1. Total Quality Management (Stakeholders) Customers- satisfaction Employee involvement Supplier Partnerships

2. Employee involvement Is an approach to improving quality and productivity by involving employees in the quality management process so as to enable the organization to better meet its goals for quality and productivity at all levels. Motivation Recognition & Reward Empowerment Performance appraisals Teams Employee Surveys

3. Motivation According to Abraham Maslow, who developed one of the most popular motivational theories, there is a hierarchy of needs with five levels that need to be satisfied for one to be motivated i.e. Survival Security Social Esteem Self actualization

4. Herzberg’s Two-Factor Theory Herzberg found that people were motivated by recognition, responsibility, achievement, advancement and the work itself. These factors were labelled motivators. In addition, bad feelings were associated with low salary, minimal fringe benefits, poor working conditions, ill-defined organisational policies and mediocre technical supervision. These were labelled dissatisfiers.

5. Cont Dissatisfies are extrinsic and motivators are intrinsic. The presence of extrinsic conditions does not necessarily motivate employees, but their absence results in dissatisfaction. Absence of motivating factors does not make employees dissatisfied, but when they are present, they provide strong levels of motivation that result in good job performance for the individual and organisation

6. Achieving a Motivated Workforce Know thyself. Managers must understand their own motivations, strengths and weaknesses. This understanding can best be obtained by having peers and employees anonymously appraise the manager’s performance. Motivating managers know that the most valuable resource is people and that their success largely depends on employees achieving their goals.

7. Know your employees. Most people like to talk about themselves; therefore, the motivating manager will ask questions and listen to answers. With a knowledge of the employees’ interests, the manager can help achieve them within the business context. As the manager learns more about the employee, he/she can assist the employee in directing their efforts toward satisfying their goals and well- being.

8. Establish a positive attitude. Managers are responsible for generating attitudes that lead to positive actions. Feedback should, for the most part (say, 87%), be positive and constructive. Respect and sensitivity toward others is essential to the development of positive attitudes. Managers should treat ideas and suggestions as priceless treasures and implement them immediately whenever possible Share the goals. A motivated work force needs well-defined goals that address both individual and organisational needs.

9. 5. Monitor progress. The process of goal setting should include a road map detailing the journey with periodic milestones and individual assignments. Managers should periodically review performance. 6. Develop interesting work. Managers should consider altering the employees’ assignments by means of job rotation, job enlargement, and job enrichment. Job rotation permits employees to switch jobs within a work unit for a prescribed period of time.

10. Job enlargement combines tasks horizontally so that an employee performs a number of jobs sequentially. The employee is responsible for a greater portion of the product or service. Job enrichment combines tasks vertically by adding managerial elements such as planning, budgeting and scheduling. This contributes to the employees’ sense of autonomy and control over their work.

11. 7. Communicate effectively. Effective communication provides employees with knowledge about their work unit and the organisation rather than ‘grapevine’ information. 8. Celebrate success. Recognising employee achievements is the most powerful tool in the manager’s toolbox.

12. Creating a system that recognizes and rewards employees’ achievements Establishing efficient communication channels Managers periodically reviewing employees’ performance

13. Recognition &Reward Recognition is a form of employee motivation in which the organization publicly acknowledges the positive contribution an individual or team has made to the success of the organization. Reward is something tangible such as theatre tickets, dinner for two, or a cash award to promote desirable behaviour. Recognition and reward go together to form a system for letting people know they are valuable members of the organization.

14. Cont: Recognition and reward Employees should be involved in planning and implementation of the recognition and reward program. The system should be reviewed periodically. The system that is developed must have clear recognition criteria. The system should be structured to avoid ranking individuals. Recognition should be valid, genuine, and meaningful to the recipient; it should not be used to manipulate people.

15. Cont: Recognition & Reward Rewards should be appropriate to the improvement level-the greater the improvement, the greater the reward. Supervisors can also informally use the power of recognition by giving on-the-spot praise for a job well done whenever it is earned.

16. Empowerment “Empowerment is an environment in which people have the ability, the confidence and the commitment to take the responsibility and ownership to improve the process and initiate the necessary steps to satisfy customer requirements within well defined boundaries in order to achieve organizational values and goals.”

17. Empowerment is an environment in which people are capable, have the confidence, and the commitment to take the responsibility and ownership to improve the process and initiate the necessary steps to satisfy customer requirements within well-defined boundaries in order to achieve organizational values and goals. Employee empowerment requires that the individual is held responsible for accomplishing a whole task. The employee becomes the process owner— thus, the individual is not only responsible but also accountable

18. Cont; Three factors are necessary for empowerment to be achieved; The need for change must be clearly understood by all. The system needs to change to the new paradigm The organization must enable its employees

19. Deming Five of Deming’s 14 points relate directly to the notion of empowerment: Point 6: Institute training Point 7: Teach and institute leadership Point 8: Drive out fear, create trust and create a climate for innovation Point 10: Eliminate exhortations for the workforce Point 13: Encourage education and self- improvement for everyone

20. TEAMS A team is a group of people working together to achieve common objectives or goals. Teamwork is the cumulative action of a team during which each member of the team subordinates his individual interests and opinions to fulfill the objectives or goals of the team.

21. CHARACTERISTICS OF SUCCESSFUL TEAMS Sponsor Team charter Team composition Training Ground rules Clear objectives Accountability Well defined decision procedures Resources Trust Effective problem solving Open communication Appropriate leadership Balanced participation Cohesiveness

22. Fundamental Elements Of A Team Mission Commitment Norms/ground rules An effective process Plan, do, check & act Interdependence Tasks vs Process

23. Types of teams Process improvement teams Cross functional teams Natural work teams Self managed teams

24. Decision making methods in teams Non decision Unilateral decision Hand clasp decision Minority rule decision Majority rule decision Consensus

25. STAGES OF TEAM DEVELOPMENT Knowing a team’s location in a cycle helps management understand team performance and avoid setting unrealistic objectives that limit a team’s success. The stages are as follows Forming Storming Norming Perfoming Adjourning

26. Common barriers to team progress insufficient training incompatible reward and compensation first-line supervisor resistance lack of planning lack of management support project scope being too large project objective are not significant no clear measures of success no time to do improvement work too many people in a team no action can be taken till everyone agrees with every decision

27. Performance Appraisal The purpose of performance appraisals is to give feedback to employees, provide a basis for promotions, salary increases, counseling, and other purposes related to an employee’s future. Employees should be made aware of the appraisal process, what is evaluated, how it is done and how often. Feedback should be given on a continuous basis, not just at appraisal time. A key factor in a successful performance appraisal is employee involvement. An employee should be given the opportunity to comment on the evaluation, including protesting, if desired. Performance must be based on standards that are developed and agreed upon by the appraiser and employee

28. Criticisms of Traditional Performance Appraisal System 1. Appraisals nourish short-term performance and undermine long-term planning. Long-term gains are sacrificed by making the individual look good in the short term. This outlook is especially prevalent when quarterly profits are emphasised. 2. Individual appraisals undermines teamwork. The end result is a team that performs poorer, not better.

