CH-3-4 Global Supply Chain Quality and International Quality Standards – Managing Quality: Integrating the Supply Chain : Book Guide

This Document Contains Chapters 3 to 4 Chapter 3: Global Supply Chain Quality and International Quality Standards Chapter Outline •Managing Quality for the Multinational Firm •Quality Improvement: o The American Way o The Japanese Way o The European Way o The Chinese Way •ISO 9000:2008 •Are Quality Approaches Influenced By Culture? Overview The task of managing quality is affected by increased globalization. This chapter discusses the opportunities and obstacles created by globalization. The differences between regions of the world also include discussions of various quality approaches that have been developed in those regions and the awards that act as quality barometers within each. In an increasingly globalizing economy, it is important to understand the approaches that various nations use to improve quality. It is clear that the trend is toward greater participation in a global economy. As a result, the worker of the future will need to adapt to approaches having roots in other cultures. In this chapter, the global economy was discussed and the role quality plays in that world economy. We considered different quality models from different regions. From an integrative perspective, it is reasonable to borrow from all these models if it helps a firm perform better. The underlying theme in the chapter is the importance of learning from other cultures to compete effectively. Discussion Questions 1. What are the advantages or disadvantages of licensing as a means of gaining access to foreign markets? Through licensing, a firm expands its market and retains earnings made in a foreign market. With markets as large as China, this is a considerable amount. A licensor may also have an existing marketing establishment and existing contacts. The cultural aspects are also worth considering: a product’s name or logo might well be considered offensive in a foreign market. A good example is the Chevrolet Nova. In Spanish, “nova” means “doesn’t go.” A local partner would observe the problem. However, the disadvantages can be large also. The firm shares its profits with a foreign firm, rather than selling the product or service itself in the foreign country. 2. What are the advantages and disadvantages of globalization? Provide an example of a firm that has engaged in globalization. What are some of the potential advantages and disadvantages of globalization for this particular organization? The primary advantage of globalization is that a firm retains all of the profits from the sale of its products or services in a foreign country. This is a significant advantage when one thinks about the potential of a foreign market like China, which has over one billion potential consumers. As Figure 3-2 illustrates, the physical environment, the technical environment, and the social environment affect quality. These factors are dependent upon the local culture to a great degree. The primary disadvantage of globalization is that it is complicated and forces a firm to, in essence, "set up shop" in a foreign country. By going abroad, a firm significantly changes the physical environment, the task environment, and the societal environment in which it operates. This may result in a number of challenges, ranging from becoming familiar with a foreign culture to determining how to get the raw materials that a firm needs to manufacture its product to a foreign destination. IBM is an example of a company that engages in globalization. IBM manufactures products in many countries of the world. The major advantage to globalization for IBM is that it vastly increases the number of potential customers for its computer hardware products. However, IBM’s dark-suit culture may be considered foreign in many parts of the world. 3. What motivates U.S. firms to compete for the Malcolm Baldrige Award? How could a firm benefit from participating in the Baldrige competition, even if it did not apply for the award? Malcolm Baldrige was Secretary of Commerce from 1981 until his death in July 1987. Baldrige was a proponent of quality management as a key to the U.S.’s prosperity and long-term strength. He took a personal interest in the quality improvement act that was eventually named after him and helped draft one of the early versions. In recognition of his contributions, Congress named the award in his honor. As Figure 3-5 on page 56 illustrates, the Baldrige Award recognizes the interrelationship between the various facets of the organization. There is great prestige in winning the Baldrige Award. Firms that do not win the award but receive a site visit from Baldrige examiners often include in their company brochures and other promotional material a mention of themselves as being "Baldrige Qualified." The Baldrige Award, or even being Baldrige Qualified, helps firms attract high-quality suppliers, customers, and other stakeholders. The attention to quality from being involved in the Baldrige Award helps a firm establish a culture of quality and helps a firm rally its employees around quality improvement efforts. 4. Category 3 of the Baldrige criteria focuses on the importance of the customer in assessing the quality of the products and services that a firm sells. Why do you think the authors of the Baldrige criteria included this category? How is the customer important in assessing the quality of the products and services that a company sells? Ishikawa’s second point is: The first step in quality is to know the requirements of the customer. Deming, Juran, Feigenbaum and Parasuraman, Zeithamel, and Berry – all directly address the customer. Figure 2-5 directly places “Customer Role” at the core of quality management The Baldrige Award’s category 3 directly speaks to the importance of the customer: To be successful in serving the customer, firms must understand the product and service attributes that are important to the customer. This is documented as well as how the firm assesses the relative importance of product or service features. The processes for listening to and learning from customers and markets also must be evaluated, improved, and kept current with changing business needs. 5. Category 5 of the Baldrige criteria focuses on workforce. Why do you think the authors of the Baldrige criteria included this category? Why is human resource management an important consideration in quality planning and management? Baldrige’s category 5 directly addresses the workforce: The workforce is to be enabled to develop and use its full potential, aligned with company objectives. This involves developing an internal environment conducive to full participation and personal growth, including human resources development. This initiative is directed toward process and performance improvement. Employees must be empowered to understand and respond to changes in customer needs and requirements. To facilitate this learning, skill sharing and open communication with employees are necessary to provide a cohesive work system. The applicant outlines the systems in place that provide compensation, recognition, and workforce engagement. The traditional economic definition for production defines the tools of production as: Land Labor Capitol Obviously, without labor, production is impossible. The humanistic movement that started approximately 100 years ago recognizes the importance of an effective human resource policy. All of modern management theory, Maslow’s hierarchy of needs, and Theories X, Y and Z directly address the importance of the employee and the need to be inclusive and supportive. 