Strategic Mgt Assignment

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Assignment On,

TOTAL QUALITY MANAGEMENT (TQM) & CORE PROCESSES

REENGINEERING (CPR)

Submitted By:

Student ID:

Subject: International Strategic Management.

Course No: EIB-516

Submission Date: December 13, 2011.

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ACKNOWLEDGEMENT

I am heartily thankful to course teacher of International Strategic Management,whose encouragement, guidance and support from the initial stage to the final level

enabled me to develop an understanding of the topic and prepare this asignment.

I thank all of those who supported me in any respect during the completion of the

assignment.

Date: December 13, 2011.

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1. Introduction

Strategic management is a field that deals with the major intended and

emergent initiatives taken by general managers on behalf of owners,

involving utilization of resources, to enhance the performance of firms in

their external environments. It entails specifying the organization's mission,

vision and objectives, developing policies and plans, often in terms of

projects and programs, which are designed to achieve these objectives, and

then allocating resources to implement the policies and plans, projects and

programs. Balanced scorecards often used to evaluate the overall

performance of the business and its progress towards objectives. Recent

studies and leading management theorists have advocated that strategy

needs to start with stakeholders expectations and use a modified balanced

scorecard which includes all stakeholders.

Strategic management is a level of managerial activity under setting goals

and over Tactics. Strategic management provides overall direction to the

enterprise and is closely related to the field of Organization Studies. In the

field of business administration it is useful to talk about "strategic alignment"

between the organization and its environment or "strategic consistency."

According to Arieu (2007), "there is strategic consistency when the actions of

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an organization are consistent with the expectations of management, and

these in turn are with the market and the context." Strategic management

includes not only the management team but can also include the Board of

Directors and other stakeholders of the organization. It depends on the

organizational structure.

“Strategic management is an ongoing process that evaluates and controls

the business and the industries in which the company is involved; assesses

its competitors and sets goals and strategies to meet all existing and

potential competitors; and then reassesses each strategy annually or

quarterly [i.e. regularly] to determine how it has been implemented and

whether it has succeeded or needs replacement by a new strategy to meet

changed circumstances, new technology, new competitors, a new economic

environment., or a new social, financial, or political environment.

One may generally consider that there are three distinct areas inherent in

any business: marketing, finance, and operations; all other business

disciplines fit somewhere under one or more of these areas. For example,

finance could include investing, real estate, insurance or banking. While

management is considered an academic discipline unto itself it is actually a

part of all three areas: financial management, marketing management, andoperations management. Operations management is the area concerned

with the efficiency and effectiveness of the operation in support and

development of the firm's strategic goals. Other areas of concern to

operations management include the design and operations of systems to

provide goods and services. To put it succinctly, operations management is

the planning, scheduling, and control of the activities that transform inputs

(raw materials and labor) into outputs (finished goods and services). A set of

recognized and well-developed concepts, tools, and techniques belong within

the framework considered operations management. While the term

operations management conjures up views of manufacturing environments,

many of these concepts have been applied in service settings, with some of

them actually developed specifically for service organizations.

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Operations management is also an academic field of study that focuses on

the effective planning, scheduling, use, and control of a manufacturing or

service firm and their operations. The field is a synthesis of concepts derived

from design engineering, industrial engineering, management information

systems, quality management, production management, inventory

management, accounting, and other functions.

The field of operations management has been gaining increased recognition

over the last two decades. One major reason for this is public awareness of

the success of Japanese manufacturers and the perception that the quality of

many Japanese products is superior to that of American manufacturers. As a

result, many businesses have come to realize that the operations function is

just as important to their firm as finance and marketing. In concert with this,

firms now realize that in order to effectively compete in a global market they

must have an operations strategy to support the mission of the firm and its

overall corporate strategy.

Another reason for greater awareness of operations management is the

increased application of operations management concepts and techniques to

service operations. Finally, operations management concepts are being

applied to other functional areas such as marketing and human resources.

The term marketing/operations interface is often used.

2. HISTORY OF OPERATIONS MANAGEMENT

Until the end of the 18th century, agriculture was the predominant industry

in every country. The advent of the steam engine and Eli Whitney's concept

of standardized parts paved the way for the Industrial Revolution with its

large manufacturing facilities powered by steam or water. A number of

countries (the United States included) evolved from an agricultural economy

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to an industrial economy. But for a time, manufacturing was more of an art

than a science. This changed with the introduction of Frederick W. Taylor's

systematic approach to scientific management at the beginning of the

twentieth century. The introduction of Taylor's method of scientific

management and Henry Ford's moving assembly line brought the world into

an age where management was predominantly centered on the production

of goods.