29. 3. The assumption that an individual is responsible for all results. In reality, the results are frequently beyond an individual’s control, such as processes and equipment. Deming has stated that 85% of the problems are the result of the system. 4. Traditional performance appraisals tend to foster mediocrity and discourage risk taking

30. 5. There is a concern that appraisals are frequently based on subjectivity and immeasurable targets. They should be based on objectivity; however, it is difficult to measure some attributes such as teamwork, integrity. 6. They tend to be unfair because managers frequently do not possess observational accuracy

31. Possible Improvements to Performance Appraisal Systems 1. Use rating scales that have few rating categories. 2. Require work team or group evaluations that are at least equal in emphasis to individual- focused evaluations. 3. Require more frequent performance reviews where such reviews will have a dominant emphasis on performance improvement and future performance planning

32. 4. Promotion decisions should be made by an independent administrative process that draws on current job information and potential for the new job. 5. Include indexes of external customer satisfaction in the appraisal process. 6. Use peer and subordinate feedback as an index of internal customer satisfaction. 7. Include evaluation for process improvement in addition to results.

33. Employee surveys It is very important for managers to survey their employees when carrying out or intending to carry out the process of employee involvement this helps them know and understand what the employees currently feel is their level of involvement.

34. Steps in carrying out employee surveys Create a multifunctional team with the responsibilities of determining objectives. Using both internal and external know how the multifunctional team develops the instrument s to be used in the survey. The survey is then carried out Compilation and analysis of the questionnaires is then done and a report. Finally the areas of improvement are determined.

35. BENEFITS OF EMPLOYEE INVOLVEMENT Increased employee morale. Reduced operating costs, especially in relation to HR recruitment and crisis management. Increases job satisfaction and workforce retention rates. It creates a harmonial environment. Employees make better decision using their expert knowledge of the process. Employees are more likely to implement and support decision they had a part in making.

36. Cont; Employees are better able to spot and pinpoint areas for improvement. Employees are better able to take immediate corrective action. Employee involvement reduces labour/management friction by encouraging more effective communication and cooperation. Employees are better able to accept change because they control the work environment. Employees have an increased commitment to unit goals because they are involved.

37. Examples of some questions on Employee Involvement Define Job enrichment Job enlargement Empowerment Give 2 advantages and disadvantages of employee surveys. Discuss employee empowerment and the changing African workforce. The philosophy of total quality management involves empowerment and teamwork concept. Explain the meaning and importance of this concept and how it applies to total quality management? Mr. Opiyo has been appointed by the CEO of City Manufacturers to lead a team of 10 in developing a new product. Giving examples, what five areas internal to the team and five areas external to the team should he take into consideration to ensure the team operates effectively? Define what a quality team is and explain five pre requisites of establishing a successful team?

38. SUPPLIER PARTNERSHIPS What is Supplier Partnerships

39. PARTNERING  Long-term commitment  Trust  Shared Vision SOURCING SUPPLIER SELECTION PRINCIPLES OF CUSTOMER/SUPPLIER RELATIONS SUPPLIER CERTIFICATION SUPPLIER RATING RELATIONSHIP DEVELOPMENT  Inspection  Training  Team Approach  Recognition and Award

40. INTRODUCTION Organization and suppliers have the same goal – to satisfy the end user.  Working with supplier in a partnering atmosphere will yield high quality product and services.  In the 1980s procurement decisions were based on price, awarding contracts to the lowest bidder, sacrificing the quality and timely delivery  Deming suggested that long term relationship of loyalty and trust should be developed with the supplier to ensure improved products & services.  Just-in-Time (JIT) concept calls for raw materials and components to be delivered in small quantities only when they are required and not before.

41. PARTNERING Partnering is a long-term commitment between two or more organizations for the purpose of achieving specific business goals & objectives.  The relationship is based upon trust, dedication to common goals and objectives.  Benefits include: oImproved Quality, oIncreased efficiency, oLower cost, oIncreased opportunity for innovation, & oContinuous improvement of products and services  The three key elements of partnering are: o Long-term commitment. oTrust. oShared vision.

42. Long-term commitment  Long-term commitment provides the needed environment for both parties to work toward continuous improvement.  Total organization involvement is necessary, CEO to the workers.  Each party contributes its unique strengths to the process.  A supplier may only take risks in a long-term commitment.  Dependency appears as a national consequence in a long term commitment, it is not a sign of weakness, but a sign of strength of the relationship and is necessary for competitive advantage.

43. Trust  The strength of Partnering is based on fairness and parity.  Trust enables the resources and knowledge of each partner to be combined to eliminate an adversarial relationship.  Mutual trust forms the basis for a strong working relationship.  Open and frequent communication avoids misdirection, disputes and strengthens the relationship.  The parties may share or integrate resources such as training activities, administrative systems and equipment.

44. Shared Vision  Each of the partnering organizations must understand the need to satisfy the final customer.  There should be an open and candid exchange of needs and expectations.  Shared objectives and goals ensure a common direction aligned with each parties’ mission.  Partners must understand each other’s business so that equitable decisions are made.  These decisions must be formulated and implemented as a team.

45. SOURCING There are three types of sourcing:  Sole sourcing o Organization is forced to use only one supplier. o Technical specifications, patents, raw material location, etc. cause this kind of sourcing. o Partnering is a natural consequence, to benefit the end user.  Multiple sourcing o Two or more suppliers for an item are used. o Competition will result in better quality, lower costs and better service. o It eliminates disruption of supply due to strikes etc.

46. SOURCING cont’d...  Single sourcing o A planned decision by the organization to select one supplier for an item when several sources are available. o Advantages for the organizations include reduced cost, complete accountability, supplier loyalty, partnering and a better end product with less variability. o Advantages for the supplier include new business from the customer, reduced cost of the business and production processes. o It has allowed organization to reduce their supplier base.

47. SUPPLIER SELECTION Following are the conditions for the selection and evaluation of suppliers: 1. Supplier knows management policy of the organization. 2. Stable management system of supplier, respected by others. 3. Supplier has the capability of dealing with technological innovations. 4. Supplier can supply material meeting quality specifications. 5. Supplier has capability to meet the amount of production. 6. Supplier can breach corporate secrets.

48. SUPPLIER SELECTION cont’d…. 7.The supplier is easily accessible in terms of transpiration and communication. 8.The supplier is sincere in implementing the contract provisions. 9.The supplier has an effective quality system and improvement program. 10.The supplier has a track record of customer satisfaction and organization credibility. These conditions go beyond evaluating a supplier on the basis of quality, price and delivery.

49. PRINCIPLES OF CUSTOMER/SUPPLIER RELATIONS Dr. Kaoru Ishikawa has suggested ten principles: 1. Customer and supplier are fully responsible for Quality control. 2. Customer and supplier should respect each others independence. 3. Supplier is entitled to complete information from the customer. 4. Non-adversarial contract between customer and supplier is needed for quality, quantity, price, delivery method & payments. 5. Supplier should provide quality to meet customers satisfaction.

50. PRINCIPLES OF CUSTOMER/SUPPLIER RELATIONS 6. Product quality evaluation methods should be decided by the mutual consent of both the parties. 7. Amicable settlement of disputes between customer and supplier should be established in the contract. 8. Continuous information exchange will improve the product or service quality. 9. To maintain an amicable relationship, both the parties should do procurement, production, and inventory planning. 10. Best interest of the end user should be considered while doing business transactions.