6. Do you believe the Baldrige should include a category for not-for-profit organizations? If so, what adjustments should be made in the Baldrige criteria to make it applicable for this category? The differences between a for-profit and a not-for-profit organization are vast. On page 54, the text outlines the purpose of the award: The criteria focus on business results. Organizations must show outstanding results in areas such as financial performance, customer satisfaction, customer retention, product performance, service performance, productivity, supplier performance, and public citizenship Given that not-for-profits tend to be service oriented, there are quite a few items that can be applied to the not-for-profit. The statement is also made that the Baldrige criteria are non-prescriptive and adaptable. However, the point must be made that a for-profit organization has a formal criteria for evaluating success: profit. The Baldrige Award is based upon maximizing profit. How does this apply to an organization that does not have profit as an evaluation tool? 7. If you were the CEO of a manufacturing firm, would you encourage your firm to apply for the Malcolm Baldrige Award? Why or why not? Even if a company is not selected for the award, the intensive investigation will supply invaluable information. There is a three-stage process for the award. Figure 3-6 shows that at each step, a feedback report is given to the candidate. Baldridge examiners write this report, each of whom is an expert in his or her field. Just participating in the process is a positive experience. The worst case would be a firm not being selected for the consensus review, Stage 2. This is a win-win situation. 8. If you were presented the opportunity to be a Baldrige examiner, would you accept it? Why or why not? Make your answer as substantive as possible. Being a Baldrige examiner is a very prestigious and time-consuming distinction. The job is intensive and requires a dedication to the end product. It is also performed gratis – for no pay. An individual could learn a tremendous amount by being a Baldrige examiner, through the process of examining the firms that apply for the award. However, the downside of being a Baldrige examiner is the tremendous time commitment involved. According to Chapter 3, Baldrige examiners must be willing to give up approximately 10% of their time during an entire year to fulfill their responsibilities. In addition, Baldrige examiners are not paid. As a result, it takes a special type of person who is willing to give up the time and income that is necessary to be an effective Baldrige examiner. 9. How can firms use lean production to improve quality? Is lean production a useful concept for both service and manufacturing organizations? There are two primary ways that firms can use just-in-time (JIT) to improve quality. First, JIT is comprised of a group of techniques or systems focused on optimizing quality. Second, JIT is a philosophy that helps rally the members of an organization around the themes of reducing waste and improving quality. JIT is a useful concept for both service and manufacturing organizations. Although JIT originated in a manufacturing setting, its basic principles and philosophies are equally applicable in a service setting. The focus of lean production is eliminating waste. Shigeo Shingo’s Seven Wastes identifies the characteristics of waste, as seen in Table 3-5. Lean manufacturing is directed at reducing waste. On page 66, the text states, “anything in the process that does not add value for the customer should be eliminated. Given this view, quality problems cause scrap and rework and are wasteful.” Following Shingo’s philosophy, reducing waste directly increases quality. 10. Describe the concept of “visibility” in the context of the Japanese total quality approach. How does the concept of visibility help a firm identify problems in its production processes? A noted example of the problems incurred by lack of vision is the Ford Pinto automobile. As the text illustrates: In the 1970s, after Ford engineers discovered a design flaw in the Pinto that made it susceptible to fuel tank ruptures, analysts calculated how much it would cost to pay out death benefits to victims, compared with making the minor changes necessary to prevent exploding gas tanks. The death benefits were cheaper, so they continued to manufacture defective cars, even as they lobbied US Congress to block new regulations that would require the changes regardless of cost. Hundreds of people died as a result . The concept of visibility eliminates this problem. The Japanese empower any employee to stop the assembly line if a defect is observed. This allows attention to be focused on fixing the problem. This is a concept that has always been foreign to American industry. On page 67, the text makes the point that excess inventory, in fact, has the effect of hiding problems. Attention to lean manufacturing alleviates this. In the Japanese total quality approach, visibility refers to making all aspects of the production process transparent and easily observable. This concept helps a firm identify problems by ensuring that issues are immediately visible to everyone involved, enabling quicker detection, analysis, and resolution of defects or inefficiencies. For example, using visual management tools like dashboards or color-coded indicators helps highlight problems in real time. 11. In what sense does excess inventory act as a “security blanket” for manufacturing firms? Excess inventory acts as a security blanket for a firm if the firm always has inventory readily available to substitute for parts that were scrapped or need to be reworked before they can be shipped. Having excess inventory is analogous to someone having excess money. If a person always has excess money available, it is easy to get into the habit of spending money foolishly or in a non-discerning manner. The same applies to excess inventory. If a firm has excess inventory readily available, there is no compelling motivation to eliminate scrap or rework. Conversely, if excess inventory is not available, there is a great incentive to eliminate scrap and rework. 12. Describe the concept of line-stop authority. If you were an operator in a production facility, would you want to have line-stop authority? Why or why not? Line-stop authority pertains to the authority to stop a production line if a problem is identified. Line-stop authority empowers the line worker. Quality control is now being conducted at the lowest possible level. A key point is that line-stop authority minimizes the possibility of quality problems persisting even though they have been identified. The alternative approach, off-line repair, does nothing to immediately solve the problem that caused the situation. Key for this to function is having management aware of the positive effects of line-stop authority. If an employee fears retaliation for stopping the line, the entire process is nonfunctional. 13. Why is it a good idea for workers to inspect their own work? It is a good idea for workers to inspect their own work for two reasons. First, if workers inspect their own work, they in effect become their own "inspectors," and must be satisfied with their own work before they pass it along the production line. Second, quality problems will be identified immediately, rather than several steps removed from an individual worker, after additional effort has been put into a defective part. It is always cheapest to solve a quality problem at its origin, rather than waiting for someone downstream to catch it. 14. In what ways are the Malcolm Baldrige Award and the Deming Prize similar, and in what ways are they different? Table 3-4 on page 66 address this point extremely well. 15. Is it appropriate to use the criteria for quality awards as a framework for organizational improvement and change? Why or why not? Using the criteria for quality awards as the framework for organizational improvement forces change upon the corporate culture. If the corporate culture already emphasizes quality in a healthy way, a forced cultural change possibly does more harm than good. However, the criteria for the awards contain the important elements that are necessary for quality improvement efforts. As a result, it provides firms with a convenient checklist of activities to cover in their own quality improvement initiatives. 