MG 1401 TOTAL QUALITY MANAGEMENT         2. TQM Principles
TOTAL QUALITY MANAGEMENT               THE PRINCIPLES• Total Quality Management has 10 basic principles .• They explain ho...
Organizational objective:• Total quality management must not be seen as a tool but  rather as a philosophy that underscore...
Organizational objective:• Service should also be regarded as those services rendered by  institutions who do not have pro...
A CustomerA customer is the most important person in any businessA customer is not dependent upon us.  We are dependent   ...
Measure value                            Product review redesign•   Customer loyalty is measure of value achieving custome...
2.1 Customer satisfaction               Customer is the King in TQM system•Customers                     Customersare the ...
Customer satisfaction• “What customer think” is more important than   “what company thinks”Teboul’s model of customer sati...
Customer satisfaction• To realize the customer value strategy, the concept of  customer value must be made optional• Devis...
Customer satisfactionThe task of measurement is not a simple one. Managers must(i) Understand which aspect is being measur...
Customer satisfaction     • Customers: Types                      Customers    Outside the organization                   ...
Customer satisfaction   •Product requirements                                            •User requirements   •Need for ch...
Kano model (diagram)
Kano Model (diagram)Suppliers Ability vs. Customers Perception• Expected requirements are "self-evident" and  unspoken.• E...
Kano model (diagram) Region 3 Innovations -vague written instructions -excite and delight the customer -ideas get converte...
Kano model (diagram)•   The vertical axis measures customer satisfaction, and•   The horizontal axis measures the technica...
2.2. Customer perception of quality    •   Customer driven quality cycle                     Customer needs and expectatio...
Customer perception of qualityASQ- American Society for Quality – Ranking1. Performance2. Features/ Attributes3. Service4....
Customer perception of quality4. Warranty- represents    - a public promise of a quality product backed up by a     guaran...
Customer perception of quality6. Reputation - Past performance and other intangibles,    recognized-ourselves rating organ...
Customer feedback•  must be continually solicited and monitored-   as they change their minds, their expectations   and th...
Customer feedbackThere are many techniques that fit the mean ends    model better than scaled customer    satisfaction mea...
2.3. Customer complaints• Customer complaint is reactive whereas the customer  feedback is proactive• A dissatisfied custo...
Customer complaints-Even though such complaints may not reach the top   management they do reach other potential customers...
Customer complaint flow chart                                     For any organization CC&F is the must      Letters      ...
2.4. Service qualityMotto: If we take care of our employees,           they will take care of customersApplication of TQM ...
Service quality   Characteristi               Expectations         cs   Delivery      Delivered on schedule in undamaged  ...
Service quality     • 25 elements of customer service-Jacques Horovitz and       Chan- Cudennec-poon                      ...
2.5. Customer retention-   means retaining the c with the business-   is more powerful and effective than the c s-   repre...
2.6. Employee involvement•   is an activity by which employee participate in work related    decisions and improvement act...
Supply chain management          Employee motivation Employee development•   Employee motivation and employee empowerment ...
2.6.1. Employee motivation     • is a process that starts with the physiological or psychological       deficiency or need...
EM                           Employee motivationExtrinsic motivation                Intrinsic motivation          -Physiol...
Prof. A. H. Maslow’s (1943) Hierarchy of Needs (original five-stage model)
Importance at work Higher level needs Self-realization  refers to the desire to become  everything that one capable of  be...
Mc Gregor’s Theory X and Theory Y-      has presented two opposite sets of assumptions about employeesTheory X assumes(i) ...
Herzberg’s (Frederick Herzberg-1959)                      two factor theory- extended the Moslow theory by using empirical...
HYGIENE   MOTIVATORS
Employee motivation                          Employee wants       Sl.              Factor              Wants      Percepti...
Employee motivationMotivated work force:•    Managers at all levels can not cause an employee to     become motivated;•   ...
2.6.2. Employee empowermentEmpower means “to give the means, ability or authority”• Empowerment is an environment in which...
Employee empowerment       Matrix: Build Empowerment in three dimensions-                 Capability, Alignment and Trust ...
Employee empowermentSome important characteristics of empowered employees    identified by Hubert Rampersad:They 1. feel r...
2.6.3. Teams and TeamworkTeams are essential within an organization as they are the most  suitable vehicle within which pr...
Teams and TeamworkTeamwork - is also a key element of TQM to become    successful in business-with the use of teams, the b...
Teams  History of teams: Two types:     1. Quality circles                 2. Focus teams-small group of employees-from on...
Teams    Can be divided into three main groups:          Process              Cross                Natural            Self...
ByT the direction of QC                            The use of Teams                                           QualitySever...
Characteristics of successful teams1.    Sponsor2.    Team charter3.    Team composition4.    Training5.    Ground rules6....
Effective team work                                      7.Team                                    recognition•   Main Ele...
Nine activities                                            Four roles                   Team Management wheel   •   Marger...
Team developmentStages1. Forming-learnt-purpose, roles of members, acceptance of                  roles, authority and rol...
Barriers to team progressBarriers1. Insufficient training2. Incompatible rewards and compensation3. Resistance from first ...
2.6.4. Recognition and reward schemes• Recognition: is the form of employee motivation in which the   organization publicl...
Recognition and reward• Employee should be involved in the planning and  implementation of the recognition and reward prog...
Recognition and rewardAn effective recognition and reward system:1.   Serves as a continual reminder that the organization...
2.6.5. Performance appraisalPerformance appraisal  - is a systematic and objective approach of evaluation of      performa...
Performance appraisalPurpose- to let employees know how they are doing and provide a    basis for promotions, salary incre...
Performance appraisalCommon appraisal formats Sl.    Type (method)                Description (Expectation) No    (charact...
2.6.6. Benefits of employee involvementInvolving employees, empowering them, and bringing    them into the decision making...
Benefits of employee involvement- are better able to spot and pin point areas of improvement- are better able to take imme...
2.7. Continuous Process Improvement“ Don’t bother just to be better than your contemporaries or   predecessors. Try to be ...
Continuous improvement• Total Quality Management is not a short-term program  that will finish as soon as the target has b...
