMPLING: SINGLE, DOUBLE AND MULTIPLE Many published sampling tables give a choice among single, double, and multiple sampling. In single- sampling plans, a random sample of n items is drawn from the lot. If the number of defectives is less than or equal to the acceptance number (c),, the lot is accepted. Otherwise, the lot is rejected. In double- sampling plans, a smaller initial sample is usually drawn, and a decision to accept or reject is reached on the basis of this smaller first sample, if the number of defectives is either quite large or quite small. A second sample is taken if the results of the first are not decisive. Since it is only necessary to draw and inspect the second sample in borderline cases, the average number of pieces inspected per lot is generally smaller with double sampling. In multiple – sampling plans one or two or several still smaller samples are taken, usually continuing as needed, until a decision to accept or reject is obtained. Thus, double-and multiple-sampling plans may mean less inspection but are more complicated to administer. In general it is possible to derive single, double-, or multiple-sampling schemes with essentially identical operating characteristic curves. 41 2.21 CHARACTERISTICS OF A GOOD ACCEPTANCE PLAN An acceptance sampling plan should have these characteristics: 1. The index (AQL, AOQL, etc) used to define ―quality‖ should reflect the needs of the consumer and producer and not be chosen primarily for statistical convenience. 2. The sampling risks should be known in quantitative terms (the OC curve). The producer should have adequate protection against the rejection of good lots; the consumer should be protected against the acceptance of bad lots. 3. The plan should minimize the total cost of inspection of all products. This requires careful evaluation of the pros and cons of attributes and variables plans and single, double and multiple sampling. It should also reflect product priorities; particularly form the fitness-for-use viewpoint. Inspect a first sample of n pieces If the number of defects found in the first sample Does no Exceeds but does Exceeds exceed not exceed Inspect a second sample of pieces If the number of defects found in the first and second samples combined Does not Exceeds exceed Accept Do not accept the lot the lot Paper 17.8 Schematic operation of double sampling 42 4. The plan should make use of other knowledge, such as process capability, vendor data, and other information. 5. The plan should have built-in flexibility to reflect changes in lot sizes, quality of product submitted, and any other pertinent factors. 6. The measurements required by the plan should provide information useful in estimating individual lot quality and long-run quality. 7. The plan should be simple to explain and administer. Fortunately, published tables are available which meet many of these characteristics. Figure 2.7 shows the sequences of steps in choosing a plan from published tables. The double 2. Decide type 3. Decide form 4. Define other 1. Decide type of of sampling restrictions of protection measurement desired including risk Lot-by-lot Attributes Single Disposition of Average long Variable Double rejected lots run Other Combination Multiple administration problems other 1. Secure information on published plans 2. Evaluate costs initially and in the long run 3. Evaluate noneconomic factors 4. Select one of the published plans or create a new one FIGURE: 2.7 CHOOSING A SAMPLING PLAN FORM PUBLISHED TABLES arrows emphasize the need to balance desires against the properties of the published plans. Three basic plans will be discussed here. There are other published plans developed for specific applications, such as continuous production, bulk product, and reliability testing under certain circumstances, control charts may be used as a basis for acceptance. We now proceed to a discussion of three published plans. 2.22 QUALITY ASSURANCE AND CONTROL The term ‗Quality' is a relative term. Every one must have come across the word ‗Quality' in ‗various contexts in goods and services. Establishing quality levels for goods and services and assuring that those levels are achieved are important tasks of every type of business concern quality or lack of quality can have significant consequences. In profit-oriented organisation, quality can have a strong impact on differentiation among competitors and ultimately, on the profits and losses of the organisatoins. Similarly, quality is also important in non-profit oriented organization such as schools, hospitals, local and state government agencies and soon. Moreover, social services, including public a water supply, waste removal and disposal, fire protection are coming under increasing scrutiny, both in terms of cost and quality. Quality assurance is concerned with the entire range of production, beginning with product or service design, continuing through the transformation process and extending to service after delivery. Statistical quality control techniques have contributed substantially to the success of quality assurance and quality control. These statistical techniques are classified into two groups such as acceptance sampling, which relates to inspection of lots or batches of previously produced goods or services, and process control, which involves monitoring an on-going process for the purpose of deciding when remedial action is necessary so that future output will acceptable. 43 Quality may be defined as ‗fitness for use'. It is defined as ―conformance to requirements‖. Quality is also defined as relative to use rather than as a general characteristics that may be intangible. Thus, if a product or service lives up to expectations, it is of high quality. Quality assessment is an investigation of the level of quality being achieved. Quality control begins with assessment and includes action taken to eliminate unacceptable quality. The quality control programme is based in periodic inspection, followed by feedback of the results and changes or adjustment whenever necessary. Quality assurance includes quality control, but it is also refers to emphasis on quality in the design of products, process and jobs and in personnel selection and training. It is important for management to recognize the ways in which the quality of the firm's products or services can affect the organisation and to take this into account in developing and maintaining a quality assurance programme. The major ways that quality affects the organisation are reputation and image, liability, productivity, profitability and costs etc. the management is responsible for quality of a product or service. Thus, the management is responsible for creating a supporting environment for improving the quality of the product. Some of the major sources of improvements are research and development, customers, competitors, and employees. quality measurement is a key factor for quality assurance and control. In order to measure the quality of a product it is necessary to examine the ingredients of the product. Inspection is a tool, which provide the information concerning the degree to which items conform to a standard. 2.23 INSPECTION Inspection means physical verification or examination of items. The purpose of inspection is to provide information concerning the degree to which the items in a process conform to a standard. This includes the following: 1. How much to inspect and how frequent. 2. At what points in the process inspection should occur. 3. Whether to inspect in a centralized location or on-site. 4. Whether to inspect attributes or variables. 2.24 HOW MUCH TO INSPECT AND HOW OFTEN? The amount of inspection can range from no inspection to inspecting reach item several times. Low cost and high volume items require little inspection. Con high cost and low volume items require more intensive inspection because the cost associated with passing defectives is high. The majority of quality control applications lies in between these two extremes. The amount of inspection needed is governed by the costs of inspection and the expected costs of passing defective items. If inspection activities increases, inspection cost increase, but the costs of undeleted defectives decrease. The chief objectives of inspection is to minimize the sum of these two costs in other words, it is the optimum inspection cost. This can be explained in the following figure – 2.8. In fact, operations that have a high proportion of human involvement necessitate more inspection effort then mechanical operations because mechanical operations tend to be more reliable than human ones. The frequency of inspection depends on the rate at which a process may go out of control, or the number of lots being inspected. A stable process will require in frequent checks while an unstable process will require more frequent checks. Total cost Cost of Inspection Cost t Cost of Passing defectives FIGURE : 2.8 OPTIMUM INSPECTION COST Optimum 44 2.25 WHERE TO INSPECT In manufacturing process, there are number of possible inspection points. Each inspection points adds to the cost of the product or service. Therefore, it is important to restrict inspection to the points where they can do the most good. The following are some of the important inspection points: (a) Raw materials: The maintenance manager put his efforts and time on raw materials which do not meet quality standards. (b) Finished products: The reputations and image of the product or service depends on customer's satisfaction. The seller is responsible for after sales, service and replacing the defective products. This is a costly affair. So inspection at this point is very significant. (c) Before a costly operation: Inspection at this point is necessary not to waste costly labour and on material items which are a defective. (d) Before an irreversible process: In many cases Items can be reversible up to a certain point, but beyond that point. For example tiles can be reworked before firing. After that defectives can be sold as seconds at a lower price. (e) Before a covering process: This type of inspection is necessary where certain process of manufacturing hide defects for example painting, assemblies etc. In case of service oriented organizations, inspection points are different for each situation. However, the maintenance or operation managers must weigh the costs and benefits of inspections at each point in a process in deciding where to assign inspections. 2.26 WHETHER INSPECTION IS IN A CENTRALIZED LOCATION OR ON-SITE Some items or situations require that inspections be done on-site. For example, analysis food-samples. This type of inspection facilitates quicker decisions and avoidance of introduction of extraneous factors. On the other hand inspections may be done at centralized locations. 2.27 ATTRIBUTES VS VARIABLES INSPECTION The inspection and control procedures differ on the characteristics of a product or service that is to be controlled. Attributes are counted, where as variables are measured. The actual weight of sugar can be measured but the number of mirrors in a shipment with broken pieces can be counted. 45 UNIT – 3 3.1 QUALITY AND PRODUCTIVITY We have seen that priorities arise from the value system of the culture. Both material progress and spiritual goals are important. But with affluence can come independence and self – sufficiency. And the cooperative, trust, and royalty values that have fostered success in Japanese and other cultures appear to be waning in our own. Instead, each group tends to look out for its own self-interest. Lobbism has become a growth industry in our country, and the law is often invoked. Strikes frequently occur when self-interests are threatened. Consumers seek protection from unsafe products, while firms repeatedly fight against paying the costs of damages. Meanwhile, some managers are fighting to save their jobs against hostile takeovers by financiers who may be interested only in quick profit for themselves and not the welfare of the workers. Figure 3.1 illustrates the dichotomy we face-the fundamental question of the purpose and orientation of cultural (including productive) activities. It suggests the need for reassessment, and perhaps reorientation, of some of our priorities, form a tendency toward self-orientation to a culturally higher level value of other orientation. Priorities (From Value System) Self – Oriented (Want) Other – Oriented (Give) Material Wealth Cultural and Spiritual Security Open Markets Reliance upon Self Confidence bureaucracy Equality & Justice Bargaining FIGURE : 3.1 CULTURAL ACTIVITIES : PURPOSE vs. CULTURE A self – orientation that overemphasizes our own wants is a priority dimension of our productivity problem. This has natural roots, of course. The desire to do well and be successful is both healthy and productive. However, living in a society of orientation, and the development of respect and trust among members of the society not only is consistent with our human nature, but also leads to more enduring (personal) and business relationship. 3.2 TEN BELIEVES IN PRODUCTIVITY IMPROVEMENT 1. Quality in profitable Would you like to improve your long-term profitability? Think about Yokogawa Hewlett Packard's 244 percent increase in profitability through a five-year Quality process. Or the $700 million Motorola put on the bottom line as cost savings as a direct result of Quality. Or the 100 per cent profit improvement small wholesalers BSS made from their Quality drive. By and large, the ultimate test of a Quality process is the bottom line. For some companies, the end result is survival; for others prosperity in the form of enhanced market share or margin. But there is no magic and there are no short cuts; it takes hard work, a lot of skill and some time to see bottom-line benefits. They very best quality process will show a bottom-line result, the indifferent ones will never get there. 2. Poor Quality is penalized Would you like to eliminate those nasty incidents which cause the customers not to come back but tell his friends (other customers) what happened instead? 46 Think about the cost of losing one customer (the price of the service multiplied by the number of occasions that customer might purchase over a buying lifetime). Then think aobut the Washington survey that showed that customers tell at least ten others when dissatisfied: multiply your first cost by, say, three, to cover the lost custom from damaged reputation. Add the ceiling cost of replacing your customer with a new one (usually five times as much). Your large figures is the penalty for poor Quality. Can you afford not to have a Quality process? 3. Quality distinguishes Would you like your service to stand out from the rest? Think about Marks & Spencer who achieve premium prices on mass produces such as foods… or Van Leer with steel drums… or Perdue with chickens. These are distinctive to customers because of the high standards of their products and the personal nature of their service. In a crowded market, commonplace service – that which does not stand out – is simply ignored. Even tougher in a fast moving-climate, today's exceptional service is tomorrow's norm; distinction is a continuous need. A Quality process helps maintain an edge with a sharper focus on those factors which distinguish tomorrow's service and continual improvement to ensure the reality matches tile image. If Frank Perdue can differentiate a dead chicken, then anything can be made distinctive… provided you have the Quality process to back it up. 4. Quality is expected Your customers want it: your competitors may already he doing it … ‗wouldn't you be better being ahead of the game? Think about Motorola which tells its suppliers today that mere improving the supplied product and the ensuing service is not enough a fall Total Quality process is required, including applying far tile Baldrige Award. Think about why Ford, 3M and Westinghouse are similar/v uncompromising with their demands on their suppliers…, it is because their own customers are equally demanding on them. Think about tile way Quality S/lock waves are sent it reverberating along the supply chains, crossing borders and sectors. One may hit you soon, if it has not done already think about your competitors and others who may enter your market: might they be better equipped to respond to tile new demands? Your customers will want Quality; be ready to give it to them. 5. Quality renews Would you like a sharper, leaner; more flexible organisation? Think about revitalized Xerox and Motorola… or ever Rover and Unipart, once riddled with restrictive practices as part of British Leyland, both now operating with a flexibility learned from their mutual partner, Honda. Think about the transformations at British Steel, from Britain's biggest loss-maker to productivity levels as high as a in the world. Think about the waste in you own organisatoin and how it can clog things up and slow you down. Think about IBM and Westinghouse who, over the years, got rid of billions of dollars worth of unnecessary activities as a by-product of their Quality processes – helping them adapt quicker to new competitive threats. Think also about Tesco, who have deliberately and successfully moved out of the low-price retailing to compete head on with up market Sainsbury and Marks & Spencer or Allen-Bradley who saw the writing on the wall with high-volume electormachamical switch gear and made a huge step up into bespoke computer-integrated manufacture (CIM). A good Quality process energizes the organisatoin, permitting much greater change. If change is needed, use Quality to make the change telling and lasting. 6. Quality unites and inspires When you have set a clear business strategy, would you like the organisation to follow it, quickly and decisively? Think about your organisation? Is it fragmented with units, departments and levels operating in a divisive, cut—optimal manner? Then think about Nissan, who achieve consistent practice of management and workforce in Tokyo, Sunderland and Ohio, all working to the same mission. Think about turf battles and empire—building in conventional business and think how process management can convert this negative energy into competitive power. 47 Think also about the body Shop,. Whose 1,500 staff are united behind Anita Roddick's ideals and apply them with enthusiasm; think how this spread to customers, enabling. The body Shop to row phenomenally in a few years. What about Koinatsu and NEC, whose annual policy objectives are translated into improvement tasks for every work team… and all add back-up at the end of the year to achieve the target set? Or the stretch goals of Milliken and Hewlett Packard, with tenfold improvement targets for the whole business to strive for and achieve? Think about how many ideas you get from your workforce. Then think about Milliken's 200000 or Toyota's two million suggestions for improvement form their people every year. A hundred documented ideas per year is the minimum target for companies like Ricoh or Minolta. A united, energized workforce allows opportunities to be taken fast. It also gives service distinction just by the way people behave. 7. Quality delivers Would you like a better return from you projects and restructuring endeavors? Think about Hewlett Packard who have numerous major Quality projects with major results, such as $540 million form one inventory reduction as a consequence of introducing ‗just-in-time', another $ 200 million form the space released form the same initiative; or $150 million from an accounts receivable process improvement. Think about the very many companies who are achieving a regular six to one, or better; return on their Quality projects. As American Express says, ‗It is easy to justify further investment in Total Quality because the return is so high.' A Quality process brings discipline, direction and energy to projects and can transform the end result. A good Quality process can bring in well over 10 per cent of sales revenue per year in cost savings simply from removing the waste. But this is only one dimension of the multiple benefits which a strong improvement process should deliver. 8. Pride Would you like your organisatoin to be one which everyone is proud to work for? Think about Merck who topped Fortune's most abmired businesses for five year Merck always recruit the best and the best want to work for them; it is no coincidence that they also deliver the best results (an average of over 30 percent return to investors). The US executives polled for this survey cited quality management as the most sign cant factor making up a corporate reputation (82 percent), with quality of products and services next (63 percent). A Quality process should have direct impact on these factors. Think about Marks & Spencer whose reputation as a Quality business has grown a small store offering value for money into Europe's biggest retailer with profit increases despite recession. Marks & Spencer managers still take pride in providing value for money even though the company is not very large; their staff share this pride in the service and the company. Staff in a Quality business enjoy continual recognition from pleased customers and this spurs them on to perform even better. They are allowed to take pride in their work. Who wants to work for a non- Quality company anyway? 9. Self interest Would you like to better yourself, be a better manager, achieve more, have greater prospects? First, think about the planned humility of Japanese companies such as Ricoh or Fuju‖. Their Quality process, driven from the customer back, doesn't allow them to become complacement and arrogant; there is always something better that can be done for the customer. This gives their managers unlimited scope for development. Think about the personal growth from experiencing a transformation such as Jan Carizon led at SAS or Co. in Marshall at BA. Think about the concentrated learned form being at the centre of a massive shift in the way an organisation works such as at General Electric or Rank Xerox. And think about results… what we, as managers, are paid to achieve. Lasting results come from managing the whole in a sign cant/v better way. Believing in quality did not do the presidents of Toyota or Matsushita any harm in their struggles to build their businesses in the 1950s. Neither did it harm the careers of Heini Lippuner, who introduced Total Quality to a division of Ciba Geigy and is now chairman of the whole company, or Mike Perry who did likewise in a Unilever division and went on to become chairman of Unilever plc. Quality leaders tend to do well for themselves as well as for the business. 48 10. Quality is accelerated improvement Would you like to create a better way of doing business, to adapt, to innovate, to improve continuously, and do it faster than others? Think about many of the world's leading organisatoin today. Toyota Marks & Spencer, Hewlett Packard, British Airways, Sony, Komatsu, Motorola and perhaps 30 others. How have they sustained their success? Through continual improvement, through adaptation to changing environments and through reinvention of their services and processes. A Quality process is the means to institutionalize this rare ability for continuous positive change. It is not something that is exclusively available to the very best; any organisation of any size and any nature can learn from and emulate these world-class companies. Accelerated improvement is available to all business and all units… provided their leaders are prepared for revolution and believe in Quality. 3.3 TYPES OF QUALITY COSTS The cost of quality (COQ) can be classified into three major categories as given below: 1. Cost of conformance 2. Cost of non-conformance 3. Basic operational costs 4. Prevention, appraisal and failure (PAF) Costs Let us explain each of these categories in detail in the ensuing text. 3.4 COST OF CONFORMANCE (COC) Cost of conformance (COC) in cost which an organisation incurs in meeting the requirements of its customers. A strong element of this cost is the money that a company spends on the product for preventing it from going wrong or checking the product right before it reaches the customer. Indian organizations have also started realizing that whatsoever moves out of their fadtories must be of good quality. They are doing so by fool proofing their manufacturing processes and preventing the product defects. Because cost of conformance may be more but ensures the quality of the products by doing right the first time and every time rather than spending on repairs against for removing he product defects. These costs include costs on the product quality, organisation and training of employees on quality concepts. 3.5 COST OF NON-CONFORMANCE (CONC) The costs of non-conformance (CONC) to customer requirements are the failure costs. These costs are incurred by a company in repairing what has gone wrong during manufacturing. Indian companies have to learn to avoid these costs by improving upon their production processes. This will help them in increasing their profit margins and competitiveness. By avoiding these costs, a company will be able to provide quality products and services to customers at cheaper prices. 3.6 BASIC OPERATIONAL COSTS (BOC) The basic operational costs (BOC) are those costs which an organisation cannot avoid encountering during the normal performance of its business. Quality costs and the benefits of their reduction can be represented diagrammatically in Fig. 3.2. Figure illustrates that if all the three categories of cost are systematically reduced, several benefits can accrue to the company. Heightened efficiency, improved customer satisfaction and lower operating cost are the major benefits accruing to the company with the reduced costs of quality. Basic Operating Heightened Efficiency 49 Costs (BOC) Cost of Cost of Cost of Non-Conformance Quality Quality Improved Customer (CONC) (COQ) Reduced Satisfaction Cost of Conformance Lower Operating Costs (COC) FIGURE: 3.2 BENEFITS OF REDUCING QUALITY PREVENTION, APPRAISAL AND FAILURE (PAF) COSTS Quality costs are also categorized as prevention, appraisal and failure (PAF) costs, These costs are explained in the ensuing text. FAILURE COSTS: The failure costs are the non-conformance costs incurred by a company. These costs can be further divided into internal failure costs and external failure costs. These categories of the failure costs are explained in the underlying text. (a) Internal failure costs: The internal failure cost are defined as the non-conformance costs that result from things going wrong during the process of manufacture or service provision. These costs are detected before the product reaches the customer. Some examples of internal failure costs are: (i) scrap, (ii) downtime caused by defects, (iii) rework and repair, (iv) re-inspection of rework (v) excess inventory (vi) typing errors, (vii) failure analysis and (viii) downgrading because of defects. In comparison these costs are more in Indian companies and needed to be reduced drastically. (b) External Failure Costs: The external failure costs may be derfined as non conformance costs that result from the discovery of defects or errors by the customer once the product or service has left the organisation. Some examples of such costs may include: (i) warranty adjustments, (ii) repairs, (iii) customer service, (iv) faulty invoices, (v) product recalls, (vi) returned goods, (vii) returned or repaired goods and (viii) product liability litigations. A significant external failure cost in addition to the examples cited above is the lost opportunity cost and reduction in market share arising from a tarnished reputation and corporate image. Prevention costs: The prevention costs are described under the major heading of cost of conformance. The prevention costs can be defined as: the cost of any activity undertaken by a company which prevents things from going wrong. Some examples of these costs may include: (i) Quality data collection (ii) Quality improvement projects (iii) Field trials, (iv) Market research (v) Quality planning (vi) Quality education and training (vii) Statistical process control and (viii) Technical reviews 50 Indian organisatoin must learn to improve the quality of their products and services by rationalizing prevention costs. many Indian companies such as TELCO, TISCO, Larsen & Toubro, Bajaj Auto, etc. have been already making strenuous efforts to reduce these costs. APPRAISAL COSTS: The appraisal costs also fall under the cost of conformance. These can be defined as: the costs of al the inspection and checking activities that occur within an organisation to ensure that the product or service does not reach the customer in a defective state. This awareness is still lacking in the case of Indian companies. They can improve quality of their products by incurring on appraisal costs. Theoretically speaking, these costs could be unnecessary if everything a company does right the first time. Some examples of appraisal cost are: (i) Goods inspection, (ii) In-progress inspection (iii) Purchase order checking, (iv) Final stock inspection (v) Laboratory inspection (vi) Quality audits (vii) Financial audits and (viii) Calibration of quality measurement equipment. Prevention costs should be viewed more as an investment by the companies. By investing in prevention activities, failure will not occur and the need for excessive appraisal costs will become superfluous. Thus expenditure on prevention costs can tremendously reduce all other costs incurred on improving quality. 3.7 COST OF QUALITY Costs are a true measure of the quality effort. Cost of a quality is a measure of the cost to the firm for a lack of quality. A competitive product based on a balance between quality and cost factor's is the principal goal of responsible production and operations management. This objective is best accomplished with the aid of competent analysis of the costs of quality. The analysis of cost of quality is a significant management tool which provides. (a) A method of assessing the overall effectiveness of management of quality (b) A means of determining problem areas and action priorities Quality costs are distributed throughout the organisation. The costs of quality are no different from any other costs in that like the cost of maintenance, design, sales, production management, information and other activities, they can be budgeted, measured and analyzed. The costs of quality may be categorized as failure costs, appraisal costs and prevention costs. Failure costs can be further spilt into internal and external failure costs. (i) Costs of Failure: The costs of attending customer complaints and providing product service are Included under the category of costs of failure. These costs of failure is classified into two viz. (a) Internal failure costs and (b) External failure costs (a) Internal Failure Costs: These costs occur when products fall to reach designed Quality standards and are detected before transfer to the consumer takes place. Internal failure includes. 