16. What are the major substantive differences between the quality awards discussed in the chapter and ISO 9000:2008? Are they intended for similar or entirely different purposes? The purposes of ISO 9000:2008 and the award programs are radically different. The purpose of ISO 9000:2008 is not to provide a framework for organizational improvement and change (although this can occur through the implementation of ISO 9000:2008). The focus of ISO 9000:2008 is for companies to document their quality systems in a series of manuals for the purpose of facilitating trade through supplier conformance. The ISO 9000 process can be described as: 1. Customer focus 2. Leadership 3. Involvement of people 4. The process approach 5. A systems approach to management 6. Continual improvement 7. Factual approach to decision making 8. Mutually beneficial supplier relationship Once this is in place, the quest for a quality award is appropriate. 17. Describe the purpose and the intent of the ISO 9000:2008 program. What are the advantages of becoming an ISO 9000:2008-certified company? Are there any disadvantages? The International Organization for Standardization (ISO) is an international developer of standards for industry. These standards are in place to enable making the development, manufacturing, and supply of products and services more efficient, safer, and cleaner. They make trade between countries easier and fairer. The international standards that ISO develops are very useful. They are useful to industrial and business organizations of all types, to governments and other regulatory bodies, to trade officials, to conformity assessment professionals, to suppliers and customers of products and services in both public and private sectors, and ultimately, to people in general in their roles as consumers and end users. The pursuit of ISO 9000 is expensive and time-consuming. The question that management must ask is: What is the value of the certification? 18. Describe the purpose and the intent of the ISO 14000 program. ISO 14000 is an international standard for environmental compliance. The compliance standard is ISO 14001, Environmental Management Systems. ISO 14001 uses the same basic approach as ISO 9000:2008 with documentation control, management system auditing, operational control, control of records, management policies, audits, training, statistical techniques, and corrective and preventive action. In addition to these controls, ISO 14001 includes quantified targets, established objectives, emergency and disaster preparedness, as well as disclosure of environmental policy. The purpose and intent of the ISO 14001 program is to certify firms as adhering to certain environmental compliance norms. 19. What are the pros and cons for an American firm that is considering pursuing ISO 14000 certification? If you were the CEO of a manufacturing firm, would you pursue ISO 14000. Why or why not? Environmental control has become a major international issue. The economic and political problems that might be raised if a firm pursues ISO 14000 are great. As a result of the self-study process incorporated in the ISO standard, firms can possibly discover violations (or variances from standards) regarding some environmental topics such as hazardous waste. Once these firms discover violations, they are required to report these variations to the U.S. Environmental Protection Agency (EPA). Even if the firm subsequently cleans up its problems, it may be subject to fines and penalties, which may be severe enough to put a firm out of business. As a result, the ISO 14000 certification process is sometimes problematic for American firms. 20. Do you believe quality approaches are influenced by culture? How? As stated at the end of the chapter, culture has a great influence on corporate tradition. •American companies are results-oriented. They are driven by the bottom line. As a result, if an aspect of quality appears to be expensive, it might well be ignored. •Japanese culture is based on an ethic of consistency and reduction of waste. They lie on a small island with minimal resources. Almost all raw materials must be imported. The expense of this is obvious. •European culture has its roots in the old medieval guild system. The effect is a “work as art” ethic. •China, which is still evolving as an economic powerhouse, slips slowly into a free market economy. As developing nations join the current marketplace, we can assume that their cultures will affect their attitudes toward quality. Case 3-1: Denver International Airport Becomes ISO 14001 Certified Case Study Questions 1. What do you view as the benefits of ISO 14001 adoption and implementation? ISO 14000 is an international standard for environmental compliance. The compliance standard is ISO 14001, Environmental Management Systems. ISO 14001 uses the same basic approach as ISO 9000:2008 with documentation control, management system auditing, operational control, control of records, management policies, audits, training, statistical techniques, and corrective and preventive action. In addition to these controls, ISO 14001 includes quantified targets, established objectives, emergency and disaster preparedness, as well as disclosure of environmental policy. The purpose and intent of the ISO 14001 program is to certify firms as adhering to certain environmental compliance norms. Environmental control has become a major international issue. The economic and political problems that might be raised if a firm pursues ISO 14000 are great. As a result of the self-study process incorporated in the ISO standard, firms can possibly discover violations (or variances from standards) regarding some environmental topics such as hazardous waste. Once these firms discover violations, they are required to report these variations to the U.S. EPA. Even if the firm subsequently cleans up its problems, it may be subject to fines and penalties, which may be severe enough to put a firm out of business. 2. Is ISO registration useful for airports? Why or why not? The answer to this question is totally dependent on the airport, its location and its competition. Or is it? Do all airports basically function in a common manner where the business of the airport is concerned? Do customers think that the business of running an airline and an airport will ever be standardized? Is standardization of the business processes even a good idea? As discussed in the chapter, cultural and environmental issues will play a role in an airport’s registration. However, what incentive does an airport have to obtain registration? In most cities, there is only one airport, so will registration really bring in more customers, improve profits, or enhance corporate goodwill? 3. How can the benefits of ISO registration extend outside the company? In the case of ISO 14000, improving environmental issues being caused by the company will have major impacts on the surrounding environment and community. Less environmental waste can lead to improved health in surrounding neighborhoods and employees. Less use of scarce natural resources also benefits society in general. Case 3-2: Wainwright Industries: An Entirely New Philosophy of Business Based on Customer Satisfaction and Quality Case Study Questions 1. In its pursuit of improved quality, Wainwright emphasized two sets of initiatives: one based on improvements in its manufacturing operations (i.e., just-in-time manufacturing, computer-aided design) and the other based on human resource management (i.e., employee empowerment, profit sharing). Why was it necessary for Wainwright to emphasize both of these sets of initiatives? How are they related? Wainwright's dual emphasis on improvements in manufacturing operations and human resource management seems to be the ideal formula for improving an organization's overall quality related efforts. As mentioned in the previous two chapters, a key to the effective implementation of any quality-related initiative is the skills and level of motivation of a company's employees. By focusing on this aspect of quality management, while at the same time initiating improved manufacturing techniques, Wainwright seems to have struck the perfect balance. The key to this discussion is in the case itself: The results of the company’s continuous improvement efforts are linked to five strategic indicators, including safety, internal customer satisfaction, external customer satisfaction, design quality, and business performance. The status of each of these criteria is tracked by “mission control,” a room set aside to document the company’s efforts. In mission control, each customer’s satisfaction is documented with a plaque, a current monthly satisfaction rating, and a red or green flag indicating the customer’s status relative to objectives. 