Continuous Process ImprovementInput / Output                                FeedbackProcess model Business and            ...
Continuous process improvement
The system of Total Continuous Process Improvement (TCPI)
Continuous Process ImprovementBasic ways to improve process1. reduce resources2. reduce errors3. meet or exceed - expectat...
2.7.1. Juran’s Quality TrilogyComponents: based loosely on financial processes1. Planning              - budgeting2. Contr...
Juran’s Quality Trilogy Diagram                  (Dr. Joseph M. Juran)    1. Quality                                      ...
Continuous Process ImprovementImprovement strategies: Jack L. Huffman- 4 Rs1. Repair            - anything broken must be ...
2.7.2. PDCA cycle (first developed by Shewhart)
Phase of problem solving method by PDSA cycle           (modified by Dr. W. Edwards Deming)      Phase 7:      Plan for th...
Continuous Process Improvement                        5W 2H method5WWhat?               Stands for subject matter what is ...
2.7.3.5S: House keeping                       1. SEIRI                     2. SEITON                     Structurize      ...
2.7.4. Kaizen:KAIZEN :• "Kai" means change, (school) and• "Zen" means good ( for the better ) (wisdom)• Basically Kaizen i...
Kaizen• Kaizen is a system of continuous improvement in    quality, technology, processes, company culture,       producti...
Kaizen• " The Kaizen philosophy is to "do it better, make it  better, improve it even if it isnt broken, because if we  do...
Continuous process improvementKaizen:                             Kaizen                            Philosophy            ...
Continuous process improvementComparison between Kaizen and Kairyo                                                        ...
2.8. Supplier partnership•   An organization spends about 50% of the sale value on    purchase of raw materials, component...
Supplier partnershipPrinciples of Customer / Supplier relation:10 principles suggested by Dr. Kaoru Ishikawa preaches a   ...
Strategic Partnership Process
2.8.1. PartneringGraphic interpretation of partnering
Partnering•   is a long term commitment between two or more    organizations for the purpose of achieving specific    busi...
PartneringKey elements to a partnering relationship1. Long term commitment2. Trust3. Shared vision1. Long term commitment:...
Partnering with clients
Types                      2.8.2. Sourcing1. Sole sourcing2. Multiple sourcing3. Single sourcingSole source is a non-compe...
Sourcing•   Multiple Sourcing is the purchasing policy of using two or    more or even many suppliers to purchase certain ...
2.8.3. Supplier selectionBefore supplier selection    - it must be decided whether to produce or outsource particular item...
Supplier selectionConditions for selection and evaluation of suppliers    listed by Dr. Kaoru IshikawaSUPPLIER1. understan...
2.8.4. Supplier rating•      A Supplier rating (sometimes referred vendor       rating)      - a business term used to des...
Supplier rating- various criteria can be analyzed- a common approach is to utilise Cost Quality and Delivery- apply weight...
Problems with vendor rating•   Problems with vendor rating•   Effective supplier rating requires a consistent and objectiv...
Problems with vendor rating•   DELIVERY     Delivery in Full    Quantity supplied matches the quantity ordered and•       ...
Problems with vendor rating•  PRODUCT/SERVICE QUALITY Product/Service Compliance     Product/service to meet the agreed, d...
Problems with vendor ratingClient-site Monitoring Effort: Minimal SPCB resource dedicated to     monitoring contractor per...
Problems with vendor ratingProvision of Quotations:Quotations requests are turned around within x                         ...
Problems with vendor ratingOpenness & Cooperation: Contractor is open and co-operative in its  relations with the SPCB, e....
Problems with vendor ratingStrategic Supplier SelectionThe second best practice is strategic supplier selection (often kno...
Problems with vendor rating• Continual Scorecarding• The fourth best practice is continual scorecarding to insure that  th...
Problems with vendor rating•   Cross-Functional Problem Resolution•   The sixth best practice is the implementation of cro...
Problems with vendor rating• Supplier Development• Predictive analytics are good, but supplier improvement is better.  Wor...
Problems with vendor rating• Laggard Steps to Success:• Measure supplier performance constantly, and at least monthly. Thi...
Problems with vendor rating• Industry Norm Steps to Success:• Transform procurement and material managers into supply base...
Problems with vendor rating• Best in Class Next Steps:• Apply statistical process control techniques and kick it up a notc...
2.8.5. Relationship developmentPrevious information on• Partnering• Supplier selection,• Principles of customer/supplier r...
Relationship development1. Inspection : Phases :     (i)100% inspection- critical quality characteristics    (ii) Sampling...
Relationship development4. Recognition:- suppliers should be recognized for the commitment of Quality   improvement journe...
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Total Quality Management ppt unit II by c.coomarasamy, Professor,TEC, Trichy

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  1. 1. MG 1401 TOTAL QUALITY MANAGEMENT 2. TQM Principles
  2. 2. TOTAL QUALITY MANAGEMENT THE PRINCIPLES• Total Quality Management has 10 basic principles .• They explain how it is implemented and the "rules" by which it operates.These are:1. Agree Customer Requirements (more than specifications)2. Understand and Improve Customer Supplier chains3. Do the Right Things4. Do things Right First Time5. Measure for success6. Continuous Improvement is the goal7. Management must lead8. Training is essential9. Communicate more effectively10. Recognize successful involvement
  3. 3. Organizational objective:• Total quality management must not be seen as a tool but rather as a philosophy that underscores the corporate strategy of all organizations.• All businesses and organizations must have a primary purpose.• They should all seek to maximize their gains, whether it be "for profit" or "not for profit".• There are two types of businesses and organizations.• Those that deliver a product and Those that deliver a service.• Products are tangible items and are mostly consumables.• With regard to service there are two perceptions.• Some people see service as banking, consulting and similar businesses.• But, this is only one aspect of service.• They are selling you a product with the profit motive as incentive.
  4. 4. Organizational objective:• Service should also be regarded as those services rendered by institutions who do not have profit as their primary purpose.• Good examples are government or local institutions that render social service to the communities that they serve.• They are dependent on financial grants received from governmental budgets (The taxes that you pay).• Thus the application and usage of such grants by institutions will determine their continued survival.• What is common is that both groups perform work and produce outputs with a specific customer in mind.• Every activity within an organization should be directed towards the fulfillment of the customer requirements.
