Principles of Business Excellence

and

Total Quality Management

M. Caluwaerts

Exmgt/be mc

TQM/Business Excellence: content

• Introduction and history of TQM / ISO 9000

• Part 1: Why Total Quality Management / Business Excellence

• Part 2: The job of a manager Maintenance management and SOP (Standard Operating Procdures)

• Part 3: Breakthrough What is a world class company?

• Part 4: Kaizen and systematic problem solving

• Part 5 :Conclusions: - Principles of TQM/BE - How to start TQM?

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Quotes concerning quality

Quality is free Author: Phil Crosby

It is the quality of our work which will please God and not the quantity. Author: Mahatma Gandhi

Quality is remembered long after the price is forgotten. Author: Gucci Family Slogan

Quality is everyone's responsibilityAuthor: Edwards Deming

Quality in the Egyptian age = The “Hammourabi Code (1750 BC): ”If a mason builds a house, and does not do it properly and the house collapses, then also the mason must be killed”.

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Reading about TQM → Quality Gurus

• Walter A. Shewhart (1891 - 1967)

- Grandfather of quality control - Contributed to understand the process of variability - Developed concept of statistical control charts

• W. Edwards Deming (1900 - 1993)

- Father of quality control - Developed “14 points” to guide companies in quality improvement - Japanese established “Deming Prize” in his name -15% of quality problems are actually due to worker error, 85% of quality problems are caused by systems and are management’s responsibility

• Joseph M. Juran (1904 - 2008)

- Defined quality as “fitness for use” - Developed concept of cost of quality

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Quality Gurus – contd.

• Armand V. Feigenbaum (1922 -)– Introduced the concept of total quality control

• Philip B. Crosby (1926 - 2001)– Coined phrase “quality is free”– Introduced the concept of zero defects– Developed the phrase “Do it right the first time”

• Kaoru Ishikawa (1915 – 1989)– Developed cause-and-effect diagrams– Identified the concept of “internal customer”

– Introduced the concept of “quality circles”

• Genichi Taguchi (1924 - )– Focused on product design quality

– Introduced the concept of six sigma

• Personally I strongly recommend the following book: A new American TQM Subtitle: four practical revolutions in Management. Authors: Shoji Shiba, Alan Graham, David Walden

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Definition of TQM

Definition of Total Quality Management or Business

Excellence:

The continuous improvement of everything we

do throughout the whole organization, using well-

known systems and with the participation of

everybody

Who is responsible for introducing and managing TQM/BE in

the company ?

mcExmgt/be

Introduction: the history of TQM = evolution in thinking about Management and TQM

1950’sOrigin of TQC = Total Quality Control (Japan), Dr Deming → Fitness to standards

(Aisi, DIN, Afnor …) → ISO 9000

1960’s Not everything can be described in standards (dr Juran) → Fitness for use

1970’s Mid 70’s: First oil crisis → supply > demand = customersatisfaction

1980’s Increased international competition → TQM

1990’s Promotion of TQM by installing Quality Awards In EU (TEQA) and USA

(Malcolm Baldrige Award) → Business Excellence Models (Bem)

2000’s Review of BEM and integration with ISO

2010’sGlobalisation → creativity, innovation, sustainability and ethical behavior (corporate governance)

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Introduction Definition and Structure of ISO 9000

Introduction: Definition and Structure of ISO 9000

Definition ISO 9000 is an international standard that helps organizations follow their own quality procedures.

ISO 9000 is not a quality system, but a method of following procedures created by an organization. Businesses that are certified to ISO 9000 have documented, repeatable processes for ensuring that they deliver quality products.

Structure of ISO 9000 Consists of three documents:

ISO 9000 – Fundamentals.(= the product, the company, top management, customers, suppliers …)ISO 9001 – Requirements, organized in four sections: - Management Responsibility; - Resource Management; - Product Realization; - Measurement, Analysis.ISO 9004 – Guidelines for performance improvements.

Remark: registration has to be renewed every 3 years (cost)

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Introduction the history of ISO 9000

1950 -1960’s

International Organization for Standardization (IOS) was created in 1946 to standardize quality requirements within the European market

Many different standards: Afnor, DIN, AISI, BS, Mil –Q , AQAP (Nasa)

1970’s BSI (British Standard Institute) issues BS 5750 = standards for use by manufacturing industries. Standards are enforced through assessment and audits by independant certification companies

1980’s

1990’s

1988: IOS adopts BS 5750 and published it GLOBALLY under the name of ISO 9000The emphasis tended to be placed on conformance with procedures rather than the overall process of management

2000’s December 2000: Review of ISO (including continuous improvement and other elements of TQM)

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What are the two main goals of TQM?

