1 - 2

Sub-Topic

Strategy ContentLeadership for QualityQuality and EthicsQuality as StrategicDeploying Quality (Hoshin Kanri)Does Quality Lead to Better

Business Result?

1 - 3

“Quality is not just a control systemcontrol system; quality is a management functionmanagement function. -- David Garvin

“Quality is strategic. Strategic planning has two important dimensions content and content and processprocess. Strategy process consists of the steps used to develop the strategy – Foster, T. S.

Strategy Content

1 - 4

“What must a business do to survive ? Grow ? Beat the competition? Satisfy customers better? Be the low-cost producer? Provide higher quality? Furnish faster delivery? Design a higher-performance product?

The answer to what a company must do in order to survive is difference for every company and every marketdifference for every company and every market.

Each company, in order to maximize its success, must decide what to emphasize and must allocate its resources accordingly.

To do this, an effective organization must study the market and the competition and create a strategic plan for how it will compete in

its industry or market – (Summers, 2009)

1 - 6

Strategies are broad statements that set the direction for the organization to take in realizing its mission and vision. (Summers, 2009)Strategies are the process of envisioning an organization’s future and developing the necessary goals, objectives, and action plans to achieve that future. (Summers, 2009)

What are strategies?

1 - 7

Strategic Planning Strategic Planning is a process of involving everyone in matching the vision, mission, and core values of an organization with the current situation to focus, tactical activities now and in the future. Strategic plans set the direction and pace for the entire organization.

(Summer, 2009)

1 - 8

“A strategy is a pattern or plan that integrates an organization’s major goals, policies, and action sequences into a cohesive whole.”

Formal strategy includes:Goals to be achievedPolicies to guide or limit

actionAction sequences, or

programs, that accomplish the goals

Evans, 2009

1 - 9

Strategic planning

1. Focus on customers2. Leaders determine critical success factors 3. Goals and objectives are process and results oriented4. Goals and objectives are based on data and are driven by trend or

pattern analysis5. Focus in on processes6. Alignment exists between CSF, mission, vision, goals, objectives,

and day-to-day activities.7. Everyone knows how his or her day-to-day activities align with CSF,

mission, vision, goals, objectives.8. Improvement activities are focused on activities CSF9. Improvement activities are both within and across functional areas.

Summers, 2009

1 - 10

Why is quality planning important?

Foster, 2010

Quality improvement involves identifying potential improvements, prioritizing areas for improvement, and planning the implementation of projects and improvement.

Quality improvement is a planned managerial activity.

1 - 11

How are strategic plans created?

Summers, 2009.

The organization’s business (what business are they really in)

The principal findings from the internal and external assessment:

Strengths and weaknesses Customer information Economic environment information Competition information Government requirements Technological environment

Strategic Planning Process (Evans, 2009)Strategic Planning Process (Evans, 2009)

Mission Vision Guiding Principles

Environmental assessment

Strategies

Strategic Objectives

Action Plans

Broad statements of direction

Capabilities and risks

Things to change or improve

Implementation

Reason for existence Future intent

Attitudes and policies

1 - 13

Mission

Definition of products and services, markets, customer needs, and distinctive competenciesSolectron: “…to provide worldwide responsiveness to our customers by offering the highest quality, lowest total cost, customized, integrated, design, supply chain, and manufacturing solutions through long-term partnerships based on integrity and ethical business practices.”

1 - 14

Where the organization is headed and what it intends to be

Brief and memorable - grab attentionInspiring and challenging - creates excitementDescriptive of an ideal state - provides guidanceAppealing to all stakeholders - employees can identify with

Vision

Solectron: “Be the best and continuously improve”

1 - 15

Foster, 2010…

What is Strategy Content?

“ content refers to the variables, definitions, components, and concepts that are included in the strategy”

1 - 16

Foster, 2010…

What are the content variables content variables that should be included in strategic planning? Among the variables are :

Time Leadership Quality Costs Generic strategies (cost,

differentiation, and focus) Order winners Quality as a core competency.

1 - 17

SQP- The importance of time in quality improvement.

Time is important component of strategy. Strategic planning implies planning for the long term. Thus strategic planning is important for continuous quality improvement.

