Tqm Final Note

8/17/2019 Tqm Final Note

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TAL QUALITY MANAGEMENT AND GLOBAL COMPETITIVE ADVANTAGE

Bringing TQ to Life at ABC Engineering Company:

ABC is a contract manufacturer of precision sheet metal and machined components for

telecommunications semi-conductor, and medical equipment industries. Some of the ways it exemplifies

the principles of TQ are described below.

C!tomer "o#!

ABC made a strateic decision to carefully select customers that support its !aluesparticularly a

systematic approach to business and performance manaement, desire for lon-term partnerships, and

lobal leadership. "anaement and Tam #eaders wor$ with each customer to establish current

requirements and future needs, and each customer is assined a three-person Customer Ser!ice team

that is on call %& hours a day for day-to-day production issues.

Pro#e!! Orientation

'rocesses such as prototype de!elopment, schedulin, production setup, fabrication, assembly, and

deli!ery ha!e process owners responsible for maintainin the process to customer requirements. A

Quality Assurance team member wor$s with manufacturin teams to create process documentation.

Contino! Impro$ement an% Learning

Teams use a structured approach to e!aluate and impro!e their processes, documentin them, and

presentin a status report of impro!ements to senior leaders and the ABC Steerin Committee. Teams

benchmar$ competitors, (best practice( companies, and customers to learn from others.

Empo&erment an% Team&or'

'roduction and deli!ery processes are desined around cell manufacturin. Teams are responsible for

$nowin their customer)s requirements and producin accordin to those requirements. Teams are

empowered to chane tarets recommended durin strateic plannin if they belie!e it will help them

achie!e hiher performance, as well as to schedule wor$, manae in!entory, and desin the layout of

their wor$ areas.

Management (y "a#t

Team analy*es defect data, customer-reported problems, and control charters enerated durin

production to identify problems and opportunities for impro!ement. +!ery business oal and proect has

defined methods for measurement, and senior leaders meet wee$ly to re!iew company performance and

ensure alinment with directions and plans.



Lea%er!)ip an% *trategi# P+anning

Senior +xecuti!e #eaders. S+#s and the #eadership Committee #C set the strateic direction of the

company, and communicate and reinforce !alues and expectations throuh performance re!iews,

participation in impro!ement or strateic proects, reular interactions with customers and team

members, and reconition of team member achie!ements.

All this has contributed to an annual a!erae increase in sales rowth of /0 percent from 1220 to %333,

and hih le!els of customer and employee satisfaction, and quality and operational performance.

TQM an% *trategi# "o#!

T)e natre of TQ %iffer! from #ommon management pra#ti#e! in many re!pe#t!.

,-*trategi# P+anning an% Management4n traditional manaement, financial and mar$etin issues such as profitability, return on

in!estments, and mar$et share dri!e strateic plannin. Quality plannin acti!ities are deleated

to the (quality control( department. #on-term quality initiati!es are !iewed as bein costly and

not contributin to the ultimate performance measure profit. Quality plannin and strateic

business plannin are indistinuishable in TQ. Quality oals are the cornerstone of the business

plan. "easures such as customer satisfaction, defect rates, and process cycle times recei!e as

much attention in the strateic plan as financial and mar$etin obecti!es.

.-C)anging /e+ation!)ip &it) C!tomer! an% *pp+ier

4n traditional manaement, quality is defined as adherence to internal specifications and

standards. Quality is defined as adherence to internal specifications and standards. Quality is

measured only by the absence of defects. 4nspection of people)s wor$ by others is necessary to

control defects. 4n TQ, quality is defined as products and ser!ices beyond present needs and

expectations of customers. 4nno!ation is required to meet and exceed customers) needs.

Traditional manaement places customers outside of the enterprise and within the domain of

mar$etin and sales. TQ !iews e!eryone inside the enterprise as a customer of an internal or

external supplier, and a supplier of an external or internal customer. "ar$etin concepts andtools can be used to assess internal customer needs and to communicate internal supplier

capabilities.



0-Organi1ationa+ *tr#tre

Traditional manaement !iews an enterprise as a collection of separate, hihly speciali*ed

indi!idual performers and units, loosely lin$ed by a functional hierarchy. #ateral connections

are made by intermediaries close to the top of the orani*ation. TQ !iews the enterprise as a

system of interdependent processes, lin$ed laterally o!er time throuh a networ$ of

collaboratin internal and external suppliers and customers. +ach process is connected to the

enterprise)s mission and purpose throuh a hierarchy of micro-and macro processes. +!ery

process contains sub processes and is also contained within a hiher process. This structure of

processes is repeated throuhout the hierarchy.