2. What is an egalitarian culture? How does the development of an egalitarian culture help a company like Wainwright Industries become more quality minded? The case states the approach towards egalitarianism as: The employees at Wainwright (including the CEO) now all wear the same uniform, eat in the same cafeteria, and park in the same parking lot. Office walls have literally been torn down and replaced with glass, based on the premise that if the managers can watch the frontline employees work, the frontline employees should be able to watch the managers work too. As a result of these changes, the managers of the company have become coaches and facilitators rather than supervisors and disciplinarians. This important change has helped facilitate the teamwork atmosphere that is supportive of high quality and total customer satisfaction. The immediate response to this might be expressed as fear of this turning into a communal society. Marx said, “From each according to his ability to each according to his need.” Is this culture a possibility? Is there a danger of the new culture hurting individual initiative? The case also discusses Six Sigma. This methodology is discussed in detail later in the text. 3. Although quality is important for every product or service, it may be particularly important for the precision auto parts industry. Do you agree with this statement? Why or why not? What is the difference between a Mercedes and a Chevrolet? Functionally, they `are identical. They both have the same basic parts; however, there is a large difference in cost between the two automobiles. A Rolex watch performs the same function as a Timex. The Rolex, however, is far more expensive than the Timex. Why? In both cases, we are paying for the precision that the branding provides. In World War II, the German Tiger tanks were vastly superior to the American Sherman tanks. They were better armored, were far more reliable, and they had superior firepower. However, a Tiger tank was expensive and manufacturing them was extremely labor and time intensive. The American tanks, in spite of their inferior quality, were produced in much larger numbers. Which tank is preferable from the point of view of the crewman in the tank? Does the Division Commander perhaps have another opinion? What is the price of precision? Does the mission or use of the product or service make the price valid? Chapter 4: Strategic Quality Planning Chapter Outline •Strategy Content •Importance of Time in Quality Improvement •Leadership for Quality •Quality and Ethics •Quality as a Strategy •Quality Strategy Process •Deploying Quality (Hoshin Kanri) •Does Quality Lead to Better Business Results? •Supply Chain Strategy Overview Quality is strategic. This may seem somewhat obvious, but the actions of companies implementing quality measures often obscure this fact. This is especially true when a company is in a reactive mode and does not use effective planning. In this chapter, aspects of strategic quality planning are discussed. Strategic planning has two important dimensions: content and process. Strategic content answers the question of what is to be contained in the strategic plan. Strategy process consists of the steps used to develop the strategy. The chapter discusses quality from the perspective of strategy. One of the fundamental themes of this text is that quality improvement is a managed process. Although this may seem obvious now, a framework is needed to help achieve desired results. The chapter provides a strategic framework for this to occur. The chapter discusses various strategic issues relating to strategy content and process. Two processes are discussed: the forced-choice model and Hoshin plan. It also discusses the results associated with quality. Results are of strategic importance because they help us to determine if we have accomplished what we wanted to. Discussion Questions 1. Recently, the Malcolm Baldrige Award changed the name of the “Strategic Quality Planning” category to simply “Strategic Planning.” Why was this change made? Do you agree or disagree with the committee’s rationale? Traditionally, quality was an adjunct effort. Quality inspections were made as the product went out of the door. The philosophy expressed by Deming, Juran, and others is that strategy is integrally attached to the entire process. Strategic planning implies long-term planning. The Malcolm Baldrige Award stresses that continuous quality control is part of the entire process. Changing the name from “Strategic Quality Planning” to “Strategic Planning” emphasizes this point. It is generally understood that to ensure an organization is competitive, a strategic quality planning process is required. However, when discussing strategic quality planning (SQP), many authors describe strategic quality planning as a separate entity from the generalized strategic planning process. This creates the erroneous impression that SQP is a separate process from strategic planning. For this reason, the Malcolm Baldrige Award recently changed the name of the Strategic Quality Planning category to a simpler strategic planning. 2. A study by the U.S. General Accounting Office reported that, on average, a firm takes 3.5 years to see significant results from a quality improvement program. Why do you think it takes so long to see significant results? Please make your answer as substantive as possible. In the play Macbeth (V, v, 19) the character Macbeth says: Tomorrow, and tomorrow, and tomorrow, creeps in this petty pace from day to day to the last syllable of recorded time. Our lives are governed by time. Our lives are also governed by habit; we grow accustomed to the manner in which we function both at work and at leisure. Any change to either work or leisure is naturally resisted. In the section The Importance of Time in Quality Improvement, the length of time that it takes for implementing an effective quality program is discussed. The estimates vary from 3.5 years (US General Accounting Office) to 25 years (Shigeo Shingo). In the discussion, however, the point is made that a slower process is more effective than a rapid one. The Management by Dictate model is also discussed. In this case, management specifies a time frame and an expected level of accomplishment. On page 83, the text says: According to Donald Wheeler, a quality expert, when goals such as these are set, one of three things will occur: 1. People will achieve the goals and incur positive results. 2. People will distort the data. 3. People will distort the system. The text states that for the process to be successful, firms need to put in place a process that will allow learning to occur, and allow people to be a part of the change. Quality improvement, if it is successful, is a change in the culture of the company. On page 83, Deming said that continuous quality improvement was a “slow process that required commitment of resources and time.” 3. According to the quality literature, without top management leadership, quality improvement will not occur. Why do you believe this is the case? The text maintains that leadership equates with power. This power is defined as: •Power of expertise •Reward power •Coercive power •Referent power •Legitimate power The text also states that for the employees to feel empowered, power must be shared. This establishes an environment wherein a leader can effectively influence the organization through mutual trust. Employees also must trust that if they make recommendations for improvement, the recommendations will be taken seriously and considered for implementation by management. Nothing can damage a quality improvement effort faster than management’s failure to consider implementing changes that employees recommend. Employees may begin to think, “nothing will really change.” Quality specialists who find themselves in companies not implementing a majority of employee suggestions need to work with management to increase the percentage. This all implies that direction, in the form of strategic planning, must originate from the top. In an environment where the mutual trust has been established, the line will then follow along. 