1. To satisfy all stakeholders of the company

2. To reduce all types of waste

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Shareholders

Suppliers

Communi

tyCustomer

s

First goal of TQM = to satisfy all stakeholders in the company

Employees

Operators

Managers

Top

management

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Second goal of TQM : Reduction of waste

Definition: What is waste ?

Waste is anything other than the minimum amount of time, equipment, materials, space, energy … which are absolutely necessary to add value to the product

A zero waste future will help to reduce solid waste, increase diversity, build a greener economy and a more sustainable society.

Henry Ford: “ If it doesn’t add value, it’s waste”

Cost of waste?

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The ghost plant or ghost office produces only waste =scrap, unnecessary activities, reprocessing, unhappy customers, claims, controls, inventories, incorrect documents, files that are not up-to-date, telephone calls or letters that are answered late or even remain unanswered, ineffective meetings………….

The second goal of TQM = to close the ghost plant / ghost office

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Reducing Quality costs = reducing waste

what is a quality cost?

Quality cost is the result of waste

or:

Quality cost is the result of anything that is not right from the first time.

2 main types of Quality costs:

► Internal cost: 3 types of internal quality costs - control and inspection (labs, Q department) - rejection and rework - prevention costs (training, SOP’s, TQM…)

► external cost - customer complaints (losing customers), - returned goods (invoices to be reimbursed, material to be replaced …)

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Internal costs for Prevention Internal Costs: rejection, rework

Quality engineeringQuality trainingQuality circlesStatistical process controlQuality data gathering, analysis, and reportingQuality improvement projects (TQM)Support provided to suppliersPreventive maintenance

ScrapRework Re-inspection of reworked productsRetesting of reworked productsDowntime caused by quality problemsDisposal of defective productsRe-entering data because of keying errorsDebugging software errors

Internal costs for Control and inspection

External Costs

Test and inspection of incoming materialsTest and inspection of in-process goodsFinal product testing and inspectionSupplies used in testing and inspectionSupervision of testing and inspection activitiesLab’sQuality department

Handling complaintsWarranty repairs and replacementsProduct recallsLiability arising from defective productsReturns and allowances arising from quality problemsLost sales arising from a reputation for poor quality.

Examples of quality costs

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Exmgt/be mc

Quality costs (rejection, scrap) increase as the process advances

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Investments in prevention are (very) profitable

The Seven Wastes in production (Toyota)

After years of work to eliminate waste, Toyota, the Japanese automobile manufacturer, identified the following seven types of waste as the most prominent ones:

1.      Waste from overproduction

2.      Waste of waiting time

3.      Transportation waste

4.      Processing waste

5.      Inventory waste

6.      Waste of motion

7.      Waste from product defect

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The importance of time Productivity

Time = a non renewable resourceQuote: “How we spend our days is, of course, how we spend our lives.”

Definition:

Productivity = output per unit of time (hour/day/month) of a worker

Example:Company A produces with 1000 employees, 1000 cars in 1 month- cost for 1 car = 10000 € wages + 10000 € material, energy… - sales price for 1 car = 22000 € company B produces in the same time with the same number of employees, 2000 cars. Expenses for material and sales price are the same as for company A

Questions: * what is the cost of 1 car for B?* what is the profit on 1 car for A and for B?

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What is the job of a manager ?

Classic view (Peter Drucker)

Modern view

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The 3 levels of improvement

1. Maintenance = keeping everything running smoothly

2. Continuous improvement (Kaizen) = small improvements, but on a massive scale, in all departments and on a continuous basis

3. Breakthrough = a jump in improvement, drastic change

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Maintenance Management

Maintenance Management is taking the necessary actions to ensure a good functioning, stable organization. Maintenance management is the basis for any improvement activity

What is the content of maintenance management ?

1. Creating a positive work environment

2. Division of responsibilities (organization)

3. Information and communication

4. Doing the tasks that workers cannot do

5. Setting the standards of work regarding quantity and quality

SOP / SPC

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What is a Standard Operating Procedure (S.O.P.)? How do you make a SOP?