51 Scrap - Defective product which cannot be repaired used or sold Re-work or rectification - The correction of defective output or errors to meet the required specification Re-Inspection - The re-examination of output which has been rectified Down-inspection - Product which is usable but does not meet specifications and may be sold as ‗Second Quality' at a low price Waste - The activities associated with, doing unnecessary work or holding stocks as the result of errors. Poor organisation, the wrong materials etc. Failure analysis - The activities required to establish the causes of internal product failure (b) External failure costs: These costs occur when product or services fall to reach design quality standards and are riot detected until after transfer to the consumer external failure includes Repair and servicing - Either of returned products or those in the field Warranty claims - Failed products which are replaced under guarantee. Complaints - All work associated with servicing of customers' complaints Returns - The handling and inverstigation of rejected products and service including they transport costs Liability - The result of product liability, litigation and other claims, which may include changing contact. Loss of Goodwill - The impact on reputation and image which impinges directly on future prospects for sales. External and internal failures produce the costs of getting it wrong. (ii) Costs of Appraisal: These cost are associated with the evaluation of purchased materials, processes, Intermediates, products and services, to assure conformance with the specifications. Cost of appraisal includes. 1. Verification – of incoming materials, process-set up, first offs, running processes, Intermediates, final products and services, and includes product or service performance appraisal against agreed specifications. 2. Quality audits – to check that the quality system is functioning satisfactorily. 3. Inspection equipment – the calibration and maintenance of any equipment used in appraisal activities. 4. Vendor rating – the assessment and approval of suppliers of all products and services. Costs of Prevention: These are associate with the design, implementation and maintenance of the quality system. These are the costs to prevent the production of bad quality output. Prevention costs are planned and are incurred prior to production. They includes : 1. Product or Service requirement – the determination of quality requirements and the setting of corresponding specifications for incoming materials, processes, intermediates, finished products and services. 2. Quality planning – the creating of quality, reliability, production operation supervision, verification and other special plans required to achieve the quality objective. 52 3. Quality assurance – the creating and maintenance of the over all quality system. 4. Appraisal equipments – the design, development and or purchase of equipment for use in appraisal. 5. Training – the development, preparation and maintenance of quality training programmes for operators, supervisors and managers. 6. Miscellaneous – clerical, travel, supply, shipping, communications and other general management activities associated with quality. 3.8 IS Quality free of Quality? Why should a company calculate the cost of quality (COQ)? This may seem to be an obvious question. The following points give the major reasons for calculating the cost of quality. 1. To reduce the cost of current operations. 2. To prevent incurrence of excess cost incurring when quality improvement activities are implemented. 3. An analysis of the cost of quality is a convenient tool for analysis of business processes. 4. The calculation of the cost of quality is an additional diagnostic step in establishing current performance. 5. Cost savings will, therefore, become a criterion in any envisaged process changes. 6. By systematic planning the prevention costs, the failure costs and the appraisal costs can be reduced substantially. The resultant savings to the company will enable it to invest in the process of quality improvement. 7. According to cost of quality principles, any non-value adding activity is a waste and an unnecessary cost. Cost of quality analysis will act as a main vehicle for identifying non-value adding activities. This can assist the small and medium business managers to reduce overheads to a minimum and decimate indirect costs. in this way anything which does not add value (i.e. what the customer pays for) will he exposed and eradicated. 8. Principle of ―working smarter than harder helps removing of unnecessary costs. This makes a company's goods and services cheaper, competitive and more profitable. Thus, the wasteful costs need not be passed on to the customer in the form of increased prices, thus, helping to prevent jeopardized competitiveness. 9. By laying proper emphasis on the importance of the cost of quality, a business manager can succeed in performing quality related activities and giving equal status to all other business activities such as marketing, production, R&D, etc. 10. Identifying the cost of quality wil draw attention to activities of high cost. It will provide an effective measure of performance. This will act as a good comparator for various processes, products and services and departmental performances. 3.9 COQ VS. ORGANISATION CAPABILITY Total quality related costs Quality Failure costs Increasing Costs Approval costs Prevention costs FIGURE : 3.3 COQ vs. ORGANISATION CAPACITY 53 The relationship between the direct cost of prevention, appraisal and failure, and the ability of the organisation to meet the customer requirements is shown in the above diagram. (Figure: 3.3). Where the ability to match a quality acceptable to the customer is low, the total direct quality costs are high, the failure costs predomination. As ability is improved by modest investment in prevention and possibly appraisal, the failure costs drop Initially very steeply. It is possible to envisage the combination of the costs of failure declining, appraisal declining less rapidly, and prevention increasing, leading to a minimum or optimum in the total costs. Such a minimum does not exist because, the requirements change and become more exacting. Total direct quality costs and their division between the categories of prevention, appraisal, internal failure and internal vary considerably from industry to industry and from plant to plant. Quality is an important dimension of production and operations management. Quality is fitness for use or conformance to requirements. Quality of a good or service is often perceived by the consumer in terms of appearance – how it looks, operation – how will it works and reliability – how long it works. The quality of a product or service may be determined by the design, conformance to design, consumer education and service after delivery – Quality of a product or service to an organisation is as important as sound health to a human-being. The quality of a product or service can affect the organisatoin reputation and image. Its productivity, profitability, liability to customers and costs, thus Quality of a product is vital factor in shaping the future of an organisatoin: Costs are a true measure of the quality effort. Cost of a quality is a measure of the cost to the firm for a lack of quality. The costs of Quality may be categories as failure costs, appraisal costs, and preventive costs. Every prudential entrepreneur should maintain a balance between Quality and Cost factors. The quality of the product or services can be improved through various sources such as research and development, customers, competitors, employees and management. 3.10 COST OF QUALITY PROFILE Figure 3.4 shows a typical cost of quality profile. As so little has been spent on preventive measures, non- conformance costs as percentage of annual sales turnover are disproportionately high. Indian companies must increase prevention measures so as to decrease the non-conformance costs as a result of increased quality of products and services. SALES TURNOVER Cost of Conformance Appraisal Costs Cost of non- conformance Internal and External Failure Costs Prevention Costs Basic Operating Costs FIGURE : 3.4 COQ PROFILE – AN EXAMPLE One of the highest cost of quality are the indirect and often intangible costs associated with running the business such as general administration or customer services. Bad customer service for example, can have both high direct and indirect costs as shown in Table : 3.1 Taking the direct operating cost curve and indirect cost curve together, a total cost curve may be drawn as shown in Fig. 3.5 54 TABLE: 3.1 COST OF BAD CUSTOMER SERVICE Direct Costs - Indirect Costs - 1. Cost of handling Complaints 1. Cost sales from these effects 2. Cost of returns/refunds 2. Lost potential sales of those informed of the 3. Cost legal activities service 4. Cost of public relations 3. Cost of acquiring replacement customers 4. Cost of lost opportunities to expand FIGURE: 3.5 DIRECT AND INDIRECT COST CURVES – PAGE NO. 91 3.11 BENEFITS OF COQ MEASUREMENT The main benefits accruing from the ongoing measurement of the cost of quality as an important element of quality development are summarized below: 1. Management focus: Helps is providing a measure of financial benefit to skeptical senior managers struggling along the demanding road of quality improvement. 2. Project focus: is useful in helping to identify which areas of the business should be prioritized in terms of quality improvement activities. 3. Measurement focus: is helpful in establishing a quantifiable performance measure of the progress made through the more effective management of quality. 3.12 PROBLEMS IN QUALITY COST MEASUREMENT Major problems faced by a company while measuring the cost of quality improvement are enumerated below: The difficulty in measuring and quantifying certain quality parameters such as the customer loyalty, staff commitment, product reputation, true cost of errors in the organisatoin which are not always recorded or the improved workmanship of the properly trained employees. There is apparently subjective nature of classification of quality costs. therefore, the importance of establishing a consistent company – wide view of the various quality costs increases. The technical – accounting problems of a cost measurement system which by definition in incomplete (not all costs within an organisatoin are classified as quality costs) and therefore, does not produce a balanced account which would permit validation. The difficulty in apportioning overheads across the quality cost categories. This represents a fundamental problem as the overhead activities (such as management time spent on correcting errors and troubleshooting) are often the way quality costs. The moves towards activity-based system may improve this particular difficulty. Despite these problems, the ongoing measurement of the cost of quality is an important element of quality development. The reporting format and frequency are generally, company-specific although certain standardized approaches are emerging. The key indices, normally quoted for the cost of quality, are given in the following text. 3.13 DOES QUALITY COST ANYTHING? The cost of quality (COQ) is defined as the sum of the costs of everything that would not have been necessary if everything else was done right the first time, Control of the cost of quality is one of fire major benefits of implementing total quality management. Historically, there was the mistaken notion that achievement of better quality requires higher costs. it was this myth that prevented many Indian companies to invest more strongly into activities and programmes leading to quality improvement. Perhaps this notion of Indian companies did not allow their to enter and spearhead the quality movement simultaneously with Japan, the West, the US and other Asian Tigers. As a matter of fact, poor quality implies waste of material, machinery, equipment and manpower arid thus results in higher costs. Philip B. Crosby has written in his book titled: ‗Quality is Free' that manufactured and supplying the best quality 55 products and services do not cost anything, rather it improves profitability by avoiding repetitive work. Optimum utilization of resources such as men, money, materials and machines ensures better quality and thereby lowers the costs of products and services. A.V. Feigenbaurn in 1956 propounded the concept of quality costs. he defined quality costs as: Those costs associated with the creating and control of quality as well as the evaluation and feedback of conformance with quality, reliability and safety requirements, and those costs associated with the consequences of failure to meet the requirements both within the factory and in the hands of customer‖. Many organizations while initiating total quality concentrate on two areas, namely; the attainment of registration to quality assurance standard – ISO 9000 and satisfaction of customers through customer care programmes. These organizations disregard the fact that TQM can also lead to substantial cost savings. Increasing efficiency and minimizing waste through assessing and reducing the cost of quality, can have a potent effect upon the cash flow and profitability of business. It has been widely accepted in the industrial arid management world that the cost of quality is typically 25 per cent of the sales turnover. In the services industry, it can be more akin to 40 percent. Some of the world class companies have poised themselves as the example by reducing the cost of quality tip to 90 percent. Such successful reductions in the cost of quality have been particularly dramatic in Europe, the US and Japanese companies. For example, Rank Xerox's Business Product and Systems organisation achieved the following improvements by tackling its cost of quality: (i) A reduction in the number of defects per machine by 78 percent and (ii) A decrease in unscheduled maintenance by 40 perce4nt and service response time by 27 percent. This way the company saved millions of dollars by first identifying the cost of quality and then undertaking corrective measures to reduce the same. In view of the above example, Indian companies can do a wonderful job for themselves as well for their customers by reducing costs and increasing their profitability. This way they can help India in becoming the number one economy of the world. The benefits to the small and medium organizations will be fantastic as there will be profit increase of nearly 40 percent of sales turnover. Improvement to a company's products and services are achieved without spiraling cost increase simply by carefully monitoring quality cost. 3.14 COMPETITION IN QUALITY – TO BECOME WORLD CLASS COMPANY THINK BEYOND QUALITY : Revolutionary fervor does fade. So does the uniting value of Quality which provides the inspiration. But the need for improvement and the energy behind it will always be needed, so the leader has to find ways of continuing the stimulus and excitement of improvement, year on year, decade on decade. Quality itself may no longer be the focus. Quality becomes the foundations, the base from which new initiatives are spawned. Quality, by this stage, is well embedded in the way things are done. No longer is it viewed as an act of faith but as a direct contributor to business results. People know what the Quality way is and would not think of compromising the standards established. In this scenario, the leader needs to put the focus on new initiatives which maintain the energy level. In going beyond Quality, the focus should provides new stimulation, new challenges and new targets but at the same time reinforce what has been achieved already. In is difficult to generalize on what these initiatives for the advanced company should be: they are invariably specific to the company and its environment. But most of the world's leading companies are tending towards similar practices as they continue their relentless drive for improvement. Thus, one company may have a two-year major push on time-based competitiveness; another may introduce the concept of total produce maintenance; yet another might fashion an improvement focus around a service charter. The initiative might be unique, it might the borrowed from someone else; it might be pioneering or catching up on what others has done. That is not important. What is important is that the improvement energy build up with the Quality process is kept high and that the initiatives are chosen to continue the process of business improvement. 3.15 QUALITY MATURITY At what point does Quality mature in an organisatoin? At what stage do companies need to go beyond Quality into other concepts to keep the acceleration high? Looking at the leading practitioners, there is a very wide spectrum of experience between the 40-year experience of the early Japanese companies and those in the West who have employed a Quality process in the last decade. The Japanese companies have kept the profile on Quality very high throughout and their new initiatives till have a Quality focus. Many of them have retained the formal Quality process to hold it all together – TQC – but, in reality, this merely describes the procedures. The custodian of Quality in 56 Japanese companies is management practice, which is highly consistent today. In the best Japanese companies, Quality and management are synonymous. The Western companies who are leading the Quality revolution have not achieved this degree of consistency (indeed some might argue against it). As companies install Quality processes and go on to achieve and maintain accelerated improvement, they go through patterns of common experience which can be generally translated into phases of maturity. Level zero is when the management of the business has decided they do not need Quality. They are ignoring the movement, content with their firefighting and fixing, relying on intuition and luck. Such a blinkered, insular existence is hard to comprehend and yet does still exist. Level one is when a company begins to explore the field of Quality, often through the necessity to conform to standards such as ISO 9000. Outputs and inputs receive more attention. Product assurance is strengthened and suppliers controlled more. Management start to learn about Quality and talk about it. Awareness sessions are often set up. The phase is a very frustrating one because the real underlying issues are not being tackled and indeed there probably is no common understanding of how to approach them. Managers and staff who see the reality of the business day to day are very skeptical of the new emphasis on Quality. They do not believe it is for real. Level two is when it begins to be seen as a reality. An installation process is devised and may people are trained, supported with much communication about Quality and what it will do. Cross-functional initiatives are established and champions emerge who push the process hard. At some point, the energy level pushes the feeling from skeptical to enthusiastic. Then most companies have their hardest phase. People have enjoyed their training; hey like the ideas and the practice. They want more. Where is it? Those who are well into Quality are becoming frustrated because it is harder than they thought. The projects are taking a long time and there are too many of them; they clash over resources and priorities. Other are getting fed up of the amount of effort and time that has gone into the whole thing – what about the business? This is a test for the leader and the more determined he is, the faster this stage is bridged. Level three, embedding the Quality process, means fighting for organizational living space and the fight is a tough one. The challenge is to see it through and achieve that state of inevitability which allows the Quality process to survive. Most often, the leader will firm up on a top-down process at this stage, even when his sympathies may be more for bottom- up. Level four is reached when the CEO starts to make the Quality process sweat. He wants to use it for business advantage and drives the process accordingly. This is the big differentiator between those who do and those who do not succeed with a Quality process. In driving the process, the leader will set hard goals, install sharp measures, establish benchmarks from external sources and gear every body up for deliver. FIGURE: 3.6 OBSERVED LEVELS OF QUALITY MATURITY – Page No. 97 The results of this take the company into the Level Five, where strong returns and widespread success fuel continue improvement. It is a time of integration of many activities which had not sat comfort ably together. Kaizen and breakthrough; leadership and empower meant; the Quality process and business objective. Knitting these together takes leadership skill and time. By this time, the company is receiving accolades from outsides. Suppliers are doubly keen to win the business; customers are more attentive; competitors are watching closely. Visitors want to see that it is that the company has done. Awards are won and more attention is poured on the company. The company has reached the toughest step of all: continuing to improve despite the success. Those that do so, that manage further improvement at this stage, are going beyond Quality. They will not find a methodology which takes them into Level six. The have to create it uniquely form the platform they have achieved. They have become lean, fast and capable. The are consistent in their approach wherever they do. They are an elite group – those companies which truly close to world-class. 57 3.16 ROLE OF MNCS IN THE EMERGENCE OF GLOBAL QUALITY Real life is never the smooth curve as depicted; despite everyone's good efforts inside, the world outside is always trying to throw us off course. Alcatel's Spanish division offers a good illustration of the sheer determination needed to keep pushing up the curve in the face of adversity. A significant part of the gaint Alcatel Alsthom telecoms group, Alcatel Standard Electrical employs ground 10,000 people across eight major locations. The Alcatel group, headquartered in France, has a mission to be strong in Europe (reporting from national units is already routinely made in ecu's and Alcatel has applied for a European statute to reflect this emphasis). Number one is Europe in telecoms equipment, in digital switching, in cables and in several other related fields, Alcatel operates a hands-off policy for its national divisions, provided that a major contribution to this overall position is maintained. This has proved challenging to Alcatel Standard Electrical. Quality first came on the scene as a Quality programmed in 1984. This was level on in Quality maturity with all the problems of a well-meaning initiative struggling for life in an indifferent managerial environment. Cristobel Serra, Quality director, fought hard to keep going, switching the emphasis to development circles with the more sustainable aim of developing people rather than problem-solving. Facilitators were trained to work with middle management and a plan for ISO 9001 accreditation was launched; a shaky level two was reached. As Cristobel now says, ‗We started bottom-up but I wouldn't recommend it.‖ Then came the first reality test from the business. A major restructuring was needed to cope with the technological shift from electro mechanical gear to electronic. Some operations which used to take 16 people now required 0.5. Through the mid-1990s, an astonishing 50 percent of jobs were lost. A new agreement between the Spanish government (who was the major customer and user), the unions and the company was thrashed out to make the new operation viable. Crucially, a new company president was brought in. Still in his thirties at the time, the new president reversed the hierarchical management structure, building units with decision-taking closer to the market, cutting across functions and leading only a tiny head office. But much more than changing the boxes was needed and a Total Quality programme was devised to bring in a different management style. Bottom-up now became top-down – level three on our maturity scale. Product quality was becoming more reliable by now and the 1,100 inspectors were replace by a 170 off-line auditors. Customer satisfaction became the stated top priority as Total Quality training sessions were rolled out to the units. Some took off fast as the local enthusiasts saw their opportunity and took up the empowerment they were being offered. But others were slow to follow, with only a gradual spread across the units as some of the successes became visible. By 1989, three years of Total Quality has passed and little additional progress was being made, even though all the key elements were there. Alcatel had hit the wall. A Quality task force was set up to find out why. Other programmes were examined and showed that it wasn't really the content. Perhaps it had just stagnated' A relaunch was devised for the middle of 1989. This time it was left to permeate through naturally; simultaneously, a plan was created and resources built up to power through the block ages. A new Quality Council of all the unit managing directors was established, chaired by the president. Now no one at senior level could opt out; all were held accountable for Quality, whether a champion or sceptic. Each unit set up a steering committee from the line management with a trained coordinator in support. The profile for the coordinator was strictly met, with many units having to go outside to meet the requirements. The steering committees appointed improvement teams top-down, made up cross-functionally to address key problems membership was non-voluntary; 20 hours graining in improvement methodology and techniques was given to all team members, reaching some 1,600 people in all. Engineers received additional training in specialist techniques and the whole workforce attended three hours of workshop education on the new approach. To reinforce the whole endeavor, a recognition day was un in December 1990 in review the team achievements and celebrate the successes of some 550 teams – a great success in is own right and repeated each year since. Such intensity of effort from 1989 to 1991 took Alcatel through the wall into level four. Management was determined and visibly so. Then came big reality test number two. From the 1986 restricting onwards, growth of 30 percent year had been achieved. This came abruptly to an end when the main customer, the Spanish government, brought the investment in telecoms infrastructure to a premature finish. Suddenly Alcatel's market was dissolving. A new strategy was quickly devised. Manufacturing was revived after a progressive move towards subcontracting. The world was scoured for expert markets. Soon destinations in China and North America were being posted on the electronic information board detailing the big systems being built. But still at the cost of more jobs. This had a double blow effect on the Quality process. Morale was low and many people who were strong participants in the teams were leaving. 