4. Explain the hazards of the “management by dictate” model. Management by dictate typically involves setting goals and insisting that the goals be met. For example, as illustrated in the chapter, a top management team might set the goals of "a 50% reduction in defects during the next year." This is a numerical goal for lower-level managers to meet. On page 85, the text’s definition of leadership is: the process by which a leader influences a group to move toward the attainment of super-ordinate goals. Achieving the goals is what management hopes for. However, the text also states that effective management involves sharing power. It is this sharing of power that makes success possible. Management by dictate infers that all power is directed downward. All management theories address the inefficiency of this attitude. 5. Trust has been identified as a very important attribute for leaders who are initiating quality improvement efforts. Why do you believe trust is such an important attribute? As quality becomes a continuing part of the line, the worker is, by default, more visible. For a genuine quality environment, an employee must feel that he is part of the solution, not the problem. An employee who feels that he is not trusted might not show the initiative to suggest methods for ongoing quality improvement. On page 86, the text states: Employees must trust that if they make recommendations for improvement, the recommendations will be taken seriously and considered for implementation by management. Nothing can damage a quality improvement effort faster than management’s failure to consider implementing changes that employees recommend. Employees may begin to think “nothing will really change.” 6. Why is commitment an important variable in quality improvement initiatives? Commitment to quality means that leaders provide funding, slack time, and resources for quality improvement efforts to be successful (page 86). This commitment is measured in decades, not quarters or budget cycles. Without a firm commitment to quality improvement, especially by businesses management, no improvement is possible. 7. Discuss some of the ways leaders resolve conflict in organizations. Which of these ways have you found to be most effective? Why? Conflict has been present in relationships as long as people have been around. While our knee-jerk reaction to conflict is that it is unhealthy, when properly managed and encouraged, conflict can help improve product or service quality. Table 4-1 identifies the set of leader skills. Phase 2: Communication deals with conflict. The point being subtly made is that negative conflict is a subset of poor communications. It is a commonly held concept that while in a conversation, most people spend more time formulating their reply than they do listening to each other. Conflict arises when two people have different ideas about a topic. If they pursue their ideas without understanding the other person’s thoughts, destructive conflict arises. It is management’s responsibility to establish an environment where all ideas are considered. 8. Do you agree with the statement “quality is good ethics”? Please explain your answer. On page 88, the following statement is made: Reliable products and low defect rates reflect an ethical approach of management’s care for its customers. This ethic is stated in the well-known mission statement of a New Bedford, Massachusetts shipbuilder: “We build good ships. At a profit if we can, at a loss if we must. But, we build good ships.” While literature is filled of examples of the destructive nature of poor ethics, the case of Enron and Arthur Andersen demonstrates the problem that arises from disregard to ethics. The statement "quality is good ethics" can be understood in different ways, but generally, it suggests that achieving high quality in work or products reflects a commitment to ethical practices. Here’s a breakdown of how this statement might be interpreted: 1. Quality Reflects Ethical Standards: High quality often involves adhering to rigorous standards and processes, which can be seen as a reflection of ethical practices. For example, producing a well-made product typically means using safe and fair labor practices, ensuring environmental sustainability, and being transparent with customers. In this sense, focusing on quality can be an ethical choice because it aligns with values like integrity, responsibility, and respect for stakeholders. 2. Ethical Implications of Quality: Good quality can also mean that a company or individual is acting ethically in terms of delivering on promises, meeting standards, and being accountable for their work. In this view, quality becomes a measure of ethical behavior because it involves respecting commitments and ensuring that products or services meet the expected standards without cutting corners or engaging in deceptive practices. 3. Quality as a Means to Ethical Ends: Sometimes, organizations pursue quality not only for its own sake but also to achieve broader ethical goals, such as ensuring consumer safety, reducing environmental impact, or promoting social responsibility. In this way, striving for quality is part of a larger ethical framework aimed at benefiting society and upholding moral values. 4. Limitations and Context: It’s important to recognize that while there is a connection between quality and ethics, they are not synonymous. High quality does not automatically guarantee ethical behavior if it is achieved through unethical means. For example, a company might produce high-quality goods but exploit workers or harm the environment in the process. Thus, while quality can be an indicator of good ethics, it is not a comprehensive measure of ethical behavior on its own. In summary, while there is a strong connection between quality and ethics, they are distinct concepts. Quality can reflect good ethics when it results from ethical practices and contributes to ethical goals, but it is not an absolute measure of ethical behavior by itself. 9. Why do companies that focus on their customers often develop a set of ethics that includes valuing employees? Please make your answer as substantive as possible. Question 9 can be formulated from page 88 of the textbook. The text goes on to state: This is reflected in education, training, health, wellness, and compensation programs that show empathy for the employees… Integrity gets down to honesty. Are we honest to our customers, employees, colleagues, family members, and ourselves? This must be the basis for business. There is not a new business model that obviates the need for integrity… It is true that companies that focus on their customers often develop a set of ethics that includes valuing employees. Perhaps this is true because a company that focuses on it customers, in effect develops a culture of focusing on people, which in the end include its customers, employees, and other stakeholders. Companies that focus on their customers often develop a set of ethics that includes valuing employees because: 1. Employee-Customer Connection: Employees are crucial in delivering excellent customer service and creating positive customer experiences. Valuing employees ensures they are motivated, well-trained, and committed to serving customers effectively. 2. Enhanced Productivity and Loyalty: Ethical treatment of employees fosters a positive work environment, leading to higher productivity, job satisfaction, and lower turnover. This, in turn, benefits customer interactions and overall service quality. 3. Reputation and Trust: Companies that value their employees build a strong reputation for ethical practices, which enhances customer trust and loyalty. Customers often prefer businesses that demonstrate fairness and respect in their treatment of staff. 