• What is a SOP? SOP is a description of the detailed tasks (actions) that must be carried out to do a good job

• How do you make a SOP ? How to write a SOP?– Use the standardised system of standard operating procedures (form, distribution, ...) – Define the information (documents) that you will need for this process– Think about the logical steps in the process– Describe only the essential tasks (steps) and check with the people involved in the process– Keep track of lessons learned in the past and improve SOP

• Why is SOP needed ? (goals of SOP)

1. To ensure that the knowledge of the best working method is maintained in the organization

2. To communicate the rules and regulations that must be followed to do a good job

3. To form the basis for supervision

4. To create stability and as a consequence, to create a basis for further improvements

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The goal of Maintenance Mgt = Escaping from the vicious circle

From the negative spiral To the positive spiral

Many problems,

lost time, scrap

…

No prevention,no improvement

No prevention,no improvement

All energy needed for firefighting

All energy needed for firefighting

There is only time to think aboutthe present and the past

There is only time to think aboutthe present and the past

Very few problems

Very few problems

Systems become even

better

Systems become even

better

There is time to think

about the future

There is time to think

about the future

Many initiatives for breakthrough and improvement

Many initiatives for breakthrough and improvement

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Statistical Process control (SPC)

Definition: What is Process control? Process Control consists of systems and tools used to ensure that processes are well defined, performed correctly, and maintained, so that the completed product conforms to established requirements.

Comments

Process Control is an essential element of managing the production floor to ensure the quality and safety of the output.

It is recognized that strict process control will aid in the prevention of “out of control” situations that may result in anomalies, incidents and non conformances.

Statistical process control uses sampling and statistical methods to monitor the quality of an ongoing process such as a production operation

Essential condition for applying SPC = excellent knowledge of all important process parameters

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Statistical process control

Example: wire drawing from 5,00 mm to 2,00 mm

UCL = 2,02 mm LCL = 1,98 mm

The UCL and LCL are calculated limits used to show when the process isin or out of control

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Conclusion regarding part 2: The job of a manager and SOP

1. Besides the traditional roles of a manager, he/she has to show the example and has to be involved intimately in the 3 types of improvement

2. Maintenance management -with emphasis on manuals and standard operating procedures- provides a foundation for stability and for further improvement

3. Statistical process control is a good method to avoid quality costs, by placing the control function in the hands of the operators

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TQM/Business Excellence: content

• Introduction and history of TQM/ISO 9000

• Part 1: Why Total Quality Management / Business Excellence

• Part 2: The job of a manager Maintenance management and SOP/SPC

• Part 3: Breakthrough

What is a world class company?

• Part 4: Kaizen and systematic problem solving

• Part 5 :Conclusions: - Principles of TQM/BE - How to start TQM?

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Breakthrough is a planned effort of the whole organisation. It is the a result of the strategic process

Part of a strategic review is an assessment of internal strengths/weaknesses/opportunities and threats (see course on Strategic Management)

Methodology: An excellent method for such an assessment is the use of a Business Excellence model (BEM). This will result in many opportunities for improvement.

These opportunities can be evaluated according to following criteria:- Contribution (big results or small benefits)- Manager’s ability to solve it- Time needed to solve

- Impact on humans (lay offs)

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Business Excellence model (BEM).

What is an excellent company ?

How do you recognize a world class company?

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ResultsEnablers

Leadership10 %

People9 %

Partnerships & Resources

9 %

Key performance

results15 %

Policy & Strategy

8 %

Processes14 %

Customerresults20 %

Peopleresults

9 %

Society results

6 %

The Business Excellence Model (BEM): the 9 criteria of the BEM

How What

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For what can you use the Business Excellence model?

• To make a complete evaluation of the company’s strengths and weaknesses = self assessment

• To use as a strategic planning tool to progress in a systematic way towards the desired results

• Detection of innumerable opportunities for improvement

• To compete for The European Quality Award and thus obtain free advice from outside experts

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TQM/Business Excellence Content of part 4: types of improvement: Kaizen

1. Importance of continuous improvement (Kaizen)

- what is Kaizen ? Why? How?- working in groups- project sheet

2. Step by step plan for systematic problem solvingand use of some common problem solving techniques

3. Kaizen = development of people

4. Conditions for successful implementation of Kaizen

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Continuous improvement - Kaizen

Definition: What is Kaizen?