  5. 5. A CustomerA customer is the most important person in any businessA customer is not dependent upon us.  We are dependent upon him.A customer is not an interruption of our work. He is the sole purpose of it.A customer does us a favor when he comes in. We arent doing him a favor by waiting on him.A customer is an essential part of our business--not an outsider. A customer is not just money in the cash register. He is a human being with feelings and deserves to be treated with respect.A customer is a person who comes to us with his needs and his wants. It is our job to fill them.A customer deserves the most courteous attention we can give him.He is the lifeblood of this and every business.He pays your salary.Without him we would have to close our doors. 
  6. 6. Measure value Product review redesign• Customer loyalty is measure of value achieving customer satisfaction We are continuing to build the model and consider measuring value as determined by the customer as evidence of customer satisfaction. See the graphic
  7. 7. 2.1 Customer satisfaction Customer is the King in TQM system•Customers Customersare the most •Quality is a measureimportant asset Front line of customer satisfactionof any organization representatives ie., Quality is what•The success of a Functional customer wants business depends on operational areas customer satisfaction, which can be achieved Senior through quality products Customer satisfaction Managers and service Organizational diagram CEO Quality of product Customer Business or service satisfaction success Customer satisfaction is a psychological attitude -it is more of a feeling or attitude -is difficult to measure -is defined as “the degree to which the customer’s experience of the product or service matches with the customer expectations”
  8. 8. Customer satisfaction• “What customer think” is more important than “what company thinks”Teboul’s model of customer satisfaction Company offer Customer satisfaction Customer needs• Company should strive for increasing the intersection portion• Company should ensure that its marketing, design, production and distribution processes truly meet the expectations of the customer.• When an organization produces goods & services of quality at economic cost and consistently meeting the customer needs, then the organization is said to have
  9. 9. Customer satisfaction• To realize the customer value strategy, the concept of customer value must be made optional• Devise methods to measure value and use the information to make better strategic and operational decisions• The manager must develop a comprehensive system to measure each point of customers “means-ends model”Needs, wants, preferences- Product/service quality Customer needs Measure satisfaction Measure the value during usage or dissatisfactionDesign and Usage Customer Customerproduction situation value satisfaction A general model of Antecedents, Usage consequences and Product Realised end states of customer satisfaction and value attributes
  10. 10. Customer satisfactionThe task of measurement is not a simple one. Managers must(i) Understand which aspect is being measured- needs, quality, value, satisfaction etc.,(ii) identify the dimensions of each aspect that are more important to customers(iii) Simply low cost or price cut-erroneously defined valueThe determinants of value differ for each product/service. Category Cost Value Quality components components components Bank Service charges Variety of services Financial stability Interest rates Personal interest in customers Furniture Credit policies Delivery Well known store Low prices Display methods brands Price range Knowledgeable sales people Ice Low cost Container size Taste cream Specials Richness amount coupons of flavour creaminess
  11. 11. Customer satisfaction • Customers: Types Customers Outside the organization Inside the organization External InternalOne who uses the product or service EngineeringOne who purchases the product or Order processing erviceOne who influences the sale of product Production r serviceMc Donalds determined the child as the Sales etc., ustomer in their happy meals, why? Because the child influenced the sale. Every person in a process is considered as a customer of Categories the preceding operation Goal/aim: make sure that quality meets the expectations of the Current Prospective Lost customer Inputs Internal customer-supplier chain from Outputs External to external customer customer c/s c/s c/s c/s c/s
  12. 12. Customer satisfaction •Product requirements •User requirements •Need for change •System specification •Strategy •Requirements management •Operation •Quality and risk levels •IT support •Process criteria •Usability •System constraints •Development process•Confidence that product •Assurance process requirements met •Process risks•Argument / evidence about quality •People competence
  13. 13. Kano model (diagram)
  14. 14. Kano Model (diagram)Suppliers Ability vs. Customers Perception• Expected requirements are "self-evident" and unspoken.• E.g. one can expect that a car will drive and can stop.• Even a 100% fulfillment of these functions will never satisfy a customer - it is expected anyway.• On the contrary, when these functions are absent or fail, customer will be dissatisfied.• Kano calls them dissatisfiers• Revealed requirements are expressed somehow.• They are known; the degree of fulfillment correlates with customer satisfaction - like asking for a specific interior of a car.• Kano calls them satisfiers. Exciting requirements are not expected and are not asked for - they are unspoken.• However, should they be available in the product, customer can become very excited - like having a new system at no extra cost.• Kano calls them delighters.