2-Organi1ationa+ C)ange

5nce a traditional orani*ation has found a formula for success, it $eeps followin ti.

"anaement)s ob is to pre!ent chane, to maintain the status quo. 4n TQ the en!ironment inwhich the enterprise interacts is chanin constantly. 4f the enterprise continues to do what it

has done in the past, its future performance relati!e to the competition will deteriorate.

"anaement)s ob, therefore, is to pro!ide the leadership for continual impro!ement and

inno!ation in processes and systems, products, and ser!ices. +xternal chane is ine!itable, but a

fa!orable future can be shaped.

3-Team &or'

4n traditional manaement, indi!iduals and departments wor$ for themsel!es. 4ndi!iduals are

dri!en by short-term performance measures, ha!e narrowly defined obs, and rarely see how

they fit into the whole process or system. #ittle communication and cooperation exists between

desin and manufacturin, manufacturin and mar$etin, and sales 6 ser!ice and desin. 4n TQ

indi!iduals cooperate in team structures such as quality circles, steerin committees, and self-

directed wor$ teams. 7epartments wor$ toether toward system optimi*ation throuh cross-

functional teamwor$.

The ad!ersarial relationship between union and manaement is ine!itable in traditional

manaement. The only room for neotiation is in areas such as waes, health, and safety. 4n TQ

the union is a partner and a sta$eholder in the success of the enterprise. The areas for partnership and collaboration are broad, particularly in education, trainin, and meaninful

in!ol!ement of employees in the impro!ement of processes that they affect and that affect their

wor$.



4-Moti$ation an% 5o( De!ign

"oti!ation untraditional manaement is often a$in to "c8reor)s Theory 9 model of

moti!ation: wor$er disli$e wor$ and require close super!ision and control. TQ orani*ations

support the premise of Theory ;: wor$ers are self-moti!ated, see$ responsibility, and exhibit a

hih deree of imaination and creati!ity at wor$. TQ manaers pro!ide leadership rather than

o!ert inter!ention in the processes of their subordinates, who are !iewed as process manaers

rather than functional specialists. 'eople are moti!ated to ma$e meaninful contributions to

what they belie!e is an important and noble cause, of !alue to the enterprise and society.

4n traditional manaement, competition is ine!itable and inherent in human nature. 'erformance

appraisal, reconition, and reward systems place people in an internally competiti!e

en!ironment. 4ndi!idualism is reinforced to the detriment of teamwor$. Competiti!e beha!ior

one person aainst another or one roup aainst another is not a natural state in TQ. TQ

reward systems reconi*e indi!idual as well as team contributions and reinforce cooperation.

6-Management an% Lea%er!)ip

Traditional manaement !iews people as interchaneable commodities, de!eloped to meet the

percei!ed needs of the enterprise. 'eople are passi!e contributors with little autonomy-doin

what they are told and nothin more. TQ !iews people as the enterprise)s true competiti!e ede.

#eadership pro!ides people with opportunities for personal rowth and de!elopment. 'eople are

able to ta$e pride and oy in learnin and accomplishment, and the ability of the enterprise to

succeed is enhanced. 'eople are acti!e contributors, !alued for their creati!ity and intellience.

+!ery person is a process manaer presidin o!er the transformation of inputs to outputs of

reater !alue to the enterprise and to the ultimate customer.

Competiti$e A%$antage on (a!i! of Qa+ity *trategy

·

A firm has many options in definin its lon-terms oals and obecti!es, the customers it wants

to ser!e, the products and ser!ices it produces and deli!ers, and the desin of the production and

ser!ice system to meet these obecti!es. Strateic plannin is the process by which the members

of an orani*ation en!ision its future and de!elop the necessary procedures and operations tocarry out that !ision. Stratey the result of strateic plannin is the patter of decisions that

determines and re!eals a company)s oals, polices, and plans to meet the needs of its

sta$eholders. An effecti!e stratey allows a business to create a sustainable competiti!e

ad!antae.



Qa+ity a! a *trategy

The concept of stratey has different meanins to different people. <ames Brian Quinn characteri*es

stratey as follows:

A stratey is a pattern or plan that interates an orani*ation)s maor oals, policies, and action

sequences into a cohesi!e whole. A well formulated stratey helps to marshal and allocate an

orani*ation)s resources into a unique and !iable posture based on its relati!e internal

competencies and shortcomins, anticipated chanes in the en!ironment, and continent mo!es

by intellient opponents.

"orma+ !trategie! #ontain t)ree e+ement!:

1.8oals to be achie!ed,

%.'olicies that uide or limit action, and

/.Action sequences, or prorams, that accomplish the oals.