51. SUPPLIER CERTIFICATION ASQC has developed the following certification criteria: 1. Customer and supplier shall have agreed on specifications which are mutually developed, justifiable, and not ambiguous. 2. Supplier shall have no product-related lot rejection for a significant period of time. 3. Supplier shall have no non-product related rejections for a stated period of time. 4. Supplier shall have no negative non-product related incidents for a stated period of time. 5. Supplier shall have a fully documented quality system. (ISO 9000)

52. SUPPLIER CERTIFICATION 6. Supplier shall have successfully passed an on- site system evaluation. 7. Supplier must make inspections and tests. (Laboratory results & SPC are used) 8. Supplier shall have the ability to timely provide inspection and test data. Occasionally it may be necessary to decertify a supplier as a result of a major problem. Benefits of certification include customer/supplier partnership, direct shipment to stock and reduction of supplier numbers to a manageable level.

53. SUPPLIER RATING Supplier rating system is based on quality, delivery and other added services. The objectives of a rating system are: o To obtain an overall rating of supplier performance. o To ensure communication with suppliers in the areas of quality, service, delivery and other desired measures. o To provide supplier with a detailed and factual record of problems for corrective action. o To enhance the relationship between the customer and the supplier.

54. RELATIONSHIP DEVELOPMENT All the previously discussed issues contribute to the development of the relationship. It includes: 1. Inspection The goal is to eliminate or automate the inspection process. It has four phases: o 100% inspection, o Sampling, o Audit, and o Identity check.

55. RELATIONSHIP DEVELOPMENT 2. Training All personnel should receive quality awareness and problem solving, technical and safety training.  Team approach Customer/supplier teams are established in areas such as product design, process design and quality system. 4. Recognition and Award Incentives/recognition in the form of newsletters, letter of accommodation, ensures that suppliers remain committed to a quality improvement strategy.

56. Sample of examination questions: Mr. Musyoka assembles computers and gets his supplies from Computer Technologies Limited (CTL). In order for the relationship between Mr. Musyoka and his supplier to result in delivery of high quality products, a true partnering relationship must occur. (i) What is meant by a partnering relationship? (ii) Explain three key elements that are instrumental to a successful partnering relationship.

57. Cont… 2. (a) You have been hired to conduct an inspection of a manufacturing plant that appears to have multiple problems that are resulting in high levels of customer dissatisfaction. Giving examples in each case discuss five categories of problems you might identify in the plant. (b) Explain five benefits that could be realised by implementing an ISO quality system

58. Cont… 3. You have been employed as a quality assurance manager for a small manufacturing firm. Your first assignment is to certify the suppliers. Make a checklist of the certification criteria you will use.

59. BENCHMARKING DEFINITION Reasons to Benchmark Steps Types Criticisms and pitfalls

60. DEFINITION Benchmarking – a systematic method by which organizations can measure themselves against the best industry practices. Benchmarking is the systematic search for best practices, innovative ideas, and highly effective operating procedures.

61. It promotes superior performance by providing an organized framework through which organizations learn how the “best in class” do things, understand how these best practices differ from their own, and implement changes to close the gap. The essence of benchmarking is to borrow ideas and adapt them to gain competitive advantage. It is a tool for continuous improvement.

62. Benchmarking Concept

63. The definition of benchmarking has two elements. 1.Measuring performance requires some units of measure. These are called metrics and are usually expressed numerically. The numbers achieved by the best-in-class benchmark are the target. An organization seeking improvement then plots its own performance against the target. 2. Benchmarking requires that managers understand why their performance differs.

64. Reasons to Benchmark To achieve business and competitive objectives: Benchmarking is a tool to achieve business and competitive objectives. Organizations must decide which markets to serve and determine the strengths that will enable them to gain competitive advantage. Benchmarking is one tool to help organizations develop those strengths and reduce weaknesses

65. Cont To be aware of the competition: An external outlook greatly reduces the chance of being caught unaware by competition. Benchmarking can notify the organization if it has fallen behind the competition or failed to take advantage of important operating improvements developed elsewhere. Benchmarking can inspire managers (and organizations) to compete.

66. Cont To allow goals to be set objectively based on external information: In contrast to extrapolating next year’s goal from last year’s performance, benchmarking allows goals to be set objectively, based on external information. With external information, managers are more motivated to attain the goals and objectives. It is also hard to argue that an objective is impossible when other organizations have achieved it.

67. Cont To be able to imitate and adapt based on the experience of others: Benchmarking is time and cost efficient because the process involves imitation and adaptation rather than pure invention. Benchmarking partners provide a working model of an improved process, which reduces some of the planning, testing and prototyping effort.

68. Allows for innovation: For functions that are critical to the business mission, organizations must continue to innovate as well as imitate. Benchmarking enhances innovation by requiring organizations to constantly scan the external environment and to use the information obtained to improve the process.

69. Organizations that benchmark, adapt the process to best fit their own needs and culture. The following six steps contain the core steps: 1. Decide what to benchmark. 2. Understand current performance. 3. Plan. 4. Study others. 5. Learn from the data. 6. Use the findings.

70. 1. Deciding What to Benchmark Most organizations have a strategy – vision and mission statements – that define how the firm wants to position itself and compete in the marketplace. Supporting these statements is a set of critical activities, which the organization must do successfully to realize its vision. They are often referred to as critical success factors (CSFs).

71. When deciding what to benchmark, it is best to begin by thinking about the mission and CSFs. Critical success factors are those product/ service features that are particularly valued by a group of customers and, therefore, where the organisation must excel to outperform competition. E.g., performance of a product.

72. High impact areas to benchmark: 1. Processes that are causing the most trouble. 2. Processes that contribute most to customer satisfaction and which are not performing up to expectations. 3. Processes or functions that have the most potential for differentiating the organization from the competition.

73. In order to limit the scope of a study and thereby limit the time it takes to conduct the study, it is best to choose a broad and shallow scope or a narrow and deep scope. Broad and shallow studies ask, “What is done?” and may span many functions and people and do not go into detail in any one area. Broad and shallow studies are useful in developing strategies and setting goals.

74. Narrow and deep studies ask, “How is it done?” and delve into a few aspects of a process or function. Narrow and deep studies are useful in changing how people perform their jobs. Either way, it is often effective to start with the process output and trace back to the inputs, asking what, how, where, when, and why questions along the way.

75. 2. Understanding Current Performance To compare practices to outside benchmarks, it is first necessary to thoroughly understand and document the current process. It is essential that the organization’s performance is well understood. The benchmarking team should be comprised of those who own or work in the process to ensure suggested changes are actually implemented

76. When documenting the process, it is important to quantify it. Units of measure must be determined. These are the key metrics that will be compared during the benchmarking investigation. Common examples include unit costs, hourly rates and quality measures.

77. 3. Planning Choose a team: The team should decide what type of benchmarking to perform, what type of data to be collected, and the method of collection. Identify organisations for benchmarking: Organizations that are candidates for benchmarking need to be identified. Set timetable for action: A timetable should be agreed upon for each of the benchmarking tasks and the desired output from the study.

78. Types of benchmarking There are three main types of benchmarking: internal, competitive, and process. 1.Internal benchmarking: In most large firms, similar activities are performed in different operating divisions, and a firm may train personnel in one division to copy the work and social habits of the best performers. Some of these habits may be as simple as managing work in-baskets, managing customer feedback, and managing departmental meetings.