  15. 15. Kano model (diagram) Region 3 Innovations -vague written instructions -excite and delight the customer -ideas get converted as expected s 2 ent n rem er g i o requi l- to t omR e plicit verb ected a us Ex itten, , exp is fy c Region 1 r d sat Undeclared or unspoken requirements -w tifie d le to n ide ulfillesimp -hardest to explain but prove very costly f , be filled if ignored ul If f The Kano model conceptualizes customer requirements The model suggests three major regions of customer satisfaction
  16. 16. Kano model (diagram)• The vertical axis measures customer satisfaction, and• The horizontal axis measures the technical level of the product or service.• Dr. Kano first identified the zones of this diagram.• In the basic quality zone, any technical failure causes customer dissatisfaction, and no level of technical excellence causes customer satisfaction— in other words, you can cause the customer to be unhappy, but you cannot cause him to be happy.• In the performance zone, the more you give the customer, the more satisfied he (or she) becomes.• In the excitement zone, the customer is very happy— even if the execution of the concept is imperfect, the concept causes excitement.• The pink arrow representing time shows the natural progression of the marketplace.• The exciting idea of today becomes the required product
  17. 17. 2.2. Customer perception of quality • Customer driven quality cycle Customer needs and expectations (expected quality) Identification of customer needs Translation into product/service Specifications (design quality)Perceived quality= OutputActual quality- Expected quality (actual quality) Satisfaction A Q > EQ Dissatisfaction AQ < EQ Customer perceptions (perceived quality)One of the basic concepts of TQM philosophy is continuous processimprovement.This implies that-there is no acceptable quality level because thecustomer’s needs, values and expectations are constantly changingand becoming more demanding
  18. 18. Customer perception of qualityASQ- American Society for Quality – Ranking1. Performance2. Features/ Attributes3. Service4. Warranty5. Price6. Reputation1.Performance- fitness for use, Availability, Reliability, Maintainability2. Features/ Attributes- Secondary characteristics are- psychological, time oriented, contractual, ethical & technological3. Service is- an intangible (made up of many small things), not quantifiable, but adds value to customer satisfaction -organizations should emphasize service -never stop looking -find ways to serve their customers better, even if they are not complaining
  19. 19. Customer perception of quality4. Warranty- represents - a public promise of a quality product backed up by a guarantee of customer satisfaction - also represents a public commitment to guarantee a level of service sufficient to satisfy the customer - generates feedback by providing information on the product and service quality - also forces the organization to develop a corrective action system -builds marketing muscle -encourages customers to buy a service by reducing the risk of the purchase decision and - generates more sales from existing customers by enhancing loyalty5. Price -customers –willing to pay a higher price to obtain value -constantly evaluating to determine who provides the greater value -customer’s concept of value is continuously changing -efforts must be made to identify, verify, and update each customer’s perception of value in relation to
  20. 20. Customer perception of quality6. Reputation - Past performance and other intangibles, recognized-ourselves rating organization by our overall experience-total customer satisfaction-based on the entire experience with the organization, not just the product-good experiences are repeated to 6 people and bad experiences are repeated to 15 people-therefore it is more difficult to create a favourable reputation-customers –willing to pay a premium for a known brand name and often become customers for life-customer retention is important-to win new customer- 5 times cost to keep an existing customer-is required-difficult to quantify improved customer satisfaction-very easy to quantify an increase in customer retention-investment in customer retention-more effective bottom-line approach-than concentrating on lowering operational costs-effective marketing retention strategy is achieved through using feedback from information collecting tools
  21. 21. Customer feedback• must be continually solicited and monitored- as they change their minds, their expectations and their suppliers continually• is not a onetime effort• is an ongoing and active probing of the customer’s mindWhy?1. Discover customer satisfaction or dissatisfaction2. Discover their relative priorities of quality3. Compare performance with competition4. Obtain the customer’s needs and develop5. Establish opportunities for improvementTechniques for measuring customer value• Scaled measures• Absolute measures
  22. 22. Customer feedbackThere are many techniques that fit the mean ends model better than scaled customer satisfaction measures1. Personal interview2. Protocol analysis3. Focus groups4. Laddering5. Trade off analysis6. Market test7. Direct observation8. Other sources of data on customer value9. After sales feedback
  23. 23. 2.3. Customer complaints• Customer complaint is reactive whereas the customer feedback is proactive• A dissatisfied customer can easily become a lost customer• Customer retention is less costlier than getting new customer• ASQ survey on dissatisfied customer says that-only about 1.5% took the time to complain the management-about 20% took up the dissatisfaction on frontline personnel-about 80% did nothingWhat does the survey indicate? Analyze.More than ½ of the dissatisfied customer will buy again, if they believe their complaint has been heard and resolvedOnly 1/5 will buy again if their complaint is heard but not resolvedLess than 1/10 will repeat buying when a complaint is not heard
  24. 24. Customer complaints-Even though such complaints may not reach the top management they do reach other potential customers-As a positive approach complaints can be seen as an opportunity to obtain information and provide positive service to the customer-In reality the customer is giving the organization a second chance-Recognition and reward should be linked to service, quality, performance and the ability-Front line employees should have the responsibility and authority to provide services necessary to satisfy the customer-Management should encourage employee to take risk, make decision and not to be afraid of making a mistake
  25. 25. Customer complaint flow chart For any organization CC&F is the must Letters Phone calls Meetings Verbal inputs Others Record customer Collect data Complaints or use CC&F forms from other locations feedback and countries Within 15 days Simple thank you yes Is it a Thank Transmit to Complement? customer Central data bank No or solution use CAR form (Corrective Action Is there an yes Inform Routine review Request form) available fix? customer Data and identify company No wise systematic issues Conduct analysis or central coordinator or analyst levelResolve Analyze and Analyzed systematic issueslocally No generate Identified, resolved & Local corrective action eliminated problems request yes Identify performance measures Contact Take corrective •Number of complaints per month Process or action to eliminate •Average time to resolve issue owner the issue and prevent •Percentage resolved Represents local recurrence entry activity •Pareto diagram of complaint Determine Inform Inform customer Long term Represents central customer if necessary fix coordinator activity
  26. 26. 2.4. Service qualityMotto: If we take care of our employees, they will take care of customersApplication of TQM have produced significant results inmanufacturing industries but often harder to implement inservice sectors. Service quality is customer serviceCustomer service can be provided-before the sale of product-during the sale of product-after the sale of product-to win and retain the customer’s satisfaction Service quality is an activity that can be controlled andDimensions: improved Organizations with higher quality, service can charge• Time up to 20% more and still retain customers• Timeliness Satisfied customers continue to patronize the• Completeness organization- they also add to profits by referring new customers• Courtesy Referrals can be twice as effective as advertising, an• Consistency essential part of the customer satisfaction occurs• Accessibility after the sale• Accuracy• Responsiveness