In the late 1950s and early 1960s scholars moved from writing about

industrial engineering and operations research into writing about production

management. Production management had itself become a professional field

as well as an academic discipline. As the U.S. economy evolved into a service

economy and operations techniques began to be incorporated into services

the term production/operations management came into use. Today, services

are such a pervasive part of our life that the term operations management is

used almost exclusively.

2.1 Importance of organization’s internal operation to its overall

performance and strategic success

Efficient internal operations are the foundation of long-term corporate

success. But individuals or teams can only approach their full performance

potential when they commit to achieving strategic objectives. A corporation’s

leadership strategy must be supported by a foundation of internal operations

that are focused, understood, and accepted if the corporation is ultimately to

succeed. The challenge for corporate leadership must go for beyond

establishing a strategic plan and /or articulating overall performanceobjectives. It must also create an environment or culture in which the

individual contributor, alone or participating on a team, can identify with end

result in a personal way. This linking between people and their essential

elements separates those companies that simply exist from those who truly

achieve.

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3. WHAT DO OPERATIONS MANAGERS DO?

At the strategic level (long term), operations managers are responsible for or

associated with making decisions about product development (what shall we

make?), process and layout decisions (how shall we make it?), site location

(where will we make it?), and capacity (how much do we need?).

At the tactical level (intermediate term), operations management addresses

the issues relevant to efficiently scheduling material and labor within the

constraints of the firm's strategy and making aggregate planning decisions.

Operations managers have a hand in deciding employee levels (how many

workers do we need and when do we need them?), inventory levels (when

should we have materials delivered and should we use a chase strategy or a

level strategy?), and capacity (how many shifts do we need? Do we need to

work overtime or subcontract some work?).

At the operational level, operations management is concerned with lower-

level (daily/weekly/monthly) planning and control. Operations managers and

their subordinates must make decisions regarding scheduling (what should

we process and when should we process it?), sequencing (in what order

should we process the orders?), loading (what order to we put on whatmachine?), and work assignments (to whom do we assign individual

machines or processes?).

Today's operations manager must have knowledge of advanced operations

technology and technical knowledge relevant to his/her industry, as well as

interpersonal skills and knowledge of other functional areas within the firm.

Operations managers must also have the ability to communicate effectively,

to motivate other people, manage projects, and work on multidisciplinaryteams. Sunil Chopra, William Lovejoy, and Candace Yano describe the scope

of operations management as encompassing these multi-disciplinary areas:

• Supply Chains—management of all aspects of providing goods to a

consumer from extraction of raw materials to end-of-life disposal.

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• Operations Management/Marketing Interface—determining what

customers' value prior to product development.

• Operations Management/Finance Interface—Capital equipment and

inventories comprise a sizable portion of many firms' assets.

• Service Operations—Coping with inherent service characteristics such

as simultaneous delivery/consumption, performance measurements,

etc.

• Operations Strategy—Consistent and aligned with firm's other

functional strategies.

• Process Design and Improvements—Managing the innovation process.

3.1 The Strategic Role of Operations

One of the two main sources to the capacity and the abilities is a firm’s

operations to produce the elements of differentiation, low cost and quick

response that customers value. A firm’s ability to produce the elements of

competitive advantage is dependent on it’s capabilities or the internal

resources it has to draw from, and this perspective is sometimes referred to

as the source-based view of the firm.

Processes are systems of the interconnected activities involved in

accomplishing an organization’s work. For instance key process:

For a bank: key processes might include credit management and

transactions.

For an airline: key process might be flight operations, route and

management and ticketing.

The generic model of core processes and systems given below :

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Fig 1: Generic Model of Core Processes and Systems

Complementary approaches to improving a firm’s process capabilities. One is

commonly known as total quality management (TQM), the other as core

process reengineering (CPR).

Total Quality Management (TQM) is an approach that seeks to improve

quality and performance which will meet or exceed customer expectations.

This can be achieved by integrating all quality-related functions and

processes throughout the company. TQM looks at the overall quality

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measures used by a company including managing quality design and

development, quality control and maintenance, quality improvement, and

quality assurance. TQM takes into account all quality measures taken at all

levels and involving all company employees.

There are several reasons why TQM and CPR have become so popular for

improving process execution capabilities

1. The encourage a strategic approach to management at the

operations level: Process improvement virtually always cuts across

functions or involves multiple departments. When individual

departments or functions are manages in isolation, managers tend to,

in the language of management science.” Reach local maximum while

avoiding global optimums.” In other words

2. They get the results managers want

3. They work equally well for blue-collar and white –collar

process: regardless of whether the output is a service or a

manufactured good, process usually share certain elements. Managing

operations as processes has provided a common framework that

managers can apply throughout their organization, and this

encourages its widespread use.