Firms will seek after and attempt to attain rapid quality improvement in order to attain the benefits associated with improved quality, such as greater market share and increased sales.

1 - 18

1. The time it takes to achieve business goals as a result of quality.

There are two aspects of time:

2. The speed at which companies improve.

1 - 19

Setting short-term goals for higher quality levels and managing toward those goals actually may prove detrimental to the firm.

Managerial action that will lead to an optimal rate of quality improvement requires an understanding of the effects of rapid quality improvement.

1 - 20

Leadership is a key strategic variable for quality improvement

SQP- Leadership for Quality

A leader organizes, plans, controls, communicates, teaches, advices, and delegates. The existence of a leader implies the existence of a follower, Therefore

Leadership is the process by which a leader influences a group to move towards the attainment of superordinate goals.

(Foster,2010)

1 - 21

For followers to have power, leadership must share power. As a result leadership is about the sharing of power.

Leadership powers take many forms such as : • The power of expertise

• Reward power• Coercive power• Referent power• Legitimate power

1 - 22

Leadership for quality is leadership from the perspective of total quality.

It is about applying the principles of leadership to continually improve work methods and processes.

Leadership for quality is based on the philosophy that continually improving work methods and processes will, in turn, improve quality, cost, productivity, and return on investment.

(Goetsch and Davis,2010)

1 - 23

Improve Quality

Cost Decrease (Less rework, fewer mistakes,

fewer delays, snags, better use of machine

time and materials)

Productivity Improves

Capture the Market

Stay in Business

Provide Jobs and More Jobs

Deming Value Chain

Principles of Leadership for Quality

1. Customer Focus

• The organization’s primary goal is to meet or exceed customer expectations.

• In total quality setting, there are both – internal and external customers.

Internal / external customer

2. Recognizing the Structure of Work

• Menganalisa proses kerja bagi belum mantap memastikan kesesuaiannya seperti bersesuaian dengan tools.

• Menganalisa proses kerja sudah mantap bagi tujuan penambahbaikan.

3. Obsession with Quality

• Is an attitude that leaders must be instilled and continually nurtured in organization.

• It means that every employee aggressively pursues quality in attempt to exceed the expectations of customers.

4. Freedom Through Control

• Iaitu merujuk kepada kawalan sumber manusia.

• Kawalan dari segi kaedah bekerja dan proses yang dilakukan.

• Bermakna pemimpin memastikan kakitangan berkeja dengan kaedah dan proses yang seragam.

5. Unity of Purpose

• Matlamat organisasi yang jelas dan tepat supaya semua kakitangan faham dan komited.

6. Looking for Faults in Systems.

• 85% kesilapan dalam organisasi disebabkan oleh kegagalan dalam kawalan sistem pengurusan (Deming & Juran)

• Pemimpin perlu elak dari ‘mengutuk’ masalah kepada menilai / perbetulkan sistem.

7. Teamwork

• Pemimpin perlu mewujudkan konsep kerja berpasukan dalam organisasi.

Teamwork vs Team Building

8. Continuing Education and Training

• Sekarang adalah zaman teknologi tinggi.

• Perlu pendidikan dan latihan berterusan.

Education VS Training

1 - 33

Quality and Ethics

1. Quality appears to be good business.

2. Quality is also good ethics.3. It is unethical to ship defective

products knowing to a customer.4. Reliable products and low defect

rates reflect an ethical approach of management’s care for its customers.

1 - 34

Organizations focusing on their customers often develop a set of ethics that includes valuing customers.

This is reflected in education, training, health, wellness, and compensation programs that show empathy for the employees.

Good quality management is good ethics.

1 - 35

From the perspective of generic strategies.

SQP- Quality as Strategic

These strategies are :

1. Cost2. Differentiation3. Focus

1 - 36

1. Cost of Quality

One of generic means of competing is COST.

Traditionally, this meant the LOWEST-PRICED items in the industry.

Many companies compete on COST.

1 - 37

New definitions of COST are expensive. Considering the summation of costs over the life of a product. One of generic means of competing is COST.

This includes service, maintenance, and operating costs for the product.