+ffecti!e strateies de!elop around a few $ey concepts and thrusts that pro!ide focus. The essence of

stratey is t build a posture that is so stron in selecti!e ways that the orani*ation can achie!e its oals

despite unforeseeable external forces that may arise.

The traditional focus of business strateies has been finance and mar$etin. These parallel two of the

principal sources of competiti!e ad!antae i.e. cost and differentiation. Total quality with a focus on

people leads t impro!ements in both areas. Therefore, quality can be !iewed as a stratey in itself.

The role of quality in business stratey has ta$en two sinificant steps since 12=3. >irst, many firms

ha!e reconi*ed that a stratey dri!en by quality can lead to sinificant mar$et ad!antaes. Second, the

lines between quality stratey and eneric business strateies ha!e become blurred to the point where

TQ principles are interated into most businesses) normal business plannin? that is, TQ is a basic

operatin philosophy that pro!ides the foundation for effecti!e manaement

>or most companies, interation of TQ into strateic business plannin is the result of a natural

e!olution. >or most new companies or those that ha!e enoyed a reasonable measure of success

quality ta$es a bac$ seat to increasin sales, expandin capacity, or boostin production. Strateic

plannin usually focuses on financial and mar$etin strateies.

As a company beins to face increasin competition and risin consumer expectations, cost-cuttin

obecti!es ta$e precedence. Some departments or indi!iduals may champion quality impro!ement

efforts, but quality is not interated in the company)s strateic business plan. 4n the face of mar$et

crises, which many @.S. firms experienced in the 123s and 12=3s, top manaement beins to reali*e

the importance of quality as a strateic operatin policy. 4n many cases, howe!er, quality is considered

separate from financial and mar$etin plans. Companies that aspire to world-class status reach the



hihest le!el of e!olution where quality becomes an interal part of the o!erall strateic plan and is

!iewed as a central operatin stratey.

Competiti!e ad!antae denotes a firm)s ability to achie!e mar$et superiority o!er its competitors. 4n the

lon run, a sustainable competiti!e ad!antae pro!ides abo!e-a!erae performance. A stron

#ompetiti$e a%$antage )a! !i7 #)ara#teri!ti#!:

1.4t is dri!en by customer wants and needs. A company pro!ides !alue to its customers that

competitors do not.

%.4t ma$es a sinificant contribution to the success of the business.

/.4t matches the orani*ation)s unique resources with the opportunities in the en!ironment.

o two companies ha!e the same resources? a ood stratey uses them effecti!ely.

&.4t is durable and lastin and difficult for competitors to copy. A superior research andde!elopment department, for example, can consistently de!elop new products or processes

to remain ahead of competitors.

0.4t pro!ides a basis for further impro!ement.

.4t pro!ides direction and moti!ation to the entire orani*ation.

As each of these characteristics relates to quality, quality can be an important means of ainin

competiti!e ad!antae. #et us see how total quality contributes to competiti!e ad!antae.

7iscuss cost leadership, differentiation, and people as principal sources of competiti!e

ad!antae, and their relationship to quality?Delate quality to the achie!ement of hiher profitability?

·7escribe the importance of quality in meetin customer expectations in product desin, ser!ice,

flexibility and !ariety, inno!ation, and rapid response? and

7iscuss empirical results showin the impact of quality on business results.

*or#e! of Competiti$e A%$antage

The classic literature on competiti!e stratey suests that a firm can posses) two basic types of

competiti!e ad!antae: low cost and differentiation.

Co!t Lea%er!)ip

"any firms ain competiti!e ad!antae by establishin themsel!es as the low-cost leader in an industry.

These firms produce hih !olumes of mature products and achie!e their competiti!e ad!antae throuh

low prices. Such firms often enter mar$ets that were established by other firms. They emphasi*e

achie!in economies of scale and findin cost ad!antaes from all sources. #ow cost can result from



hih producti!ity and hih capacity utili*ation. "ore importantly, impro!ements in quality lead to

impro!ements in producti!ity, which in turn lead to lower costs. Thus a stratey of continuous

impro!ement is essential to achie!e a low-cost competiti!e ad!antae.

To achie!e cost leadership for hih !olume products, companies use a !ariety of approaches:

·

+arly manufacturin in!ol!ement in the desin of the product both for ma$e-!ersus-buy

decisions and for assurance that the production processes can achie!e required tolerances.

·

'roduct desin to ta$e ad!antae of automated equipment by minimi*in the number of parts,

eliminatin fasteners, ma$in parts symmetric whene!er possible, a!oidin riid and stiff parts

and usin one-sided assembly desins.