  27. 27. Service quality Characteristi Expectations cs Delivery Delivered on schedule in undamaged condition Installation Proper instructions on set up , or technicians supplied for complicated products Use Clearly written training manuals or instructions provided on proper use Field repair Properly trained technicians to promptly make quality repairs Customer Friendly service representatives to service answer questions Warranty Clearly stated with prompt serviceOrganizations should: on claims-emphasis traditional or reactive services after the sale-must move to the proactive level-proactive organizations contact their customers and determine their service quality needs and expectations-this information is used to develop the organization strategy for customer satisfaction
  28. 28. Service quality • 25 elements of customer service-Jacques Horovitz and Chan- Cudennec-poon III. CommunicationOrganization 13. Optimize the trade off between time andIdentify each market segment personal attentionWrite down the requirements 14. Minimize the number of contact pointsCommunicate the requirements 15. Provide pleasant, knowledgeable andOrganize processes enthusiastic employeesOrganize physical spaces 16. Write documents in customer friendly languageCustomer careFulfill or meet customer’s IV. Front line employees (People) expectations 17. Hire the best people who like peopleIdentify/get customer’s 18. Challenge them to dev. better methods point of view 19. Give them authority to solve problemsDeliver what is promised 20. Serve them as internal customersMake the customer feel valued 21. Be sure they are adequately trainedRespond to all complaints without 22. Recognize and reward performancereluctanceOver-respond to the customers V. leadershipProvide a clean and comfortable 23. Lead by examplecustomer reception area 24. Listen to the frontline people 25. Strive for continuous process improvement
  29. 29. 2.5. Customer retention- means retaining the c with the business- is more powerful and effective than the c s- represents the activities that produce necessary c s that creates c loyalty which actually improves the bottom line- By using c fb such as c s surveys, focus groups, interviews, observations- management can think of what c think of a product or service - however,- what people say and think is often different from what they doResearch findings reveal the significance of c r as given below1. Over 60% of future revenue will come from existing c2. A 2% increase in c r has 2% increase (equal impact) upon profitability and 10% reduction in operating cost3. Up to 96%of unhappy c do not in fact complain, but they communicate bad experience 3 times more than a good one4. 91% of the unhappy c will never purchase products and services from you again5. If you make an effort to remedy c c 82 to 95% of them will stay on with you6. It costs 1 time to keep an old c - 5 times to attract a new c Therefore the c r is more essential than attracting new cLikewise, high employee retention has a significant impact on high retention of customersTherefore one way is : pay attention to the present employees and to who they are hiring. Then c r can be managed
  30. 30. 2.6. Employee involvement• is an activity by which employee participate in work related decisions and improvement activities• is an approach for improving quality and productivity• is not a replacement in management• is not the final work in quality improvement• begins with the personal commitment to quality the employees who accept and commit to quality philosophy• or more apt to learn quality tools, and techniques and use them in the daily work• as the employees begin to see the benefits of commitment to quality, they will more willing to work in Teams• this team interaction, in turn reinforces personal commitments driving a never ending cycle of improvementEmployee involvement -Important aspects• Employee motivation• Employee empowerment• Teams and Teamwork• Recognition and reward schemes, and• Performance appraisal• Benefits
  31. 31. Supply chain management Employee motivation Employee development• Employee motivation and employee empowerment are part of employee development.• The next step is to add employee motivation, employee empowerment and employee development to our business model.
  32. 32. 2.6.1. Employee motivation • is a process that starts with the physiological or psychological deficiency or need that activates behaviour or a drive that is aimed at a goal or incentive • is the driving force starting and keeping a person at work in an organization • Scott defines “Motivation means a process of stimulating people to accomplish desired goals” • Edwin B. Flippo defines “Motivation is a process of attempting to influence others to do your will through the possibility of reward” Basic motivation process Needs Drives Incentives-are created whenever there is or motives are set up to -End of motivation cyclephysiological or psychological alleviate needs - will alleviate a need andimbalance -Physiological drive reduce a drive -Extrinsic Motivation(e.g.,) (as a deficiency with direction) (e.g.,) -Psychological drive Eating food, drinking water- Cells in the human body -Intrinsic Motivationdeprived of food and water - (not coming from Outside) and obtaining friends will - physiological need (e.g.,) tend to restore the balance -need for food & water are trans- and reduce the correspond--Personality deprived of friends lated into hunger and thirst ing drives -Need for friends becomes-and companions - drive for affiliation – psychological need
  33. 33. EM Employee motivationExtrinsic motivation Intrinsic motivation -Physiological -Psychological1. Pay 1. The feeling of having accomplished2. Promotion something worthwhile3. Status 2. Satisfaction one gets after doing4. Fringe benefits work well5. Holidays 3. Praise6. Retirement plans & 4. Responsibility7. Health insurance schemes 5. Recognition 6. EsteemAssociated with financial rewards 7. Power Associated with non-financial rewards Theories of motivation 1. Maslow’s hierarchy of needs theory 2. Mc Gregor’s Theory X and Theory Y 3. Herzberg’s two factor theory
  34. 34. Prof. A. H. Maslow’s (1943) Hierarchy of Needs (original five-stage model)
  35. 35. Importance at work Higher level needs Self-realization refers to the desire to become everything that one capable of becoming Using abilities to the full Esteem for self confidence, competence, Promotion opportunities self respect, knowledge Delegated tasks Thank you from supervisorsLower level needs Social Liking colleagues Being liked by colleagues Safety Job security, Pleasant environment Survival Adequate wage Employee motivation Prof. A. H. Maslow’s (1943) Hierarchy of Needs (original five-stage model)
  36. 36. Mc Gregor’s Theory X and Theory Y- has presented two opposite sets of assumptions about employeesTheory X assumes(i) The average person dislikes work and whenever possible will avoid it(ii) Most people are not ambitious, have little desire for responsibility(iii) To make people to work, use strict control, threats, constant pressure, persuasion and even punishment(iv) People actually like to be directed and supervised very closely(v) Many people have little capacity for creativity in solving problems• He concluded that theory X- are often inaccurate• The management may fail to motivate many individuals• Management by direction and control-may not succeed• We cannot use to physiological and safety needs satisfied people i.e., to those whose higher level needs are becoming predominant• Therefore he developed alternative theory YTheory Y assumes(i) The people are not lazy and unreliable in nature(ii) They enjoy work, show initiative and imagination in self-direction and self control -work is natural activity like playing and taking rest, if conditions are favourable(iii) Close supervision and threats, punishments are not the only ways to make the people work(iv) People can be self-directed and be creative at work if properly motivated(v) Motivation occurs at the social esteem and self actuation levels as well as at the physiological and security levels Employee motivation