58 The leaders did not give up. Rather they redoubled their efforts. People issues came into even sharper focus. Eduardo Motez, one of he managing directors and long committed to the Quality process, had been spending 20 perdent of his time on Quality in one form or another. Now he doubled it. His description of the development teams, which had floursished since the relaunched programme, was ‗like mushrooms in England in the autumn – suddenly they are every where, then just as quickly they've gone.' He deliverately and visibly invested in more training to show commitement. He rapidly introduced cross-training for people to learn additionalskills and soon 60 percent of the workforce had certified skills in two tasks and 15 percent in four tasks. He personally inspired a ‗Pride of Team Spirit' compaign and backed it with tangible changes. He introduced music on the factory floor, uniforms, a no smoking rule (very bold in heavy – smoking Madrid) and an open space concept (even trickier: no private offices were allowed in the company at any level). His open-door policy meant he was inundated with visits, mostly to complain about the changes. But the majority stuck with him and the feeling of a new factory began to emerge. The pride returned, improvement activity started to rise again. Meanwhile at the centre, Cristobel Serra had his best idea yet. The rather adhoc measures that had been in use in the group were superseded by a carefully thought through and well-tested series of metrics. These enable local development teams to link their contribution right back to group strategy. The metrics have been evolved to 23 sharp indicators ranging from competitors' market share to percentage of products delivered without objectives. Today, Eduardo discuss his strategic plan, defined by these indicators, with his whole team in one big meeting before presenting them to his president. The president, in turn, is more interested in the indicators than the profit and loss account which is submitted with them. He looks particularly at the metrics describing progress on inventory, on people and on customer; he knows these will effect the next profit and loss account. All in all, Alcatel Standard Electrical has had a good return from its Quality process. The process has reached level five in some units such as Eduardo's. One observer, a supplier, express amazement that Quality still survives,' despite restructuring, down sizing and a culture change. Eduardo and Cristobel would say it is only because of the Quality process that huge changes have been possible. To go further and this is central to Alcatel's strategy, the business has to look outward. Benchmarking is being established. Assessments to external standards, such as the European Quality Award criteria, are being introduced. Alcatel is one of the growing numbers of companies which have clearly set their ambitions to achieve world-class standards and this is where it is headed, despite the tests set by reality. Assessing Maturity As companies come through the brick wall and drive for world class, leaders begin to ask how they compare with others. ‗We've worked hard to build up to 38 percent of the workforce in improvement teams but it's stuck there. Is this as far as you get or are other doing better?'; or ‗We're achieving a four to one average return on our improvement projects. Is this a good standard?'; or ‗We've taken 30 percent of time out of this key process. Is this all we can expect?' Many similar questions arise as companies begin to have a clearer picture about their own achievements. There is a thirst for comparison, both inside, between units, and outside with other improving organizations. This is a healthy sign of developing maturity with Quality and the leader should be prepared to respond. An objectives assessment is an opportunity for focused learning and re-energizing. Some large companies create their own assessment criteria and develop a process which provides local units with an assessment for their own improvement plans plus data to integrate into an overall assessment of company progress. Hewlett Packard, for example, have for some years evaluated units against a simple star framework with five main elements. For each of the five elements – customer focus, improvement goals, process management, the planning process and total participation a score of one to five is given to each of over a hundred business units. A central Quality team does the assessment interactively with the local management team. HP's main aim is consistency across the group and they have set a target of an overall score of 3.5 for 80 percent of units by 1994. Some groups in Unilever have a similar approach, but using outside consultants to conduct a maturity review directly with the local business unit. The consultants develop the evaluation to a maturity model customized for Unilever. The aim here is direct assistance to the local unit by drawing out implementation strengths and week nesses. To this end, the local facilitators and workforce groups contribute to the evaluation as well as management. The data is not collected centrally and it is up to the local unit whether they share the information with anyone else. Westinghouse have designed their own Quality Review, which they have been using since 1981 to asses their business units. Units do self-assessments against 12 criteria areas, supported by a week-long input of structured interviews by people from outside the unit. The unit receives a strengths and weakness assessment, recommendations against the 12 points and a score. The score is important and, over the decade or so of use, continuous progress has 59 been tracked. In fact, Westinghouse has sufficient data over he years to make some fascinafing correlations. Graphs plotting three key indices at Westinghouse profit/sales ratio, a composite of financial objectives known as the green tag' and a composite of reliability and failure costs – show very strong relationships with the fitness score ( correlations of 0.957, 0.992, 0.961 respectively). As a result, managers at Westinghouse have little doubt about the relationship between Quality and business success. As Quality companies raise themselves higher up the maturity curve, they increasingly want to know how they compare with the world's best. Benchmarking helps them with specifics like time to market or service levels but does not give an overall comparative picture, especially on a global basis. FIGURE : 3.7 CORRELATION BETWEEN PROFIT AND IMPROVEMENT PAGE NO. 103 The Malcolm Baldrige Award and the European Quality Award are increasingly used for this purpose. The Malcolm Baidrige National Quality Award (MBNQA) has been around for a few years and is well known by many managers. It has been won by some of America's best companies and has embraced a reasonable range of organizations ‗In its winners: from high tech such as Zitec to service in Federal Express and Ritz Carlton. As such, it has universal attraction and hundreds of thousands of companies reputedly use MBNQA criteria for self-assessment. In reality, much fewer of these have a disciplined assessment process. Of those that do, Du Pont is typical. Every division of Du Pont world-wide is required to assess its Quality achievement against MBNQA criteria every year. The assessment is self-administered by the local unit management team, but it must be done to an accepted methodology and help in given if needed. One of he bi advantages fm Du Pont is that they can allow a lot of freedom of implementation to divisions (and, indeed, each division has its own programme with a different theme and different emphases) but there is an overall comparative guide to progress which can be normed internally and externally. There is nothing like a score to motivate a business unit. MBNQA scores a theoretical maximum of 1,000, with an Award, wining score being of 700 plus. Once a unit under stands the criteria, rapid progress can be made if the management is determined enough. IBM Rochester went from a self assessed score of 340 in 1987 to win the Award three years later. Some of Du Point's units have made similar rapid progress once they have understand their position. For instance, one unit went from 280 to 440 in 12 months. Dieter Wullschleger, the Geneva-based TQ manager for the Electronics division, has been coaching units in self-assessment for some time and in many cases he finds an assessment can be now made, without fuss, in one day. Form time to time, however, Dieter encourages units to accept an external assessment, which usually rates tighter than the self-assessment – sometimes to the order of 100 points. The difference is often how the management team perceives its own leadership and its own accomplishments in valuing people. Having an externally – benchmarked number has great motivational value. MBNQA is not a perfect fit for companies working their way up the Quality maturity curve. Indeed, it has been extensively criticized by practitioners for being too focuses on the process of improvement and not sufficiently on the results. No business today can afford the lusury of an improvement process that does not directly lead to business results and this factor has to taken into account by anyone using the MBNQA for self-assessment. The creators of The European Quality Award (TEQA) were fortunate in being able to take this view into account. TEQA was formally announced in 1991 at the London forum of the European Foundation of Quality Management (EFQM), the sponsoring body, and the first award was made at he Madrid forum in October 1992. Prior to this, three years of intensive research and practical development was invested in creating TEQA. Roy Peacock, who led the programme to develop TEQA for the EFQM, painstakingly reviewed all the Quality awards in the world and the experience of their use, paying especial attention to MBNQA, which is by far the most well-known. In addition, many Total Quality practitioners and EFQM member companies were involved in creating the most expressive form of Quality evaluation which could be devised. The outcome has much in common with MBNQA but with significant differences. The biggest differences are that the results criteria lacking in MBNQA are very well counted in TEQA. TEQA criteria are grouped into two: one to cover the enablers – the process of improvement or the how things are being done – and one to cover results – what has been achieved as perceived by 60 the stakeholders the organisatoin. This slit goes all the way through the assessment with assessors looking at each specific criterion in two parts: first the method chosen for, say, managing processes more effectively and secondly the deployment of that approach – what has been achieved in practice. This makes for a powerful assessment tool. A company or unit may have a wonderful intention and a compelling theoretical or conceptual description but if it is not getting results it won't score highly. TEQA criteria are not cast in stone and will inevitably evolve to match a changing environment in the future, but all the signs are that they represent the best comparative assessment which an organisation could choose to evaluate its progress to world-class. One company's journey to world-class Rank Xerox would not claim to be world-class. Like ass the leading companies in the world, they have a rigorous assessment process which highlights the gaps against other outstanding performers. They know where hey are not yet truly world-class, but they also know they are on the right track. That said, the Xerox group have won national Quality awards in Britain, Mexico, France, Canada, Holland and Australia plus lots of specific awards such as ‗best factory'. Even more telling, Xerox subsidiaries have won the big-ones – Baldrige in the USA, Deming in Japan and, now, TEQA in Europe. Despite this unique achievement, of which they are very proud, Xerox remains humbler about its status as a global model. This stance is also revealing: it is a characteristic of the very best to have pride with humility. Xerox has clear intent not just to achieve the spirit of being world-class but to measure performance within the international peer group of Quality-led companies. Rank Xerox was formed in 1956 as a joint venture between the Rank Organisation and Xerox Corporation to manufacture and market reprographics and other office equipment outside of the Americas. Rank Xerox today has operations in over 80 countries around the world including all of Europe, Africa, the Middle East and India. The story of its journey towards world-class is a table of a classic Quality revolution. In the 1960s, Rank Xerox has the seemingly wonderful position of a monopoly in reprographics, a booming sector. Nowadays we know that monopoly positions never last and, worse, breed complacent habits, and Rank Xerox was no exception. When the patent protection ended in the 1970s, Rank Xerox was shown up by the youthful Japanese competitions as expensive, complex, bureaucratic and slow. The Quality was that hit the Xerox businesses could not have been bigger. By the 1980s, survival was a big question. As so often in good Quality stories the right leaders arrived on the scene at the right time. David Kearns was not interested in past glories and not interested with any delusion of superiority'. He knew the Japanese (Ricoh, Canon, Brother, Minolta) had the better management model. Fortunately, he had his own model with the group: Fuji Xerox, a joint venture between Rank Xerox and Fuji Corporation, had since the mid-1970s, been seriously applying a Total Quality process to counter the intense local competition. In 1980, they won the Deming Prizes in Japan and this triggered a stream of learning between Tokyo and the rest of the group. A corporate-wide process began in 1984, called Leadership Through Quality. The first years of this process were conventional enough. A formal training programmes in Quality was rolled out rolled out across all 100000 people in the group, taking five years to finish. A key ingredient was using managers to front the training, with a strict cascade level by level. Thus managers actually experienced the training twice – as learners with their peers and then as leaders of their family group at the next level down. After training, people went into problem-solving teams and applied the techniques learned. This phase took nearly four years at Rank Xerox before the process was complete and all 28000 were initiated in Quality. The result was a through awareness of Quality and steady improvement practice. However, when the Rank Xerox management team stood back from it, they knew is was nothing like enough to keep up with the competition. At this crucial stage another Quality leader emerged. Bernard Fourier, managing director of Rank Xerox, admits he was skeptical when first introduced to the Quality concept. He now says: This changed when I discovered that it could help me with any two main issues of the day – moving from management to leadership and encouraging everybody to contribute to the company's goals. A strategic review told his management team that, on the things that count (customer satisfaction, employee satisfaction, marker share and return on assets), the Quality process was not making sufficient impact. They did some benchmarking and prepared to break through the brick wall which was holding hem back. A Quality intensification plan followed in 1990. This plan shifted up a few gears. It was led personally by Bernard, who firmly believes in leading from the front: ‗At Rank Xerox, I ensure that Quality is driven from the top. Throughout the organisation, it is managed in the lien by the line.' The new plan knitted together some of the separate strands of the Quality process under six key categories: management leadership, human resources management, process management, customer focus, Quality support and tools, and business results. This was not a reshuffle of components. Crucially, for each category a statement was made which defined sharply what the aim was and all six were combined on one page to become the new vision statement. Metrics were set up for each and the measurement mechanisms built. Assessments were made 61 to evaluate progress and overall results on the six categories began to deter mine promotion prospects. For further reinforcement, Business Excellence Certificates were introduced for all units as a way of emphasizing both the business consequences of Quality performance and the means by which results are achieved. The certifications process evolved into a road map for success by which units could assess them selves and identify gaps in performance, followed by specific improvement action. Certificates were awarded via a formal examination, carried out by specific improvement action. Certificates were awarded via a formal examination, carried out by senior Rank Xerox managers, which recognized both progress and approach. This bit shift in internal emphasis was reflected back to the marketplace: Rank Xerox was not ‗the document company' offering a ‗total satisfaction guarantee' Quality was not driven by customer and business requirements. This new plan had a bit impact and Rank Xerox went on to the next level with Quality. Naturally, no one was satisfied. In particular, there was a feeling that the process of Quality was quite strong, but was it really hardwired to business results? The new emphasis became ‗from process to business excellence' and drew heavily on the disciplines of policy deployment and business process re-engineering to link the Quality effort directly to business results. Where once Rank Xerox units had 40 or 50 priorities with never enough budget to go round, now they have three or four ‗vital few' with the focused resources to ensure achievement. The whole planning process deploys down from the ‗Rank Xerox Vision 2000' to individual objectives at every level, with open measures and visible tracking of performance. To match the vital few at unit or division level, business processes are hit with routine process simplification targets of 100 percent improvement in three to six months and radical process re-engineering targets of 1000 percent improvement in two to three years. FIGURE : 3.8 RANK XEROX QUALITY INTENSIFICATOIN PLAN : PAGE NO. 108 Rank Xerox are always seeking to maintain high energy and integrate their improvement activities. A new opportunity for this was presented with the announcement of the European Quality Award in 1991. Xerox had gained enormously from winning the Baldrige Award in the USA, particularly from the challenge of external scrutiny and the enthusiasm generated for the competition in ‗Team Xerox'. The Rank Xerox management saw the opportunity for a similarly uplifting experience in Europe and the catalytic benefits at their stage in the Quality journey. This was a chance to add new dimensions to the business excellence certification processes by benchmarking against Europe's best and adding the rigor of outside evaluation. The new challenge reinforced much of the planned activity and helped raise the overall consistency, whilst highlighting some areas not previously emphasized. Starting with customer satisfactions, a closed-loop management process has been established for some time across the company. This means: listening to the external or internal customer; understanding his or her requirements; developing and delivering solutions to any problems; measuring and reviewing performance. This closed-loop ways of managing overlaid with the radical improvement disciplines enabled further progress to be made. With this improvement activity linked directly into Policy Deployment and the Business Excellence process, Rank Xerox was soon well set to contend for the award. Rank Xerox became the inaugural winners of The European Quality Award in December 1992. 3.17 CONTINUING THE JOURNEY Winning this award is a market along the path to world-class for Rank Xerox. It has enabled them to take stock of their journey and ask the question: has it been worth it? Their answer is a collective yes. In their award submission on business results, they were able to demonstrate that over the ten-year period of a Quality process, they had enjoyed an almost uninterrupted revenue growth and a related profit performance, even in 1991 when many similar high-technology businesses showed losses. Their submission concludes: ‗Our performance reflects the success of our commitment to customer satisfaction through our Quality strategy. This, together with our investments in employee satisfaction, market share new products and improvement programmes, will provide the basis for continued profitable growth. ‗Bernard Fournier put it another way in his award acceptance speech.: 62 ‗We started the Quality Journey in 1984. Rank Xerox was 28 years old and was rapidly losing market share. We had become complacent and were losing sight of out customers. Now we are one of the few companies that is actually winning market share back from the Japanese – slowly but surely.' Rank Xerox die not reflect on this success for long. They are proud of what they have achieved and do not shun the advantages of a Quality image but their pride also demands they fill the haps in their world-class canvas. They have no intention of resting on their laurels; they know there is so much more to do. They also know Quality pays and they are greedy for more of it. Pride and prosperity are powerful motivators. On accepting the award form King Carlos of Spain, Bernard said: ‗This is a crucial step on our journey to 100 percent customer satisfaction. It recognizes our achievements and gives us the drive to go further. Make no mistake – encouragement is important. One of the lessons I have learned over the past eight years is that Quality does not come easily. It has to be permanently managed. The drive for improvement at Rank Xerox continues to be managed; it is not left to chance. Rafael Florez, as Quality, as Quality and customer satisfaction director in 1993, has a specific responsibility for coordinating activities for that most important one of the vital few customer satisfaction. On his wall was a storyboard of the closed-loop process which links corporate values and priorities, customer feedback, analysis, actions and results. Twelve charts depict each stage. There is no exhortation or slogans; each chart is factual, either a statement or data. The last chart in the loop shows Rank Xerox' own datas on why customer satisfaction is a business priority.: 52 percent of very satisfied customers state they would definitely repurchase from Rank Xerox and 65 percent of very satisfied customers would definitely recommended Rank Xerox to others. Any visitor to Rafael's office had little doubt that, European Quality Award or not, the pres sure to meet the customer satisfactions goal is unrelenting. FIGURE : 3.9 RANK XEROX CLOSED LOOP KEYBOARD : PAGE NO. 110 Rank Xerox is clearly well motivated to keep its Quality revolution in motion. As Bernard Fournier concludes: ‗Perfect service is an unclaimed crown.' Rank Xerox have their sights set on that crown. 3.18 ALWAYS LEARNING At the 1992 European Quality Award presentations, Clive Jeanes was not feeling quite so pleased as Bernard Fournier. Clive, as managing director of Milliken Europe, had been presented with the European Quality Prize as one of the runners-up to Rank Xerox. That evening, as he reflected with his colleagues on how close they had come to the top award, Clive suddenly realized what an opportunity he now had. He had the perfect challenge for his 1160-person team spread across four countries – they would complete again next year, but this time they were going to win. ‗Our corporate culture engenders a dislike of coming second.' He disclosed shortly afterwards. So he and his colleagues returned to Wigan well motivated for a renewed effort but with a nagging problem. They felt they had already given their best effort – how could they improve further Applying self- assessment based on the award criteria, Clive quickly had teams at all levels rights across the European operations, scrutinizing what they were doing and how they were doing it. These teams quickly spotted gaps to work on Clive himself learned about many ways that he could improve. One was to help establish more of a pan-European feel to Milliken Europe which was previously focused on a country basis. Clive introduced formal European team meetings. ‗We built a fantastic team spirit as a result of that.' The new improvement energy paid off. At the subsequent EFQM Forum in Turin, Clive Jeanes was the proud recipient of the 1993 European Quality Award. Over a few years, Milliken Europe had made a remarkable transformation from being a disparate collection of acquired companies to a world-class unit. Invoice process time 63 was slashed to ten minutes by 1993 from eight hours in 1989. On-time shipment was up to 99 percent in 1992 from 75 percent in 1985. Product defects were steadily eradicated – down 79 percent over he last decade. Better than these point-in-time results, Milliken has created a consistent Quality culture that unites a work team in, say, Milliken Denmark with counterparts in Spartanburg, South Carolina. This culture, together with the leadership passion for Quality, will help Milliken to continue to re-invent itself to compete through the 1990s. As Clive states: ‗I would guess that if there is a destination for Total Quality, we are no more than 25 or 30 percent on the way towards it.' 3.19 CONTINUOUS REVOLUTION Leaders like Clive Jeanes of Milliken, Bernard Fournier of Rank Xerox, Mike Perry of Unilever, Tony Gilroy of Perkins, Tom Little of Colworth laboratory, John Craddock of Legal & General, Mike Nash of L & K : Rexona and all the others mentioned in this book are permanent revolutionaries. Their styles range across the whole spectrum from flamboyant to restrained and their backgrounds are equally diverse. But they share a belief in? Quality and find they have a common language – the language of improvement. Their business practice had many similarities too. They are all striving to do better. They are all using Quality as an accelerated way of improvement. They all aspire to world-class standards and they are prepared to change anything and everything to get there. Today there is a growing club of like-minded leaders, as the Quality revolution continues to embrace more and more organizations. Continuous revolution may sound like a contradiction in terms but these Quality leaders are living proof that it exists. 64 UNIT – 4 4.1 THE SYSTEMS CONCEPT In primitive societies, coordinating the quality activities around the spiral is the job of one person, e.g., manufacturer, farmer, artisan. The proprietor of the small shop is also personally well placed to do such coordination through ob serving all activities, through deciding what actions should be taken, and through having the most compelling personal reasons for attaining good coordination. As enterprises grow in size and complexity, the reach a stage where it is no longer possible to retain personal coordination by the leader. The company is not organized into specialized departments, each of which carried out some specialty of the sort shown in the spiral, Figure – 4.1. Of course each of these specialized departments can aid in attaining fitness for use in ways that output form the predecessor proprietors of the small shops. However, these specialized departments must collectively coordinate their activities so as to meet the goals of the company. This interdepartmental coordination has turned out to be difficult to achieve. In part this difficulty is due to sheer complexity arising from the multiplicity of goals pursued by or imposed on the company; in part the difficulty is organizational in nature, since the departments usually exhibit strong tendencies to pursue departmental goals to the detriment of company goals. There are several approaches which the large company may use for coordinating the quality function. One of these is through use of the systems concept. Under this concept, managers collectively agree on what are to be the broad quality ‗policies‖ (or guides for managerial conduct) as well as the specific quantitative quality goals or objectives‖ to be met. In addition, the managers prepare ―plans' for meeting these objectives. These plans include agreement on how to ―organize‖ i.e. definition of what tasks are to be per formed and two is to be held responsible for carrying out these tasks. Because all this coordination of an interdepartmental nature, it requires the participation and agreement of the respective departmental managers. Some of it requires the agreement of upper management as well. In addition, since a great deal of analytical study is involved, it is increasingly the practice to make use of specialists who posses experience and skills relative to the quality function. These specialists (e.g., quality engineers) collect and analyze the pertinent data, draft proposals, and otherwise assist the managers to attain coordination. FIGURE: 4.1 THE SPIRAL OF PROGRESS IN QUALITY : PAGE NO. 114 The systems concept is widely used though under a variety of names. Its principal features include: 1. Based scope. It is intended to achieve coordination of the entire quality function. 2. Definition of the organizational mechanisms. It defines the work to be done and what departments are to be responsible for doing it. 3. Quantitative standards and measures. It sets our measureable goals and provides for review of progress against goals. 4.2 TQC vs. TQM SYSTEMS As its meeting in Brisbane in November 1992, TC/176 discussed whether to create an international TQM standard. The proposal was subsequently passed by majority vote in a postal ballot. However, several influential countries voted against it, while several others had not voted yet noted yet because of not receiving the voting paper. 65 As a result, an ad-hoc group was formed to review the situation. Japan was against the proposal, for reasons which I (Hitoshi Kume ) shall describe in the following paragraphs. According to Kume, ―There are two main areas of quality management. One deals with the type of human activity that can be controlled by standards, while the other centers on people and must be allowed to develop outside the scope of standards-based measurements and control. As a management technique, TQC is more concerned with the latter area. Trying to standardize this area would deviate from the spirit of TQC, at least as its practiced in Japan. Quality management can be divided into two principal areas. The first is conducted mainly through standards, while the second is more to do with people. It is difficult to draw a clear boundary line between the two. However, quality management based on the ISO 9000 series is typical of standards is typical of people-centered quality management. The best illustration of the distinction that I can think of is the old proverb about getting a horse to drink. You can lead a horse to water, just as you can make people follow standards. However, that alone is not enough to make the horse drink if it doesn't want to. A cleaver horse might even pretend to drink. Only a thirsty horse will really drink, and the amount it will drink depends on how thirsty it is. At the 1988 TC/176 meeting in Oslo, the opinion was expressed that the previous year's publication of the ISO 9000-9004 series of standards had made it possible for organizations anywhere in the world to practice quality management. In response, I stated that real quality management could not be achieved merely by applying merely by applying ISO 9000-9004, because they totally lack improvement viewpoint, which is so important for quality management. The reaction to this opinion was, ―All right, then let's create a quality improvement standard.‖ However, the idea of such a standard struck me as utterly surprising. It would be like trying to write an ISO standard for making horses want to drink. Another interesting proposal was then put forward: ―OK, if we can't make a standard out of it, let's publish it as a book.‖ I agreed to help with preparing the draft of this. However, the matter was later transferred to another working group, so I no longer had anythind to do with it. After much hard work by those involved, ISO 9000-4 Guidelines t Quality Improvement, eventually appeared. This is an excellent standard, but it still only tells us how to lead a horse to water. This is not because there is anything wrong with the standard, but because there are limits to what can be achieved through standardization. TC/176 is still working hard at establishing various quality management standards, and I invent to go on doing what I can contribute to these activities. However, it occurs to me that Aesop's fable of the Wind and the Sun is relevant to the idea that good quality can be achieved through standards. In this tale, the North Wind tries to force a traveler to remove his cloak by blowing as hard as he can, but the traveler resists by wrapping his cloak around him and grasping it even more tightly. However, the gentle warmth of the Sun soon persuaded the traveler to disrobe. The area of quality management based on standards and the area of quality management that focuses on the human element are not mutually contradictory. Rather they should complement each other. I believe it is impossible to achieve good quality management with either on its own. I would now like to define these two areas of quality management and explain how to combine them‖. 