79. Internal comparisons have several advantages: Data are easy to obtain because problems of confidentiality don’t exist. Dialogue with internal groups generates immediate improvement ideas or defines common problems to be addressed.

80. Disadvantages If the overall firm is under-performing, this benchmarking may not offer any improvements that can lead to competitive advantages. Internal conflicts may arise owing to internal competition and departments may be unwilling to learn from each other.

81. 2. Competitive benchmarking: Product competitors are an obvious choice to benchmark. In most cases, products and processes are directly comparable. Some competitors do share information, e.g., mortgage bankers compare their product types, service fees, and interest rates. On the other hand, some organizations would never share proprietary information.

82. However, there are several ways to obtain data, such as public sources, customers, etc. A firm could also buy a competitor’s product and take apart to see key components. An organization may also observe both its products and its competitor’s products in use at the customer’s location and collect comparative data. NB: whatever method is used, it must be ethical.

83. 3. Process benchmarking /Universal Benchmarking/ Generic benchmarking. The idea is that many processes are common across industry boundaries, and innovations from other types of organizations can be applied across industries. For example, every industry has payroll and accounts receivable functions. All kinds of organizations design new products and have logistics functions.

84. Process benchmarking has several advantages. Compared with competitive benchmarking: It is easier to get organizations to share information. It is relatively easy to find organizations with world-class operations through published information and through discussions with suppliers and consultants. However, care should be taken to pick firms that are comparable.

85. 4. Studying Others Benchmarking studies look for two types of information: A description of how best-in-class processes are practiced; and Measurable results of these practices.

86. Techniques for conducting original research: 1. Questionnaires: Questionnaires are particularly useful to ensure respondent anonymity and confidentiality, when data are desired from many external organizations, and when using a third party to collect information. Questionnaires can be developed as preparation for a site visit, as a checklist during a site visit, or as a follow-up device.

87. 2. Site visits Site visits provide the opportunity to see processes in action and for face-toface contact with best-in-class operators. Any relevant available information should be acquired before the visit so as to make it as fruitful as possible. As soon as possible following the trip, the visiting team should hold a debriefing to document the findings and determine follow- up activities.

88. 3. Focus groups Focus groups are simply panels of benchmarking partners brought together to discuss areas of mutual interest. Panels can be comprised of customers, suppliers or members of a relevant professional organization.

89. 5. Learning from the Data Is there a gap between the organization’s performance and the performance of the best-in-class organizations? What is the gap? How much is it? Why is there a gap? What does the best-in class do differently that is better? If best-in-class practices were adopted, what would be the resulting improvement?

90. Benchmarking studies can reveal three different outcomes: A negative gap: External processes may be significantly better than internal processes. Negative gaps call for a major improvement effort.

91. Parity: Process performance may be approximately equal. Parity requires further investigation to determine if improvement opportunities exist. It may be that when the process is broken down into sub-processes, some aspects are superior and represent significant improvement opportunities.

92. Positive gap: The internal process may be better than that found in external organizations. The finding of a positive gap should result in recognition for the internal process. Being the best-in-class should also spur the organization to continually improve to ensure they retain that position.

93. Two ways to prove that one practice is superior to another: Using figures: Summary measures and ratios, such as activity costs, defect rates, or customer satisfaction levels, can be calculated and compared. Through market analysis. Does the market prefer one process over others? If so, it can be judged superior. E.g., how many more customers would we have if we delivered in 24 hours instead of five days?

94. When learning from the data it is important to remember that: Not all operations in the process may represent best- in-class. One reason is that when a process is broken down to its component steps, a single external operation may not be the best in all sub processes. Numbers may come from several organizations and then be combined to arrive at a combined best-in class projection

95. Situational differences must be considered: Even if a single best-in-class benchmark exists, there will almost certainly be enough situational differences to require adjustments in the measures. These include differences in industry, operation size and scale and geographic reach. In many cases, it is appropriate that metrics be expressed as percentages rather than absolute figures.

96. When best-in-class processes have been described and quantified, additional analysis is necessary to determine the root causes of the gaps in the organization that collected the data

97. 6. Using the Findings When a benchmarking study reveals a negative gap in performance, the objective is to change the process to close the gap. To effect change, the findings must be communicated to the people within the organization who can enable improvement. The findings must translate to goals and objectives, and action plans must be developed to implement new processes.

98. Two groups must agree on the change. Process Owners: this group consists of the people who will run the process, Senior management: this group consists of those who will enable the process by incorporating changes into the planning process and providing the necessary resources.

99. Steps for the development and execution of action plans are: 1. Specify tasks. 2. Sequence tasks. 3. Determine resource needs. 4. Establish task schedule. 5. Assign responsibility for each task. 6. Describe expected results. 7. Specify methods for monitoring results. 8. Execute the plan

100. Because benchmarking is a tool for continuous improvement, it is not to be done once to create one permanent improvement and thereby miss the opportunity for future improvements. In order to avoid complacency, benchmarking must be used continuously to pursue emerging ideas.

101. Pitfalls and Criticisms of Benchmarking 1. Best-in-class performance is a moving target. For example, new technology can create quantum leap performance improvements. Over time, things change, and what was state- of-the-art yesterday may not be today. Some processes may have to be benchmarked repeatedly.

102. 2. The basic idea of benchmarking is to find someone who executes a process better than you do and imitate what he or she does. The most persistent criticism of benchmarking comes from the idea of copying others. How can an organization be truly superior if it is always copying its competitors? But conversely, How can an organization survive if it loses track of its external environment?

103. 3. How to identify the processes that offer the most opportunity for improvement: Benchmarking is an improvement tool. To be effective, it must be used properly. Benchmarking isn’t very helpful if it is used for processes that don’t offer much opportunity for improvement. The focus should be on core processes that offer opportunities for enhancing a firm’s competitive position

104. 4. Possibility of not being accepted. Because it essentially tells organizations what they are not doing well, it has the potential to break down if process owners and managers feel threatened or do not accept and act on the findings. 5. Cost: Does the investment in time, financial and human resources, justify the outcome, especially given the complexity of the process?

105. 6. Will the organization have the infrastructure to implement what is learnt? Are basic components such as information systems, process control, human resource programs, etc in place? If not, trying to imitate the best-in-class may be harmful as it disrupts operations and makes employees frustrated that they may not be able to implement what they have learnt.

106. FRAMEWORKS FOR ORGANIZATIONAL QUALITY

107. Frameworks: 1. Malcolm Baldrige National Quality Award Criteria 2. Six Sigma 3. ISO 9000 Series 4. ISO 14000 Series 5. COYA

108. Malcolm Baldrige National Quality Award (MBNQA) Purpose of the Award: 1. Stimulate companies to improve quality and productivity for the pride of recognition while obtaining a competitive edge through increased profits; 2. Recognise achievements of those companies that improve the quality of their goods and service and provide an example to others;

109. 3. Establish guidelines and criteria that can be used by business, industry and government in evaluating their own quality and improvement efforts 4. Provide specific guidance for other companies that wish to learn how to manage for high quality by making available detailed information on how winning companies were able to change their culture and achieve eminence.

111. The umbrella of the seven categories reflects the focus that organizations must have on customers through their strategy and action plans for all key decisions. Leadership, Strategic Planning and Customer and Market Focus represent the “leadership triad”. Human Resource Focus and Process Management represent how work is accomplished and leads to Business Results.