  37. 37. Herzberg’s (Frederick Herzberg-1959) two factor theory- extended the Moslow theory by using empirical research-distinguished between motivational and maintenance (hygiene) factors in the work situation Satisfaction Dissatisfaction (Motivational factors) (Maintenance factors)Maintenance (hygiene) factors or dissatisfiers: -the company policies and administration, Inter-personal relations, Working conditions, Pay, Job security, Personal life and status-he propounds that these factors help in removing discomfort, dissatisfaction, discontent on the part of employees but are not motivators-these factors support employees mental health. Hence known as hygiene. These are similar to Moslow’s lower levels-do not provide satisfaction to the employees, but their absence will dissatisfy them. Hence called dissatisfiersMotivational factors:- recognition, responsibility, achievement, advancement, the work itself-these are similar to Moslow’s upper levels- creates satisfaction to the workers at the time of presence- but their absence does not cause dissatisfaction- therefore hygiene factors must be taken care of before the motivators can be activated Employee motivation
  38. 38. HYGIENE MOTIVATORS
  39. 39. Employee motivation Employee wants Sl. Factor Wants Perceptions No Employee- Manager ew rating rating 1 Interesting work 1 2 Appreciation 2 3 Involvement 3 4 Job security 4 5 Good pay 5 6 Promotion / growth 6 7 Good working conditions 7 8 Loyalty to employees 8 9 Help with personal problems 9 10 Tactful discipline 10If the managers are effectively motivating employees they musalign their actions closer to the motivations
  40. 40. Employee motivationMotivated work force:• Managers at all levels can not cause an employee to become motivated;• they must create the environment for individual to motivate themselvesConcepts:1. Know yourselves, 2. Know your employees3. Establish a positive attitude, 4. Share the goals5. Monitor progress, 6. Develop interesting work7. Communicate effectively, 8. Celebrate successThese can used at all managerial levels of the orgn.Satisfier: A satisfier is an expected condition / event that leads to the fulfillment of the customers stated / implied needs.Delighter: A delighter is a positive condition / event that is not expected by the customer that leads to beyond stated / implied needs.Dissatisfier: A dissatisfier is a negative condition / event which is not expected by a customer that leads to a decrease in customer satisfaction.
  41. 41. 2.6.2. Employee empowermentEmpower means “to give the means, ability or authority”• Empowerment is an environment in which people have the ability, the confidence and the commitment to take the responsibility and ownership to improve the process and initiate necessary steps to satisfy customer requirements within well defined boundaries in order to achieve organizational values and goalsSteps: 1. Arm people to be successful through coaching, guidance and training 2. Letting people do by themselvesDelegation v/s empowermentDelegation or job enrichment refers to distributing and entrusting work to othersEmpowerment requires that the individual is held responsible for accomplishing a whole taskConditions to create employee empowerment1. Everyone must understand the need for change2. The system needs to change for new paradigm3. The organization must enable its employees
  42. 42. Employee empowerment Matrix: Build Empowerment in three dimensions- Capability, Alignment and Trust Without Alignment and Trust we will ls ia s er s suffer with paralysis, bureaucracy or chaos y stem at hod ne lit y M et hi a bi S M ac ap M C Alignment ld ui a l B u d vi ty di lity e ili In bi l dg ty e b A kil wl a ili ap ab S no C ap K C Trustuild Alignment Alignment Bureaucracy Empowerment Teach your mission, vision values and objectives Build everyone’s commitment Paralysis Chaos to them Trust Build mutual trust Employees feel that 1. They can trust their managers 2. Their management trust them
  43. 43. Employee empowermentSome important characteristics of empowered employees identified by Hubert Rampersad:They 1. feel responsible for their own task 2. are given a free hand in their work 3. balance their own goals with those of the organizations 4. are well trained, equipped, creative and customer oriented 5. are critical, have self esteem and are motivated 6. are challenged and encouraged 7. monitor and improve their work continuously 8. find new goals and change challengesBenefits:1. Builds confidence in workers2. Generates commitment and pride among employees3. Gives employees better experience and opportunityJohn Akers, former Chairman of IBM said,“ Empowering our employees and including a sense that everyone owns his or her piece of the business not only un leases the talent and energy of our people, but also flattens the organization and reduce satisfy bureaucracy”
  44. 44. 2.6.3. Teams and TeamworkTeams are essential within an organization as they are the most suitable vehicle within which problem solving and implementation can be achieved. Objectives: refer short- term planning Goals : refer long- term planningA team is defined as a group of people working together to achieve common objectives or goalsTeams should be established to address real tasks and disband when they have achieved their objectivesTeam work is the cumulative actions of the team during which each member of the team subordinates his individual and options to fulfill the objectives or goals of the group
  45. 45. Teams and TeamworkTeamwork - is also a key element of TQM to become successful in business-with the use of teams, the business will receive quicker and better solutions to problems.-provide more permanent improvements in processes and operations.-In teams, people feel more comfortable bringing up problems that may occur, and can get help from other workers to find a solution and put into place.Principles of teamwork-It should -have clearly defined objectives or goal -a well defined time schedule should be given -listen to the suggestions of others and are conflict creatively -maintain discipline, build team spirit and motivate each other -everyone work hard to see the task is completed - have the companionship, fulfillment of personal growth and self respect
  46. 46. Teams History of teams: Two types: 1. Quality circles 2. Focus teams-small group of employees-from one -Similar to Q C, work unit -was born in US-5-6 people -identification of problems-lead by a supervisor- - Management provides input-developed in Japan -other discipline by-Kaoru Ishikawa skilled individuals included-beginning - the use of teams -multidisciplinary team-shop floor people -normally abandonedselect the problem once problem is solved -In course of time,Disadvantage: -QCs became FTs-lack of middle management support -FTs became our present teams-lack of focus
  47. 47. Teams Can be divided into three main groups: Process Cross Natural Self-directed / Improvement Functional Work Self managed work Team Team Team Team -work unit- a groupPurpose -meant for each -in solving complex -work unit of individuals work operation of processproblems-functions together continuously or sub process of various depts. -all the work unit -extension of NWTNo. of 6 to 10 6 to 10 members except the supervisorMembers including Manager -team coordinator -selected and rotated -limited to work unit -a number of diff. -is not voluntary among membersScope -an I /E supplier functional areas -projects to be -an I/ E customer E,M,P,Q,HR also improved are -meet daily –plan- a supplier & selected by decisions are usually Customer management made consensus -temporary -temporary -manager motivates -additional responsi-Life cycle-is disbanded when -however a the non-cooperating bilities are: the objective have production support employees in a -hiring/dismissal been obtained team would be proper direction -performance evaluation permanent and make them to -customer relations feel comfortable in -supplier relations e.g., a design the team -recognition/reward review team -training
  48. 48. ByT the direction of QC The use of Teams QualitySeveral CFTs can be established CouncilThese teams address Business Process Teamspecific improvementproblems of severalfunction areas Cross Functional TeamsWithin functional areas, one or morePITs are established Process Process Process Process Process Improvement Improvement Improvement Improvement Improvement teams teams teams teams teamsIn turn, one or each functional areas may establish a work group to address overallimprovementto the Work group Work group Work group Work group Work groupparticulararea
  49. 49. Characteristics of successful teams1. Sponsor2. Team charter3. Team composition4. Training5. Ground rules6. Clear objectives7. Accountability8. Well defined decision procedures9. Resources10. Trust11. Effective problem solving12. Open communication13. Appropriate leadership14. Balanced participation15. Cohesiveness