4.3 JAPANESE QUEST FOR EXCELLENCE We have already emphasized that the key to excellence is innovation. In 1950, Toyota developed ―Statistical Quality Control‖, which was nothing new to the Western Industry. In 1951, they introduced their first ―Suggestion Scheme‖ and in 1961 ―Total Quality Control (TQC)‖. The year 1962 saw the advent of ―Quality Control‖ which in 1963 because a company wide programme. In 1965, Toyota improved quality to such a standard that they received the coveted Deming Prizes. They went on to achieve further success in 1966 when they introduced a company-wide ―Quality Assurance System‖. The year 1970 saw the development of a programme to improve manager ability. The year 1983 was the beginning of the ―Improving Office Campaign‖ which in 1985 was extended to ―More Spontaneous Office Activities‖ programme. Since then the company has never looked back and has been working on general ―Quality Improvement‖. Thus it is through a continuous strive for improvement, the companies like Toyota could achieve the world class excellence. Other Japanese companies like Nippon Denso ran similar changes in their culture—starting with ―Quality Control‖ in 1956 and receiving the Deming Prize in 1961. In 1964, ―Quality Circles‖ were introduced by deploying resources to promote ―100 percent reliable products and services‖. In 1983, these resources also helped promote the campaign which was to herald Nippon Denso as producing the World's No. 1 products and the world's best corporate system-reflected in their approach ―Nippon Denso of the World, TQC by everybody‖. These examples of Toyota and Nippon Denso were followed all throughout in Japanese companies to achieve excellence. 66 4.4 QUALITY IMPROVEMENT IN EAST AND WEST If we look at a comparison of quality products from the 1950s to today, we see a big difference in the commitment to quality in the West and in Japan. We can note that quality improvement has increased much faster in Japan form year to year than in Europe and the USA. In their best-selling book the Megatreuds 2000: John Naisbit and Patricia Ahurdene explained (as shown in Fig. 4.2) that there is a shift of development from Atlantic to the Pacific region in recent years. The Pacific Rim countries to the march for excellence are led by Japan (The Lion) and the four Asian Tigers: South Korea, Taiwan, Singapore and Hong Kong. Japan has emerged as undisputed leader in Asia through efforts of continuous innovation and improvements, later other countries of this region also joined in the march for excellence. These countries include Malaysia, Thailand and Philippines. Of late, all these are hit badly by the recession of 1997-98 but still they al-c ahead of many others in the region. Evidently thirty years ago, the Japanese were noted for poor quality of their products. This was also evident from the cheap toys and textiles, they exported to India at low price. Today, the Japanese and other Pacific Rim countries like Taiwan, Singapore, Hong Kong and South Korea have been recognized as the Asian Tigers with the fastest economic development. Malaysia, China, Vietnam, etc. have also greatly improved their quality and are overtaking the USA and Europe in certain selected international markets. India and Japan got almost equal time of about 50 years after their independence since World War II for their economic development, but Japan due to their committed, dedicated and continuous improvement efforts has gone much ahead but India lagged far behind. FIGURE: 4.2 EAST VS. WEST ON QUALITY IMPROVEMENT Page No. 118 Was Japan could do it and India couldn't? Perhaps it was Japanese quest for excellence which left everyone behind all over the world with their dedication to the work principles. This dedication to the work principles helped Japanese in establishing a culture for excellence – a culture which is envied all over the world and even by the most developed countries like the USA. 4.5 JAPANESE DOMINANCE OF WORLD MARKETS Japan's market share in international markets in automotive, motorcycles, electrical household components (including TV, Audio equipment, video, watches, shipbuilding, electronics, cameras and photo copiers) in recent years has become the highest leafing behind even the USA, Euro0pe and everyone else. Ten years ago, the Japanese had a little part to play in the world banking and finance. Today nine out of the top ten banks in the world are Japanese. It is due to their serious pursuit of TQM efforts that Japanese are ahead of all in almost every sector, may it be manufacturing, finance insurance or other services. So the Indian companies must note that dedication to work principles and cultivating a quality culture is the key to excellence which they should sincerely adopt to achieve optimal results. Even TQM implementation in a half-hearted manner may not yield results and may lead to more frustration. Japanese have no special advantages over the USA, Europe, or India. They simply examine the process of doing a job and then try to improve upon it. To quote the Chairman of Toyota, Mr. Taiichi Ohno: ―Quality is both thinking why something is done, any why it is done this way, then thinking differently to improve it.‖ That is the spirit for achieving excellence in Japan. The USA today epitomizes this revolution. Corporate America in the nineties is an exciting place. Change is normal. Sacred cows are sacrificed. IBM and Apple (chalk and cheese of the computer business and one time deadly rivals) have set up joint operations. The Baby Bells (once divisions of the national institution At & T) are forming international alliances for telecom services around the world. General Motors, Ford and Chrysler all have ventures with Japanese or European competitors in their need to staunch the flow of imports. 67 Corporate America has gone international and along the way has rediscovered Quality. It was a long while before the revolution in the USA really started. In 1980, NBC broadcast a documentary on the success Japanese companies had with Quality and asked ‗if the Japanese can do it, why can't we? This struck a public chord and it was from 1980 on that the large US corporations really took Quality seriously. By the end of the decade, virtually all major US corporations were in the middle of Quality revolutio0ns, which have continued into the 1990s. some are dramatic like Motorola who sought a hundredfold statistical improvement in their output: now everything they do has to be 99.9997 percent correct. Some others are continuations of well-established Quality philosophies which date back to the 1980 movement, such as at IBM, 3M. American Express or Florida Power & Light, all of whom have over a decade of experience with Quality but would still describe their task today as revolutionary. The Malcolm Baldrige National Quality Award, first awarded in 1988 by President Reagan, has done much to unite the movement in the USA and take it beyond a critical mass. This award has given American business something positive to compete for, after two decades of losing out to the Japanese, and something positive to learn from and unite behind. All Baldrige winners and near-winners have said that the process of understanding and learning was far more significant than winning the award. Many organisations have used the Baldrige Award to break through complacency and stimulate further action. Digital, for example, were content with their Quality process until IBM Rochester won the 1990 Award. This stung Digital into renewed corporate effort to improve what was already good but no longer good enough; the energy thus generated initiated another wave of improvement across the business. Thousands of other have used the assessment criteria to review and stimulate their own internal progress, with no intention of submitting to the thousands of hours and dollars needed to reach the final stages of the competition (some 200,000 companies requested the Baldrige assessment criteria in 1991, but the number submitting entries was in two figures. The Baldrige Award with its extensive publicity has accelerated an interesting trend: businesses opening up and sharing what they are doing in Quality. This practice has been building up since the first major US corporations into Quality set ups a forum for exchange of information back in 1980. In those days, it was considered bad form to release performance information to anyone inside the company, never mind to other companies. In the nineties, networking (obtaining data from outside) are practiced by managers in virtually all leading US companies and this has also fuelled the revolutionary flame. In the eighties, Tom Peter exhorted people to ‗steal shamelessly'. Today the stealing has been replaced by organized trade across different sectors – not in products but in improvement know- how. Some of the evolution of Quality in the USA can be traced through the transfer of techniques and methodology between the leading practitioners. IBM ‗stole' teamwork from FPL; Xerox ‗stole' business process management from IBM; Motorola ‗stole' benchmarking from Xerox; Milliken ‗stole' the six sigma measurement from, Motorola. Federal Express ‗stole' recognition and stretching goals from Milliken…and on it goes a revolution, simply in information exchange and learning from others. 4.6 EUROPE WAKES UP Europe too has its own Quality revolution – less flamboyant than in the US, perhaps, but developing very strongly. Retailers in the UK and Germany, such as Sainsbury. Marks & Spencer, or Aldi have forced their industry standards up to the highest in the world in terms of stock management and electronic data interchange. Coincidentally, they also enjoy noticeably higher martins than retailers in the US or Japan. European airlines have been competing fiercely to raise service and efficiency standards, during a period in the eighties when US airlines appeared to have abandoned service for a price war. First SAS, then BA, created new products in the early eighties to distinguish their services, such as BA's Club Class, and then used Quality to upgrade these products continually. BA's turn round form a flabby state-owned monolith to a lean innovative competitor has been much admired. By the end of the decade, BA was not only winning many awards for service, it was by far the world's most profitable airline. However, many service organizations, like BA and SAS, followed the Service Quality sub-discipline, not full organizational quality. As the airline sector becomes more and nkore global in competitive terms, like many other industries, the European leaders are finding them selves attacked on all sides: by small niche players such as Virgin Atlantic and Swissair; by the expanding American giants, United and American Airlines; and by the sophisticated Asian carriers such as Singapore Airlines and Cathay Pacific. This continual pressure (and the same is happening in the financial services sector) is forcing the search for accelerated improvement. As a result, whole service sector in Europe is moving fast along the Quality evolutionary path into Total Quality. The huge insurance sector provides a graphic example. The big insurance societies had little interest in Quality in the seventies and early eighties when the 68 only problem was how to push more policies through the paper factory to back up the phenomenal sales. With the recessionary nineties, all that has changed, forcing a polarization in the industry between those who are investing in full Quality processes in the belief that this is the only route to survival and those who cannot afford to invest in anything at all. In Europe, there has been another strand to the rediscovery of Quality. The Quality standard, ISO 9000, has enabled companies, first in engineering then in many other sectors, to demonstrate they are capable of delivering to a prescribed level. Over 25000 UK companies, ranging from solicitors through to all giants, had been accredited with BS5 750, the British forerunner to ISO 9000, by July 1993. These companies have worked hard for their registration and are proud of what they have achieved. However, most have learned along the way that a standard, even a comprehensive one like ISO 9000, is only a small or a whole Quality process and a much more radical approach is needed to obtain major competitive advantage. Many of these are prepared to take that radical action; they too have joined the Quality revolution. The European Foundation for Quality Management (EFQM) was founded in 1989 as a forum for those companies in Europe who have committed to Quality. Many of the founder companies, such as Ciba Geigy, Philips, Electrolux and British Telecom already have many years of serous Quality experience. By 1994, 300 companies had joined them, showing the commitment to the Quality movement in Europe. The European Quality Award, launched in 1991, is helping to gel this movement together and stimulate further interest in Quality, as the Baldrige Award did in the USA. Possibly rather more than in the US at this stage, Quality in Europe has spread across all sectors and down the scale to quite small businesses. Although it took longer to take hold in Europe than the US, the intensity of Quality application today is high right across the continent from North to South and West to East. Perhaps the most resistant European country to the Quality movement was the one which needed it least – West Germany. Here high inherent standards and economic success dulled the need for change and further improvement, but as German unification put unfamiliar pressures on industry, the environment changed. In the tougher economic climate of the nineties, many more German businesses have been joining Volkswagen, Bosch and Siemens in pursuing serious Quality improvement. Even the mighty Mercedes-Benz has been forced to join the movement, with radical plans to abandon high-priced, over-engineering for Japanese-style lean production. 4.7 SURVIVAL IN JAPAN The first and biggest Quality revolution started in he East with the Japanese. The story is now a familiar one but nevertheless instructive. In the fifties, Japanese manufacturers were so far back with the standard of their exported goods that no one would buy them. Stainless-steel knives turned green and plastic toys fell to pieces within hours. For the Japanese communities supplying these goods this was true survival. Their only choice was to raise their standards – of products, of training, of service, of management – to a substantially higher level. Each major company committed to do this and started a process of improvement that began with the company president and carried on through the whole organisation and beyond into suppliers and dealers. It took them 15 to 20 years but from 1970 on they have had the edge in manufacturing and have never looked like losing it again. First with basic technologies – steel, aluminum, shipbuilding – then with increasingly sophisticated products – Japanese companies invaded world markets. Toyota, Yamaha, Canon, Matsushita, NEC and their peers owe their world dominance of many sectors to their disciplined approach to improvement which started in 1950. The Japanese Quality revolution is far from over. When faced with a major problem, such as the 1973 oil crisis (Japan has no oil of its own), the Japanese companies turned their Quality process to address it. Energy usage was attacked at all points from the mill melting the steel to the power consumption of the product in use. Miniaturization became popular as a means of focusing power reduction (leading, as so often with improvement processes, to new market opportunities such as the personal stereo). In 1985, Japan faced another crisis—the high value of the Yen was making Japanese goods very expensive and, for the first time for three decades, Japanese manufacturers were facing end-of-year losses. Without drams, these companies turned the Quality process fully onto productivity and cost reduction. Companies like Ricoh and Minolta turned in substantial productivity improvements and were back to profitability in one year, to the surprise of some pundits who had predicted this as the end of the Japanese miracle. By the mid-eighties, Japan was becoming a high-wage economy and could no longer compete with Taiwan, Korea and Singapore on price. Instead, Japanese companies went up-market with higher value products and multinational manufacture, locating plants in all the main markets. Again the Quality process has been used to ensure success with these strategies. The Japanese model of improvement remains a compelling one which has been successfully copied by many developing countries. Singapore, an early follower, has also become a high-wage area 69 and accordingly has rapidly shifted from low-cost manufacturing to sophisticated products and services. The role of the lowest – cost operators was taken up by Thailand, India and the Philippines, where everything from chip production to overnight data processing can be obtained. To attract such basic business from customers thousands of miles away, successful companies in these countries have to offer not simply a lower price tag but complete reliability. As a result, they are amongst the most eager followers of the Quality movement. As markets open up throughout the world, more and more enterprising business leaders discovers the competitive advantages of using Quality; businesses in Kenya, in Colombia, in the Czech republic are installing Quality processes, often following the examples set by the leading Japanese and Western multinationals. Meanwhile, in the early 1990s, Japan faced a very unfamiliar problem -- recession. Japanese businesses are built for growth and this challenge to their prime driving force prompted many question in the West. How will they cope with a period of non-growth? Will this finally bring down the much-vaunted advantages of life-time employment and long-term investment? All the evidence of the last 40 years suggests that Japanese manufacturers will cope with this in exactly the same way as with every other hurdle they have faced in this period. They can and will switch to shorter-term profit focus if that is required, as Akio Morita of Sony has been advocating for some time. They will relax the rigidity of their employment system and move people between companies, again, if necessary. But these are not the important factors; they are not at the heart of Japanese management practice. The core of best Japanese practice is company-wide continuous-improvement – that is, Quality. Throughout the 40 years of industrial expansion, Japanese companies have not wavered from the one disciplined overriding approach – Quality. In the same period, Western businesses have yo-yoed from one management fashion to anther, discarding both good and bad in the rush for enlightenment. The Japanese too have been vociferous consumers of new management ideas and many of he Japanese practices being exported to the West originally came from Western thinkers. Not only the well-known examples of statistical teaching from Edwards Deming and Joseph Juran, but a whole spectrum of disciplines: management by objectives, market research, product rationalization, industrial engineering, value analysis, even just-in-time, can be traced back to Western inspiration. The big difference is that the Japanese companies took the best of these disciplines and wove them into their own improvement process. They adapted and integrated them into one overall Quality process which every one in the company could contribute to and benefit from. Over the decades they have used this Quality process to address all problems and opportunities which they have faced in a united way. Despite their phenomenal economic success, Japanese businesses display no signs of complacency. Their Quality process demands persistent development and challenge. Japan will not stop improving. 4.8 A WORLD REVOLUTION Continuous improvement is the difference that the West has been much later in understanding and practicing. Nevertheless, Western businesses that now have this belief in disciplined improvement, also have other advantages which the Japanese companies are striving to emulate. Japanese companies in the UK admire the flexibility and ingenuity of thinking that they find in the European workforce. Japanese companies worry about their ability to innovate, to make quantum leaps as readily as Europeans, in addition to their natural incremental steps. They are also concerned about the real productivity of individual workers relative to the USA and the inefficiency and bureaucracy of their administration. These are all areas which they continue to work on and learn from the West, whilst we learn form. Today, best management in the West and East is converging, as the best of both is sought out and applied. The Quality movement has been a major contributor to this mixing and leavening. The way in which the Quality philosophy was installed, East and West, has been different (after all, no one has twenty years to do it now) but the end result is becoming very similar. Leading companies display traits which can be observed in Tokyo, Minneapolis or Paris: clear purpose and direction, customer-focus, continuous challenge, structured improvement and an organizations culture that unites and binds action together. Within these characteristics are many common management disciplines which have been adopted by the companies. The Quality culture that supports these disciplines can be stronger than the national culture. Look at Honda in Ohio or Nissan in Washington, UK – advanced examples of Japanese management practice with a Western workforce performing as well as plants in Japan. Or, the remarkable transformation of NUMMI in California, where the once worst-performing General Motors plant become the best, using the same workforce but with an injection of Japanese management. It works the other way too, IBM Japan and Yokogawa Hewlett Packard are more closely aligned to the IBM and HP cultures than to Japan. The Quality movement is creating cultures where people think and act in a compatible and consistent way regardless of location or origin of the organisation. 70 4.9 JUST – IN - TIME ‗Self one, make one' (SOMO) is Nissan's worldwide manufacturing these but it was rival Toyota who originate the idea of only making what you can sell and no more. Taiichi Ohno, chief engineer and Eiji Toyoda, President of Toyota, wanted to rebuild their business in 1950 and start producing cars. They studied the world's best – the Rouge Ford planet in the USA – and concluded that they could not afford the vast investment in plant to stamp out large numbers of body panels to be stockpiled for later assembly. They could only afford to produce what they could sell – thus the revolutionary concept was born. Ohno ingeniously devised ways of making small lots efficiently – inter changeable dies that could be switched in minutes rather than days, for example. The thinking was revolutionary but the practice was painstaking step-by-step experimentation, using the brains of the workforce as well as their hands. Along the way, Ohno created the Kanban, which was to become the heart of a completely different way of production planning. In the 1950s and 1960s, Western engineers developed elaborate models to balance assembly lines, juggling sales forecasts, supplier delivery and actual production, with little success. The result was an unhappy compromise with a fixed line speed and parts being fitted if they were there or left to the rectification crew at the end if they were not. Ohno way was to have a simple card – the kanban – which said what parts were to go on a particular car. This card drove the whole process, only the exact parts required for that unique car being avail able at each assembly point and the car not moving until they were perfectly fitted. The parts were supplied to order; kanban squares painted on the floor showed when a new supply was needed. As the square was emptied, another pallet could replace it; there was simply no space made for any surplus or excess parts. This simple discipline revolutionized production and was soon adopted by other Japanese manufacturers. In the seventies, the West saw it as part of the emerging magic of Japanese practice and some companies attempted to transplant the system directly into a Western approach. The resulting havoc put off many companies until the late eighties when a wider understanding and acceptance of all the other aspects of a Quality organisation allowed companies to successfully supply Just in-time. JIT simply does not work without a Quality environment; it is in fact better viewed as a result of a Quality revolution, an advanced and enhance management of the whole supply chain. 4.10 JIT : DEFINED Just-in-time is an approach to minimize waste in manufacturing in the form of time, materials, energy and errors. There are many definitions of JIT but something which is common to all these definitions is that it is a broad philosophy of pursuing zero inventories, zero transactions and zero disturbances, i.e. execution of the schedule day- in-day out. The major issue in any JIT system is maintaining flow times. Work must flow through the factory quickly so that detailed tracking is not required. Just like the speed of water flow in a stream depends on gradient, stones and rocks, bushes and other barriers on they way, the flow of the materials through the factory depends upon the operation cycle time, set-up time, queue time, handling system, layout, line balancing, machine maintenance and other such factors. The workers' attitude is very vital as they can remove these road blocks to increase speed and reduce cycle time. They can also become blocks and slow down the existing speed if they are not trusted, involved and motivated. JIT displays an excellent ability to adapt to the changes in demand and help reduction of work in processing industry. 4.11 OBJECTIVES OF JIT The objectives of JIT are achieved through several physical systems or projects. Some of the JIT objectives are as follows: 1. To reduce the set-up times and lot sizes 2. To achieve zero defects' goal in manufacturing 3. To focus on continuous improvement. 4. To concentrate on involving workers and using their knowledge to a greater extent. 5. To layout equipment in such a way so as to minimize both travel distances and inventories between the machines. 6. To reduce inventories and thus economies on inventory carrying costs. 7. To eliminate waste (such as long set-up times, zig-zag material flow, scrap, machine breakdown, higher stocks, rework, inspection etc.) JIT aims at identifying any problem related to waste and solve that through total employees' involvement. 8. To eliminate all non-value adding activities by systematically identifying these. 9. To cross-train the workers in multi-functions to maintain and enable them to run several machines at a time. 71 JIT companies tend to group their equipment into manufacturing cells, that is a group of machines is dedicated to the manufacturing of some group of parts. The layout of equipment is made to minimize both travel distances and inventories between the machines. Cells are typically U-shaped to increase workers interactions and to reduce material handling. Workers are cross-trained to handle multiple machines. Capacity can be made quite flexible in cellular manufacturing so that the surge or mix changes can be more readily handled. Changing business environment is forcing the companies to adopt the JIT system. Almost all the excellent companies in the world are today using the JIT systems. A study of the suppliers of raw materials, parts and components to the mother auto industry in the US has revealed that over 70 percent of the companies have implemented JIT systems. JIT is also considered to be one of the major factors contributing to the grand success of Japanese industrial performance. In India, companies like Maruti Udyog, Eicher Demm. Escorts, Telco, Tisco, TVS, etc. have adopted JIT systems and improved their product quality. 4.12 JIT AND INVENTORY REDUCTION JIT is commonly understood as a technique to reduce inventories and thereby economist on inventory carrying costs. the common belier if that the conditions prevailing in our country are different from that of other advanced countries like the USA and Japan and reduction of inventory levels to zero may cause huge production losses. The introduction of JIT in many organisatoins in India has been abandoned because of this fear. We agree that external environment (e.g. inadequate infrastructure for material movement and informati9n flow, unscrupulous practices, obsolete industrial policies, etc.) is not so congenial in our country as in others and may suggest higher safety stocks. Also, there are may internal factors such as long set-up time, zig-zag material flow, scrap, machine breakdown, etc. which demand higher inventory levels. Nevertheless, we emphatically recommend the scientific use of JIT to successfully tackle manufacturing problems and reduce waste and inventories. 4.13 JIT AND PROBLEMS By acquiring higher stocks, the productivity problems get hidden. These never get exposed. The central ideal behind the JIT philosophy is to expose these problems and involve all employees to remove them so that the necessity of higher stocks does not arise. The old thinking that JIT is a low inventory management system and is only applicable to automobile arid electronics industry, is not still getting changed in Indian industries. JIT is not a system, it does riot necessarily need computerization; it is rather a philosophy or an approach to management. Its objectives is not merely inventory reduction hut to eliminate it along with the whole supply chain, it is extremely intolerant of failure of: suppliers to supply, people to perform, arid equipment to work. The issue is not the level of performance which is achieved through techniques but variability which is controlled through principles and philosophies. The used by various companies under waste elimination techniques JIT are as follows: Batch size reduction Group technology layout Scientific machine and factory design Mixed model of production Kanban applications Balanced scheduling Set-up time reduction Flexible and multi-function workforce Vendors orientation to JIT manufacturing A manufacturing firm carries out two types of activities. Some of these are productive as they make products and add value to them. While the other are non-productive activities such as inspection, storage, avoidable handling, loading, unloading, repairs etc. over the time, former activities have been decreasing in relative cost as compared with the later. Various studies reveal that 95 percent of the cycle time is non-productive. The objective of the new production systems (FMS) is to eliminate non-value adding activities. 