Managing Quality Integrating the Supply Chain S. Thomas Foster

Global Supply Chain Quality and International Quality Standards Chapter 3 • Quality Improvement: The American Way • The Malcolm Baldrige National Quality Award • Quality Improvement: The Japanese Way • Quality Improvement: The European Way • Quality Improvement: The Chinese Way • Are quality Approaches Influenced By Culture © 2007 Pearson Education

America has been called the birthplace of modern quality management because it is home to Shewhart, Deming, Juran, and others. The U.S. military also was an early adopter of many quality techniques. Originally, the main interest in quality in the U.S. was in the application of statistics to solve quality problems. In recent years, the approach has become much more behavioral as teams and other approaches have been applied. The Malcolm Baldridge National Quality Award This is one of the most powerful assessment mechanisms. The MBNQA process is open to small (less than 500 employees) and large firms in the following categories: manufacturing, health care, education, and service sectors. The MBNQA is not open to public-sector and not-for-profitorganizations.| There can be only two winners per category per year for a total of eight winners for a given year. The number of winners has always been six or less. Global Supply Chain Quality and International Quality Standards Quality Improvement: The American Way © 2007 Pearson Education

Global Supply Chain Quality andInternational Quality StandardsQuality Improvement: The American Way • Key characteristics of the MBNQA: • The criteria focus on business results (financial performance, customer satisfaction, customer retention, product performance, service performance, productivity, supplier performance, and public citizenship. • Winners must show they have consistently performed at best-in-class and best-of-the-best levels. • Business results weigh from 25% to 45% in the scoring. • The Baldrige winner must not have financial problems and must be able to serve as a role model. • The focus of the MBNQA is on results, but the means of obtaining these results are not prescribed. The Baldrige criteria are prescriptive at the strategic level with regard to the nature of the goals. • The criteria support and advocate company-wide alignment of goals and processes. © 2007 Pearson Education

Global Supply Chain Quality andInternational Quality StandardsQuality Improvement: The American Way • The criteria permit goal-based diagnosis. • The criteria and scoring guidelines provide the following assessment dimensions: approach, deployment, and results. • Approach defines the method or system for addressing a particular performance objective. Deployment describes the execution of the approach. Results show the outcomes of the approach and deployment. • By assessing approach, deployment, and results in several areas, firms are able to assess their current strengths and areas for improvement in quality management. Once areas for improvement are identified, these can be prioritized and accomplished one by one. • The model for the MBNQA consists of seven interrelated categories that compose the organizational system for performance. • The basis of the model is measurement, analysis, and knowledge management. This confirms the core value of management by fact. © 2007 Pearson Education

Global Supply Chain Quality andInternational Quality StandardsQuality Improvement: The American Way Organizational Profile: Environment, Relationships, and Challenges 2. Strategic Planning 5. HR Focus 1. Leadership 7. Business Results 3. Customer & Market Knowledge 6. Process Management 4. Measurement, analysis, and knowledge management © 2007 Pearson Education

Global Supply Chain Quality and • International Quality Standards • Quality Improvement: The American Way The Malcolm Baldridge National Quality Award Seven Categories • Leadership • Strategic Planning • Customer and Market Focus • Measurement, Analysis and Knowledge Management • Human Resource Focus • Process Management • Business Results © 2007 Pearson Education

Global Supply Chain Quality and • International Quality Standards Quality Improvement: The American Way 1. Senior Leadership – This category is used to evaluate the extent to which top management is personally involved in creating and reinforcing goals, values, directions, and customer involvement. Also, the applicant outlines what the firm is doing to fulfill its responsibility as a corporate citizen. 2. Strategic Planning – This category focuses on how the company establishes strategic directions and how it sets its tactical actionplans to implement the strategic plans. 3. Customer and Market – This category focuses on how well the firm understands the product and service attributes that are important to the customer and how well the firm assessesthe relative importance of product or service features. 4. Measurement, Analysis, and Knowledge Management – This category focuses on the firm’s selection, management, and use of information to support company processes and to improve firm performance. © 2007 Pearson Education

Global Supply Chain Quality andInternational Quality StandardsQuality Improvement: The American Way 5. Human Resource – This category focuses on well the workforce is enabled to develop and use its full potential, aligned with company objectives. 6. Process Management – This category focuses on the processes for the design and delivery of products and services, the support processes, and the gathering and analysis of data to measure customer satisfaction. 7. Business Results – This category documents the results of the other six categories in a series of tables and graphs. This is considered the most sensitive category by the applicants. © 2007 Pearson Education

Global Supply Chain Quality andInternational Quality StandardsThe Japanese Way -- The Deming Prize • The Deming Prize for quality is awarded to individuals and groups who have contributed to the field of quality control. • The examination and award process is performed under the direction of the Japanese Union of Scientists and Engineers (JUSE) Deming Award Committee. There is no limit on the number of companies that can receive the award in a given year. • The Deming Prize is awarded in three categories: • Deming Application Prize for Division • Deming Application Prize for Small Business • Quality Control Award for Factory • The Deming Prize is much more focused on processes than is the Baldrige and is more prescriptive. The Baldrige is more focused on business results and is more general and managerial. © 2007 Pearson Education