112. These functions are linked to the leadership triad. Measurement, Analysis and Knowledge Management support the entire framework for providing the foundation for a factbased system for improvement.

113. Criteria for performance excellence The criteria address seven categories: 1. Leadership: This category examines how an organization’s senior leaders guide and sustain the organization Also organization. examined are governance and how the organization addresses its ethical, legal and community responsibilities.

114. 2. Strategic Planning: This category examines how an organization develops strategic objectives and action plans. Also examined is how the chosen objectives and plans are deployed and changed if circumstances require, and how progress is measured.

115. 3. Customer and Market Focus: This category examines how an organization determines requirements, needs, expectations, and preferences of customers and markets. Also examined is how the organization builds relationships with customers and determines the key factors that lead to customer acquisition, satisfaction, loyalty, retention, and to business expansion and sustainability.

116. 4. Measurement, Analysis and Knowledge Management: This category examines how an organization selects, gathers, analyzes, manages and improves its data, information, and knowledge assets, and how it reviews its performance

117. 5. Human Resource Focus This category examines how the organization’s work systems and employee learning and motivation enable employees to develop and utilize their full potential. Also examined are the organization’s efforts to build and maintain a work environment of employee support conducive to performance excellence.

118. 6. Process Management This category examines the key aspects of an organization’s process management, including key product, service and organizational processes for creating customer and organizational value, and key support processes involving all work units.

119. 7. Business Results This category examines an organization’s performance and improvement in key business areas – product and service outcomes, customer satisfaction, financial and marketplace performance, human resource outcomes, operational performance, and leadership and social responsibility. Also examined are performance levels relative to competitors and other organizations providing similar products and services

120. SIX SIGMA A business improvement approach that seeks to find and eliminate causes of defects and errors in process by focusing on outputs that are critical to customers and have clear financial return. The term Six Sigma derives from a statistical measure that equates to 3.4 or fewer defects or errors per million opportunities

121. Philosophy of Six Sigma 1. Think in terms of key business processes and customer requirements with a clear focus on overall strategic objectives. 2 Focus on corporate sponsors responsible for championing projects, support team activities, help to overcome resistance to change, and obtain resources.

122. 3. Emphasize quantifiable measures as defects per million opportunities, that can be applied to all parts of the organization: manufacturing, engineering, administrative, software, etc. 4. Ensure that appropriate metrics are identified early in the process and that they focus on business results, thereby providing incentives and accountability.

123. 5. Provide extensive training followed by project team deployment to improve profitability, reduce non value-added activities and achieve cycle time reduction. 6. Create highly quantifiable process improvement experts who can apply improvement tools and lead teams 7. Set stretch objectives for improvement

124. ISO 9000:2000 Series The International Organization for Standardization (ISO) – is mandated to promote the development of international standards to facilitate the exchange of goods and services worldwide. The ISO standards require an organization to say what it is doing to ensure quality, then do what it says, and, finally, document or prove that it has done what it said.

125. Benefits of ISO Registration Customers/ markets are suggesting or demanding compliance to a quality system. To maintain or increase market share, organizations need to conform with an ISO standard standards. There are needed improvements in processes and a desire for global deployment of products and services. Internal benefits such as improved management and control that may be received implementing a quality system.

126. Improvements that have been noted in firms using an ISO standard include: Internal quality, as measured by the reduction in percent of scrap, rework and non- conformities at final inspection; Production reliability as measured by the reduction in number of breakdowns per month, percent of time dedicated to emergencies, and percent of downtime per shift;

127. External quality as measured by increase in products accepted by customers without the need for inspection, reduction in claims of non-conforming products and returned products; Time performance as measured by reduction in time to market, on-time delivery, and throughput time; Overall reduction in costs of poor quality (quality costs).

128. ISO Standards The vast majority of ISO standards are highly specific to a particular product, material, or process. However, ISO 9001 (quality) and ISO 14001 (environment) are "generic management system standards". "Generic“ means that the same standard can be applied to any organization, large or small, whatever its product or service, in any sector of activity, and whether it is a business enterprise, a public administration, or a government department

129. ISO 9001 contains a generic set of requirements for implementing a quality management system ISO 14001 is for an environmental management system.

130. ISO 9000 Series of Standards ISO 9001:2008 Quality Management Systems (QMS) – requirements are the standards used for registration by demonstrating conformity of the QMS to customers, regulatory, and the ISO 9000 Series of Standards organization’s own requirements. ISO 9004:2009 Quality Management Systems (QMS) – guidelines for performance improvement provides guidelines that an organization can use to establish a QMS focused on improving performance – not for certification

131. ISO 9001:2008 Requirements The standard has eight clauses: 1. Scope 2. Normative References 3 Definitions 4. Quality Management Systems 5. Management Responsibility 6. Resource Management 7. Product and/or Service Realization 8. Measurement, Analysis and Improvement

132. The first three clauses are for information while the last five are requirements that an organization must meet.

134. 1. Scope The purpose of the standard is for the organization to demonstrate its ability to provide a product that meets customer and regulatory requirements and achieves customer satisfaction. This purpose is accomplished by evaluating and continually improving the system, rather than the product.

135. 2. Normative Reference ISO 9000:2005 Quality Management Systems- Fundamentals and vocabulary are a normative reference that provides applicable concepts and definitions. 3. Terms and Definitions The terms and definitions given in ISO 9000:2005 apply. In addition the supply chain is defined as: Supplier Organization Customer

136. 4. QUALITY MANAGEMENT SYSTEMS (QMS) General Requirements Documentation Management Commitment Customer Focus Quality policy: Planning Management Review

137. 4. QUALITY MANAGEMENT SYSTEM (QMS) 4.1 General Requirements The organization shall establish, document, implement, and maintain a QMS and continually improve its effectiveness The effectiveness. organization shall: (a) Identify needed processes such as management activities, provision of resources, product realization, and measurement

138. (b) Determine their sequence and interaction; (c) Determine criteria and methods for effective operation and control of these processes; ( d) Ensure the availability of resources and information necessary to support and monitor these processes; (e) Monitor, measure, and analyze these processes; (f) Implement to achieve planned results and continual improvement of these processes

139. 4.2 Documentation General: Documentation shall include: a)Statements of a quality policy and quality objectives; b) A quality manual; c) Required documented procedures; d) Needed documents to ensure effective planning, operation, and control of processes; and e) Required records

140. Quality Manual: A quality manual shall be established and maintained. Control of Documents: Documents required by the QMS shall be controlled. A documented procedure shall be in place to define the needed controls. Control of Records: Records shall be established and maintained to provide evidence of conformity to requirements and the effective operation of the QMS. They shall be legible, readily identifiable, and retrievable.

