Chapter 3 Global Quality and International Quality Standards S. Thomas Foster, Jr. Boise State University PowerPoint prepared by Dave Magee University of Kentucky Lexington Community College ©2004 Prentice-Hall

Chapter Overview Managing Quality for the Multinational Firm Quality Improvement: The American Way The Malcolm Baldrige National Quality Award Quality Improvement: The Japanese Way Quality Improvement: The European Way ISO 9000:2000 Are Quality Approaches Influenced by Culture?

Managing Quality for the MNF Slide 1 of 4 Mechanisms That Firms Use In Globalizing Licensing By licensing, a U.S. corporation can allow foreign firms to sell in restricted markets while using the design of the original designer. Partnering Firms also seek international markets through joint ventures or partnering. Globalization Globalization means that a firm fundamentally changes the nature of its business by establishing production and marketing facilities in foreign countries. We refer to these firms as multinational corporations.

Managing Quality for the MNF Slide 2 of 4 Global Factors That Affect Quality-Related Decisions Physical Environment Task Environment Quality Management Social Environment Figure 3.3

Managing Quality for the MNF Slide 3 of 4 Exporting Another means of entering international markets is to not globalize but become an exporter. Exporters produce their products and ship them internationally. Firms that are entrepreneurial in nature and plan their exports effectively tend to have higher quality For exporting firms, quality leads to lower price and greater export success

Managing Quality for the MNF Slide 4 of 4 Export Quality Model Figure 3.4 Firm Characteristics Product Strategy Performance Low Price Entrepreneurship High Quality Export Planning Standardization Export Success Promotion

Malcolm Baldrige National Quality Award Slide 1 of 11 The award is open to small (less than 500 employees) and large firms (more than 500 employees) in the manufacturing and service sectors. It is not open to public-sector and not-for-profit organizations. There can be only two winners per category each year, which limits the number of yearly awards to six. Additional information on the Baldrige award www.NIST.gov

Malcolm Baldrige National Quality Award Slide 2 of 11 Key Characteristics of the MBNQA The criteria focus on business results. Companies must show outstanding results in a variety of areas to win. The Baldrige criteria are nonprescriptive and adaptive. Although the focus on the Baldrige is on results, the means for obtaining these results are not prescribed. The criteria support company-wide alignment of goals and processes. The criteria permit goal-based diagnosis. The criteria and scoring guidelines provide assessment dimensions.

Malcolm Baldrige National Quality Award Slide 3 of 11 Organizational Profile: Environment, Relationships and Challenges Baldrige Award Framework Figure 3.5 2 Strategic planning 5 HR develop. & management 7 Business results 1 Leadership 3 Customer and market focus 6 Process management 4 Information and analysis

Malcolm Baldrige National Quality Award Slide 4 of 11 MBNQA Categories Category 1 Award criteria for leadership. The extent to which top management is involved in creating and reinforcing goals, values, directions, customer involvement and other issues. Category 2 Focuses on how the company establishes strategic directions and how it sets it tactical actions plans to implement the strategic plans. Concerned with methods, measures, deployment, and evaluation.

Malcolm Baldrige National Quality Award Slide 5 of 11 MBNQA Categories Category 3 Addresses the customer and market focus. The processes for listening to and learning from customers and markets must be evaluated, improved, and kept current. Category 4 Information and analysis relates to the firm’s selection, management, and use of information to support company processes and to improve firm performance.

Malcolm Baldrige National Quality Award Slide 6 of 11 MBNQA Categories Category 5 Deals with human resources focus. The workforce is to be enabled to develop and use its full potential, aligned with company objectives. Category 6 Examines the key aspects of process management. This includes customer-focus in design, delivery process design for services and products, support processes, and processes relating to partners.

Malcolm Baldrige National Quality Award Slide 7 of 11 MBNQA Categories Category 7 Documents the results of the other six categories and requires a series of tables and graphs that demonstrate the operational and business results of the firm.

Malcolm Baldrige National Quality Award Slide 8 of 11 The Baldrige Process The first step is eligibility determination. The completed application is sent to the National Institute of Standards and Technology (NIST). The application is reviewed by examiners and then by judges, who will determine whether the application will be given a consensus score by the examiners. Firms that are granted Baldrige site visits sometimes refer to themselves as “Baldrige Qualified.” The site visit consists of a team of 4 to 6 examiners visiting a company over a period not to exceed one week. One of the most important outcomes is examiner feedback.

Malcolm Baldrige National Quality Award Slide 9 of 11 Baldrige Evaluation Process Figure 3.6 Receive applications Stage 2 Consensus review Stage 3 Site visit review Stage 1 Independent review Select for site visit? Judges Review and recommend winners Judges Yes No No Yes Select for consensus review? Judges Feedback report to applicant Feedback report to applicant Feedback report Yes No Feedback report to applicant

Malcolm Baldrige National Quality Award Slide 10 of 11 Feedback Report Scoring summary is a synthesis of the most important strengths and areas for improvement. Individual scoring range provides insight concerning the relative areas of strength and areas for improvement. Scoring distribution provides the percentage of applicants for a particular year scoring in each of the eight scoring bands. Examiner comments give feedback concerning the organization.