Two broad categories of cost: Cost due to poor quality. Costs associated with improving

quality.

1 - 38

Three dimensions of Costs of Quality.

PAF Paradigm Accounting for Quality-Related Costs Lundvall-Juran Quality Cost Model

1 - 39

PAF Paradigm

1. Prevention Cost2. Appraisal Costs3. Failure Costs

PAF paradigm translates quality costs into three broad categories.

1 - 40

Prevention Cost (PC)

PC costs are those costs associated with preventing defects and imperfections from occurring. PC costs are the most subjective of the three categories of costs.. PC costs include costs such as training, quality planning, process engineering, and other costs associated with assuring quality beforehand.

1 - 41

Prevention Costs1. The cost of setting, planning, and maintaining a documented QMS.2. Quality planning: establishing production process conformance to design

specification procedures, and designing of test procedures and test equipment.

3. Quality and process engineering (including preventive maintenance)4. Calibration of quality-related production equipment.5. Supplier QA6. All training7. Robust design8. Defect data analysis for corrective action purposes9. Time spent on quality system audit

1 - 42

Appraisal Costs

Are associated with the direct costs of measuring quality.

1 - 43

Appraisal CostsAppraisal Costs1. Laboratory acceptance testing2. Inspection and tests by inspector3. Inspection and tests by noninspectors4. Setup for inspection and test5. Inspection and test materials6. Product quality audits7. Review of test andc inspection data8. On-site performance tests9. Internal test and release10.Evaluation of materials and spares11.Supplier monitoring12.ISO 9000:200813.Quality award assessments

1 - 44

Failure Costs

FCs are roughly categorized into TWO areas of costs: Internal Failure Costs

(IFCs) External Failure

Costs(EFCs)• IFCs associated with on-line

failure• EFCs are associated with

product failure after production process

1 - 45

Failure CostsFailure Costs IFC/EFCIFC/EFC1. Costs of troubleshooting2. Reinspection of stock after defect detection3. Disruption of production schedules4. Complaint handling and replacements plus extra time

with customers5. Warranty 6. Cost of holding higher levels of stock as a buffer against

quality failure7. Cost of corrective maintenance to plant8. Cost of corrective action to product (design, repair)9. Lost production because of labor availability problems

1 - 46

Failure CostsFailure Costs IFC/EFCIFC/EFC10. Lost of production caused by system problems11. Concession 12. Process waste13. Cost of product scrapped at product audit14. Cost associated with disposition of all scrap.

1 - 47

Accounting for Quality-Related Costs (AQRC)

AQRCs are all about the calculation of incurred costs.

Example – Prevention, Appraisal, and Failure.

1 - 48

Exam

ple

– A

nn

ual

Qu

ality

Costs

Annual Quality Cost RM

Failure CostDefective products Engineered scrapNonengineering scrapConsumer adjustmentsDowngrading productsLost goodwillCustomer policy changesTOTAL

527617265

125274623980

1430678Not evaluatedNot evaluated

2202473

Appraisal costs

Receiving inspectionLine 1 inspectionmLine 2 inspectionSpot checkingTOTAL

35765422345356763766

195332

Prevention costsQuality trainingProcess Engineering

CorporatePlant

Product redesignTOTAL

Grand TOTAL

14500

1256783912416422

1957242593529

1 - 49

Solution

Ratio of appraisal to failure costs:195332 / 2202473 = .0887

Ratio of prevention to failure costs195724 / 2202473 = .0889

Ratio of prevention and appraisal to failure costs(195332 + 195724) / 202473 = .1776

Proportion of total quality costsPrevention : 195724 / 2593529 = .0755Appraisal : 195332 / 2593529 = .0755Failure : 2202473 / 2593529 = .8492

1 - 50

The table shows that failure costs (2202473) are very high compared with the prevention (195724) and appraisal (195332).

Increasing prevention and appraisal activities could result in a significant decrease in failure cost.

1 - 51

Lundvall-Juran Quality Cost Model

Using the law of diminishing marginal returns, quality costs can be modeled to show the tradeoffs between these costs = called Lundvall – Juran Model.

1 - 52

The Lundvall – Juran Model is a simple economic model.