Global Supply Chain Quality and International Quality Standards The Japanese Way -- Lean Production • Two views emerge in the Japanese literature about lean manufacturing: • Philosophical Perspective -Anything in the process that does not add value for the customer should be eliminated (waste reduction). • SystemsPerspective – Lean is a group of techniques focused on holistic synergies across symbiotic agents in a system to avoid sub-optimization. • We will combine the philosophical and systems perspectives to define lean as a productive system whose focus is on optimizing processes across a system through the philosophy of continuous improvement. • We need these words and definitions to help us communicate. Philosophies, once internalized, help us to communicate on a feeling-based level. © 2007 Pearson Education

Global Supply Chain Quality and International Quality Standards The Japanese Way -- Shingo’s seven wastes For Toyota Motor Company, the focus was on the continual reduction of waste. Shigeo Shingo, the industrial engineer who was fundamental in helping Toyota to reduce waste, identified a group of seven wastes that workers could remove or reduce by continuously improving processes. overproduction waiting transportation non-value-added processing steps inventory motion making defective products © 2007 Pearson Education

Global Supply Chain Quality andInternational Quality StandardsThe Japanese Way -- Visibility • Often when problems exist in business, the first reflex is to hide the problems as though they don’t exist. The Japanese approach makes the problems visible so they can be removed. • Among the approaches to making problems visible is reducing andeliminating work-in-process inventory, which reveals process problems. • Another approach is the andon, or warning light. Whenever a defect occurs on the line, the line is stopped. This halts production in several workstations. As a result, workers from the production line all converge on the process where the warning light went on. Teams are used to identify and eliminate the fundamental causes of the defect. Once the cause is eliminated, work resumes. The approval to stop the line whenever there is a problem is called the line-stop authority. © 2007 Pearson Education

Global Supply Chain Quality andInternational Quality StandardsThe Japanese Way – In-Process Inspection & N=2 • With in-process inspection, all work is inspected at each stage of the process, and the workers inspect their own work. This approach: • stops the flow-through of defects • gives workers authority to immediately stop defects from happening and • workers canimmediately determine the cause of the defects. • N=2 is an alternative to acceptance sampling of supplier lots. If you know the supplier’s processes are in statistical control and capable, and if the first and last pieces in the lot meet specification, then you can conclude that the entire lot of materials will meet specification. Therefore, only a sample size of 2 is needed for acceptance sampling. © 2007 Pearson Education

Global Supply Chain Quality andInternational Quality StandardsThe Japanese Way – Total Involvement of Workforce & Preventive Maintenance • The total involvement of the workforce requires horizontal deployment and vertical deployment of quality management. • 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. • In preventive maintenance, the worst condition a machine should ever be in is on the day you purchase the machine. By maintaining scheduled maintenance and improvement to equipment, machinery actually can improve with age. With preventive maintenance, heavy, unscheduled maintenance is still performed by shop engineers and maintenance specialists. However, regular cleaning, fluid changing, and light maintenance are handled on a regularly scheduled basis by the people who operate the machinery. © 2007 Pearson Education

Global Supply Chain Quality and International Quality Standards The Japanese Way -- The Five S’s The five S’s are a sequential process that companies follow to remove conditions which can cause problems. • Seiri: 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 conditions that can hide or obscure problems. • Seiketsu:Standardizing locations for tools and equipment • Shetsuke: Discipline in maintaining the four prior S’s © 2007 Pearson Education

Global Supply Chain Quality andInternational Quality StandardsThe European Way – EQA and ISO 9000:000 • It is difficult to tell where Europe now stands concerning quality management because of radical differences in infrastructure, politics, and business practices. Europe appears to be behind the Japanese and U.S. in improving quality. • ISO 9000:2000 is the European standard for quality that has been deployed world-wide because if you are going to compete for European business you have to measure yourself and provide measures to your customers using the ISO 9000:2000 framework. • Two types of quality recognition are widely used in Europe. These are the European Quality Award (EQA) and ISO 9000:2000 certification. © 2007 Pearson Education

Global Supply Chain Quality andInternational Quality StandardsThe European Way – European Quality Award (EQA) • The European Foundation for Quality Management administers the EQA. • The EQA has two levels. The highest level of the EQA is 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. • The EQA is similar to the MBNQA in tone and process. The differences are found primarily in the focus of the EQA on: people satisfaction, impact on society, and business results. • In the EQA, people satisfaction is focused on the perceptions of employees concerning their employer whereas the MBNQA focuses more on those things that lead to customer service and improved products. • The EQA criterion of impact on society is focused on how the company is viewed by the society it affects: quality of life, environment, and preservation of global resources. • The EQA criterion for business results is focused on corporate social responsibility in addition to operational and financial results. © 2007 Pearson Education