72 4.14 SPC Perspectives on Statistical Process Control (SPC) vary widely. It can be viewed as a major discipline with revolutionary potential or as a set of basic tools (the same can also be said for JIT. BPR and some other major disciplines). Quite where your position it in this wide spectrum is a matter of performance. Disciples of Dr. Deming are of the persuation that SPC can be the driving force for real change in the organization. In their perspective, appropriate statistics are indispensable in the continuous search for profound knowledge', as Dr Deming graphically defines core facts. Ford provides a classic example of a Quality process heavily dependent on SPC, at least in the early years. SPC was used not only for internal improvement throughout the whole corporation worldwide but pressed, rather forcibly, onto suppliers as well. There can be not doubt that this approach made a valuable contribution to Ford's turnaround in the early part of the 1980s. But large scale SPC has its problems and limitations. One is the general point no single discipline, however broadly based, can achieve the transformations needed in a full Quality process (as Ford discovered by the late 1980s). A related one is that ht statistical route to profound knowledge tends to disregard the irrational, but very real, nature of organisatoins and the need to manage change. A third is that people do not like statistics very much: their effect in practice can sometimes be the sometimes be the antithesis of high-energy, dynamic improvement. That said, SPC is an amazingly powerful discipline. BP Chemicals trained all their staff in simple SPC many years ago. Process charting is done routinely by operators to maintain the production process in control. These and other SPC tools are also used to challenge and improve processes of all kinds from effluent waste to sales fore casting. Every three months BP Chemical arrange a SPC forum where people gather to share and exchange their SPC stories. A typical example is shown in the figure – 4.3 FIGURE : 4.3 TYPICAL EXAMPLE OF ‗SPC' : PAGE NO. 131 British Steel is another avoid used of SPC in recent years. In Teesside Works, some 150 SPC products are producing a regular £1 million of saving every year and another 150 SPC teams are coming out of training to extend this Many are quite small applications, but some have major consequences. One example alone has added another £1.5 million to these savings at Teesside. Known as the ‗return fines' project, this started life as a work team brainstorm which identified scope for improvement in the yield of a process which screens raw material going into a furnace. Basically the screen should separate out the raw material by size; in operation, undersize material slipped through into the furnace from time to time and oversize material crept into the return fines system where it was wasted. A team of operator from sections whose work depended on this system formed an improvement team and began charting the process. The SPC charts showed up a number of problems centering around the maintenance of the screen. This was a dirty, cold and heavy job and the screen holes were often damaged because the regular cleaning process was too crude. One by one, new procedures were trialed and introduced, ultimately changing the tools used, the screen material and the monitoring and trigger points for action. Some of the changes were obvious, like replacing heavy crowbars with pneumatic picks to clear4 the holes and using rubber hammers for refining the screen without damage. But the obvious had never been highlighted before. Indeed, the operator sitting in the control room had been receiving and logging three sets of control data on the process for ten years. In his words: ‗I did nothing with it and management never asked for it.' The simple disciplines of putting control chars in the hands of an empowered team 73 brought the yield up to 95 per cent, with dramatic benefits for the rest of the process. Having fixed the recurring problems and build preventive steps into the process, the team are not planning to go one step further and tightening the input variables so that the screen can be eliminated altogether. Such SPC examples, big and small, are quite commonplace in many organizations, particularly process-type businesses, such as chemicals and repetitive manufacturing like motor industry components. But their use in other sectors is very patchy. The processes in financial services have similarities to a chemical flow process, except the flow is paper or information or money. But only a few insurance companies are experimenting with SPC with any enthusiasm; others are entirely ignorant of the possibilities. 4.15 TECHNICAL ASPECTS OF QUALITY CIRCLES There are several techniques available for quality improvement. These include: a) Process flow charging b) Brainstorming c) Cause and effect analysis d) Data collection and histograms e) A.B.C analysis f) Scatter diagrams and g) Control charts 4.16 WHAT IS QUALITY CIRCLE? The quality circle (QC) is a small group of people who voluntarily perform quality improvement activities within the workshop of work area to which they belong. This small group with every member participating to the full, carries on continuously, as a part of companywide quality improvement activities, self-development and mutual development, control and improvement' within the workshop or work area utilizing quality management techniques. The most commonly accepted definition of quality circle originated in Japan. This definition, explaining the essence of QC philosophy is as follows: Quality circle is a small group of employees in the same work area or doing a similar type of work who voluntarily meet regularly for about an hour every week to identify, analyze and resolve work-related problems, leading to improvement in their total performance and enrichment of their work life. This definition has the elements such as: (1) Small group of employees; (2) In the same work area or ding similar type of work; (3) Voluntary participation; (4) Meet regularly for about an hour every week; (5) To identify, analyze and resolve work-related problems; (6) Leading to improvement in their total performance and (7) Enrichment of their worklife. Poor quality of work life is disease, the symptoms of which are: high absenteeism and turnover, poor quality of products, low productivity, human relations' conflicts, non-involvement and apathy. A good quality of work life must strive for the realization of common goals. It is a system of creative and democratic efforts for raising the economic well being of all people in an organization. QCs are instrumental in improving quality. 4.17 QUALITY CIRCLES IN INDIA In India, quality circles were first initiated in an engineering company – Bharat Heavy Electricals Limited (BHEL). Starting from the engineering workshops, QCs spread in other departments of BHEL such as personnel, purchase, hospital, administration, training centres, workers' canteens, etc. Presently, at national level quality circles in India have gradually spread to chemical, pharmaceutical and other processing plants including even the more traditional jute and textile industries. Typical examples of companies are BASF, Hindustan Antibiotics, Durgapur Steel Plant, Crompton Greaves, JK Jute Mills, National Textile Corporation, Shriram Fibers, etc. There are several other companies successfully operating QCs in India both in the public and private sectors. State Bank of Hyderabad, IIM, Calcutta, Air India, Indian Airlines, Apollo Hospital in Chennai, State Road Transport Corporations of Andhra Pradesh and Kerala. South Eastern Railways, Bank of 74 Baroda, State Bank of India, etc. are some of the service sector organizations joining the fraternity of QCs implementing organizations in India. Quality circles in India have also been reported from 1 certain families and rural area projects. Unique features of QCs: QC is philosophy but not a technique QCs have a bottom-up approach—not a top-down approach QCs are voluntary but not coerced or compulsory. QCs are management supported but not directed by management QCs are truly participative QCs are a group activity QCs involve task performers or grass root employees but not top bosses. Basic Idea Behind Quality Circle Activities The basic ideas behind quality circle activities 1. Contribution to the improvement and development of the enterprise 2. Respect the humanity and build a happy workshop which is meaningful to work 3. Display human capabilities-fully and eventually draw out infinite possibilities. 4.18 MISCONCEPTIONS ABOUT "QC" * QCs tackle problems of quality alone. Instead these also solve issues affecting productivity, cost reduction, safety, housekeeping etc. A typical break up of QCs problem solving shows that 26 percent of them are related to quality, 30 percent to productivity, 13 percent to technology, 11 percent to housekeeping, 8 percent each to engineering and materials management and 2 percent to cost reduction and safety. QCs thus, aim at continuous improvement in every facet of activities in this respective work area. * QCs are not replacement for task forces, product committees, quality assurance sections, quality control departments, suggestion schemes etc. * QCs are not forum for grievances of springboards for demands * QCs are not the means for management to unload all their problems * QCs are not just another technique like value engineering or ABC analysis. QCs can use these techniques for identifying, analyzing and resolving problems. * QCs are not panacea for all ills in organisations. These misconceptions on QCs are needed to be avoided and classifications on QCs must be obtained through training programmes. 4.19 BENEFITS OF QCs The impacts and benefits of QCs are as follows: 1. Improvement in human relations and work area morale 2. Promotion of a participative culture in organisations. 3. Enhanced interest in jobs. 4. Help in more effective teamwork in organizations 5. Help in reducing defects and improving product/service quality 6. Improved housekeeping, cost effectiveness and safety in organizations. 7. Help in improving the productivity 8. Enhancement members' problem solving capabilities 9. Encouraging an attitude of problem prevention 10. Improved communication between employees and management in organizations 11. Help in leadership development among members 12. Catalyzed attitudinal changes among employees towards quality improvement. In a nutshell, tangible and intangible gains from QCs are tabulated in Table: 75 TABLE: 4.1 TANGIBLE AND INTANGIBLE GAINS FORM QCS Tangible gains Intangible gains Better quality Enriched quality of work life Productivity improvement Attitudinal changes Higher safety Harmony and mutual trust Greater safety Effective team building Better profitability Better human relations Better housekeeping Participative culture Waste reduction Human resource development Reduced grievances Promotion of job knowledge Absenteeism Greater sense of belongingness 4.20 QUALITY TEAMS A team can be defined as a group of individuals working in harmony to achieve a common objective which as individuals they could not have been able to achieve. Teamwork is one of the underlying principles of total quality. In all spheres of activity the cooperation and shared understanding of a group of people with a common objective will usually achieve more than a single individual. This is very true in the case of TQM implementation. A team-based approach to quality improvement will create both – a greater sense of purpose and mutual dependence. Many organization in India such as Maruti Udyog, Hero Honda, TVS Suzuki, Larsen & Toubro, Swaraj Mazda, etc. who are implementing TQM have formed various type of teams to meet their objectives. In order to establish a team-based quality culture, high order team building skills must be sued by managers. Professor John Adair (1983) in his Action Centered Theory of Leadership has propounded a model which will apply very aptly in developing a team-based approach to TQM implementation. According to Adair, effective leadership rests on three promises (i) task, (ii) team and (iii) individual as shown in Fig. 4.4 Developing the Team Achieving the Task Caring for the Individuals FIGURE: 4.4 JOHN ADAIR'S ACTION CENTERED LEADERSHIP MODEL Thus, a manager responsible for team building in an organisation must be aware of Adair's leadership model. A managers should bear the following points in mind while building teams for TQM implementation: The objectives of the team should be agreed upon and clearly stated. The approach to achieving a task should be based upon effective team work. The leader of each team should be sensitive to the individual needs of each team member. 4.21 QUALITY TEAM OBJECTIVES Team objectives should be clearly established and should have the following features: Objectives should be agreed upon by the whole team. Objectives should be written clearly and unambiguously so that everyone understands the team's purpose in clear terms. Objectives should be directed to measureable results so that team has a measures for success. In order to keep the team members motivated and in right spirit, challenging but achievable objectives should be established on a scientific and realistic basis. Objectives should be arranged in sequential and hierarchical manner Objectives should be quantifiable. 76 4.22 POINTS FOR EFFECTIVE TEAMWORK Effective teamwork is essential if TQM is to follow a systematic team-based approach. Many companies in enthusiasm believing that companies can achieve wonderful results started team-based activities, but after a few yeas found that despite a lot of expenditure incurred on time and training, results were not as strong as expected. This was nto the fault of the teams, but of management and its failure to understand how to make teams effective. It was the failure of management not to provide the right direction and guidance to teams. It was the failure of management not to get actively involved in the activiteies of the teams. It was the failure of management not to set example and work in a team manner. Thus, it is easy to form tems but their operation requires a lot of knowledge and skills. Team activity seem s simple but does nto work like magic. A lot of hard work on the part of management is required to help teamwork in TQM implementation. While revitalizing a company with a team-based approach, management must understand the following points. 1. Different types of teams available to managers 2. When to use and promote the different types of teams 3. The education, training and support that is necessary for teamwork. 4. The time required for teamwork operations 5. The number of teams required for effective implementation of TQM. 6. The roles arid responsibilities of management in teams operations. 7. The tools needed for effective use of teams. 8. Identifying reasons why team activities may fail. Signs of effective teamwork within an organisation will be as follows Competence to conduct meetings. Sound inter-departmental relationships Cross-functional teams Collective loyalty of staff to the company as a whole. In considering a team-based approach to TQM, a manager should ask himself / herself four fundamental questions: (i) What teams currently exist within the organisation? (ii) Do they have a clear purpose? (iii) Is each team effective at achieving its purpose? (iv) If not, what are the reasons? Some of the teams in existence might become defunct and hence needed to be disbanded. Others may require rejuvenating by redefining their role and perhaps changing their composition by introducing new members to the team to induce new ideas. Undoubtedly, many teams will need to be formed to resolve problems and to foster a spirit of continuous improvement for accelerating the pace of TQM implementation. For example, this principle was followed in Milliken (UK) which believed in the powe4r of improvement teams. In 1998, they had 8,769 corrective action teams, 2,722 customer action teams. 779 supplier action teams and 8,039 process improvement teams: 20,309 teams in all. What was the number of employees in 1998 to fill these teams? Just 27,000. In India, many organisatoin such as Telco, Maruti Udyog, Eicher Tractors, etc. have started implementing TQM with the help of teamwork following Milliken as a role model. Companies like Hero Honda, Maruti Udyog, Eicher Tractor, etc. have started implementing TQM with the help of teamwork following Milliken as a role model. Companies like Hero Honda, Maruti Udyog, TVS etc. are some of the glaring examples of Indian companies which have achieved success through the systematic teamwork. 4.23 ROLES OF TEAM MEMBERS In any small or large organisation, team members are required to perform a number of roles. These roles are as follows: Leader: An individual with leadership qualities has to play the role of the team leader. Specialist: An individual with an expert knowledge within a particular field has to play this role so that team has the necessary expertise to fulfill its purpose. 77 Achiever: This role is played by an individual who is constantly monitoring the progress of the team against the set targets and urging other team members to take action to achieve its objectives. Team player: An individual who is concerned with the effectiveness of the team from the stance of interpersonal relationships can play this role. This role is often portrayed by a meticulously sensitive person who is conscientious in recording minutes and agreed actions of the team. Challenger: this role is confrontational and is played by an individual who does not fear to question some of the targets and assumptions of the team. This role maybe devil's advocate's role which should be given to argument – oriented team member Other individuals will be active tem members. However, some role has to be player by each team member. Some roles can be combined into one individual. But no one particular role should predominate; otherwise, the team wills no work in a successful manner. If the management finds that there is an imbalance in team roles, then the composition of the team can be changed to instill the necessary stimulation for its success. 4.24 SIZE OF THE TEAM Generally, as regards the size of the team five to eight people form an ideal number to maximum individual contributions. Team size should not exceed eight persons because interaction and role playing becomes less in a larger team. Teams with less than five persons usually lack the combination of talents and ideas that a well balanced group can produce. Moreover, discussions within very small groups can prove arid and fruitless result in a little or not progress in the team activities. The managers must communicate within the organisation that everyone will be involved in the team-based activities so that persons in ‗a department or organisation may not carry an impression that the team is a group of a ―chosen few'. The manager of the team-bases organisation must keep all the other departmental members informed of the team's progress. This will help in avoiding the feeling of lineation by those who are not involved in team activities. This should ensure more ready acceptance of team's recommendations. 78 UNIT – 5 5.1 TQM PHILOSOPHY The principles of Total Quality Management (TQM) are now a recognized characteristic of most of successful businesses world over. Customers' changing demands, the awesome penetration of Japan (Asian Lion) and its Pacific Rim neighbors, viz, South Korea, Taiwan, Singapore and Hong Kong (called Asian Tigers) into the US and western markets and the need for stringent cost management in fluctuating environment, make TQM a practice of paramount Importance for every enterprise, big or small. Gone are the days when customers considered price as the main reason for purchasing a product or service. Quality and reliability are now the overriding factors which customers favour in exercising choice. Meeting customer specifications, dependability of service and speed of delivery are the very distinguishing features of success. No other theory of business management addresses these issues more fully than TQM. 5.2 ELEMENTS OF TQM According to Keheo (1946), the main components of TQM are as follows: Senior management commitment; Improvement orientation; Customer focus; Company – wide improvement; Commitment to training and education; Ownership of the process; Emphasis on measurement and review; and Teamwork In terms of activities these can be categorized into four main components as shown in Fig. 5.1. The sub-components are also shown in the same figure. Total Quality Activities Supplier Process Policy deployment People Customer focus development development development - Supplier - Process - Leadership & - Teamwork & - Customer assessment control culture involvement requirements - Supplier - Process - Quality - Training & - Customer improvement improvement systems education satisfaction - Supplier - Process re- - Measurement - Empowerment - Customer partnership engineering & assessment & recognition loyalty FIGURE: 5.1 ELEMENTS OF TOTAL QUALITY DEVELOPMENT Organizations are needed to be developed in each of the areas as shown in the above figure. The progress in each of these elements will not necessarily be equal as organizations priorities their development activities. On of the components is ownership which means that people should understand the quality development process and develop their own way forward on the basis of business priorities, customer needs and prevailing management culture. 5.3 COMPETITIVE BENCHMARKING ‗While other use starch to thicken their tomato ketchup, Heinz just uses tomatoes' – as a total quality management company, under the leadership of Tony O'Reilly, Heinz decided to wrap this competitive benchmarking message around the neck of a ketchup bottle in an advertisement which is part of as to show its commitment to produce quality food. O'Reilly uses competitive benchmarking to achieve Heinz's mission: We have taken out company from being rather stodgy, mid-performing, rather unromantic pickle and ketchup company, into a multi-dimensional, international corporation… both in terms of conceptual approaches to the food industry and nutrition in general… So if you ask me what my vision is for the future. It is to maintain the dominance that we have established over the past 10 years as one of the leading food innovators in the world. 79 Comparing one company's performance with that of another is a reflex of TQM. Competitive benchmarking is a continuous management process that helps firms assess their competition and them selves and to use that knowledge in designing a practical plan to achieve superiority in the market-place. To strive to be better than the best competitor is the target. The measurement takes place along the three components of a total quality programme—products and services, business processes and procedures, and people (Table – 5.1) TABLE : 5.1 COMPETITIVE BENCHMARKING Aim: ―To be better than the best competitor Means: By benchmarking the following: Products: products and services delivered to external and internal customers Processes: business processes in all departments/functions People: organization, business culture and caliber of people The idea is to benchmark performance, not only with one's direct competitors, but with other firms as well to discover best practice and bring that practice back to one's own company. It may be that 3M's practice of boot- legging, whereby the firm promotes employees unofficially using 15 percent of their time, as well as company resources, to develop their own pet projects, is something that other companies will want to copy. (The sticky yellow notes called Post-it notes, one of 3M's most successful global products, came from Arthur Fry and Ben Silver, two 3M employees boot-legging). Adopting such a programme of boot-legging and adapting it to one's own firm would be a clear example of competitive benchmarking. Effective appraisal systems, or team briefings used in rival firms, can be brought back into the company and improved. Likewise an airline adopting a similar empowerment of frontline people to deal with customer service as in SAS's moments of truth would be an act of competitive benchmarking. Defects in cars that surface after delivery to the customer can be benchmarked, as well as warranty costs. When done correctly competitive benchmarking produces the hard facts needed to plan and execute effective business strategies that fully satisfy agreed customer requirements. The competitive benchmarking process has the following five steps: 1. Decide what is going to be benchmarked. These may include products and services, customers, business processes in all departments and the organization, business culture and the caliber and training of employees. 2. Select the competitors who are the best in terms of products and services, business processes and people, aspects that one's firm wants to measure. (Usually firms will be looking at their direct competitors. But they may go outside these companies to compare themselves with an outstanding leader in some aspect of business which is famous for certain practices). 3. Decide on the most appropriate measurements which will be used to define the performance levels in the competitor's business and in one's own company and develop a strategy for collecting the data needed to make meaningful and valid comparisons. 4. Determine one's competitors strengths and assess those strengths against one's own company's track record or performance Ask question such as: Is the determine competitor better? If so, how much better? If they are better, why are they better? What can we learn from them? How can we apply what we have learned to out business? 5. Develop an action plan. Use the analyzed data to set company goals to gain or maintain superiority and to include these goals in the formal planning process. Gaining senior management's acceptance of the results of the competitive benchmarking is crucial to getting commitment to the action plans. A staged problem-solving process is often used to achieve the action plans. Accordingly competitive benchmarking can be defined as the continuous systematic process for evaluating companies recognized as industry leaders to develop business and working processes that incorporate best practice and establish national performance measures. Competitive benchmarking, then, is a vital component of any total quality programme. Five solid reasons for actively using the techniques are to: 80 1. Define customer requirements 2. Establish effective goals and objectives 3. Develop time measures of productivity 4. Become more competitive 5. Determine industry best practice A simple approach to benchmarking called the benchmarking cycle shows four separate sequential activities (see Figure: 5.2). The cycle starts wit discussions and debates which establish the critical success factors in the business. Once these are decided on, it is essential to determine best-in-class performing among competitors. Data collection should eliminate high performance in terms of products and service, business process and procedures and people. The task, then, is to create programmes and projects to achieve best-in-class targets – to be better than the best competitor. Having put real measurements in place, performance is monitored, progress measured, the entire cycle is repeated and improvement spirals upwards. Establish critical success factors Determine Monitor best-in-class performing performing Create programmes to achieve best-in-class targets FIGURE: 5.2 THE BENCHMARKING CYCLE In its own exercise in competitive benchmarking, the Royal Mail claims to have the best post service in Europe. A survey of the postal service is six European countries puts Britain top of the performance league. ‗The rest of Europe does not even come dose to us when it comes to letter reliability', Sir Bryan Nicholson, Post Office Chairman, said. Letters were posted in the United Kingdom, Germany, France, The Netherlands, Italy and Spain and the time measured to handle the mail from post-box to doormat. The United Kingdom not only had the cheapest first-class service, but its 86 percent average score for the number of letters delivered the day after posting was 12 points higher than. The Netherlands in second place. Germany came next with 68 percent, followed by France with 65 percent, Italy with 17 percent and Spain with 15 percent. The price of a first-class stamp to all EC countries is 22 in the United Kingdom, 22.4p in The Netherlands, 24.6p in Spain and 33 in Germany. The survey comes as the EC plans to lay down common standards for mail service. Benchmarking against other firms' best practice with their people is a salutary experience. For example, Federal Express, which moved into the United Kingdom only in 1985, already holds the number two position in the British parcel business behind the Royal Mail. Federal Express's philosophy is about the link between people – service—profits. ‗Take care of the people; they in turn will deliver the impeccable service demanded by our customers who will reward us with the profitability necessary to assure our future' is how the philosophy is formally put. The company was founded in 1973 by Fred Smith, a Harvard MBA. He wrote a paper at Harvard suggesting an overnight delivery service based on the hub and spoke system. He got a ‗C' grade on the paper, but he stayed with the idea and turned it into a TQM company. He is not the chief executive officer of a $4 billion company employing 70,000 people worldwide. The people focus of the philosophy works through the organization in practical ways such as a ‗no loyoffs' policy. When its business venture ‗Zapmail' failed, all 1,300 employees were redeployed to other parts of Federal Express. British Airways (BA) makes use of competitive benchmarking in its attempt to deliver the highest quality service to its customers. According to Liam Strong, Director of Marketing and Operations, the benchmarking is used 81 especially where he knows the comparisons will become a spur to action. He cited Japanese engineers who take only 40 minutes to turn a jumbo jet around when BA needs 3 hours to do the same task. Whether the competitive benchmarking results are used internally within the company or published in advertising campaigns, great care must be taken to ensure accuracy and meaningful comparisons. British Rail opened an advertising campaign in which it claimed to run more high speed trains that than any other European country. The benchmark British Rail chose to advertise was trains traveling at more than 100 miles per hour. Although its claim is valid at 100 miles per hour, above 1.10 miles per hour British Rail drops down in the league, and as the benchmark goes higher British Rail eventually is out of the competition. When the benchmark is raised to 125 miles per hour the speed that gave British Rail's Inter City premium trains their brand name Germany has more trains at that speed than Britain. Above that speed, British Rail falls off the table. This boastful, misleading and expensive advertising campaign had the opposite effect from that which the transport company intended. The claim was not amusing to passengers on British Rail trains crawling through Sunday engineering works. The television commercial showed a train wrapped in black silk flying past landscape and the voice-over said: The French TCV train, the Japanese Bullet. All over the world faster trains are being unveiled. But the fact is, here in Britain with the launch of the new Inter City 225 we have more trains going at over 100 miles per hour than any country in Europe. The advertisements left British Rail open to criticism in the press. The Sunday Times, for example, in a page one critical response commented: What the commercial does not say is that by more ambitious measures, British Rail fails to compete: above 136 miles per hour, Japan runs 407 trains a day, France 142 and Germany 40. Britain has none. Even the 225 electric train which the commercial was commissioned to celebrate will not help. It is named the 225 because it is capable of 225 kilometers an hours (141 miles per hour). But you will not find any travelling at the speed until signaling is upgraded. 