#imited product models and customi*ation in distribution centers rather than in the factory.

·

A manufacturin system desined for a fixed sequence of operations. +!ery effort is made toensure *ero defects at the time of shipment. Eor$-in-process in!entory is reduced as much as

possible, and multi s$illed, focused teams of employees are used.

A cost leader can achie!e abo!e-a!erae performance if it can command prices at or near the industry

a!erae. Fowe!er, it cannot do so with an inferior product. The product must be percei!ed as

comparable with competitors or the firm will be forced to discount prices well below competitors)

prices to ain sales. This can cancel any benefits that result from cost ad!antae.

Differentiation

To achie!e differentiation, a firm must be unique in its industry alon some dimensions that are widely

!alued by customers. 4t selects one or more attributes that customers percei!e as important and positions

itself uniquely to meet those needs. >or instance, 7ell)s direct business model was the first of its $ind in

the computer industry and continues to be a principal source of the company)s success.

5ften, a firm with a differentiation stratey can command premium prices and achie!e hiher profits.

<uran cites an example of a power tool manufacturer that impro!ed reliability well beyond that of

competitors. >ield data showin that the differences in reliability resulted in sinificantly lower

operatin cost were publici*ed, and the company was able to secure a premium price.

Fowe!er, a firm that uses differentiation as its source of competiti!e ad!antae must ma$e its products

or systems difficult to copy. 5ften this in!ol!es culture, habits, and sun$ costs. >or example, why

doesn)t e!ery company copy 7ell)s superior direct business modelG 7ell)s approaches are hardly a

secret? e!en "ichael 7ell has written a boo$ about it. Competitors ha!e copied its Eeb site with

stunnin precision, but they face far reater difficulty copyin the supportin acti!itiespurchasin,

schedulin, and loisticsthat 7ell has built around its direct model o!er se!eral decades. Competitors



are burdened by lon-standin relationships with suppliers and distributors and by a different culture.

Peop+e

The competiti!e ad!antae resultin from an orani*ation)s people can dri!e low cost and

differentiation. >or example, o!er se!eral decades, Southwest Airlines has been the most profitable @.S.

carrier. 4t has fewer employees per aircraft and flies more passeners per employee. "uch of its cost

ad!antae comes from its !ery producti!e, moti!ated, and unioni*ed wor$force.2 4s its competiti!e

ad!antae low cost, or is it the peopleG 4t would appear that the real dri!er of Southwest)s competiti!e

ad!antae is its people. Ferb Helleher, former C+5, once stated, (4t)s the intanibles that are the

hardest thins for competitors to imitate. ;ou can et on an airplane. ;ou can et tic$et-counter space,

you can et baae con!eyors. But it is our esprit de corp.the culture, the spiritthat is truly our most

!aluable competiti!e asst.( 'ro!idin a wor$ en!ironment that foster cooperation, initiati!e, and

inno!ation? educatin and trainin the wor$force? and enhancin the factors that affect well-bein,satisfaction, and moti!ation are !ery difficult for competitors to copy. This is a sinificantly different

philosophy from the wor$ en!ironment that came into bein durin the 4ndustrial De!olution.

T)e Importan#e of Qa+ity to Competiti$e A%$antage

The role of quality in achie!in competiti!e ad!antae was demonstrated by se!eral research studies

durin the 12=3s. '4"S Associates, 4nc., a subsidiary of the Strateic 'lannin 4nstitute, maintains a

database of 1,%33 companies and studies the impact of product quality on corporate performance.

researchers ha!e found that'roduct quality isthe most important determinant of business profitability.

·Business offerin premium quality products and ser!ices usually ha!e lare mar$et shares and

were early entrants into their mar$ets.

·

Quality is positi!ely and sinificantly related to a hiher return on in!estment for almost all

$inds of products and mar$et situations. '4"S studies ha!e shown that firms with products of

superior quality can more than triple return on sales o!er products percei!ed as ha!in inferior

quality.A stratey of quality impro!ement usually leads to increased mar$et share, but at a cost in terms

of reduced short-run profitability.Fih quality producers can usually chare premium prices.

The !alue of product in the mar$etplace is influenced by the quality of its desin. 4mpro!ements in performance, features, and reliability will differentiate the product from its competitors, impro!e a

firm)s quality reputation, and impro!e the percei!ed !alue of the product. This allows the company to

command hiher prices and achie!e an increased mar$et share. This, in turn, leads to increased re!enues

that offset the added costs of impro!ed desin and pro!ides sustainable basis for the competiti!e

ad!antae.

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