4. Sustainable Success: Investing in employees through fair wages, development opportunities, and supportive policies contributes to long-term business success. Satisfied employees are more likely to stay with the company and contribute to consistent, high-quality customer service. In summary, valuing employees is integral to a customer-focused company’s ethics because it directly impacts service quality, employee retention, and overall reputation. 10. Discuss the concept of prevention cost. Why is prevention cost such a pervasive consideration in quality programs? An old nursery rhyme says: For want of a shoe the horse was lost. For want of a horse the rider was lost. For want of a rider the battle was lost. For want of a battle the kingdom was lost. And all for the want of a horseshoe nail Or as Benjamin Franklin said, “An ounce of prevention is worth a pound of cure.” Prevention costs are those costs associated with preventing defects and imperfections from occurring. Prevention costs include: •The cost of setting up, planning, and maintaining a documented quality system •Quality planning •Quality and process engineering (including preventive maintenance) •Calibration of quality related production equipment •Supplier quality assurance (including supplier assessment) •All training •Defect data analysis for corrective action purposes •Time spent on quality system audits Compare these costs with the cost of not selling your product or service. 11. Describe the difference between external and internal failure costs. Is one cost more important than the other? Explain your answer. The table and figure below illustrate the situation. They are associated with product failure after the production process. External failure costs include failure after the customer takes possession of the product. While the cost of failure may vary across circumstances, common sense says that external failure costs are the most expensive. It is always better to catch mistakes as soon as possible. The worst possible scenario is to find out that a part is defective after the customer has already started using it. The Lundvall-Juran model illustrated below is a simple economic model. It shows the difference in expenditures between internal and external expenditures. 12. What are the quality costs incurred when your hard disk crashes? The costs should be minor. The text makes the point that planning is an essential part of quality. If a company is planning properly, then backup and restore should be an integral part of the plan. With today’s technology, loss of more than a couple of hours of data is unforgivable. 13. Think of a product you buy that is differentiated through quality. Do you believe the manufacturer’s strategy to differentiate this product through quality is sustainable, or will the manufacturer eventually have to find other ways to attract you to the product? Explain your answer. The answer depends greatly upon the industry and technology. Rolex and Rolls Royce will probably never lose the generated respect of quality. However, consumer products usually do not have that luxury. On page 92, the text states, “Differentiation is achieved by a competitor if the consumer perceives the product or service to be unique in an important way.” (Note: Emphasis is the author’s.) The word perception is the key to this. Toyota and Datsun (now called Nissan) impacted the American market due to the perception of quality. In spite of the fact that American cars improve their quality, Japanese cars still sell extremely well. Consider a high-end smartphone brand known for its exceptional build quality, innovative features, and reliable performance. Differentiating through quality can be sustainable initially, as long as the manufacturer continues to uphold and advance these quality standards. However, the strategy's sustainability depends on several factors: 1. Technological Advancements: As technology evolves, competitors may introduce similar or superior quality products at competitive prices. The manufacturer will need to innovate continuously to maintain its quality edge and differentiate itself. 2. Consumer Expectations: Quality alone might not be enough if consumer preferences shift towards other attributes, such as price, eco-friendliness, or unique features. The manufacturer must stay attuned to changing consumer demands and adapt its strategy accordingly. 3. Market Saturation: In a saturated market, differentiating solely through quality may become less effective. The manufacturer may need to leverage additional strategies, such as enhancing customer service, creating a strong brand identity, or offering unique features, to remain attractive to consumers. 4. Economic Conditions: Economic downturns or changes in consumer spending habits could make high-quality, premium products less appealing if more affordable alternatives gain traction. In summary, while a strategy focused on quality can be sustainable in the short term, the manufacturer will likely need to diversify its approach to maintain its competitive edge and attract consumers over time. This could include innovations, addressing evolving consumer preferences, or integrating additional value propositions beyond just quality. 14. Describe the concept of core competency. Can quality be considered a core competency? Why or why not? Core competencies involve those competencies that remove the barriers between the various segments of the firm. They are communication, involvement, and a commitment to working across organizational boundaries. Core competencies are those skills that can blend the various activities into an efficient product. These are skills that will improve with use. The text states that while quality, by definition, is not a core competency, the importance of long-range planning and ongoing improvement provide the foundation for these skills. 15. Describe the difference between “strategy content” and “strategy process.” Describe examples of quality-related strategy content and strategy process issues. The word strategy has its roots in the military. Strategy is the set of high-level plans of action that will be used to accomplish a specified goal. Strategy content is the set of actions at which a long-range plan is aimed. The text speaks to cost, differentiation, and focus as the base generic strategies. This content is the basis for planning. Strategy process identifies those steps used to develop the strategy. Strategic content refers to what is included in a strategic plan. In contrast, strategic process consists of the steps used to formulate annual strategic plans. Examples of strategic content include: time, leadership, quality costs, generic strategies, order winners, order qualifiers, and quality as a core competency. Examples of strategic process include: forced-choice models and strategic control. Figure 4.3 illustrates the process for constructing the strategic plan. 16. Describe the benefits of strategic planning. On page 81, the text outlines the basic reasons for strategic planning: The basis for assuring quality is strategic planning that prioritizes and plans quality improvement. The question is: “If we want to achieve our goals, how are we going to get there?” Continuous quality improvement is dependent upon long-range strategic planning. Figure 4-5 illustrates the steps needed for supply chain strategic planning. The steps are: •Define •Identify •Observe •Organize •Implement •Monitor They are integral for any activity. Strategic planning offers several key benefits: 1. Clear Direction: Provides a clear vision and objectives, aligning organizational efforts towards common goals. 2. Improved Decision-Making: Helps in making informed decisions by setting priorities and evaluating alternatives. 3. Resource Allocation: Optimizes the use of resources by focusing on critical areas and avoiding waste. 4. Competitive Advantage: Identifies opportunities and threats, enabling the organization to stay ahead of competitors. 5. Enhanced Coordination: Ensures different departments and teams work cohesively towards strategic objectives. 