5.4 KAIZEN VS. BREAKTHROUGH Engineers in Japanese companies are never satisfied with a product or a process. They are looking for small improvement on a continuous basis. They will take out a worker on a line, move a conveyor or sometimes slow a machine down. This is not blind tinkering, but controlled experimentation with the variables in a process to seek out what may be minute improvement in flow or efficiency. Such small step improvements, or kaizen, are a key ingredient in the superiority of Japanese reliability, both of the end products and the processes which produced them. Small steps taken in a planned way don't destabilize the process and they don't take it out of control. In fact, they enable the variables to be tightened that little bit more. FIGURE: 5.3 KAIZEN VS. BREAKTHROUGH : Page no 149 In the seventies, this approach began to show through and a cultural difference was noted. In general, the Western tendency was to leave things alone for as long as possible and them make great leaps forward – big new technology, whole systems replaced (often with non-compatible software), next generation solutions. Big bank… with years of fun trying to master the disruption. General Motors' crash course in automation is probably the ultimate example. Threatened in its homeland both from imports and leaner domestic rivals, GM hit the spend button. During the 1980s, GM spent $77 billion on new equipment and plant. To put this in context $77 billion is much more than twice the worldwide 1992 sales of Honda, one of the companies causing GM such problems. Even GM could not handle that order of spending and many of the robots remain unused. This technological solution simply could not work without the training, the organisation, the philosophy to support it. GM in North America ended the decade still 82 bagging Ford by a reputed 40 percent in basic productivity comparisons. GM finds it has no choice but to adjust to a lower competitive base, with plans developed to cut 20 or more plants through the nineties. During the eighties, it became more and more apparent to the West that Japanese automation hadn't mysteriously appeared overnight but had evolved over many years of continuous improvement. For from putting in robots wherever they could be fitted, Japanese engineers often prefer low technology, installing hand rollers rather than power conveyors for example, looking for flexibility rather than speed. Far from trying to rid the operation of people altogether, as GM had seemed determined to do, Japanese engineers used technology to complement and support the skills and versatility of their workers ironically, GM Europe, one of the West's most improved car manufactures in recent years, learned this lesson earlier than most and has pursued a totally different path from its parent. Former president Louis Hughes was in no doubt that what they are involved in is a revolution. He drew together a team who had direct experience of joint venture working with Japanese practice such as at NUMMI or CAMI (GM and Suzuki) or with Toyota in the US. ‗We call them advisers but, in another sense, they are more like missionaries – and we are in need of conversion. It is close to religion, it is a life philosophy, it is that different.‖ Coming from the most successful part of the world's largest industrial company, this was revolutionary talk indeed. Today, as Western and Eastern disciplines are blending together with world best practice, both kaizen and breakthrough are sought by Japanese, European and US companies. The rate of change in the market demands it. But the part which remains hardest for Western minds is the step-by-step. It is particularly hard for managers, especially well-educated ones, who are seeking more complex issues than this methodical approach offers. There is a widespread feeling that the simple tools and procedures of kaizen are for the workforce. They are, but they are for managers too. Such managers may not be aware that Japanese engineers and managers account for the vast majority of improvements made each year – not the millions of Quality Circles and employee suggestions, important through these also are. 5.5 DISCRETE IMPROVEMENT FIGURE: 5.4 DISCRETE IMPROVEMENT Page No. 151 Process improvement is a relatively new and exciting business discipline. The practice is often labeled business process re-engineering (BPR), which is examined in the next sections. Before we look at this in detail, it is worth exploring another concept – discrete improvement. Discrete improvement can be used to describe the blend of East and West experience which is resulting in major improvement successes. The idea is this: kaizen is too slow and unambitious, big bang is too risky and disruptive; why not go for the best features of the two extremes, whilst avoiding the problems? The middle ground offers radical gains made in a controlled methodical way, which can be implemented relatively quickly. This is in effect discontinuous improvement using breakthrough concept with systematic techniques. Discrete improvement is planned to exploit the area between kaizen and bit bang, as the diagram above illustrates. It will not provide the solution for every process problem or opportunity, but it offers an alternative which may well be the sound route in many competitive situations. Discrete improvement is particularly well suited to an 83 organisatoin which already has a well-established Quality environment. People are familiar with improvement practices and will relate to the stretch goals which have been set. They will be used to working in terms and be more relaxed about crossing functional boundaries. In a Quality environment, process teams can be quickly set up to tackle strategic goals and their energy and enthusiasm will contribute to the success. Legal & General illustrated this when they published their service standards to their customers after two years of creating a Quality ethos inside the business. One critical standard referred to the turnaround time for new business. This was originally ten days; through systematic improvement using process teams this time was brought down to one day. A radical improvement which couldn't have been achieve without breakthrough thinking, but neither was it a completely new process requiring external expertise to design and commission. A number of such discrete improvements, reinforced by kaizen from a large proportion of the 5,000 staff, enabled L & G to capitalize on their Quality environment and achieve competitive advantage. 5.6 RE-ENGINEERING THE PROCESS Discrete improvement is aimed at distinct sizable gains to an existing process; big bang improvement is about completely novel solutions to what the process does. Both are radical, both require breakthrough: one to bring new ideas to restructure a processes, the other to replace it, or a major part of it, entirely. Business process re-engineering (BPR) is a term loosely used to describe both of these approaches, but the words are a better fit with discrete than bit bang improvement. Certainly, the use of BPR in a Quality company could mostly be described as discrete improvement, with fewer Western companies now trusting to fortune with big bang or playing safe with continuous improvement alone. Jose Lopez, production director at Volkswagen sums it up: ‗Kaizen is yesterday's text, today it is the message of ―quantum leap‖ improvements to generate value for customers improvements of 5,6 or 7 percent are not enough, it is 30 to 40 to 50 percent improvements that must be made.‖ Don't be put off by the label of BPR: it is not at all confined to engineering businesses not does it need engineers to use it. If the label is a barrier, call it business process re-design or re-structure, or more prosaically, business process improvement (BPI), as man do. BPR follows a systematic improvement methodology, often combined with technological inputs to ‗engineer' a major gain. A typical example is at Western Provident Association where processing applications for health insurance took 28 days and occupied seven staff before BPR. After systematic re-engineering, applications are turned round in four days by one person, who reviews the medical history, sets up the policy and triggers the payment from the customer's bank account This amounts to 45 minutes' work on each file; for the rest of the previous 28 days the file was in transit. The technological input was to capture document images on computer and to route these automatically thorough the computer network to the next user as each operation is compete. Rank Xerox have used a similar approach to produce specialized contracts in two days instead of 100 originally. Other BPRs exploit modular components to achieve flexibility and speed. Bridgeport Machines brought out a new machine tool range aimed at giving discernible value for money (‗Bridgeport quality at Taiwanese prices') using standardized control cabinets and modular components such as spindles mixed and matched to give a range of features. Using a computer-aided design system, their BPR brought the time from concept to launch down to six months, compared to an industry average of 18 months to two years. In the same vein, one of the contributors to Benetton's phenomenal growth in the late 1980s was a re-engineering of their supply chain to enable them to add colour very late in the process. Stock of grey sweaters turned into Benetton's ‗world of colors' just before they were shipped to the shops, providing Benetton with the Quality edge of running with the fashion as it developed rather than having to predict and commit to colours at the beginning of the season. Re-engineering processes can cut costs too. Aetna Life & Casualty, An US insurance company under pressure from weak investment, is using the combination of simplifying process flows plus selective input of new technology to take $100 million annually out of costs. one example is for stolen cars claims: it used to take five days to set up a representative visit to the person making the claim and provide a rental car; now it takes one telephone call. The customer is happier and the claims department is reduced by two thirds. 5.7 BUSINESS PROCESS REENGINEERING (BPR) Michael Hammer, an eminent management consultant in association with CSC Index and former professor at Massachusetts institute of Technology is the founding father of business process reengineering. According to him, reengineering is one of the methodologies for providing sustainable competitive advantages. It is, therefore, a problem solving technique, although the primary class of problems that reengineering is structured to solve is operational. 84 5.8 BPR - DEFINITION Business process reengineering can be defined as – ―The fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service and speed. (A process is a set of activities that, taken together, produce a result of value to the customer)‖. 5.9 WHAT IS BPR? Yet another definition of BPR will clarify further. ‗BPR is the means by which an organisation can achieve radical change in performance as measured by cost, cycle time, service and quality by the application of variety of tools and techniques that focus on the business as a set of related customer oriented core business process rather than a set of organized function'. 5.10 FOUR KEY WORDS The 4 key words which sum up the essence of reengineering Fundamental: Fundamental change is involved in reengineering Radical: Radical redesign of procedures and structures Dramatic: Dramatic improvements obtained Process: Reengineering must focus on redesigning of business processes, not on departments and other administrative organizational units that cannot be reengineered. Reengineering is not downsizing, nor can it be equated with restricting or some offer business fix. It is also not the same as reorganizing, de-layering or any quality program. Although information technology plays an important role in business reengineering, reengineering is not the same as automation. Automation simply provided faster and more efficient ways of doing the same wrong things. Reengineering is about starting again, about reinventing corporations from top to bottom. 5.11 WHY BPR? When there is a felt need foe reengineering in a company, then BPR is adopted. It may be because of competitive pressure or betterment in the existing products or a company may stay far ahead and would like to remain so. The initiative depends on the immediate requirements – could be severe competition, dwindling market share, declining profits, customer dissatisfaction, etc. or it could be to build a sustainable competitive advantage. 5.12 COST BENEFIT ANALYSIS The main costs are: Consulting costs Information technology costs Cost of the time of people spent on the reengineering exercise wherein they are away from the field, and Cost of opportunity loss during gearing or the transitional phase which is the period of acquaintance with new methods – there might be even a slight drop in productivity during the period. The benefits are: Improvement in the methods of production Inimitability (nil chance for competitors copying) Survival and quantum leaps in all aspects of performance. 5.13 TIME-SCALE The whole process might take about 18 to 24 months for the full cycle to be implemented. In a small company it takes 3 months to 6 months. In a large organization, it is 6 months to 1 year. 85 5.14 SUITABILITY Both large and small companies can reengineer. In fact small companies benefit more since they are more prepared, adaptive and achieve results faster. 5.15 HOW TO CARRY OUT BPR? There are typically three phases in the reengineering process: Focus phase Design phase Implementation phase 5.16 FOCUS PHASE During the focus phase, the main objective is interaction. At the outset, there is a top management workshop wherein the group as a whole interacts to arrive at the objective. Then, there are individual interviews with each members of the group to gather their vision. The group would then be called back together for a presentation when the information gathered is discussed and a consensus reached on where one would like to be, say 3 to 4 years hence; or how they perceive the business at that time. There is next an interaction with the second level wherein an analysis of the processes is done within the critical areas located during earlier stage. Next, an identification of the critical activities within the processes, after which there is against discussion with the top management. At this stage, a team or a task force of key management personnel is identified who would work along with the consultant for the reengineering process. 5.17 DESIGN PHASE Then comes the design stage wherein the task force designs a system which would result in the existing activities being done faster and better, the main point is since the members of the organization themselves design the new system, the organisation owns it. At this stage, the management has to take decision on whether to go ahead with the exercise or not. 5.18 IMPLEMENTATION PHASE The principles of reengineering that are to be applied during implementation are: Work must be organized-around outcomes, not tasks. As few people as possible should be involved in the performance of a process. Identification of annihilation of irrelevant traditional assumptions Utilization of the tremendous capabilities of the information technology 5.18 BPR IMPLEMENTATION METHODOLOGY Thomas H. Davenport of Ernst and Young and James Short of MIT Sloan Schoo of Management recommended a 5 – step methodology to implement reengineering. Step 1 : Developing process vision and determining process objectives. An articulate, well defined and customer – oriented vision is essential The first step – developing process vision – essentially recognizes the following Business vision and goals i) Achievement of business vision ii) Process attributes and process measures. iii) Process attributes and process measures Step 2 : Defining the processes to be Reengineered .The first step here should be mapping the company's business not in terms of its organizational structure, but as an outcome of its processes. Only when will be processes, where the most value is added – and where dramatic improvement will deliver the greatest benefits to the bottom line – be identified. Apart from clearly defining the process, this step also helps to create an early vision of the reengineered process for the departments covered by the process, from amongst whom the eventual owner of the reengineered process can also be identified. 86 Step 3 : Understanding and Measuring Existing Processes.This step must be taken up only after visioning and identifying the process to be reengineered. Otherwise, the poor performance levels of the existing processes may inhibit the company from aiming high enough to achieve dramatic improvement – which is the quintessence of any reengineering initiative. Step 4 : Identifying the Information Technology levers: Reengineering should end up achieving process obliteration thorough effective or innovative deployment of information technology. Step 5 : Designing and building a prototype of the new process . This is the action or implementation part of the reengineering process. In this step, the senior management, must bridge the resource gaps in terms of personnel, skills and technology, thus setting a conducive climate and preparing the ground so as to enable the reengineered process to achieve full potential. 5.19 INTERNATIONAL STANDARD ORGANISATION (ISO) 900 IN SERVICE ORGANIZATIONS ISO – 9004 – 2 ISO is the International Standard for quality systems. It is a set of requirements specified by the International Organisation for Standardization (ISO). ISO 9000 is recognized throughout the world. The corresponding standard known in some countries is an under: IS 14000 (the Indian Standard) EN 29000 (the European Community Standard) BS 5750 (the United Kingdom Standard) ISO consists of representatives from 90 countries. Each county is represented by its one national standards body. Bureau of Indian Standards is the Indian representative to ISO. 5.20 STRUCTURE OF ISO 9000 The ISO 9000 series currently consists of the following published and planned documents. 1. ISO 9001 : Quality Systems – Model for Quality assurance in design/development, production, Installation and servicing 2. ISO 9002 : Quality Systems – Model for quality assurance in production and installation. 3. ISO 9003 : Quality Systems – Model for quality assurance in final inspection and test. i. ISO 9004-1 : Quality management and quality system elements – Guidelines. ii. ISO 9004-2 : Quality management and quality systems elements – Guidelines for Services. iii. ISO 9004-3 : Guidelines for Processed Materials iv. ISO 9004-4 : Guidelines for Quality Improvement. v. ISO 9004-5 : Guidelines for Quality Plans. vi. ISO 9004-6 : Guide to Quality Assurance for Project Management. vii. ISO 9004-7 : Guidelines for Configuration Management Of the above documents, ISO 9004-2 is applicable to all Service Organizations like Financial (Banking, Insurance etc.), Communications (Telecom, Postal, Airlines, Etc.) Hospitality Services (Catering, Tourism, Television, etc.), Health Services and others. 5.21 NEED FOR ISO 9004-2 STANDARDS Quality and customer satisfaction are important subject receiving increasing attention worldwide. This part of standards provides a response to the awareness of the customers and seeks to encourage organizations and companies to manage the quality aspects of their service activities in a more effective manner. ISO 9004-2 standards deal with Marketing Process Design Process Service Deliver Process, Service performance Analysis and Improvement Process which speak about need, demand, design and proper delivery of a product/service to a customer and ensuring customer satisfaction. This part of standards also deals with regular review of methods used for promoting contacts with customers which is a crucial dimension to improve the quality of service perceived by the customer. Thus the guidance provided by ISO 9004-2 would certainly enable the service organizations in rendering quality service to customer and obtaining customer satisfaction. 87 Vocabulary : A few terms used in ISO 9004-2 are: 1. Organisation: Company, Corporation, Firm, Enterprise or Institution, or part thereof, whether incorporated or not, public or private, that has its own functions and administration. 2. Customer: Receiver of a product provided by the supplier. 3. Supplier: Organisation that provides a product to the customer. In a contractual situation it is termed as contractor. 4. Quality: totality of characteristics of an entity that bear on its ability to satisfy stated or implied needs. 5. Conformity: Fulfillment of specified requirements. 6. Defect: Non-fulfillment of an intended usage requirement or reasonable expectation, including one with safety. 7. Record: Document which furnishes objectives evidence of activities performed or results achieved. 8. Hold Point: Point, defined* in an appropriate document, beyond which an activity must not proceed without the approval of a designated organisation or authority. 9. Process: Set of inter-related resources and activities which transform inputs into outputs. 10. Quality Audit: Systematic and independent examination to determine whether quality activities and related results comply with planned arrangements and whether these arrangements are implemented effectively and are suitable to achieve objectives. 5.22 THE ELEMENTS OF THE QUALITY SYSTEM OF ISO 9004 - 2 The following are the requirements for demonstration of s supplier's capability to design and deliver a product. These are called as ‗elements of the quality system'. 1. Management Responsibility – To have a documented systems of quality assurance i.e., to identify a representative for ensuring the requirements of ISO are met. 2. Quality System – To have a documented quality system. 3. Contract Review – To met customer's stated requirements 4. Design Control – To control and verify that the design of the product meets the specified requirements. 5. Documents Control – To ensure that the staff doing the work has the right docum available. 6. Purchasing and Sub-contracting – To ensure the conformity of quality requirements by all concerned. 7. Purchasing Supplies Product – to store the equipments / instruments belonging to customers properly. 8. Product Identification and Traceability – To identify and trace the product at all times. 9. Process Control – All work must be planned and carried out under controlled conditions. 10. Inspection and Testing – Product must be dispatched until final inspection and test according to the quality plan or documented procedures are successfully completed. 11. Inspection and Test Status – To record the date of inspection and particulars of fitness of the testing equipment. 12. Control of a Non-conforming Product – Clearly label the non-performing products and segregate them from those products that do meet quality standards. 13. Corrective Action – Analyze how and why things have gone wrong and take correction action. 14. Handling, Storage, packaging and Delivery – To demonstrate that you adequately project the quality or equipment. 15. Quality Records – To demonstrate that the quality systems operating effectively. 16. International Quality Audits – Regular checks to ensure, the procedures are being followed and documented as required. 17. Training – to ensure' that you are competent to carry out your work through qualification, experience or training. Indentify the training needs as necessary. 18. Serving – To properly design, plan and implement the serving activities. 19. Statistical Techniques – To demonstrate quality performance, identify the statistically based techniques. 5.23 ISO 9000 SERIES : REGISTRATION AND CERTIFICATION PROCEDURE As discussed in earlier paragraph, organisation / supplier can be a bank or any one branch. If it is a branch, necessary approval from competent authority should be obtained before going for registration. Thereafter, the following procedure has to be followed: 88 1. ‗The supplier must Identify the products that are appropriate to their business and shall prepare documented procedures, consistent with the requirements of the standard as per the quality manual and declare this, so as to avoid misleading assessors and reviewers. 2. Train and educate staff in the working/operation of the system and test the procedures that have been developed. Take corrective action, if any, complete the appropriate documentation. 3. Arrange for a pre-assessment of the system to be carried out by a suitably qualified person. 4. Consult the list of accredited certifications bodies and carry out a supplier audit of them. It is important to establish the scope of the certification body's approval powers and its fee structure. In India, at present there are two well recognized organizations. They are : i. Bureau of Indian Standards (BIS) ii. Indian Register Quality System (IRQS) (Accredited by the Dutch Council for certification) 5. Apply to the chosen body. It will send an information pack. Upon completion of the necessary forms, the certification body will provide a quotation and details of fees. After agreeing to a contract, the appropriate documentation (including the quality manual) is then sent to the certification body to check compliance against the standards. The body will see the proof whether the quality system has been in effective operation for six months. 6. If the documentation covers the standard adequately, the certification body will proceed to the on-site assessment for a preliminary review. At this stage, the supplier can make appropriate system modification and establish corrective action. 7. The assessment is carried out by a team of independent assessors appointed by the certification body and under the supervision of a registered Lead Assessor. It involves an in-depth appraisal of the organization's procedures for compliance with the appropriate part of the standard. If the assessors find any deviation from the requirements or identify any non-compliance with the documented procedures, a discrepancy report is raised. This report should be fully complied with by the applicant. 8. After the assessment, basing on the conformity, the assessors make recommendation to the certification body either for Unqualified Registration, Qualified Registration, or Non registration. Any non-compliance must be rectified before the approval is given. After approval, the certification will be awarded and conveyed to the applicant company/supplier. 9. Once registered, registration usually covers a fixed period of 3 years. Subject to the regular surveillance visits (twice a year) by the certification bodies. After completion of 3 years, quality system reassessment will be made and certificate will be renewed subject to the conformity of standards. 5.24 BONUS FEATURES OF ISO 9004-2 STANDARDS 1. Many customers require their suppliers to be registered to the ISO 9000 series. It results in: I. Improved service performance and customer satisfaction. II. Improved productivity, efficiency and cost reduction. III. Improved market share. 2. The guidance provided through 20 elements of quality system and the Independent assessment surveillance certainly aids in developing and maintaining the procedures, controls and discipline required in Total Quality Management (TQM) 3. There will be a reduction in the number of audits and assessments, leading to a saving in resources needed for such activities. Registration to the relevant part of ISO 9000 Series (ISO 9004 – 2 for banks) should be treated as the minimum requirement and the objective should be to develop and improve the system. An organisation does not achieve the status of superior performance merely by registration. The winners will be those with a dedicated commitment to never ending improvement. 89 UNIT – 6 6.1 TQM AND LEADERSHIP Eighty per cent TQM initiatives fail because they do not have the backing of the senior management. Senior management in many cases does not realize that it has to change the way it managers, including its style. Many think that exhortation of the TQM philosophy is their only responsibility. TQM dies because of top management failures to lead by example and create a transformation. Commitment is the foundation of an effective TQM initiative. Without it even the most carefully designed programmes will never work. In some cases management teams fail to understand the level of commitment required to make TQM is living and a breathing reality. Leadership is the key in promoting commitment. Leadership and commitment go hand in hand. If there is doubt about these issues, it is best to leave TQM until another day. TQM needs leaders who are committed to change. 