141. 5. MANAGEMENT RESPONSIBILITY 5.1 Management Commitment Top management shall provide evidence of its commitment to the development, implementation, and continual improvement of the QMS by: a) Communicating the need to meet customer, legal, and regulatory expectations; b) Establishing a quality policy; c) Ensuring that quality objectives are established;

142. d) Conducting management reviews; e) Ensuring the availability of resources. Top management is defined as the person or group of people who directs and controls an organization. 5.2 Customer Focus Top management shall ensure that customer requirements are determined and met with the aim of enhancing customer satisfaction

143. 5.3 Quality policy: Top management shall ensure that the quality policy is appropriate to the organization’s purpose or mission; and includes a commitment to comply with requirements and continually improve the effectiveness of the QMS;

144. 5.4 Planning 5.4.1 Quality Objectives: Top management shall ensure that quality objectives are established at relevant functions and levels within the organization. 5.4.2 Quality Management System Planning: Top management shall ensure that the planning of the QMS is accomplished in order to meet the requirements of the QMS as stated in the General Requirements and Quality Objectives

145. 5.5 Responsibility, Authority, and Communication 5.5.1 Responsibility and Authority: Top management shall ensure that responsibilities and authorities are defined and communicated within the organization. 5.5.2 Management Representative: Top management shall appoint a member of management, that shall have the responsibility and authority to ensure that processes needed for the QMS system are established, implemented, and maintained

146. 5.5.3 Internal Communication: Top management shall ensure that appropriate communication channels are established within the organization and that communication takes place regarding the QMS.

147. 5.6 Management Review 5.6.1 General: Top management shall review the QMS at planned intervals to ensure its continuing suitability, adequacy and effectiveness. 5.6.2 Review Input: The input to the review shall include information on results of audits, customer feedback, and conformity of products and processes.

148. 5.6.3 Review Output: The output from the review shall include any decisions and actions related to improvement of the effectiveness of the QMS and its processes and products.

149. 6. RESOURCE MANAGEMENT 6.1 Provision of Resources The organization shall determine and provide the resources needed to implement and maintain the QMS and continually improve its effectiveness; and enhance customer satisfaction.

150. 6.2 Human Resources 6.2.1 General: Personnel performing work that affects product quality shall be competent on the basis of appropriate education, training, skills and experience. 6.2.2 Competence, Awareness and Training: The organization shall determine the necessary competence for personnel performing work affecting product quality.

151. 6.3 Infrastructure The organization shall determine, provide, and maintain the infrastructure needed to achieve conformity to product requirements. 6.4 Work Environment The organization shall determine and manage the work environment needed to achieve conformity to product requirements. Creation of a suitable work environment can have a positive influence on employee motivation, satisfaction, and performance

152. 7. PRODUCT REALIZATION 7.1 Planning of Product Realization The organization shall plan and develop the processes needed for product realization Planning of product realization shall be consistent with the requirements of the other processes of QMS.

153. 7.2 Customer-Related Processes 7.2.1 Determination of Requirements Related to the Product: The organization shall determine requirements specified by the customer, as well as requirements not stated by the customer but necessary for specified or intended use, where known; 7.2.2 Review of Requirements Related to the Product: The organization shall review the requirements related to the product.

154. 7.2.3 Customer Communication: The organization shall determine and implement effective arrangements for communicating with customers

155. 7.3. Design and Development 7.3.1 Design and Development Planning: The organization shall plan and control the design and development of the product. 7 3 2 Design and Development Inputs: These shall include: functional and performance requirements, statutory and regulatory requirements.

156. 7.3.3 Design and Development Outputs: These shall meet the input requirements for design and development; provide appropriate information for purchasing, production and for service provision; and production, safety features. 7.3.4 Design and Development Review: this is to evaluate the ability of the results of design and development to meet requirements; and identify any problems and propose necessary actions

157. 7.3.5 Design and Development Verification: Verification confirms that the specified requirements have been fulfilled. Confirmation can comprise activities such as comparing the new design specification to a similar proven design specification, and undertaking tests and demonstrations.

158. 7.3.6 Design and Development Validation: Validation shall be completed prior to the delivery or implementation of the product. Validation confirms that the requirements for a specific intended use have been fulfilled. 7.3.7 Control of Design and Development Changes: The review of design and development changes shall include evaluation of the effect of the changes on constituent parts and product already delivered

159. 7.4 Purchasing 7.4.1 Purchasing Process: The organization shall ensure that purchased product conforms to specified purchase requirements. 7.4.2 Purchasing Information: this shall describe the product to be purchased. 7.4.3 Verification of Purchased Product: The organization shall establish and implement the inspection to ensure that purchased product meets specified purchase requirements.

160. 7.5 Production and Service Provision 7.5.1 Control of Production and Service Provision: The organization shall plan and carry out production and service provision under controlled conditions – a pilot test. 7.5.2 Validation of Processes for Production and Service Provision: Validation shall demonstrate the ability of these processes to achieve planned results

161. 7.5.3 Customer Property: The organization shall exercise care with customer property while it is under the organization’s control or being used by the organization. 7.5.4 Identification and Traceability: Where appropriate, the organization shall identify the product by suitable means throughout product realization. Where traceability is a requirement, the organization shall control and record the unique identification of the product.

162. 7.5.5 Preservation of Product: The organization shall preserve the conformity of product during internal processing and delivery to the intended destination

163. 7.6 Control of Monitoring and Measuring Devices The organization shall determine the monitoring and measurement to be undertaken and the monitoring and measuring devices needed to provide evidence of conformity of product to determined requirements.

164. 8. MEASUREMENT, ANALYSIS AND IMPROVEMENT 8.1 General The organization shall plan and implement the monitoring, measurement, analysis, and improvement processes needed to demonstrate conformity of the product, ensure conformity of the QMS; and continually improve the effectiveness of the QMS

165. 8.2 Monitoring and Measurement 8.2.1 Customer Satisfaction: the organization shall monitor information relating to customer perception as to whether the organization has met customer requirements. 8.2.2 Internal Audit: the audit shall determine whether the QMS conforms to the standard, and to the requirements established by the organization; and is effectively implemented and maintained

166. 8.2.3 Monitoring and Measurement of Processes: The organization shall apply suitable methods for monitoring and measurement of the QMS processes. 8.2.4 Monitoring and Measurement of Product and Service: The organization shall monitor and measure the characteristics of the product to verify that product requirements have been met.

167. 8.3 Control of Nonconforming Product The organization shall ensure that product which does not conform to product requirements is identified and controlled to prevent its unintended use or delivery.

168. 8.4 Analysis of Data The organization shall analyze appropriate data to demonstrate the suitability and effectiveness of the QMS and to evaluate where continual improvement of the effectiveness of the can be made. The data shall relate to: a) Customer satisfaction; b) Conformity to product requirements; c) Characteristics and trends of processes and products; d) Suppliers

169. 8.5 Improvement 8.5.1 Continua/Improvement: The organization shall continually improve the effectiveness of the QMS through the use of the quality policy, quality objectives, audit results, analysis of data, corrective and preventive actions, and management review. 8.5.2 Corrective Action: The organization shall take action to eliminate the cause of nonconformities in order to prevent recurrence. Corrective actions shall be appropriate to the effects of the nonconformities encountered.

170. 8.5.3 Preventive Action The organization shall determine action to eliminate the causes of potential nonconformities in order to prevent their occurrence. Preventive actions shall be appropriate to the effects of the potential problems.