Malcolm Baldrige National Quality Award Slide 11 of 11 Being a Baldrige Examiner Appointment to the board of Trustees for the MBNQA Board of Examiners is a very prestigious designations. Examiners are unpaid volunteers, and must be willing to give up approximately 10% of their year to serve as an examiner. State Awards Full-Baldrige approach Baldrige-lite approach Multilevel approach

Quality Improvement: The Japanese Way Deming Prize Awarded to individuals and groups who have contributed to the field of quality control. Other Japanese Contributions to Quality Thought Juran stated that the genius of the Japanese was in their ability to maintain a focus on the minutia and detail associated with process improvement. There are several uniquely Japanese contributions that are a part of the Japanese approach to production and service.

Deming Prize for Quality Slide 1 of 7 The Deming Prize for quality was established in 1951 by the Japanese Union of Scientists and Engineers (JUSE). Three categories of awards Deming Application Prize for Division Deming Application Prize for Small Business Quality Control Award for Factory There is no limit on the number of companies that can receive the award in a given year. The Deming Prize is much more focused on processes than is the Baldrige.

Deming Prize for Quality Slide 2 of 7 Deming Categories Policy Organization and Operations Collecting and Using Information Analysis Planning for the Future Education and Training Quality Assurance Quality Effects Standardization Control

Deming Prize for Quality Slide 3 of 7 Deming Categories Policy Org. and Operations The first category of the Deming Prize addresses the areas of management of quality policy, quality formation, policy correctness and consistency, and related topics. The organization and operations portion of the Deming application requires the applicant to document processes for clarifying authority and responsibility, and related topics.

Deming Prize for Quality Slide 4 of 7 Deming Categories Information Analysis The information that is collected for this item includes information that is gathered on the outside and inside. The analysis category of the Deming Prize covers the areas of selection of priority problems and themes, correct use of analytical methods, and use of statistical methods.

Deming Prize for Quality Slide 5 of 7 Deming Categories Planning for the Future Education & Training To plan well for the future, firms must understand their present condition well, which is the documentation required for this category. Applicants document plans and accomplishments relating to education and training.

Deming Prize for Quality Slide 6 of 7 Deming Categories Quality Assurance Quality Effects As discussed in Chapter 1, quality assurance has to do with the design of products and the new product development process. Quality effects relate to the documentation of benefits, outcomes, and results of quality improvement.

Deming Prize for Quality Slide 7 of 7 Deming Categories Standardization Control The systems of setting standards, monitoring performance against the standards, and revision of standards are documented. The applicants describe how they are using SQC, control points, control items, statistical thinking, and the current state of control in the company.

Other Japanese Contributions to Quality Slide 1 of 7 Lean Production Japanese Total Quality Control (TQC) Visibility In-Process Inspection N = 2 Technique Total Involvement of the Workforce The Five Ss

Other Japanese Contributions to Quality Slide 2 of 7 Lean Production Two views emerge in the literature that pertain to Lean (a.k.a. just-in-time (JIT) manufacturing). The first view of Lean is a philosophical view of waste reduction. This view asserts that anything in the process that does not add value for the customer should be eliminated. The second view of Lean is a systems view stating the JIT is a group of techniques or systems focused on optimizing quality processes.

Other Japanese Contributions to Quality Slide 3 of 7 Japanese Total Quality Control Just as the Japanese Lean approach requires attention to detail in every aspect of the process, so does the TQC approach. This attention to detail runs deep in the Japanese culture.

Other Japanese Contributions to Quality Slide 4 of 7 Visibility Problems must be made visible before they can be addressed. Andon or warning lights Line-stop authority In-Process Inspection All work is inspected at each stage of the process. Workers inspect their own work.

Other Japanese Contributions to Quality Slide 5 of 7 N = 2 Technique The N = 2 technique is an alternative to acceptance sampling. Usually, an acceptance sampling plan involves rules such as: If 2 or fewer defects, accept the lot. If more than 2 defects, reject the lot. Total Involvement of Workforce Horizontal deployment means that all departments are involved in quality. Vertical deployment means that all levels of management and workers are actively involved in quality.

Other Japanese Contributions to Quality Slide 6 of 7 The Five S’s. The five Ss are a sequential process that companies follow to literally “clean up their acts.” The Ss are: Seri: organizing by getting rid of the unnecessary. Seiton: neatness that is achieved by straightening offices and work areas. Seiso: cleaning plant and equipment to eliminate dirtiness that can hide or obscure problems. Seiketsu: standardizing locations for tools, files, equipment, and all other materials. Shetsuke: discipline in maintain the prior four Ss.

Other Japanese Contributions to Quality Slide 7 of 7 Quality Circles Are natural work teams made up of workers that are empowered to improve processes they use. Preventive Maintenance (PM) The idea behind this concept is that the worst condition a machine should ever by is on the day you purchase it.

Quality Improvement: The European Way ISO 9000:2000 Is the European standard for quality that has been expanded worldwide. European Quality Award (EQA) The highest level is the EQA for the most accomplished applicant in a given year. The second level given is the European Quality Prize for other firms that meet the award criteria.