It states that as expenditure in prevention and appraisal activities increase, quality conformance should increase.

Example – the more organization spend on training and developing employees, the more benefit organization should get.

As conformance improves, failure costs will lessen as well.

1 - 53

The product price is significantly above the average market price for such product.

2. Differentiation trough Quality

It might be a very expensive, brand-name that the customer want. Chances are that such a product benefits from differentiation.

Differentiation is achieved by a competitor if the consumer perceives the product or service to be unique in an important way.

1 - 54

Example - motorcycle

1 - 55

Product that is particularly regional or is marketed to a particular segment of the population.

3. Focus trough Quality

This limited customer group or segment of the market is the object of the focus strategy.

By focusing on the particular group of consumer will the organization will get more business.

1 - 56

Examples

1 - 57

HOSHIN ????

KAIZEN ????POKA-YOKE???

Quality Strategic Process

1 - 58

(Foster, 2010)

Process consists of the steps developing strategy within an organization. There are many different processes strategy – the simple and the comprehensive.

1 - 59

Simple Strategic Model

Foster, 2010

Known as ‘Forced-Choice Model’.

FCM is very simple and very useful for firms that are beginning / inexperienced in strategic planning.

FCM is a generic and is used simplify for explanation purposes.

1 - 60

FC Simple Strategic Model

Organization’s PositionEnvironmental

Assessment

1. Statement of mission.2. Interrelated set of financial & nonfinancial objectives.3. Statement of strengths and weakness.4. Forecast of operation needs.5. Major future programs

6. Broad economic assumption.

7. Key government and regulatory

issues8. Major

technological forces.9. Significant market

opportunities and treats

Explicit strategic of competitors.

11. Strategic options; requirements for

implementing options; contingency plans.

1 - 61

The strategic planning process contains quality concerns at every step of the process.

A Mature Strategic Quality Planning

Using professional facilitators, the strategic management team reviews the current year’s performance against projections .

The team makes adjustments to the current year’s plan.

Once completed, the mission, vision, and values are reviewed and updated.

1 - 62

The company forecast market demand and reassessing company position. The company forecast market demand and reassessing company position. Company discusses their competencies

and develop visions and expectations for each of its product.

Makes revenue projection and plan to extent competencies.

Assessment future market

Company analysis of capacity needs for the coming year

1 - 63

Develop broad goals and plans

To develop separate missions, visions, values, and plans.

Develop the coming year’s annual strategic plan.

Include market and product projections, plant and equipment projections, labor projections,

1 - 64

Step 1 : Mission, Vision, Values, and Current Strategy

Step 2: Market Assessment

Step 3 : Set Goals by Assessing Future Markets

Step 4 : Devbelop Broad Goals and Plans by Production Line

Step 5 : Review and Monitor Implementation of Strategic

Plan

Pre

pare

for

Nex

t P

lann

ing

Cyc

le

1 - 65

Comprehensive developing strategic - Deploying Quality (Hoshin Kanri)

Foster, 2010

DQ is a comprehensive quality strategic process.

HoshinHoshin IS Japanese for a COMPASS, a COURSE, a POLICY, or a PLAN.

This is to indicate a VISION or PURPOSE to an existence.

KanriKanri refers to MANAGEMENT CONTROL or POLICY DEPLOYMENT.

1 - 66

HoshinHoshin is Japanese Strategic Quality Management (QM).

The Japanese translation of hoshin kanri as:

A useful interpretation of the literal translation is that hoshin kanri is a methodology for setting strategic direction.

Bedi, 2006

ho – method shin – shiny metal showing direction kanri - planning

It also known as hoshin planning, policy management, and policy deployment.

1 - 67

Development of 3 – 5 year Hoshin Goals

Rev

iew

Hos

hin

Pro

cess

Senior Management Devbelops 1 Year Hoshin Goals

Product Management Develops 1 Year Hoshin Goals

Senior Management Action Plans

Product Management Action Plans

Revfiew By CEO Review By Senior Management

Problems

Yes

No

Yes

1 - 68

Does Quality Lead to Better Business Result?

Foster, 2010

The answer was provided by W. Edward Deming in value chain concept.