Global Supply Chain Quality andInternational Quality StandardsThe European Way - ISO 9000:2000 • On a world-wide basis, ISO 9000:2000 has had a much more significant impact than any of the quality standards or recognitions in terms of the number of companies (400,000) that have implemented the approach. • The focus of ISO 9000:2000 is on companies documenting their quality systems in a series of manuals to facilitate trade through supplier conformance. • Once the quality system is documented and certified by a registrar, ISO 9000:2000 registration states that: • there is a quality system and • the quality system is being adhered to. © 2007 Pearson Education

Global Supply Chain Quality and International Quality Standards The European Way ISO 9000:2000 • To become ISO 9000:2000 certified, you need to: • plan and document your processes, • prove that you are following these documented processes, • prove that the processes are effective, • show that you are correcting deficiencies in your processes, and • show that you are continually improving your processes. • ISO 9000-2000 is not a prescription for running a business. • The requirements provide a recognized international quality standard that businesses everywhere can follow and validate their quality with customers. In turn, supplier quality can be validated. © 2007 Pearson Education

Global Supply Chain Quality and International Quality Standards The European WayIS0 9000:2000 The eight principles of ISO 9000:2000 are similar to the MBNQA categories. 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 © 2007 Pearson Education

Global Supply Chain Quality andInternational Quality StandardsThe European Way IS0 9000:2000 – Selecting A Registrar • The ISO 9000:2000 certification process is very different from the processes for winning the Deming Award, MBNQA, and the EQA. • The selection of the registrar is the most important and ill defined step. • There is no centralized authority that qualifies ISO registrars. • Although many countries officially encourage their firms to use ISO-registered suppliers, no European countries require ISO 9000:2000 registration. However, individual firms world-wide require their suppliers to be certified. • Certain ISO registrars have memoranda of agreement with the departments of commerce of individual countries, which means that out of the hundreds of registrars that exist in the world, only a relative few may be recognized in any particular country. And many registrars are not recognized officially anywhere. • You should check with customers in your country and departments of commerce and customers within the countries to which you plan to export for recognized registrars. © 2007 Pearson Education

Global Supply Chain Quality andInternational Quality StandardsThe European Way - The IS0 9000:2000 Process • The registration process typically takes several months from initial meeting to final registration audit. • Step 1 is inquiry, where the client contacts registrars to investigate the terms for registration. The client then makes a final selection of a registrar. • Step 2 is contacting the registrar. In this process, registration steps are determined, and a price is negotiated. A client-signed quotation or purchase order leads to the first stage of the certification process. Some clients may wish to have a pre-assessment or gap-analysis audit. • Step 3 is the phase 1 audit. At this stage, the registrar performs an onsite audit of the documented quality system against the applicable standard. © 2007 Pearson Education

Global Supply Chain Quality andInternational Quality StandardsThe European Way - The IS0 9000:2000 Process • Step 4 is the certification audit. Every element of the ISO 9000:2000 standard is audited several times during the registration process. A representative sample of an organization’s business processes are chosen for any audit. During each three-year period, 100% of the organization is audited. The audit program is a valuable tool that provides a clearly and mutually defined process and snapshot of auditing – past, present, and future. • Step 5 may involve 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 and style. © 2007 Pearson Education

Global Supply Chain Quality andInternational Quality StandardsThe European Way - The IS0 9000:2000 Process • Step 6 involves the 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. This may involve interviewing the process owners and responsible personnel as designated in the documented quality system for processes chosen from the audit program. • Step 7 involves rolling certification audits. These are sometimes referred to as surveillance audits, where the registrar returns on either 6-month or annual cycles. © 2007 Pearson Education

Global Supply Chain Quality andInternational Quality StandardsThe European Way – ISO 14000 • ISO 14000 is an international standard for environmental compliance, which is a series of standards that provide guidelines and a compliance standard. • ISO 14000 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. • ISO 14000 includes quantified targets, established objectives, emergency and disaster preparedness, and disclosure of environmental policy. • The process of documenting these elements and seeking registration mirrors the ISO 9000:2000 process. Again, a key process has to do with selecting the appropriate registrar. © 2007 Pearson Education

Global Supply Chain Quality andInternational Quality StandardsThe European Way – ISO 14000 • Firms in the U.S. usually decide not to adopt the standard for ISO 14000 because the certification process is very risky. • As a result of the self-study process, firms can possibly discover violations regarding some environmental topic, such as hazardous waste. Once firms discover violations, they are required to report these variances to the U.S. Environmental Protection Agency (EPA). Even if the firm discovers and cleans up environmental problems, the EPA has made it clear the firm will be subject to fines and penalties, which could include shutting down the business. As a result, firms are reluctant to begin the process of self-discovery until the EPA changes its policy. © 2007 Pearson Education

Managing Quality Integrating the Supply Chain S. Thomas Foster