171. Implementation 1. Top Management Commitment The most important step in implementing a quality system is to acquire the full support of top management. The CEO must be willing to commit the resources necessary to achieve certification. Because top management is assigned specific responsibilities in the standard, it is necessary that they be involved in its implementation

172. 2. Appoint the Management Representative This person is responsible for coordinating the implementation and maintenance of the quality system and is the contact person for all parties involved in the process, both internal and external external. 3. Awareness Everyone should understand the quality system. They should know how it will affect day-to-day operations and the potential benefits. Be sure everyone knows the intent of the standard

173. 4. Appoint an Implementation Team This team should be drawn from all levels and areas of the organization so that it is representative. Committees for each of the five clauses may be used. 5 Training The implementation team, supervisors, and internal audit team should be trained. This activity can be accomplished by sending team leaders for training and having them train the other team members or by bringing the training in-house for all team members.

174. 6. Time Schedule This time frame will vary, depending on the size and type of organization and the extent of its existing quality system. Most organizations can complete the entire certification process in about 1½ years. 7. Select Element Owners Many element owners will be members of the implementation team. Owners may be assigned more than one element. The more people involved, the more effective the system

175. 8. Review the Present Perform a review of the present quality system. Copies of all the quality manuals, procedures, work instructions, and forms presently in use are obtained. These documents are sorted into the system elements to determine what is available and what is needed to complete the system.

176. 9. Write the Documents Prepare written quality policy and procedure manuals—they can be combined into one document. Write appropriate work instructions to maintain the quality of specific functions. 10. Install the New System Integrate the policies, procedures, and work instructions into the day-to- day workings of the organization, and document what is being done.

177. 11. Internal Audit Conduct an internal audit of the quality system. This step is necessary to ensure that the system is working effectively and to provide management with information for the comprehensive management review. Minor corrections to the system are made as they occur

178. 12. Management Review Conduct a management review. The management review is used to determine the effectiveness of the system in achieving the stated quality goals. The system is revised as needed.

179. 13. Pre-assessment This step is optional. If a good job has been done on the previous steps, pre assessment is not necessary. 14. Registration: This step has three parts: Choosing a registrar; Submitting an application; Conducting the registrar’s system audit.

180. Pitfalls to implementing QMS 1. Using a generic documentation program or another organization’s documentation program. 2. Over-documentation/ documentation that is too complex. 3.. Using external consultants without internal ownership and involvement.

181. 4. Lack of real top management’s involvement. 5.. Developing a system that does not represent what actually occurs. 6. Developing a system that does not focus on business results.

182. DOCUMENTATION

183. 1.Policy The first tier is the policy manual. This defines what will be done and why. The policy manual addresses what will be done to comply with the standard being used. A quality policy manual should be written so it is clear, precise, practical, and easy to understand. The ‘why’ can be stated just once as a quality policy statement. This statement should be a short, simple definition of the organization’s quality intentions

184. 2.Procedure The second tier of documentation is the quality procedures. These procedures describe the methods that will be used to implement and perform the stated policies. The procedures define who should perform specific tasks, when the task should be done, and what kind of documentation and where it will be made to show that the task was performed

185. 3.Work Instructions Work instructions are usually department, machine, task, or product-oriented, and spell out how a job will be done. These instructions are the most detailed of the documentation hierarchy. A work instruction may be in the form of a detailed drawing, recipe, routing sheet, specific job function (for example, turn nut four times clockwise), photograph, video, or simply a sample for comparison to standards.

186. 4.Records Records are a way of documenting that the policies, procedures, and work instructions have been followed. Records may be forms that are filled out, a stamp of approval on a product or a product, signature and date on some type of document, such as a routing sheet. Records are used to provide traceability of actions taken on a specific product or batch of products. They provide data for corrective action, if necessary

187. INTERNAL AUDITS Policies, procedures, and work instructions must be checked to ensure that the system is being followed and the expected results are being obtained. This activity is accomplished through the internal audit, which is one of the key elements of the ISO standard. All elements should be audited at least once per year and some more frequently, depending on need

188. Objectives of the audit Determine that actual performance conforms to the documented QMS. Initiate corrective action activities in response to deficiencies. Follow up on noncompliance items from previous audits. Provide continued improvement in the system through feedback to management. Cause the auditee to think about the process, thereby encouraging possible improvements.

189. Techniques Examination of documents: The auditor should start with the quality manual to determine that the policies cover the QMS standards, and that they are assessable. Observation of activities: To evaluate the preservation of product element the auditor would observe the identification, handling, packaging, storage, and protection of the product. Interviews.

190. Procedure The audit has three parts: The pre-audit meeting: The audit process and timetable are discussed and prior audits are reviewed. The audit: The audit seeks to determine how well the quality system has been implemented and maintained. The objective of the auditing process is to provide for continuous improvement and increased customer satisfaction. A closing meeting: At the closing meeting, the lead auditor presents a summary of the audit findings with evidence that supports them.

191. CERTIFICATION The certification process has six basic steps: 1. Application for certification: The application contains the rights and obligations of both parties, determines which standard the applicant will use for the registration, and leads to the formalized contract for services. 2. Document review: The registrar will review the quality system documentation. The registrar compares the organization’s documentation with the appropriate standard to determine if the intent of the standard has been met

192. 3. Pre-assessment: The pre-assessment is a broad overview of the organization’s operations to determine an initial preparedness for a full assessment or audit. A pre-assessment could identify a major deficiency or lack of documentation that can be corrected before the audit takes place, thus enhancing the possibility of approval on the first audit attempt.

193. 4. Assessment: Typically an audit will take two to four days and will involve two or more auditors at the organization’s facility. The audit will cover all areas and all procedures of the organization in one audit. The audit process should verify that the organization’s QMS is performing effectively

194. 5. Certification: If the applicant has only minor non-compliances, the recommendation is for certification. If one or more major noncompliances are registered but appear to be easily corrected the recommendation is for a corrected, conditional certification pending corrective action. The recommendation for disapproval will be made if it is determined that procedures have not been implemented or at least one element of the standard has not been addressed

195. Follow-up surveillance: The registrar conducts surveillance audits after registration at intervals of six months to a year. These audits will not be full audits but random checks of some elements to ensure that the system continues to function. Certification is good for three years, at which time the organization must be recertified END

196. IMPORTANCE OF QUALITY TO COMPETITIVE ADVANTAGE

197. Competitive strategies What are they? Give examples of your organizations strategy Differentiation Focus Cost leadership Quick respose

198. 1. Differentiation In pursuing a competitive advantage based on differentiation, firms attempt to create unique bundles of products and/or services that will be highly valued by customers. Product features: The physical characteristics and capabilities of a product may be an important form of differentiation. After-sales service: Convenience and quality of service may be a critical factor in deciding among alternative products.

199. Desirable image: This is the basis of virtually all fashion products, ranging from designer jeans to furs. Manufacturing consistency: This is especially important in making components that must mesh with others to produce a finished good. Status symbol: Luxury cars are obviously purchased for reasons other than transportation.

200. Greater product flexibility or compatibility: Products that are compatible with other gadgets, or can be used in different environments have an appeal to them. Less maintenance: If a product’s purchase price is high, but the maintenance costs are low, it could motivate customers. Ease of use: A product that is user-friendly will attract customers.

201. Cost leadership A cost leadership strategy usually permeates the firm as evidenced by: High efficiency Low overhead costs Limited perks Intolerance of waste Intensive screening of budget requests Narrow spans of control Rewards linked to cost containment Broad employee participation in cost control efforts

202. 3. Quick response Quick response advantages can take several forms. They include speed of: Developing new products. Customizing products. Improving existing products. Delivering ordered products. Answering customer questions and requests.