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Fig 2: Widespread Use of Various TQM and CPR Related Practices

4. They allow organizations to take advantage of several

“enabling” developments: over the last 10/15 years, several

developments have taken place that facilitate, or enable managing

operations as cross-functional processes. When work teams were

organized around functions, cross – functional work was virtually

impossible, but as workforces are organized into cross-functional

teams, organizational entities that can take a process perspective

develop.

5. They fit with an orientation toward interorganizational

collaboration: as organization process management, they grow

more adept at looking at the cross-functional issues cutting

horizontally across intraorganizational boundaries can be

extended to interorganizaional collaboration with suppliers

and customer.

4. Origins of TQM

Total quality management has evolved from the quality assurance methods

that were first developed around the time of the First World War. The war

effort led to large scale manufacturing efforts that often produced poor

quality. To help correct this, quality inspectors were introduced on the

production line to ensure that the level of failures due to quality was

minimized.

After the First World War, quality inspection became more commonplace in

manufacturing environments and this led to the introduction of Statistical

Quality Control (SQC), a theory developed by Dr. W. Edwards Deming. This

quality method provided a statistical method of quality based on sampling.

Where it was not possible to inspect every item, a sample was tested for

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quality. The theory of SQC was based on the notion that a variation in the

production process leads to variation in the end product. If the variation in

the process could be removed this would lead to a higher level of quality in

the end product.

After World War Two, the industrial manufacturers in Japan produced poor

quality items. In a response to this, the Japanese Union of Scientists and

Engineers invited Dr. Deming to train engineers in quality processes. By the

1950’s quality control was an integral part of Japanese manufacturing and

was adopted by all levels of workers within an organization.

By the 1970’s the notion of total quality was being discussed. This was seenas company-wide quality control that involves all employees from top

management to the workers, in quality control. In the next decade more non-

Japanese companies were introducing quality management procedures that

based on the results seen in Japan. The new wave of quality control became

known as Total Quality Management, which was used to describe the many

quality-focused strategies and techniques that became the center of focus

for the quality movement.

4.1 Principles of TQM

TQM can be defined as the management of initiatives and procedures that

are aimed at achieving the delivery of quality products and services. A

number of key principles can be identified in defining TQM, including:

• Executive Management – Top management should act as the main

driver for TQM and create an environment that ensures its success.

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• Training – Employees should receive regular training on the methods

and concepts of quality.

• Customer Focus – Improvements in quality should improve customer

satisfaction.

• Decision Making – Quality decisions should be made based on

measurements.

• Methodology and Tools – Use of appropriate methodology and tools

ensures that non-conformances are identified, measured and

responded to consistently.

• Continuous Improvement – Companies should continuously work

towards improving manufacturing and quality procedures.

• Company Culture – The culture of the company should aim at

developing employees ability to work together to improve quality.

• Employee Involvement – Employees should be encouraged to be pro-

active in identifying and addressing quality related problems.

4.2 The Cost of TQM

Many companies believe that the costs of the introduction of TQM are fargreater than the benefits it will produce. However research across a numberof industries has costs involved in doing nothing, i.e. the direct and indirectcosts of quality problems, are far greater than the costs of implementing TQM.

The American quality expert, Phil Crosby, wrote that many companies choseto pay for the poor quality in what he referred to as the “Price of Nonconformance”. The costs are identified in the Prevention, Appraisal, and

Failure (PAF) Model.

Prevention costs are associated with the design, implementation andmaintenance of the TQM system. They are planned and incurred beforeactual operation, and can include:

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• Product Requirements – The setting specifications for incomingmaterials, processes, finished products/services.

• Quality Planning – Creation of plans for quality, reliability, operational,production and inspections.

• Quality Assurance – The creation and maintenance of the quality

system.• Training – The development, preparation and maintenance of

processes.

Appraisal costs are associated with the vendors and customers evaluation of purchased materials and services to ensure they are within specification. They can include:

• Verification – Inspection of incoming material against agreed uponspecifications.

• Quality Audits – Check that the quality system is functioningcorrectly.

• Vendor Evaluation – Assessment and approval of vendors.

Failure costs can be split into those resulting from internal and externalfailure. Internal failure costs occur when results fail to reach qualitystandards and are detected before they are shipped to the customer. Thesecan include:

• Waste – Unnecessary work or holding stocks as a result of errors,

poor organization or communication.• Scrap – Defective product or material that cannot be repaired, used

or sold.