6.2 TEN TOP AXIOMS FOR SUCCESSFUL BUSINESS LEADERS 1. Do the normal, sensible things first by production marketable products, looking after your management, personnel and customers, and checking the till. That is, do the obvious by getting back to the basics. 2. Change the criteria for selecting managers. In addition to professional know-how, they need to think more about their responsibilities than about their careers of power games. They need to be courageous and to have good, steady nerves. 3. Realize the importance of the lowers levels of management. They represent the organisation. For the reason focus on people and products rather than on systems and procedures. 4. Reminders that it's better to take the long views than to seize a short-term advantage. Proper timing is more important. Make rapid, though not always perfect, decisions. Keep three phases in mind: recognize that is needed early, then accelerate the decision-making process; and finally, implement the decision quickly. 5. Soberly estimate the possibilities of streamlining and subsequently implementing the measures. Adapt corporate structure more rapidly to growth, activity and empowerment. Do not subsidize non-viable business. Adapt the workforce to new circumstances both regionally and professionally. Think of a reduction in costs as an opportunity to think about long-term options and to lay the groundwork for future investment. 6. Do not overlook renovation in addition to innovation. Furthermore, innovation should be applied to management, leadership, and organization, as well as to products. 7. Communication as a means to an end is the key. Of course, actions and facts are more convincing than mere words. 8. Establish good labour-management relations even though an ideal peace is unlikely. 9. Implement a new style of management and new kinds of relations with employees based on management commitment and employees involvement. 10. And last but certainly not the least, the most important single axiom for executives is: be credible and consistent in work and deed. 6.3 LEADERSHIP FOR TOTAL QUALITY Total quality is defined as ―performance leadership in meeting customer requirements by doing the right things right the first time.‖ Total quality can be achieved through three quality constructs: its required results, its measures and its imperatives. Total quality can be measures in three ways: value – to – price ratio, value-to-cost ratio and error costs. an objective of a total quality operating strategy should be a continual, significant and synergistic improvement in all the three of these measures. Customer orientation is the keystone of a total quality operating strategy. Human resource excellence is central to any successful operating strategy. If you are to be first in total profitability you need to be first in value – to – cost ratio and to do this, you require products and process leadership. Management leadership is the foundation for the success of your operating strategy. Management must provide training and motivation essential for success. Management leaders must set the goals, establish measures and maintain vision of world-class performance. Value edge is a diagnostic process which aids an organisatoin in defining the customers value structure and measuring competitive performance in satisfying that structure. The total quality fitness review is an in –depth interview process which provides insight into the organization's current status relative to the 12 conditions of excellence for total quality. 90 6.4 TWELVE CONDITIONS OF EXCELLENCE These 12 conditions of excellence for total quality as practiced by Westinghouse Electric Corporation are: (1) Customer satisfaction, (2) Stockholders' value, (3) Employee satisfaction, (4) Public approval (are the requirements), (5) Value/price ratio, (6) Value/cost ratio, (7) En-or free performance (are the measures), (8) Customer orientation, (9) Human resource excellence, (10) Product/process leadership, (11) Management leadership (are the imperatives), and finally (12) The operating plan (which leads to the total quality). The gist of all these conditions of excellence is the management leadership. 6.5 CONCEPT OF LEADERSHIP No one can disagree that ‗Leadership' in any TQM initiative is imperative. However, what do we understand by ‗leadership'? Does it mean the same thing to different people? Bennis in his book ‗Leaders‖ The Strategies for Taking Charge' claims that ―academic analysis have given us over 350 definitions of leadership. Literally thousands of investigations over the last 75 years have not created a clear understanding of what distinguishes effective leaders from ineffective ones.‖ Much has been written on ‗Leadership' and ‗Management Styles'. We can study the works of McGregor, Blake and Mouton, Reddin, Adair, Likert and many others to examine their thoughts and theories. As an example, McGregor suggested that the attitudes we hold towards others, and the level of perceived control they need and want to perform jkljljljljljlkjlkjlkPageno.167 create a ‗Leadership Style'. Two models of leaderships style were developed jjjjkjlkjkllkjjklj McGregor in his book: The Human Side of Enterprise named ‗Theory X' and ‗Theory T'. The ‗X' managers was far more directive had little trust in people and believed that strict control systems were needed to be in force in order to achieve results. Correspondingly, the ‗Y' model was based more upon a democratic and participative approach believing that people sough recognition and responsibility in their work. The ‗Theory Y' or human relations approach has gathered ground since then. Blake and Mouton and others have developed their own variants based on the premise that people are important and we need to utilize their talents in order to achieve results. McGregor's assumptions of theory X and theory Y are given as follows: 6.6 THEORY X 1. Work is inherently dis-taseful to most people. 2. Most people have little interest in work, are not ambitious, have little desire for responsibility and prefer to be directed. 3. Most people have to be coerced, rewarded or punished to gain their commitment to organizational goals. 4. Most people have little interest in, or capability for, contributing towards the solution of organizational problems. 5. People are motivated only by reward or punishment. 6. Most people require constant control and are often threatened with sanction to achieve organizational objectives. 6.7 THEORY "Y" 1. Work is pleasant and is as natural as play, if the conditions are favourable. 2. Workers have discipline and self-control to achieve organizational objectives. 3. Workers are motivated by things others than rewards (money) and punishment (sanctions). 4. The capability for contributing towards solving organizational problems is widely spread throughout the workforce. 5. People the motivated by things other than money. Motivation is a psychological process and involved recognition, esteem, social worth and group belongingness. 6. It is natural for people to be self-directed and creative at work, if the conditions allow. 91 6.8 LEADERS AND MANAGERS – THE DIFFERENCE Warren Bennis and Burt Namus in their Leaders‖ The Strategies for Taking Charge suggest that empowerment-the ability to generate enthusiasm and vision arid communicating this to people is critical in any leadership role. They start to draw the distinction between managing and leading: ―Managers do things right. Leaders do the right things‖. This is an important distinction between managers and leaders. However, they were not the first in the field with his view, Wortman's research distinguishes between operating and strategic managers. His argument is that senior managers should think strategically in the long-term whereas in reality manages are those who make things happen on a day-to-day basis. There may appear to be too many operators and too few Strategists. He suggests that too many manages are too concerned with day-to-day matters, something which concerns much of Goldratt's writing in ‗The Goal'. Managers are too concerned with achieving short-term goals. i.e. maintaining productivity at nay cost, keeping inventory at too high a level, reducing cost and agreeing short-term decisions which work against the long-term mission of the organisation. This short-sightedness can cause a big problem when we consider the difficulty of creating TQM culture which is completely at odds with the short-term approach. 6.9 ROLES OF LEADERS Philip Crosby lists four absolutes of leadership as follows: 1. The leader has a clear agenda. Where are we going? Why? How will we know when we get there? 2. The leader has a personal philosophy of management: What is quality? What is finance? What are relationships? 3. The leader is worldly. The five billion people of the earth do not all live in our respective cities but we all live in world community, there is a world economy, and it affects everything we do. 4. The leaders builds enduring relationships with employees, suppliers, customers, an d community. They all learn to relate to the leader in a positive way. A leader should set a clear vision, ensure clarity,, run effective meetings, communicate effectively and invest in role model for employees so as to motivate them for total quality. Table: 6.1 gives the characteristics of non- visionary and visionary leaders in TQM role model. A project was sponsored to identify and train managers in those behaviors and skills which would have a positive effect on the attitude, understanding and commitment to the Total Quality Management (TQM) programme. Non-Visionary Executive Visionary Executive 1. Solves daily problems and makes daily 1. Articulates vision and philosophy decisions. constantly. 2. Meets formally with immediate 2. Makes regular contracts the people at all levels 3. Is aloof, rational, critical and cold 3. Is receptive, expressive and supportive 4. Talks mainly about current short-term 4. Talks about future goals and long-term activities strategies outlook 5. Pays attention to weaknesses 5. Pays attention to strategies 6. Rarely seen, too busy to talk, and deaf to 6. Is visible, accessible and a good listener hear By using Personal Construct Techniques, it was possible for those behaviors to be identified and rated by managers themselves, thus avoiding the impositions of some others research of theoretical stance. From the identification of the behaviors, it was possible to analyze them in order to make explicit those skills that would increase the likelihood of their being modeled throughout the management group. Also to ensure and reinforce consistency with quality principles, a grid was designed to highlight the links among the behaviours, skills, quality principles and company values. This was used as the basic training design. The research led to identification of the following behaviours: 92 1. Gets full use out of staff, knows their capabilities, encourages them, and considers their feelings and aspirations. 2. Has strength of purpose, is willing to deal with important issues head-on, no matter how tough. 3. Does the job for the company and the customers, puts in 110 percent, sees self as part of team. 4. Is open and honest, approachable and dependable, a good listener, and displays an interest in other points of view. 5. Will take action: ‗let's go for it'. 6. Will discuss decisions and listens to arguments. Disseminates all relevant information. 7. Inspires confidence and is to be trusted. 8. Delegates, demonstrates trust and encourages ownership. 9. Asks for people's ideas, is prepared to be persuaded by logical and relevant discussion. 10. Cares about people and their problems and is interested on a personal level. 6.10 ACHIEVING TOTAL COMMITMENT IN QUALITY Quality goals to be achieved by the entire company and by the individual teams members require respective approaches and resource deployment. These goal and approach relationships, when understood as quality systems have several facets. Quality systems and their procedures complement an organization and drive the company forward. Through implementation in the form of quality programs, a quality system mobilizes and energizes an organization and its people. The individual employee becomes directed toward quality performance in the context of the organization. Under the systems viewpoint, people external to the organization, such as consumers, suppliers and government representatives, also enter the team and movement for quality. Figure 6.1 depicts this inter relationship. Customers of course, play an important role in Spec quality, either through contracting before production or in test marketing. Contracting customers often impose quality assurance standards and supervise their suppliers and subcontracts. DESIGN SEQUENCE SUPPLIER PRODUCER CONSUMER PRODUCTION SEQUENCE FIGURE: 6.1 QUALITY SYSTEMS WITH CONSUMERS 6.11 CUSTOMER REQUIREMENTS What does the customer require? The customer will have five questions, consciou8sly or unconsciously. These are the five dimensions of quality. The traditional view of quality is simply ‗conformance to specification'. However, this is only part of total quality. Quality involves all of the five dimensions for the customer to be satisfied. The measurement of quality will reflect each of these elements specification, conformance, reliability, cost (value) and delivery. The five questions are as follows: 1. What can I except when I buy your product? – the specifications for the product or service. For example, most vacuum cleaners for the car simply are not designed to do the heavy work of vacuum cleaning the debris found in cars. Run as they are by small batteries they have a specification more suited to sucking up crumbs from a toaster than the bits of gravel, dirt and foreign matter that invade cars. 2. Is it what I expected? – The conformance to the specification. For example, a horse trailer should conform to the technical specification in the literature and manuals. A car that claim economic fuel consumption driven 93 at 55 mph should deliver only its promise. A hotel that advertises ‗old world' luxury and service should provide the proper level of opulence and excel lent service. 3. Does it continue to do what expected? – reliability (or conformance through time). For example, products should not fall apart – a person does not purchase a radio for a few weeks' use. It should last for years. Laws governing guarantees support common sense demands for reliability. The labour Party's Citizen's Charter includes consumer, protection provisions about guarantees. 4. How much do I have to pay? – the value for money aspect. For example, people who visit Disney World in Orlando, Florida, do not complain about the price of admission because the spectacle is splendid, the customer care is dazzing and the day itself, 8.30 a.m. to midnight, could hardly be longer. 5. When can I have it? Deliver (quickly and on time). For example, once the deliver date is agreed, it should be adhered to. Some customers often want products as soon as possible. Others requires them just-in-time. Speed if delivery is usually a factor. If one's competitor can make an earlier delivery date he or she has. What then, is quality itself? How does one define it? Quality is: Fully satisfying agreed customer requirements at the lowers internal cost. Finally, concern is on the lowers internal cost, part of a quality delivery process must be concerned with cost control. Having money to throw at a product to improve its quality is a rare phenomenon and is becoming rarer. IBM's ‗quality focus on the business process' programme aims at improving all processes with a natural cost cutting element. 6.12 STRATEGIC ALLIANCE FOR ENSURING QUALITY The need for a strategy arises because choices are not obvious. Better quality at any price is a naïve strategy which recently turned out to be right because the cost of quatiy has been grossly understated and the benefits of quality entirely unaccounted for. Today it is believed that a comprehensive approach to the design and management of quality is essential to strengthen a firm's competitive position. An investment in quality must be justified by an acceptable rate of return, however. In an article on quality, Business Week (August 8, 1994) reports that thers is an overwhelming concern that quality must pay. For example, Varian, a Silicon Valley firm, went about reinventing the way it did business with what seemed to be stunning results. A unit that makes vacuum systems for computer clean rooms boosted on-time deliver from 42% to 92%. The radiation-equipment – service department ranked number 1 in its industry for prompt customer visits. But while Varian performed extremely well according to its statistics, it did poorly in the market place. While meeting production schedules, they did not return customers phone calls. Radiation-repair people were so rushed to meet deadlines that share. Over-emphasis on statistical performance and neglect of the firm's bottom line' has recurred in many other firms, leading to myopic policies, and subsequently to losses. This has led to reassessment, and a treatment of quality as means and not and an end. A strategic approach to quality must necessarily be sensitive and comprehensive, providing value where it matters and which can be justified. Quality can create value if it: Improves product's marketability or the firm's image. It contributes to repeat-purchase, and thereby to long-term profitability. Provides a competitive edge. For example, entry to some markets that are well protected can in some cases be reached only through an improvement in quality. Meets regulated standards, such as health and security standards. Affect the market structure by reducing competition when it is based on differentiation and substitution. Firms with particularly high quality products can, in some market segments, act as if they were monopoly. Improves the social image of a firm because quality cart provide greater benefits to society and thus contribute to the firm's long-term profitability. Reduces the costs of servicing, of attending to defectives and dealing with customer complaints. These effects were discussed earlier, but are extremely difficult to evaluate and quantify. To assess their true impact, it is first necessary to conduct a strategic quality audit and to assess its impact in terms of the value quality can add. In figure: 6.2, circles of quality are outlined. Starting from a basic operational concern for the control of 94 quality, emphasizing the control of processes, and expanding outwards to the global concerns of quality, emphasizing profitability and long-term survival. In this unit, we shall elaborate on aspects of the quality strategy, on producer-supplier relationships, as well as studying the economic approach to quality. In addition Environment markets demand management Suppliers Management selection procedures control Prevention Robust SPC / SQC, DOE design Design interfaces Control Organizational design Information Human resources Demand, supply, management Market structure, prices, markets, consumers behavior, competition technology FIGURE: 6.2 THE STRATEGIC CIRCLES OF QUALITY special strategic topics such as technologies and quality software systems are discussed. We shall also briefly reviews the economic theory approach to quality, which it is important to appreciate in order to formulate a quality strategy. 6.13 STRATEGIC ISSUES AND QUALITY MANAGEMENT Strategic alternatives are of course a function of the firm or organization which seeks to devise such a strategy and its definition of quality. A quality strategy can be explicit, devised in terms of specific goals which it seeks to attain directly, or be implicit, devised in terms of specific actions and organizational change devised to induce change, which will improve quality and profitability. If a firm's strategic orientation is upstream, emphasizing product enhancements and costs reduction, then a quality strategy might he defined in terms of technology choices, types of process controls and improvements, quality suppliers and, of course, better management. If the firm does not value improvement in terms of profitability, it risks reducing costs but then also ignoring the customer and the firm's aim to make money. If the firm is market oriented, emphasizing downstream, activities, its strategic choices might involve greater attention to market differentiation, post-sales services, market research, advertising, warranty design and so on. This is summarized in Figure 6.3. In following a cost reducing strategy, manufacturing design may have to be re-engineered and simplified to assemble, produce, maintain and service. Cost reduction and product design, appropriately integrated in a manufacturing process, can therefore be a bipolar strategy, improving the strategic advantage through cost reduction and improving quality at the same time. In following a differentiation strategy, a firm seeks to answer the following questions. Should it sell excellent products only at high prices or low quality products at low prices? Or perhaps segment its product line by creating a product quality mix? This is a function of competition, manufacturing technology and other variables (such as market penetration). Quality increases consumers' loyalty and, in some cases, the profit margin (if a competitive advantage can be reached through a quality producing technology). Alternatively, differentiation can be reached through the opportune time can provide a temporary monopoly for the producing firm. Through focusing on quality, a firm can penetrate selected market segments while at the same time improve consumers'' loyalty. 95 Upstream Downstream motivations motivations Strategic approach to quality Cost reducing Differentiation Technology Service SPG/SQC/DOE management Suppliers Advertising Robust products Warranties FIGURE: 6.3 STRATEGIC ALTERNATIVES AND TOOLS Focusing is both a marketing and manufacturing strategy which allows the concentration of effort in areas where the firm is expert and has, potentially, a comparative advantage. In this sense, the selection of a quality strategy need not mean a general and uniform movement towards improvement. Throughout cost reduction and differentiation strategies, the firm seeks to control variability. To do so, there are three strategic tools: 1. Improve the process, its organization, its competence, and so on, and thereby prevent poor quality. In this sense, prevention and improvement have similar effects. This type fo control can be construed as ‗before the fact' control. 2. Use controls such as inspection, control charts and detection schemes, as well as other actions. This type of control can be construed as ‗after the fact' control. 3. Construct robust designs, which build quality into the system product or service. In this case, the problems of something more than prevention, since it builds into the product a non-sensitivity to the factors that product non-quality. A quality strategy can deal with three strategic alternations at the same time. The means applied to these alternatives are not the same however. The foundations of TQM seen in earlier chapter dealt with the ‗bows' of improvement. It is important to appreciate these approaches and their relationship to the firm's strategy as a whole. For example, we4 saw that organizing for Just in Time manufacturing induces a process improvement and the control of quality is primarily achieved through prevention. The relative importance of each of these strategic alternatives is just a matter of degree of shifting over time from much control to no control, from sensitivity to robustness, and to improvement as a perpetual operational goal. These issues have been raised repeatedly and their importance should not be under-estimated. Robustness Robustness Effort(%) Prevention Evolution of strategic approaches Prevention to the control of quality control control Time FIGURE: 6.4 STRATEGIES ALTERNATIVES FOR CONTROL 96 The selection of one approach or the other depends upon managerial objectives, the recurrence and the severity of quality problems, evaluated in terms of measurable and financial values. Strategic approaches can vary according to the stage at which a problem of quality occurs. For example, when quality is applied at: An intra-process stage, activities based on the reduction of costs of quality manufacturing costs, the control of variability, distribution costs, and so on, might be dominant. A post-process stage, activities such as the development of a marketing strategy emphasizing product differentiation, post sales services, services contracting, industry agreement that tend to introduce standards acting both as barriers for further competition and seen agreement on the definition of quality (such as food labeling, environmental impact, and so on.) might be the more relevant strategic tools. A pre-process stage, activities will seek to secure stable sources of quality supplies. Producer-supplier agreements, joint ventures, mutual visits, EDI (Electronic Data Interchange) incentive contracts and so on, are only some of the means used to ensure the stable inflow of quality products, and thereby allow the firm to focus on what it can competitively do best. Pre-process activities have been discusses at length in earlier units. The growth of purchasing-related functions in industries accounts for this, seeking to assure quality of components, parts, materials and everything the firm uses. Firms are no longer isolated entities striving for competitive advantage, Rather, there are suppliers, joint ventures, know-how sharing agreements, sub-contractors and, in general industrial stake-holders which compete together to gain a competitive advantage, as loosely connected entities sharing the spoils of profits on the one hand, and the burdens of failure on the other. Firms such as The Limited, United Technology, Galleries Lafayette, GE, IBM,GM and so on are only name fronts for a multitude of suppliers, vendors and services which often seem to compete explicitly but even more often cooperate implicitly with (and through) their stake-holders. 6.14 RECOGNITION AND REWARDS An appropriate system of recognition and reward is critical to any company's TQM programme, particularly as the quality improvement process offer greater involvement to ordinary working people. Positive reinforcement through recognition and reward is essential to maintain achievement and continuous improvement through participative problem-solving projects. People work for many reasons – for achievement, advancement, increased responsibility, recognition, job interest as well as money. Although the words are often used together, recognition and reward: are quite distinct concepts. Recognition form its Latin root means ‗to know again'. It is means of encouraging individuals and groups by acknowledging their achievements. It also serves as a per to further efforts through appreciating contributions already made. There are both formal and informal ways of giving recognition. Some examples of formal recognition are presentation of their accomplishments at management reviews, publication of achievements in company media, a letter of thanks and commendation, launches or dinners, award certificates, plaques and other tokens. Informal recognition includes words of thanks, gestures of appreciation and favorable comments made to others about the individual or group. Reward is the giving of financial benefits linked to performance, further reinforcing the day-to-day recognition processes. Two exam-pies are merit-based increase in earning resulting form performance appraisal, and the promotion of an individual who contributes in a major way to quality improvement. Both recognition and rewards have a powerful motivating effect on people at work. They enhance and person's awareness of self-worth and self esteem. The giving of recognition and rewards are gestures that recognize a person's uniqueness and human dignity. They also have a social value since they re often given in the presence of colleagues. The way recognition and rewards are perceived, administered and received are an important part of the change process stimulated through quality management. Managers have a key role in this process. The following are recognition and rewards guidelines for managers: 1. Managers should look for positive behaviour to recognize and reward, rather than for negative conduct to criticize. It is a question of emphasis – applauding success rather than always berating failure. 2. Managers should give recognition and rewards in a public way to maximize their impact and effectiveness. 3. Managers should strive to be open and genuine in the process of recognition and reward-giving. A single world of sarcasm or cynicism can ruin a recognition programme, so can being ‗over-the-top' or too slick about it. 4. Managers should have a wide range of recognition and reward options to allow them to match the recognition or reward to the individual or special group involved. 97 5. Managers need to develop a sense of timing about recognition and rewards. Recognition should be continual and rewards should follow hard on the heels of achievement. 6. Managers must remain impartial and even-handed in giving out recognition and rewards. They should also be able to communicate exactly why individuals and groups are receiving awards. Ambiguities in this area create hard feelings and can be destructive of the very participative process they are intending to foster. 