The culture of searching and implementing annual improvements in all departments, at all levels and with the involvement of all employees of the company, is called continuous improvement (in Japanese: kaizen). At the heart of kaizen is systematic problem solving in working groups (Quality circles)

Why do we need Kaizen?

Through kaizen we can protect our competitiveness by reduction of costs, thus avoiding big and frequent increases of sales prices

A decrease of costs with 3 to 5 % per year allows a company to compensate for inflation and to protect its profit margins.

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Step-by-step plan for the “systematic” solution of problems =

the 4 steps in systematic problem solving - SCRA

• The method for systematically solving problems is described by means of a step-by-step plan. The steps describe the different phases that must be gone through in solving these problems.

• The four different steps in problem solving are– Symptom

– Cause

– Remedy SCRA– Action

• It is important to stress that the best way to find a good innovative solution, is to work as a group i.e.in a project team

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Kaizen = Development of people

Traditional company New company

Skilllevel

Number ofpeople

Skilllevel

Number ofpeople

Objective of development of people = to build a stronger organization which will

allow top management to delegate more tasks to the employees / workers

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Respect for humanity

Trust

Development

Motivation

What are the conditions for development of people?

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Conditions for successful implementation of Kaizene.g. Bekaert

1. Top management commitment

2. Setting up an organisation dedicated to promote Kaizen

3. Providing training and education

4. Creating the right mindset for kaizen

5. Giving recognition and motivating employees to pursue continuous improvement

► articles in corporate newspaper ► CEO special lunches ► “quality” days

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Some rules for creating the right mindset (= way of thinking = business culture) for kaizen

1. Good ideas are valued, not titles and ranks

2. Everything can and should be improved

3. Don’t just criticize, suggest an improvement

4. Think of how to improve instead of why it can’t be changed

Do not accept IDEA KILLERS

5. Think beyond common sense. Even if something is working, try to find a way to make it work even better

6. Use problem solving in a team approach ( involving different disciplines)

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Part 4: Conclusion concerning Kaizen

1. The goal of Kaizen is to improve quality, costs, customer satisfaction, safety… continuously

2. To achieve this, people should work together in workgroups that solve problems in a systematic way.

3. By applying Kaizen, the employees of the company will develop their skills and competences so that the company as a whole becomes much stronger.

4. Respect for people is an important condition for motivation and development

5. There should be a policy to encourage Kaizen and to create the right business culture

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TQM/Business Excellence - Content of part 5: Conclusions

1. Principles of Excellence

2. How to start TQM/BE in your organisation?

3. What results can you expect from TQM/BE?

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Principles of TQM/BE

• Good communications and feedback in the whole organisation (Strategy Operational)

• Systematic problemsolving in projectteams involvement of all employees from top to bottom

• Stable processes through SOP’s and Process Management (also in administrative services) SPC

• Education of suppliers to Quality Suppliers (TQM applied by our suppliers)

• Upgrading the capabilities of the whole organisation (education and training)

• Elimination of all possible forms of waste

• Use of facts and figures instead of opinions or emotions

• Company policies supporting TQM philosophy

• Quality of leadership

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Principles of TQM/BE

• Respect for people and environment

• Safety, Cleanliness and orderliness in factories and offices

• Care for the product e.g. avoid damage to the product at all stages = from raw material until end product and transportation to the customer

• Keeping Commitments

• Alignment of the whole organisation towards achieving the long and short term goals (Policy Deployment)

• Customer orientation; not only external customers, but also internal customers

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How could you start with TQM in an organization? = First steps towards TQM

• Improve Safety and housekeeping

• Analyze your main costs cost matrix

• Train people in problem solving techniques

• Apply Standard Operating Procedures for all critical processes ISO 9000

• Start a customer satisfaction survey

• Start improvement projects in all departments

• Apply the BEM to find areas for improvement

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General conclusion: What can we expect from TQM/Business Excellence ?

1. Improvements in costs, safety, quality, service and motivation

2. Minimum waste and therefore contribution to a better environment

3. Satisfied and loyal customers

4. A structured approach to implement the company’s strategy

5. Increase in competences at all levels in the organisation

6. An extremely efficient, profitable world class company

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TQM = a fundamental change of the DNA of a company

Quality control is a revolution in the philosophy of management and it needs a complete turnaround in the attitudesof everybody in the company, from the president to the workers on the shop floor.

“Introduction to Quality Control”

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