• Rework – Correction of defective material or errors.

• Failure Analysis – This is required to establish the causes of internalproduct failure.

External failure costs occur when the products or services fail to reachquality standards, but are not detected until after the customer receives theitem. These can include:

• Repairs – Servicing of returned products or at the customer site.

• Warranty Claims – Items are replaced or services re-performed underwarranty.

• Complaints – All work and costs associated with dealing withcustomer’s complaints.

• Returns – Transportation, investigation and handling of returneditems.

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4.3 Principles of CPM

When discussing how to improve the way we work within any organization,core process re-engineering is a commonly used tool. Why? The reason is

that optimization of business processes to eliminate duplicating or redundant

steps can contribute significantly to improving organizational efficiency.

What is a process?

If you have ever waited in line at the grocery store, you can appreciate the

need for process improvement. In this case, the "process" is called the

check-out process, and the purpose of the process is to pay for and bag your

groceries. The process begins with you stepping into line, and ends with youreceiving your receipt and leaving the store. You are the customer (you have

the money and you have come to buy food), and the store is the supplier.

The process steps are the activities that you and the store personnel do to

complete the transaction. In this simple example, we have described a

business process. Imagine other business processes: requesting a new

telephone service from your telephone company, developing new products,

administering the social security process, building a new home, etc.

Davenport & Short (1990) define business process as "a set of logically

related tasks performed to achieve a defined business outcome". A process

is "a structured, measured set of activities designed to produce a specified

output for a particular customer or market. It implies a strong emphasis on

how work is done within an organization" (Davenport 1993). In their view,

processes have two important characteristics: (i) They have customers

(internal or external), (ii) They cross organizational boundaries, i.e. they

occur across or between organizational subunits.

Processes are generally identified in terms of beginning and end points,

interfaces, and organization units involved, particularly the customer unit.

High impact processes should have process owners. Examples of processes

common among UN offices include: developing a programme strategy,

procurement process for program supplies and office supplies, processing of

payments, etc.

4.4 What is process reengineering?

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Improving business processes is paramount for organizations and businesses

to stay competitive in the marketplace (be it developmental or otherwise)

and provide better products and services.

Business Process Improvement (BPI) efforts attempt to understand, map and

measure the current process, and make performance improvementsaccordingly. This method is effective to obtain gradual and incremental

improvement.

Nowadays, organizations across the board want breakthrough performance

changes and not just incremental changes. One approach for rapid change

and dramatic improvement that has emerged is Business Process

Reengineering (BPR).

Michael Hammer & James Champy define reengineering as “the fundamental

rethinking and radical redesign of business processes to achieve dramaticimprovements in critical, contemporary measures of performance, such as

cost, quality, service, and speed.“

What CPR isn’t…

• Overlaying new software on top of the same business processes

• Evolutionary

• Incremental improvements

• Downsizing

• Merely reorganizing and restructuring

• Single dimension solution

• Continuing to maintain status quo

What CPR is…

•

Starting from scratch and fundamentally changing the way we dobusiness

• Innovative

• Leveraging best practices and enablers

• Multi-dimensional, integrated solution

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• Cross-functional, inter-departmental change

• A migration to from activity management process

TQM focuses on encouraging a continuous flow of incremental improvements

from the bottom of the organization’s hierarchy. CPR, on the other hand

generally more of a top down approach, aimed at more radical changes in

how processes are designed. TQM and CPR are both usually manage as

broad-based, multifaceted improvement efforts that entail a variety of

initiatives and activities.

There are several reasons why TQM and CPR have become so popular for

improving process execution capabilities:

• They encourage a strategic approach to management at the

operations level.

• They get the results managers want.

• They work equally for blue collar and white-collar processes.

• They allow organizations to take advantage of several “enabling”

developments.

• They fit with an orientation toward inter organizational collaboration.

Approaches to managing at the operation level

TQM and CPR as the most common approaches to process improvement.

They have similarities and differences.

4.5 Similarities:

Since their fundamental objective is to improve process execution

capabilities, it is not surprising that TQM and CPR have significant similarities

in how they are manages:

• Both are meant to improve the capabilities of processes to provide

customer value.

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• Both look for opportunities to simultaneously improve multiple

dimensions of competitive advantage.

• Both are based on a systems view of the organization.

• Both typically cross intraorganaizaional boundaries.

• Both benefit from benchmarking.

• Both are aimed at achieving, if possible, redefining best-in-class

performance.