6.15 THE EUROPEAN QUALITY AWARD The European Quality Award model is being by many companies for self-appraisal of their position against common criteria indeed many companies have had key managers trained as assessors so that the self-appraisal can be more consistent and more comparative others use outside consultants to be completely objectives. There a nine criteria, split into the two groups of enablers and results, as the model shows. In the enablers group, the first item is leaders hip. Using TEQA guidelines for self-assessment, and assessor would look for evidence of visible involvement in a Quality process, both inside and outside the organisation. Personal commitment to the process is expected, coupled with recognition of the contribution of teams and individuals. Item two is policy and strategy – the organization's vision, values and strategic direction and the clarify of them. The assessor will look for how the policies are determined and the mechanisms of their deployment and how tightly Quality fits with business plans and how strategy is communicated and reviewed. Item three looks at people management, ‗how the organisation releases and harnesses the full potential of its people towards the continuous improvement or the business. As such, the assessor wilt examine the structures for the development of people, how involvement is effected how continuous improvement is organized. The fourth item in the enablers is called resources and can be sub-divided into four financial resources, information resources, human resources and application of technology. Each one is assessed independently, seeking out the means of managing cash and working capital, for instance, strategies for effective information flow, raw materials management and the appropriate use of technology for competitive advantage. The next criterions links the enablers and the results – processes. This investigates business processes and how they are managed, looking for a systematic approach to the identify of value-added process and the measurement and improvement of performance. The results groups is to ensure that the whole Quality endeavor does not or has not become a theoretical or conceptual activity with little return Big returns are expected and the process should be geared accordingly An assessor here is looking for hard facts particularly trends over a period of years. Metrics are mandatory.' Assumptions and feelings are not counted An assessor will want to see comparative data, the organization's targets for each measured result area, the relevance of this result area to the stakeholders, actual performance against the target and a comparison with competitors and/or ‗best in class'. Item six, and the first of the results criteria, is on customer satisfaction. The assessor looks for quantified evidence of customers' requirements being met, together with data on the perceptions of customers about the organization. Item seven is a similar one on people satisfaction, looking at evidence of what people feet about the organisation and indirect measures such as absenteeism, staff turnover and ease of recruitment. Item eight looks at results of he impact on society the perception of the community of such areas as the organization's role and involvement in the community, the effect on the environment and the use of global resources. The final result criterions is the ultimate long-term test – business results. The assessor here is looking for the achievement of the organisation against its own business plan in absolute terms: how all the financial ratios have been influenced by the Quality process plus appropriate non-financial measures such as market share, new product percentage, cost reduction, inventory turns, cycle time reduction. In a Quality business well on its way to world class, the evidence of TEQA assessment should show a clear thread form strong enablers to sound results. 6.16 HOW RANK XEROX WON THE EUROPEAN QUALITY AWARD Competing for the first European Quality Award was not an end in itself but a means to fake Rank Xerox closer to world-class standards. However, once the decision was taken to compete, it was compete to win. Quality director Rafael Florez took it on as one of his ‗vital few objectives' and put together a small team to submit an application. This team knew from their own internal assessment that the business units had already accomplished a tremendous amount; the task now was to present the Rank Xerox Quality story in a compelling light. For ‗The document company', here was an opportunity to display some capability and the 75-page submission was a masterpiece of written communication, fully desk-top published with illustrations and examples. The content came from Rank Xerox people themselves with every department in every country telling their Quality 98 stories to the term. The application passed the first hurdle – an assessment by external examiners. Next the assessors requested site visits. Rank Xerox' submission was for the whole company, so the visiting assessors had a right to examine any location. They chose three; international Headquarters at Marlow, Rank Xerox Belgium (a marketing unit), and a manufacturing operation at Venray in Holland. In the short notice period before the visits, teams at the local units were rehearsed with difficult questions. In the event, it didn't matter, for the assessors went wherever they chose, talking to people around the business, testing the pervasiveness of the approach The assessors' reports and comments were evaluated rigorously before a Jury of eminent European industrialists made their decision Rank Xerox came out the best. 1. Leadership There are some of the practices and accomplishment which made the Rank Xerox Quality story the best in 1992 Rank Xerox leaders do not support Quality – they lead if. Executives are directly involved in improvement projects; for instance, the management team in Germany visited personally 300 customers to understand areas of dissatisfaction in electronic printing (subsequent actions led to this unit moving from number three to number one in customer satisfaction). Every manager is expected to lead by example which means using Quality fools as normal management practice and complying with a strict role model of management behaviour. All managers communicate strategy and improvement goals to all their staff and are accessible in a variety of ways to people for information and discussion. For instance, Carlos Pascual in France holds monthly meetings with a broad-section of staff Bernard Founder at international headquarters holds regular breakfast meetings which anyone can attend. Such practices are pervasive across the organisation. Rank Xerox managers are also expected to be Quality champions and promote Quality inside and outside of the company. The once very introspective organisation is now committed to sharing its experience and managers in the units regularly host visitors or make visits to other companies to spread the Quality message. 2. Policy and strategy Rank Xerox use Quality as the base for policy an strategy. A set of values, known as ‗the way we work underpins all activities. These have been refined over the years with input form staff. The ‗vision 2000' positions Rank Xerox now as ‗the document company' and defined what this means in strategic terms. Supporting this are four business priorities. At the Start of the Quality journey, there were three – return on assets, customer satisfaction and market share in that order. Through the Quality process, customer satisfaction became the first priority, employee motivation and satisfaction was added as the second, followed by market share and return on assets. To impact these four imperatives, Rank Xerox have designed powerful information and measurement systems, feeding current data on performance against each priority. All of the above gives (he essence of the Rank Xerox business, to make it work dynamically, Rank Xerox managers are enthusiastic users of policy deployment. Three to five years goals are set for the business based on benchmarking, analysis of the market and Rank Xerox capability. Every business units and every department within a unit takes these goals and agrees a ‗vital few' (four or five) annual improvement objectives which define their contribution to the mid-term goals. Quite often, new strategies and new processes are required to deliver the objectives. The goals and objectives re cascaded down the whole organisation and captured in what is known in the UK as ‗The Blue Book' (le livere bleu' in France and ‗das Kursbuch' in Germany). Every Rank Xerox person is involved in the development of the local ‗blue book' which is actively used to make local decisions and guides improvement action. Bernard Founier points Out: ‗We use a formal process to cascade the company's policy and strategy throughout the organisation, so that every individual has clear personal direction and targets, can relate his or her activities to those of other people and can understand how to the success of the company.' The downward cascade of objectives at the beginning of the year is followed by quarterly upward reviews always bringing the focus back onto the four business priorities. Awareness of these priorities across Rank Xerox units is in astonishing 96 percent. 3. People management Rank Xerox manages its management: the recruitment, assessment and development of all managers is managed as a complete process called ‗management resource planning' (MRP). Managers are assessed on five criteria: business results, leadership through quality, human resources management, teamwork, corporate values. Note that four of these five are on the ‗soft' people-related issues showing how important people management is to Rank Xerox. A closed-loop process is used to ensure that the management is to Rank Xerox. A closed-loop process is used 99 to ensure that the management of 28,000 people is effective, driven by data from the annual employee satisfaction survey. Issues identified from this survey are tackled by Quality Improvement Teams (QITs), thus involving people in improving their own environment. Skills development is an important part of the deployment of policy, with needs determined by the strategies goals. As a result, much training is undertaken, varying from cross functional needs such as effective meetings to specific needs such as service attitude for salespersons. Some 7 percent of payroll Cost (2 percent of revenue) is spent on training, with a minimum target of 40 hours training per person well exceeded. Rank Xerox people of all ranks are appraised against set objectives and individual development plans agreed. Empowerment is active on many fronts: self managed teems in service centres; selling price delegation to the local sales team; merit pay increases down to the local manager; implementation responsibility for QITs. The Rank Xerox ‗capacity to act' policy, introduced in 1988, helped to define and clarify empowerment in practice. 4. Resources Financial resources (cash, revenues, working capital and cost) are we managed at Rank Xerox, being treated again as closed-loop processes. Cost of Quality (CoQ) was used in the early years of Quality implementation, recording some dramatic shifts such as the increase in prevention and appraisal activities from 12 percent to 45 percent of the CoQ at the Welwyn manufacturing plant which led to a reduction of CoQ from £32m to £45m, or the billing process which over five quarters was raised in accuracy form 95 percent to 97 percent whilst cutting $4m off the CoQ. Information is also treated as a valued resource with an overall aim of all information being up to date and accurate. Billing accuracy is now moving close to 98 percent in most units. Customer data accuracy at Rank Xerox Portugal is over 99 percent, an infernal benchmark for other units to match. All information systems are being fully integrate with some units reaching a total integration figure of 80 percent (high compared to external benchmarks) and fast approaching the targets in 93 of over 90 percent. Material resources are managed through well-established JIT, Which has halved inventory levels. A dedicated team 01414 suppliers (reduced from an original 5000) are linked together through the Continuous Supplier Involvement Process (CSIP). This process ensures that the 80 percent of production cost which are bought-in are tightly managed with an emphasis on prevention well up the supply chain: 95 percent of parts are certified and line fall out is down to 125 parts per million. 5. Processes Rank Xerox have valued process management since the beginning of their Leadership through Quality activities. At first, processes were managed at O/P level as teams learned about improvement in their work systems. Gradually this practice spread cross-functionally and eventually cross-organisation. In 1990, all the experience with processes was brought together and an integrated process structure devised. Known as the Business Architecture, this knits together all the key business processes and the 76 sub processes which feed them. The Business Architecture is the Rank Xerox template for future systems and organisatoin development. All processes have assigned owner who are responsible for setting process standards and meeting performance targets. Feed back is collected routinely from external customers, infernal customers, suppliers and comparisons made to internal best practice and external benchmarks. To ensure that processes are improving they are audited and scored each year. But the best assessment of an improved process is how quickly and we/I it has met with the stretch objectives set through the policy deployment,' in or her words, how it has impacted overall results. 6. Customer satisfaction For Rank Xerox, the most important result is customer satisfaction. Millions are spent each year finding out what the result is, through a combination of anonymous and sponsored surveys The Rank Xerox targets were to be rated number one in customer satisfaction for all reprographic and all printing products and in all countries by the end of 1992 and to make significant progress towards 100 percent measured satisfaction. In 1989, customers rated Rank Xerox number one vendor in nine out of 75 business sectors. In 1992, Rank Xerox were first in over 60. Three years ago, 71 percent of customers across Europe said they were satisfied; in 1992, dissatisfaction was down to an average of 3 percent, wit/i some units maintaining the ultimate goals of 100 percent satisfaction. The key to the rapid progress has been the closed-loop drive for improve merit based on real data, with a focus on the identified dissatisfies. Consistent with the improved ratings and to maintain a pioneering approach, Rank Xerox launched their Total Customer Satisfaction Guarantee in January 1991. This offers the customer an exchange of any product which is not 100 completely satisfactory for a three-year period. This has been favorably received by customers, with some units reporting 20 percent citing this as a significant reason for purchasing a Rank Xerox product. Less than 0.5 percent exercised this option in the first year. 7. People satisfaction This second business priority is monitored annually against organisation-wide criteria which include career development, pay, team spirit, training, work environment, communications and overall satisfaction. To meet the benchmark goal targeted for 1995, Rank Xerox was looking for marked improvements in survey scores from their weakest country units. Thus Greece, Finland and Portugal showed bit improvements from 1990 to 1991 (92 percent 53 percent and 48 percent), whilst all but two countries showed improvement above their set percentage target. This means that every units has a big challenge to improve employee satisfaction score which already go up into 80s and 905. The closed loop improvement process means that any gaps found in the employee survey are auctioned directly. For example, Bernard Fournier sponsored six QITS to address issues arising form the 1990 headquarters survey. He personally led one of these and assigned the others to board members. These and other QITs resulted in a 35 percent increase in the overall satisfaction rating. 8. Impact on society This criterions was not one of Rank Xerox' four business priorities; nevertheless it is a serous issue and Rank Xerox view themselves as being at the forefront of requirements in this area. By way of evidence of this, Rank Xerox can demonstrate performances that beat industry standards and match world benchmarks on a number of parameters. Their safety record beats the acknowledged benchmark – Du Pont's 0.5 incidents per 200000 working hours; ozone emissions form products are less than half the industry standard and are targeted lower still; dust emissions likewise; noise emissions have been reduced well below competitor standards. Site environmental audits have been running since 1984 and energy conservation, waste reduction and product recycling is measures and systematically improved. Community involvement is actively encouraged, primarily in the areas of charity support, education, sports and arts. To promote the further development of Quality in society, Rank Xerox has undertaken to open its doors to other organisatoins wishing to learn from its experience. 9. Business results Market share is the third Rank Xerox business priority. Reprographics is still the big market at 70 percent of revenue and this has steadily grown from 1986.187 when the Quality process started to bite. Indeed, in all the main segments in which Rank Xerox competes, Rank Xerox has countered the expectation of a Japanese take-over of the market, dominating the high-volume segment at 85 percent, overtaking the leader, Canon, in mid-volume and forcing new inroads into low-volume copiers. Printers are also faring well, despite intense competition, with the high-volume segment share improved by 25 percent in four years. Return on assets is the Rank Xerox fourth business priority and the trend shows stability at around 21 percent in conventional measurement terms, some 50 percent above Dun & Bradstreet's upper quartile rating for the industry. A big Contributor to this success has been the major upgrade in operational effectiveness. Manufacturing proe variability is measured by the Cpk factor which shows the relationship between specification and achievement. The Rank target is 1.33 (which equates to 99.994 percent of output within specification) and this has risen from 41 percent of processes beating this target in 1990 to 70 percent in 1992. Delivery targets have been raised from 80 percent achievement of daily commitments to 99 percent, whilst days of supply (whole manufacturing inventory) has been reduced from 36 to around 20. Cycle times have been compressed throughout; manufacturing lead time has been cut by 46 percent, warehouse to customer time by 60 percent and new products are brought to the market much faster. On the service side, outstanding customer queries have been systematically reduced; for instance, queries still outstanding after five days have been brought down at Rank Xerox Netherlands from an average of 340 to 50 in two years. Finally, all of these improvements have led to a healthy balance sheet. Revenue and profit after tax have risen consistently over the last ten years and were held at a high level in 1990-1 at a time when many high technology companies made losses. 101 6.17 NATIONAL AWARDS OF DIFFERENT COUNTRIES 1. Malcolm Baldrige National Quality Award (United States) 2. The Deming prize (Japan) 3. The European Quality Award (for companies based in Western Europe) 4. Golden Peacock National Quality Award (India) 5. Argentina Quality Award 6. Australian Quality Award 7. British Quality Award 8. Canadian Award for Business Excellence 9. Columbia National Quality Award 10. French National Quality Award 11. Isreal Quality Prize of the Association of Electronics Industries 12. Malaysia Quality Award 13. Mexican National Quality Award 14. New Zealand Railfreight Award for Excellence in Manufacturing 15. Norwegian Quality Prize 16. Philippines Outstanding Quality Company of the year Award 17. Polish Committee for Standardization Sward 18. South African Quality Award 19. Swedish Quality Award 20. Turkish Standard Institution Award 21. Egyptian Quality Award These are some of the selected national awards out of so many other awards given for quality in different countries. This list is only indicative and by no means comprehensive and exhaustive. Initiatives are springing up across the nations and within the countries as the power and appeal of existing award programmes become recognized. Limited to a maximum of six winners per year, the major national quality awards recognize only the best of the best. Countries other excellent companies would go un-recognized. It should be noted that, although the Baidrige criteria has emerged as the definitive quality standard, the Deming Overseas Prize is the only true international quality competition. 6.18 COMMUNITY AND STATE AWARDS A list of some of the community and state quality awards is given below: 1. The Erie Quality Award (Community Quality Award) 2. Connection Quality improvement Award 3. The Margret Chase Smith Maine State Quality Award 4. The United States Senate Productivity Awards for Maryland and the Mary land Centre Excellence Awards. 5. Armand V. Feigenbaum Massachusetts Quality Award 6. The Minnesota State Quality Award. 7. The Governor's Excelsior Award 8. The North Corolina Quality Leadership Award 9. The US Senate Productivity Awards or Virginia and the Award for Continuing Excellence 10. The Wyoming governor's Award These are only a few awards which are given in the USA at slate level. There are some awards in India at slate level as well, but the list is not available right now. 6.19 INDUSTRY – SPECIFIC QUALITY AWARDS 1. Singo Prixe for Excellence in Manufacturing 2. The Presidential Award for Quality and Productivity Improvement 3. The NASA Excellence Award / George M Low Award 4. Quality Medal of American Society for Quality Control 5. Shewhard Medal to Individuals 102 6. The Edward Medals to individuals 7. The Engine L. Grant Award for Educational Programmes on Quality Control 8. The Brumbaugh Award for best paper on Quality 9. The Lancaster Award to the International Fraternity of Quality Professionals. In India too, there are a number of industry – specific awards but the list is not available right now. 6.20 THE DEMING PRIZE The Deming Prize was created in 1951. It was named after Dr. W Edwards Deming who contributes significantly to promoting quality concepts in Japanese industry. The Deming prizes are awarded for excellence in the systematic application of total quality management. These awards fall into the following six categories: 1. Individual 2. Companies and other operating organizations (Divisions of companies) 3. Factories of work sites. 4. Companies which are located outside Japan (Overseas companies) 5. Small Enterprises. 6. Public institutions The Japanese Union of Scientists and Engineers (JUSE) are the administrators of the prize process. The examiners are chosen by this body. The examiners are typically university professors with areas of expertise in quality management. They have often spend their entire careers studying and improving quality and management systems of the companies with whom they have worked. 6.21 APPLICATION FORM The application processor those companies interested in challenging the award is very rigorous. The procedure of making an application for the Deming Prize by organisations represents a daunting task. They must prepare a written summary that describes their quality management system in great detail. To provide a perspective, when Florida Power and Light (USA) became the first recipient of the overseas category of the Deming Prize in 1989, they submitted an application that was approximately 1000 pages long and that too in Japanese language. The written applications are closely scrutinized by the examiners. If they determine that the company has successfully applied the required quality systems, they schedule a site visit by a team of examiners. The site visit is conducted by a team of usually 5 – 7 examiners. The team may spend a couple of weeks on the location. Assessment Procedure The evaluation itself is a highly interactive but cumbersome process, allowing the applicant companies to emphasize on practices that they are proud of. The examiners are free and authorized to question departmental heads of each unit about their quality management activities. Additionally, the examiners interview the top management team to fully understand their direction for the company. In the process they confirm the accumulated information. Success in receiving the prize is determined by the examiners based on how thoroughly the quality management system is deployed in the company and how the key operating results correlate with their management system. Approximately six weeks later, the chief executive of the applicant company or others will receive a feedback from the evaluators identifying both positive aspects of the evaluation as well as the areas for improvement. Applicants will also know by then whether they have been successful in their challenge for the prize. If they are not selected, however, they will be classified as pending, allowing them to re-apply in the following year. This status continues until either the company is awarded the Deming Prizes or they withdraw their application. For 1995, the winners of the Deming Prizes are summarized as follows: 6.22 LIST OF DEMING PRIZES WINNERS 1. The Maeda Corporation Ltd. (awarded Japan Quality Model) 2. Ishikawajima Harinia Heavy Industries Co., -- Nuclear Power Division (winner of he 1995 Deming Prize) 3. Mtex Matsumura Corporation 4. Kikuchi Metal Stamping Co., Ltd. 103 5. Toyaseiki Co., Ltd. 6. Nissan Motor Co. Ltd. Murayama Plant (winner of Quality Control Award for Factories). 7. Ayatomo Karino, Professor, Teikey Heisei University (winner of the Deming Prize for individuals) This list is only indicative and in no way exhaustive and comprehensive. The Deming Prizes is, of course named after Dr. W. Edwards Deming, one of the pioneers of the quality movement, who first gained recognition for his work in post World War II Japan. Prior to his death in 1993, he finally gained recognition in his own country (USA). The Deming Prize criteria as given below, can be used as a guide for obtaining p and organizational excellence. Each areas deals with one facet of the process of quality. The Deming Prizes Criteria involves the following ten major points and each of these points has sub-points as given in the ensuing text. 6.23 GOLDEN PEACOCK NATIONAL QUALITY AWARD (GDNQA) Former President of India, Dr. Shankar Dayal Sharma said: ―The Institution of National Quality Award by the Institute of Directors (TOD) is commendable and enhances corporate commitment to Quality‖. The Golden Peacock National Quality Award (GPNQA) of India is also regarded as India's Malcolm Baidrige—the ultimate recognition for quality. This is the award given every year by the Quality Council of India (QCI). The award is sponsored and decided by the Institute of Directors (IOD). Indian Institute of Foreign Trade (IIFT) and Institute of Directors (IOD) are the premier certification bodies in India, which have signed an agreement to introduce total quality management in the Indian companies and service departments. The Government departments that are exposed to international trade are also included as candidates for this purpose. This is the first effort to involve the government departments in total quality management in India. IOD in association with the UK based worldwide quality management network and World Quality Council which is of international repute, has agreed to conduct programmes in India. For getting the coveted National Quality Award, all Indian companies have to feel the need for TQM implementation. Some enlightened managements are doing it entirely on their own, but on the whole what is needed is the will to improve. ―Unfortunately, TQM in India still does not focus on the process (that is not on the finished product) but when the product is conceived. Various organisations In India have taken initiative to launch TQM especially, those which anticipated the liberalization process, and those who were pressurized by their foreign collaborators‖, said Janak Mehta, M.D. TQM Consultant India Ltd. The great hurdle for implementation is the lack of a national perspective In India. Statements on the formation of National Quality Council have been Issued for last many years but it has taken shape now. Such issues get lost in India in the corridors of power. While the nations of the world are making rapid strides in quality on a daily basis, we are patient to let such an important matter lie untracked for 4-5 years. The Auxiliary Accreditations Boards for Quality Systems, laboratories and assessors have also not been finalized in India. Assesses in India have to pay very heavy fees to foreign accreditation boards for registration. Can the country afford this foreign exchange drain? And what we are to tell the World Trading Community ―We are a great nation‖, ―Our goods are of international quality but our assessors have to be registered in the UK and USA. Will it sound credible? How long are we to follow Western initiatives in quality rather than starting our own. Quality is very much the need of the hour in India. It is like a dying man needing life‖, says L.T. Gen. A.S. Bhullar, Senior Counsellor, TQMI. The following two steps are recommended for immediate action: 1. Increase awareness of the principles and techniques of total quality through education and training; and 2. Create an atmosphere, including a national framework for implementing the principles and techniques of TQM in Indian organisatoin. It is good that at this juncture Quality Council of India (QCI) is made finally operational in the country. The Golden peacock National Quality Award (GPNQA) has been instituted by IOD. ****************** 104 MODEL QUESTION PAPER Course M.B.A. Paper 453 Quality Management Time 3 Hours Marks 100 Max. ( 5 x 8 = 40 Marks ) PART – A *Answer any Five Questions 1. Illustrate quality as a customer delight? 2. Explain 6 Sigma concepts? Give its uses? 3. Highlight the procedure involved in the planning for quality? 4. Enumerate the benefit of quality? 5. Explain, with example, TQC? 6. Detail ISO – 9000 series? State its scope? 7. Explain core competence? Give examples? 8. Highlight the quality control awards and the institutions behind the award? PART B ( 4 x 15 = 60 ) *Question No. 15 is compulsory *Answer any Three among question 9 to 14. 9. Demonstrate how quality can be treated as a problem as well as a challenge? With Indian examples, prove the points? 10. Illustrates how SPC helps in achieving total quality management? 11. Describe the role of MNCs in emergence of global quality? Give Examples. 12. Explain the difference in TQC practices of Japan, US and Europe? Give examples. 13. Demonstrate how BPR help in achieving Global standards for an organisation? 14. With suitable examples, explain the strategic alliances for ensuring quality? Compulsory 15. Explain, with examples, how productivity can be increased by adopting various quality management techniques?