6. Risk Management: Anticipates potential challenges and develops strategies to mitigate risks. Overall, strategic planning helps organizations achieve long-term success and adapt to changing conditions. 17. Why is the forced-choice model particularly useful for companies that are relatively inexperienced in strategic planning? Explain your answer. The forced-choice model, illustrated below in Figure 4-2, is an organized approach to strategic planning. It provides a road map for effective long range planning. The process involves sequestering six to twelve managers and having them construct the plan following the steps identified. The advantages for this are obvious. When a company embarks on an involved process for the first time, direction becomes important; without a roadmap or documented procedure, results are unpredictable at best. Using a forced-choice model provides that direction for the first few planning efforts. 18. Should the strategic planning process consider quality concerns at every step of the process? Why or why not? If you follow the traditional concept that quality is an adjunct, then the answer is obviously no. However, once you agree that quality is an ongoing process at every step in the production of the good or service, then the answer is obviously yes. Questions 10 and 11 illustrate this point. It is cheaper to address problems early in the process. If quality is an integral part of this process, overall quality will become more accomplishable. Yes, the strategic planning process should consider quality concerns at every step. Here’s why: 1. Alignment with Goals: Quality concerns ensure that the organization's objectives and strategies align with high standards, leading to better outcomes and customer satisfaction. 2. Risk Management: Addressing quality at each step helps identify potential issues early, reducing risks associated with subpar products or services. 3. Resource Efficiency: Integrating quality considerations helps in optimizing resource use, avoiding waste, and ensuring that investments yield the best results. 4. Competitive Advantage: Maintaining high quality can differentiate the organization from competitors, enhancing its market position and reputation. 5. Continuous Improvement: Regular focus on quality supports a culture of continuous improvement, ensuring that strategies evolve based on performance and feedback. Incorporating quality concerns throughout the strategic planning process helps ensure that the organization delivers on its promises, maintains customer trust, and achieves long-term success. 19. Describe the concept of catchball. Catchball is a process taken from the Japanese “Hoshin Kanri” school of management. In English, this is referred to as policy deployment. The term catchball refers to those steps that occur as control is passed between levels of management where plans are reviewed and discussed before the next lower level of management takes control of the process. Catchball refers to the interactive nature of these interfaces. 20. Juran argues that both incremental (continuous) improvements and stepwise (breakthrough) improvements are needed in a strategic framework. Do you agree with Juran’s assessment? Why or why not? Actually, continuous and breakthrough improvements are somewhat different. The focus of the book is an emphasis on continuous improvement. Continuous improvement implies making quality an integral part of the entire process. As a side effect of this action, the employee is empowered and will feel a part of the system. As the employee feels comfortable in his or her role, the employee will be willing to take risks and both identify and recommend stepwise or breakthrough improvements. However, the reverse is most probably not true. Most students will agree with Juran's argument: firms should simultaneously seek incremental improvements and stepwise improvements. It is entirely appropriate to plan for both types of improvement in a strategic framework. The enabler is the environment that a continuous improvement process creates. Case 4-1: Ames Rubber Corporation: Realizing Multiple Benefits through Improved Quality 1. In developing its Excellence through Quality program, Ames initially benchmarked against Xerox. Is benchmarking against another company’s quality program a good idea? What are the potential hazards and benefits involved? In general, benchmarking is a good idea. It helps a firm emulate the practices of a company that is very good at a particular activity (like quality), and as a result, helps a firm avoid "reinventing the wheel" every time it wants to launch a new initiative. The downside of benchmarking is that no two firms are exactly alike. As a result, it is naïve for one firm to think that it can exactly copy the practices of another firm. A firm needs to learn what it can from a benchmarking experience, and then incorporate what it learns into its own corporate culture. (Note: Of course, sometimes what a firm learns is that it needs to change its culture.) 2. Discuss the manner in which Ames implemented its Excellence through Quality program. Did the company place its emphasis in the right areas? Please explain your answer. The company did an excellent job implementing its Excellence Through Quality program. The emphasis of its initiatives seemed to be equally split on systems issues (e.g., reject tracking, cost of quality collection systems, strategy and operations review meetings) and human resource management issues (e.g., involvement groups, teamwork, training, egalitarian culture). As discussed in previous chapters, this is the ideal combination. To improve quality effectively, a firm must improve its quality-related systems, and must provide its employees the skills and level of motivation necessary to implement the quality improvement program. 3. Discuss the benefits that Ames Rubber achieved from its quality program. Are these benefits more encompassing than you would have expected? Why or why not? Most students will be impressed with what Ames Rubber has accomplished, and will argue that the benefits have been more encompassing than they would have expected. The benefits are clearly articulated towards the end of the case. Particularly impressive is Ames' successful run for the 1993 Malcolm Baldrige National Quality Award. The approach that Ames took to upgrade its quality serves is an excellent model for other firms. Ames Rubber’s quality program yielded several significant benefits, which might be more encompassing than initially anticipated: 1. Enhanced Product Reliability: The program improved the consistency and performance of their products, leading to higher customer satisfaction and fewer returns. 2. Operational Efficiency: By focusing on quality, Ames Rubber streamlined production processes, reduced waste, and minimized defects, resulting in cost savings and more efficient operations. 3. Increased Market Share: The company’s reputation for high-quality products helped them capture a larger share of the market and attract new customers. 4. Employee Morale and Engagement: The emphasis on quality fostered a culture of pride and involvement among employees, which enhanced job satisfaction and productivity. 5. Compliance and Risk Management: Improved quality control helped Ames Rubber meet industry standards and regulatory requirements, reducing the risk of compliance issues and legal disputes. These benefits might be more encompassing than expected because a quality program typically impacts not just product quality but also broader business areas like customer relationships, financial performance, and organizational culture. The holistic improvements seen in these areas demonstrate that quality initiatives can have widespread and profound effects beyond immediate product enhancements. Case 4-2: MidwayUSA 1. How does MidwayUSA engage the customer in its focus on quality? The company's focus on quality resulted in a customer retention rate of 98% in 2009. In addition, the company provides customers multiple opportunities to give feedback, through the complaint center, by conducting surveys, and allowing customers to submit reviews of items and suggest new product lines. 