European Quality Award European Quality Award Model Figure 3.7 Leadership People management Processes People satisfaction Business results Policy and strategy Customer satisfaction Resources Impact on society Enablers Results

ISO 9000:2000 Slide 1 of 11 Worldwide Impact Focus of ISO 9000:2000 On a worldwide basis, ISO 9000:2000 has had a much more significant impact than any of the quality awards in terms of the number of companies that have implemented the approach.. Focus of ISO 9000:2000 The focus of ISO 9000:2000 is for companies to document their quality systems in a series of manuals to facilitate trade through supplier conformance. ISO Organization for International Standards

ISO 9000:2000 Slide 2 of 11 Three Standards 1. ISO 9000:2000 - Quality management systems - Fundamentals and vocabulary. 2. ISO 9001:2000 - Quality management systems - Requirements. - These are used for internal implementation, contractual purposes, or for third-party registrations. 3. ISO 9004:2000 - Quality management - Guidelines for Performance Improvement - These include continual improvement and enhancing overall performance.

ISO 9000:2000 Slide 3 of 11 ISO 9001:2000 consists of 5 clauses. Clause 4: Quality Management System Clause 5: Management System Clause 6: Resource Management Clause 7: Product Realization Clause 8: Measurement, Analysis and Improvement

ISO 9000:2000 Slide 4 of 11 ISO 9001:2000 Clause 4 Quality Management System Includes development, design, implementation, and maintenance of quality management documents. ISO 9001:2000 Clause 5 Management System Outlines management’s responsibility in developing and maintaining a quality management system.

ISO 9000:2000 Slide 5 of 11 ISO 9001:2000 Clause 6 Resource Management This includes providing needed resources, personnel, facilities, and the environment necessary to get the work done. ISO 9001:2000 Clause 7 Product Realization These are all of the requirements, including processes, documents, customer requirements, specifications, designs, and quality processes needed to produce a product. This includes selecting and developing suppliers in a way that ensures that purchased components satisfy requirements.

ISO 9000:2000 Slide 5 of 11 ISO 9001:2000 Clause 8 Measurement, Analysis and Improvement This has to do with analyzing process data and using the data to improve operations and service to the customer. This includes performing internal audits and monitoring and measuring processes and products. Also included are corrective action preventive action for improvement.

ISO 9000:2000 Slide 6 of 11 Underlying Quality Management Principles Customer Focus Leadership Involvement of People The Process Approach A Systems Approach to Management Continual Improvement Factual Approach to Decision Making Mutually Beneficial Supplier Relationship

ISO 9000:2000 Slide 7 of 11 ISO 9000:2000 Registration Process Step 1: Inquiry Step 2: Contract with registrar Step 3: Phase 1 audit Step 4: Certification audit Step 5: Process audits (optional) Step 6: Final certification audit Step 7: Rolling certification (surveillance) audits

Step 2: Contract with registrar ISO 9000:2000 Slide 8 of 11 ISO 9000:2000 Registration Process Step 1: Inquiry Client contacts registrars to investigate the terms for registration and makes a selection. Step 2: Contract with registrar Registration steps are determined and a price is negotiated. A pre-assessment or gap analysis may be done.

ISO 9000:2000 Slide 9 of 11 ISO 9000:2000 Registration Process Step 3: Phase 1 audit Registrar performs an onsite audit of the documented quality system against the applicable standard. Step 4: Certification audit Every element of the ISO 9000 standard is audited several times during the registration process. During each 3-year period, 100% of the organization is audited.

ISO 9000:2000 Slide 10 of 11 ISO 9000:2000 Registration Process Step 5: Process audits (optional) The client may choose business processes for auditing to the applicable standard, allowing the client to learn and experience the registrar’s auditing methods. Step 6: Final certification audit Once the client’s documented quality system has met the applicable standard, the registrar will conduct an audit to determine the system’s effective implementation.

ISO 9000:2000 Slide 11 of 11 ISO 9000:2000 Registration Process Step 7: Rolling certification audits The registrar returns on either 6 month or annual cycle. Sometimes referred to as surveillance audits.

ISO 14000 ISO 14000 A series of standards that provide guidelines and a compliance standard for environmental compliance. ISO 14001 The compliance standard for ISO 14000, Environmental Management Systems. Uses the same basic approach as ISO 9000:2000 with documentation control, management system auditing, operational control, control of records, management policies, audits, training, statistical techniques, and corrective and preventive action.

Are Quality Approaches Influenced By Culture? Quality Approaches are Influence by Culture The US approach has historically been command-and-control oriented. The Japanese approach is based on an ethic of consistency and emphasis on reduction of waste. The Europeans have adopted broad standards that can be adapted to the diverse nation states of the EC.

Summary Managing Quality for the Multinational Firm Quality Improvement: The American Way The Malcolm Baldrige National Quality Award Quality Improvement: The Japanese Way Quality Improvement: The European Way ISO 9000:2000 Are Quality Approaches Influenced by Culture?