  50. 50. Effective team work 7.Team recognition• Main Elements 6.Team 1.Team results purpose Effective teams 5.Team 2.Team role and decisions responsibilities 4.Team 3.Team effectiveness activities
  51. 51. Nine activities Four roles Team Management wheel • Margerison & McCann graphic tool Advisors Advising Linking InnovatingControllers PromotingMaintaining TEAM Explorers Developing Inspecting Producing Organizing
  52. 52. Team developmentStages1. Forming-learnt-purpose, roles of members, acceptance of roles, authority and roles of functioning2. Storming-challenge and establish-initial agreements, role allocations3. Norming-establish- formal and informal relationships, observe- openness and cooperation4. Performing-start- operation, reach- trust, openness, healthy conflict, & decisiveness of a group’s performance5. Maintenance-maintain-performance of teamwork at the earlier stage for some period of time6. Evaluating-evaluate- team’s performance- both self and management basedA team consists of1. A team leader- selected by the QC or team itself2. Facilitator-not a member, will not get involved in the content3. Recorders-by the leader or by the team, rotated periodically4. Time keeper- by the leader or by the team, rotated periodically5. Members-by the leader, sponsor or QC or a member of the
  53. 53. Barriers to team progressBarriers1. Insufficient training2. Incompatible rewards and compensation3. Resistance from first line supervisor4. Lack of planning5. Lack of management support6. Lack of access to information systems7. Lack of union support8. Project scope- too large9. Project objectives- not sufficient10. No clear measure of success11. No time to do improvement work12. Team is too large13. Trapped in group thinking
  54. 54. 2.6.4. Recognition and reward schemes• Recognition: is the form of employee motivation in which the organization publicly acknowledges the positive contributions an individual or team has made to the success of organization -This acknowledgement is delivered by verbal and written praise like certificate• Reward: is something tangible day-to-day, such as a cash award, bonuses, increased salaries, commissions, gain sharing etc., to promote desirable behaviour1. Intrinsic rewards- related to feelings of accomplishment or self-worth2. Extrinsic rewards- related to pay or compensation issues• Recognition and Reward -go together to form a system for letting people know they are valuable members of the organization
  55. 55. Recognition and reward• Employee should be involved in the planning and implementation of the recognition and reward program• The system that is developed by the team must have clear recognition criteria• The system should be so developed that monetary reward is not a substitute for compensation• Reward may be delayed until an appropriate time• The recognition should on a timely basis• People like to be recognized, either as a team or individually• Gain sharing is another form of reward - is a measurement of organizational productivity and a method to share productivity gains
  56. 56. Recognition and rewardAn effective recognition and reward system:1. Serves as a continual reminder that the organization regards quality and productivity as important2. Offers the organization a visible technique to thank high achievers for outstanding performance3. Provides employees a specific goal to work toward. It motivates them to improve the process4. Boosts morale in the work environment by creating a healthy sense of competition among individuals and teams seeking recognition
  57. 57. 2.6.5. Performance appraisalPerformance appraisal - is a systematic and objective approach of evaluation of performance of an individual in an organization - is an exceedingly difficult HRM activity - is a process of evaluating and generating information about employees’ effectiveness and efficacy at work “How one is elevated determines how one performs” Team spirit “All for one and one for all”Process of performance appraisal1. Establish performance standards2. Communicate expectations to employees3. Measure actual performance4. Compare actual performance with standards5. Discuss the appraisal with employees6. If necessary, initiate corrective action
  58. 58. Performance appraisalPurpose- to let employees know how they are doing and provide a basis for promotions, salary increases, counseling, and other purposes related to employee’s future- to motivate employees by providing feedback on their performance levels- to guide the individual to plan job and personal objectives and help him in career planning- to validate the selection processes- to determine training and development needs of the employees- to know personal strengths and weaknesses of different individuals- to establish a basis for research and reference for personal decisions in future- to improve communication in an organization- to make the supervisors and executives more observant of their sub-ordinates
  59. 59. Performance appraisalCommon appraisal formats Sl. Type (method) Description (Expectation) No (characteristics) 1 Ranking compare employees by ranking from highest to lowest 2 Narrative gives a written description of employee’s strength and weaknesses 3 Graphic indicates the major duties performed by the employee and rates each duty with a scale which is usually from 1 (poor) to 5 (excellent) 4 Forced choice place each employee in a category with a predetermined percentage For example: Excellent - 100% Very good - 80% Good - 60% Fair - 40% Poor - 20%
  60. 60. 2.6.6. Benefits of employee involvementInvolving employees, empowering them, and bringing them into the decision making process - provides the opportunity for continuous process improvementThe untapped ideas, innovations and creative thoughts of employees - can make the difference between success and failureCompetence is so fierce that - it would be unwise not to use every available toolEmployee involvement• improves quality and increases productivity - because, employees - make better decisions using their expert knowledge of the process - are more likely to implement and support decisions they had a part
  61. 61. Benefits of employee involvement- are better able to spot and pin point areas of improvement- are better able to take immediate corrective action- are better able to accept change because they control the work environment- have an increased commitment to unit goals because they are involved- reduces labour / management friction by encouraging more effective communication and cooperation- increases morale by creating a feeling of belonging to the organization More involvement might be encouraged by the sign “No one of us knows as much as all of us”S.T.A.R- program ? Suggestions, Teams, Actions, Results- program
  62. 62. 2.7. Continuous Process Improvement“ Don’t bother just to be better than your contemporaries or predecessors. Try to be better than yourself ” - William Faulkner“ We need never-ending improvements…… to establish better economy” - Edwards DemingProcess definition begins with defining the I / E customersCustomer defines the purpose of the organization and every process within itOrganization exists to serve the customerTherefore, Process improvements must be defined in terms of increased CS as a result of higher quality products and services. All processes have at least one ownerThe process will cross multiple organizational boundaries and supporting sub-processes will be owned by individuals within each of the organizationsThus, ownership should be part of process improvementContinuous improvement may be achieved through big steps (breakthroughs) and little steps (increments)
  63. 63. Continuous improvement• Total Quality Management is not a short-term program that will finish as soon as the target has been met.• It is a strategy of continuous improvement.• Organizations must keep revising the cost targets downwards and productivity targets upwards with achievable results and a commitment to succeed.• No matter how much an organization improves, its competitors will continue to improve and customers will continue to expect still better quality.• Organizations cannot afford to stop or slow down.• They can never be satisfied with what they have achieved.• Organizations must always be trying to do even better.• If organizations always do the things you have always done, they will always get the results they have always got.• Productivity is a common theme.• Therefore develop approaches to productivity improvement.