2. MidwayUSA has incorporated quality and customer focus into its culture. How does MidwayUSA ensure employees support the culture? Also, how do employees contribute to quality customer service? By adopting the Baldrige Core Values and Concepts and making them an integral part of the company’s culture, MidwayUSA has shown its employees that they are serious about quality and customer focus. They have posted these values and concepts throughout the company. In addition, they encourage their employees to interact with the customers and offer personal insight and knowledge about products. They encourage the workforce to join the National Rifle Association and to participate in hunting and shooting events. This passion and level of interaction has contributed to a customer satisfaction rating of 93%. 3. MidwayUSA wants to be the best-run company in America. Is this a useful vision statement? Are there benefits to this vision Instead of being the best-run company in the industry? Although a very broad vision statement, MidwayUSA has set a goal to be the best and has involved its workforce in helping them achieve this vision. The employees can engage in the appropriate activities to help MidwayUSA obtain its vision, and can see the results via regular reviews of the company’s performance and results. There are definite benefits to being the best run company in America instead of in the industry. Being the best run company in the industry may mean that MidwayUSA is the top dog in its industry, but when compared to other companies, they may find that they are way down the list. Striving to be the best company in America is a definite worthwhile goal, but why stop there? Why not compare themselves to the overall global economy, not just America? Are there benefits to this? Yes. 4. Effective quality and strategic planning are not a onetime event. In looking at MidwayUSA and other companies, what can companies do to make these a continual process? On the MidwayUSA website (http://www.midwayusa.com/General.mvc/Index/AboutUs), the company states: “You see, as a company grows, it's important to formalize the planning, processes, systems, training and communications; and to develop a great team of leaders throughout the organization. This is the hardest part of running a business and they don't teach it much in business school. From the time we began to formally state our goals, Customer Satisfaction has always been #1; and at the current 93% level, it’s the highest we’ve ever recorded. There aren't many companies in our industry that measure Customer Satisfaction, so we benchmark with the best catalog/internet companies in America and I am pleased to say we are right there with them. Great Customer Satisfaction is no accident; it's the result of planned and methodical execution of all things important – of listening to Customers and of continuously improving. At MidwayUSA, we became ISO 9000 registered in 2008, adopted the Malcolm Baldrige National Quality Award Criteria in 2006 and set a goal to apply for and improve enough to receive the award in 2009. We applied for and received the Missouri Quality Award (a Baldrige-criteria state program) in 2008, and applied for and received the Malcolm Baldrige National Quality Award in 2009, meeting the goal we set in 2006. Those of you in management, engineering or operations know the significance of ISO and Baldrige to Customer Satisfaction.” They have adopted quality and strategic planning as an integral everyday part of running their business. They have found the solution and more companies should adopt this approach. Suggested Answers to End of Chapter Problems 1. The Colorado Manufacturing Company of Boulder, CO has gathered the following quality-related costs. You are hired as a consultant to evaluate these costs and to make recommendations to management. a. Compute the ratio of prevention and appraisal costs to failure costs: Ratio of Prevention to Failure Cost = 212,724 / 2,500,604 = .0851 Ratio of Appraisal to Failure Cost = 42703 / 2,500,604 = .0171 Ratio of Prevention and Appraisal to Failure Cost = 255,427/2,500,604 = .102 b. What would you recommend that this company do? This analysis indicates that failure costs are high as compared to both appraisal and prevention. Appraisal costs are particularly low. The student may even notice that over half of the appraisal costs are associated with Receiving Inspection versus Line Inspection and Spot check. Obviously, Colorado Manufacturing needs to increase its activities (and costs) relating to prevention and appraisal costs in order to reduce failure costs. 2. The Aggie Remanufacturing Company of College Station, TX has gathered the Following quality-related costs data: a. Compute the ratio of prevention and appraisal costs to failure costs. P / F = 212,724 / 75,276 = 2.8259 A / F = 36,601 / 75,276 = .4862 P&A/F = 249,325/75,276 = 3.3121 b. What would you recommend that this company do? As compared to the Lundvall Juran model, the cost of prevention and appraisal are excessive compared to failure costs, and perhaps Aggie Remanufacturing has passed the point of diminished marginal returns. In addition, the student may notice the costs associated with process engineering prevention costs at corporate. 3. The Gorilla Manufacturing Company of Pittsburgh, Kansas recently studied its expenditures and losses relative to quality for the month of October. They found that they had lost $300,000 in scrap and rework. They had spent $40,000 for inspection and $25,000 in prevention-related activities. Evaluate their cost ratios and suggest whether or not the expenditures are warranted. P/F = .083 A/F = .1333 P&A/F = .2163 They are spending $65,000 and are still incurring $300,000 in loss. This brings up more questions. How much are they saving? We really can’t tell if these expenditures are warranted until the company does more research to see how much they are saving. Recommend to management that they do this study. Only then can they determine if they should invest more in quality-related activities. This question is written to help you discuss the managerial implications of the costs of quality. To evaluate Gorilla Manufacturing Company’s cost ratios: 1. Cost of Quality Breakdown: • Total Costs: $300,000 (scrap and rework) + $40,000 (inspection) + $25,000 (prevention) = $365,000 • Cost of Non-Conformance: $300,000 (scrap and rework) • Cost of Conformance: $40,000 (inspection) + $25,000 (prevention) = $65,000 2. Ratios: • Cost of Non-Conformance: $300,000 / $365,000 = 82.2% • Cost of Conformance: $65,000 / $365,000 = 17.8% 3. Evaluation: • The high percentage of costs attributed to non-conformance (82.2%) suggests significant losses from quality issues. The cost of conformance (17.8%) is relatively low compared to the losses incurred. Suggestion: Increasing investment in prevention and inspection could help reduce the high costs of scrap and rework. A shift towards more proactive quality management could result in long-term cost savings and improved product quality. 4. The Buffalo Machine Works of Boulder, CO was evaluating its cost structure relating to quality costs. In the prior year, the company had lost $500,000 in warrantee and scrap. They didn’t have good numbers for rework costs. In the prior year, they had spent $100,000 training employees in quality tools and $200,000 for quality assurance personnel. Inspection costs were 2% of sales of $50,000,000. Evaluate these costs and recommend what actions should be taken to upper management. This question is designed to allow you to discuss managerial issues relative to the cost of quality. Research shows that companies lose conservatively about 20% of sales in quality-related costs. If we use that number, this company should expect to lose $10 million in quality-related costs, presuming rework costs are negligible. That they only lost $500,000 shows that their quality expenditures may have been effective. Their ratios are as follows: P/F = 300/500 = .6. A/F = 1,000/500 = 2.00 P&A/F = 1,300/500 = 2.60 It may be hard to justify additional expenditures given the lower marginal returns. Solution Manual for Managing Quality: Integrating the Supply Chain Thomas S. Foster 9780133798258