4.6 Differences:

As similar as TQM and CPR are, there are also important differences between

them. These are summarized and discussed below:

• Differences in general orientation

• Scope and “scoring”

• Within versus on

• Direction and staffing

• Involvement and numbers

• Boundaries

• Degree of continuity

4.7 How TQM and CPR Complement Each other

Despite their differences, there is no reason for the top-down approach of

CPR to conflict with the bottom-up approach of TQM.

Guideline for Managing TQM and CPR

Because there are similarities in and differences between TQM and CPR, it

should come as no surprise that the two have correspondingly shared and

distinct managerial guidelines for their applications.

First, common things are discussed:

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Shared Guidelines for Managing Process improvement, both shouldbe driven by a Broader Strategy:

Assuming that the business has a strategy that is focused on creating and

sustaining a competitive advantage based on offering customers superior

value, this strategy should be the starting point for managing either TQM and

CPR.TQM and CPR are about improving operations, and only the overall

strategy can determine which operations matter most. Without solid

grounding in the broader strategic issues, both TQ!M and CPR generally slip

into addressing less important issues or devolve into efforts to improve

internally focused operations through market-blind cost cutting.

To ensure that its process improvement efforts are grounded in a strategic

view of providing customers with superior value. Firm widely recognized for

its successful use of TQM and CPR principles, uses three questions to guide

its improvement/reengineering teams

Q1. Who is your customer? This question forces teams to link their efforts

back to customers, encouraging an external focus.

Q2. What value are you providing for your customer? This forces explicit

consideration of the specific forms of customer value.

Q3. What business strategy are you contributing to? Here the process

improvement efforts is placed in the context of a broader strategic initiative

so that the various efforts throughout the organization are cumulative ratherthan disconnected.

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4.8 Managerial Guidelines Unique to TQM or CPR

There is obviously an overlap between the managerial approachesappropriate for TQM and CPR, there are also differences. The differences are

subtle, but they are important and organizations’ that overlook them will

likely suffer setbacks as a result.

4.8.1 Guideline unique to TQM

The steps involved in TQM Initiatives: TQM is managed as a series of

projects. In order to facilitate the work of the various project teams, the

organization will usually adopt a particular model or approach for its teams

to use and this approach is meant to be used companywide with adaptations

made where require by special circumstances. Usually this approach is

broken down into a series of steps the team is to take, and often these steps

are presented as a flowchart in keeping the process orientation. Typically,

these frameworks are kept as basic and as simple as possible in order to

facilitate their widespread applicability and use.

TQM’s Greatest Managerial Challenge: the greatest managerial challenge

involved in TQM is making it a way of life rather than an isolated program or

project. The power of TQM is the power of the masses, hundreds of teams

each making an individual effort to achieve a greater , shared goal.

4.8.2 Guidelines Unique to CPR

The steps involved in CPR: In this model a team identifies a strategically

important process and then studies it as it currently exists. The team then

rethinks the current process, with possible ideas for change being stimulated

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by benchmarking other organizations to identify best practices and/or by

considering generic process improvement principles.

4.9 CPR’s Greatest Managerial Challenge

The greatest challenge to CPR is making the transition from the “as-is”

process to the newly designed “should-be” process. There are two specific

problems associated with this transition period. One problem lies in the fact

that the organization cannot usually just shut down while it moves one

process to another, and this can be seen on the time axis of our exhibit.

Usually the organization must continue operating its old process while it

brings the new process on line, and considerable confusion results from the

overlap in operating the two processes.

5. Conclusion

The fundamental concepts of CPR - defining core processes, radical redesign,

customer focus, empowerment, cross-functional collaboration, hierarchy

flattening and team work - has been explained in detail. Five critical factors

were suggested to increase the effectiveness of the reengineering effort - in

particular, the factors that address how to ease resistance and how to build a

successful team. Successful companies will be those who not only reengineer

their processes and technology, but that reengineer their approaches to

people.

By getting people actively involved in the reengineering process, the

company not only benefits, but they also make their employees beneficiaries

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rather than victims of change. TQM is a proven technique to guarantee

survival in world class economy. As we have seen the purpose of TQM is to

provide a quality product or service to customers which in turn will increase

productivity and lower the costs.

An organization is more likely to know both the costs and the benefits of the

process it has been using than the one it is considering adopting.

Furthermore in considering new process, managers typically know more

about the new processes are not only unknown but unknowable-simply

impossible to foresee or predict. When analysis of a proposed change is

based on known costs and unknowable benefits, it is usually difficult to gain

widespread support for it.

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