203. 4. People The quality machine is the workforce – the team members, the suppliers, the engineers – everybody who has a hand in production. The human resource is the only one that competitors cannot copy, and the only one that can synergize – that is, produce output whose value is greater than the sum of its parts.

204. The competitive advantage resulting from an organization’s people can drive low cost, differentiation and speed. It is the intangibles that are the hardest things for competitors to imitate. Providing a work environment that fosters cooperation, initiative and innovation; educating and training the workforce; and enhancing the factors that affect well-being, satisfaction, and motivation are very difficult for competitors to copy.

205. Figure 1: Quality and Profitability Improved quality of design Higher perceived value Increased market share Higher prices Increased revenues Higher profitability Improved quality of conformance Lower manufacturing and service costs

206. QUALITY AND COMPETITIVE STRATEGIES Competitive advantage is gained from meeting or exceeding customer expectations. Key dimensions of distinctiveness include: Superior product design; Outstanding service; High flexibility and variety; Continuous innovation; and Rapid response.

207. 1. Competing on Superior Product Design The quality of a product’s design is influenced by several quality dimensions: Performance – the primary operating characteristics of the product Features – the add-ons, the “bells and whistles” of a product. Reliability – the probability of a product’s surviving over a specified period of time under stated conditions of use.

208. Durability – the amount of use one gets from a product before it physically deteriorates or until replacement is preferable. Aesthetics – how a product looks, feels, sounds, tastes, or smells.

209. The product design function must be concerned with manufacturing and marketing issues, in addition to the technical aspects of the product. Product designers must match the right products with the continually changing variety of customer needs. This requires great flexibility.

210. The Role of Total Quality in Product Design Useful techniques of quality engineering include: Concurrent engineering, in which engineering and production personnel jointly, develop product designs that are both functional and easy to manufacture (product teams) thus reducing opportunities for poor quality;

211. Value analysis, in which the function of every component of a product is analyzed to determine how it might be accomplished in the most economical fashion; Design reviews, in which managers assess how well the design relates to customer requirements and how it might be improved prior to releasing it to production.

212. 2. Competing on Service Two key components of service system quality are employees and information technology. Customers evaluate a service primarily by the quality of the human contact

213. Employees: When employee satisfaction is high, customer satisfaction is high, and that when job satisfaction is low, customer satisfaction is low. Many service companies act on the motto “If we take care of our employees, they will take care of our customers.” Another important aspect of service is complaint resolution. About 80 percent of unhappy customers will purchase from a company again if their complaints are resolved quickly. This drops to around 20 to 45 percent if complaints are not resolved

214. Information technology It is essential in modern service organizations because of the high volumes of information they must process and because customers demand service at ever-increasing speeds. Intelligent use of information technology not only leads to improved quality and productivity, but also to competitive advantage. This is particularly true when technology is used to better serve the customer and to make it easier for customers to do business with the company.

215. The Role of Total Quality in Service Companies that provide superior service have certain elements in common: 1. They establish service goals that support business and product-line objectives. 2. They identify and define customer expectations for service quality and responsiveness. 3. They translate customer expectations into clear, deliverable, service features.

216. 4. They set up efficient, responsive, and integrated service delivery systems and organizations. 5. They monitor and control service quality and performance. 6. They provide quick, but cost-effective response to customers’ needs.

217. 3. Competing on Flexibility and Variety Flexibility is the capacity of a production system to adapt successfully to changing environmental conditions and process requirements. Variety refers to the ability to produce a wide range of products and options. Companies that can change product lines more rapidly in the face of changing consumer demands and exploit new technologies can gain a competitive advantage in certain markets

218. The Role of Quality in Flexibility and Variety The ability to develop the right products depends on a clear customer focus and determination of customer expectations. As these change, the company must be able to respond quickly. Being close to the customer is essential. Equally important is the ability of different functions and groups of employees to work together as teams in designing and operating the type of production systems that require continuous change and improvement

219. 4. Competing on Innovation Research and development are a core component of organizational strategy. Firms that focus on R&D are on the leading edge of product technology, and their ability to innovate and introduce new products is a critical success factor. These companies focus on:

220. Outstanding product research, design, and development; High product quality; and The ability to modify production facilities to produce new products frequently.

221. The Role of Quality in Innovation Innovation is encouraged through several means: (a) The criteria are non-prescriptive. They encourage creativity and break-through thinking because they channel activities toward the organization’s purpose and are not focused on following specific procedures

222. (b) Customer-driven quality emphasizes the “positive side of quality” – enhancement, new services, and customer relationship management, rather than the negative side of dealing with complaints. Success with the positive side of quality depends heavily on creativity, more so than on steps to reduce errors and defects that rely on well-defined techniques.

223. (c) Human resource focus stresses employee involvement, development, and recognition, and encourages creative approaches to improving employee effectiveness, empowerment and contributions

224. (d)Continuous improvement and learning are integral parts of the activities of all workgroups. Emphasis on continuous improvement encourages change, innovation, and creative thinking in how work is organized and conducted. (e)The focus on future requirements of customers encourages companies to seek innovative and creative ways to serve their patrons

225. 5. Competing on Time The total time required by a company to deliver a finished product that satisfies customers’ needs is referred to as the product lead time. This includes time spent on design, engineering, purchasing, manufacturing, testing, packaging and shipping. Short product lead times offer many advantages

226. They allow companies to introduce new products and penetrate new markets more rapidly, giving a firm first-mover advantages. They reduce the need to forecast long-term sales, allow more accurate production plans to be developed, and reduce inventory. They times increase the flexibility of a company to respond to changing customer needs

227. The Role of Quality in Time Competitiveness Major improvements in response time often require work organizations, processes, and paths to be simplified and shortened. This can be done by making response time a key indicator for work unit improvement processes. Simplified processes reduce opportunities for errors, leading to improved quality.

228. Improvements in response time often result from increased understanding of internal customer-supplier relationships and teamwork. Cutting response time requires a significant commitment from all employees and leadership from top management. Such efforts must involve the entire organization and often require organizational redesign.

229. Value Chain Analysis InboundLogistics Operations OutboundLogistics Marketing & Sales Service Finance Human Resource Management Technology Development Procurement SUPPORTSUPPORT ACTIVITIESACTIVITIES Primary Activities Figure 3 Margin Margin

230. Porter’s Generic Strategies Cost Advantage CompetitiveScope BroadTarget NarrowTarget Lower Cost Differentiation 1. Cost Leadership 2. Differentiation 3A. Cost Focus Figure 4 3B. Differentiation Focus

231. Strategies of Differentiation í Price Differentiation. í Image Differentiation. í Support Differentiation. í Quality Differentiation. í Design Differentiation. í Undifferentiation. 99

232. Elaborating the Core Business í Penetration Strategies. í Market Development Strategies. í Geographic Expansion Strategies. í Product Development Strategies.

233. Sam Walton 1918 - 1992 American Businessman, Founder of Wal-Mart There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else... Sam Walton If you love your work, you’ll be out there every day trying to do it the best you possibly can, and pretty soon everybody around will catch the passion from you – like a fever. Sam Walton

234. Outstanding leaders go out of their way to boost the self-esteem of their personnel. If people believe in themselves, it's amazing what they can accomplish.

235. E N D