  64. 64. Continuous Process ImprovementInput / Output FeedbackProcess model Business and to improve the process production activities Interaction between I&O this may be input Process to other process Input People Money Materials Output Desirable Materials Equipments Product (Qty, Qlty) Machine Method Service Outcomes Equipments Measurement Pollution Laws Environment Information Information data ,etc., such as Procedures data etc., Service etc., requires Customer satisfaction performance measures must be effective, efficient, under control, adaptable Conditions constraints related to policies, regulations, union, environmental, ethical & political issues
  65. 65. Continuous process improvement
  66. 66. The system of Total Continuous Process Improvement (TCPI)
  67. 67. Continuous Process ImprovementBasic ways to improve process1. reduce resources2. reduce errors3. meet or exceed - expectations of down stream4. make - process safer5. make - process more satisfying to the person doing itContinuous improvement in process - can be achieved by practicing following concepts1. Juran trilogy- Quality improvement from a cost oriented perception2. PDSA cycle - engineering scientific method3. 5 S - house keeping4. Kaizen - focuses on making small incremental improvement to individual and organization
  68. 68. 2.7.1. Juran’s Quality TrilogyComponents: based loosely on financial processes1. Planning - budgeting2. Control - expense measurement3. Improvement - cost reductionPlanning: process is crucial for improvement to become continuous activity. Therefore planning has to be conducted with a long term review rather than project by project basisControl: is used by operating forces to help meet the product, process and service requirementsStatistical process control-is the primary technique for achieving control. If the process is capable and is centered, process capability information such as Cp and Cpk are used to determineImprovement: aims to attain levels of performance that are significantly higher than current levels begin with the establishment of an effective infrastructure such as Quality Council.- process improvement can be incremental or
  69. 69. Juran’s Quality Trilogy Diagram (Dr. Joseph M. Juran) 1. Quality 2. Quality Control planning (during operations). Cost of poor Quality: % of operating budget Sporadic spike 40 Original zone of Quality control 20 Chronic waste New zone of Operations (an opportunity for Quality control Improvement) begin 3. Quality improvement 0 Time Lessons learned
  70. 70. Continuous Process ImprovementImprovement strategies: Jack L. Huffman- 4 Rs1. Repair - anything broken must be fixed2. Refinement - activities that continually improve a process3. Renovation - major/ breakthrough improvements- more costly4. Reinvention- a new product, service, process or activityPDSA cycle: first developed as PDCA cycle, then PDSA cyclePlan - carefully what is to be done?Do - carry out (do it)Study- the results- did the plan works as indented?Act - on the results- what worked as planned? and what not?
  71. 71. 2.7.2. PDCA cycle (first developed by Shewhart)
  72. 72. Phase of problem solving method by PDSA cycle (modified by Dr. W. Edwards Deming) Phase 7: Plan for the future- Phase 1: Objective is achieving improved levels Identify and prioritize the Of process performance opportunity for improvement Phase 2: Understand and analyze thePhase 6: current level of performanceStandardize the solution of the processInstitutionalize byPositrol of the process,process certification &operator certification Phase 3: Analyze causes andPhase 5: develop theStudy the results optimal solution/sMonitoring and evaluatingthe change by trackingand studying the effectiveness of the improvement efforts through data collection and review of the process Phase 4: Implement changes-Prepare the implementation plan, obtain approval and start implementing the process improvement
  73. 73. Continuous Process Improvement 5W 2H method5WWhat? Stands for subject matter what is being done? Can this be eliminated?Why? Stands for purpose why is this necessary? Clarify the purpose.Where? Stands for location where is it being done? Does it have to be done?When? Stands for sequence when is the best time to do it? Does it have to be done then?Who? Stands for people who is doing it? Should someone else do it? why am I doing it?2HHow? Stands for methodHow is it being done? Is this the best method?Is there some other way?How much? Stands for costDoes it cost now? what will the cost be after improvement?
  74. 74. 2.7.3.5S: House keeping 1. SEIRI 2. SEITON Structurize Systemize Keep needed Clearly distinguish items in the needed items from correct place unneeded items and 5.SHITSUKE to allow for easy and immediate eliminate the later retrieval Make a habit of Maintaining established procedures This is the condition Keep the workshop we support when Self discipline swept and clean we maintain the first three pillars 3. SEISO 4. SEIKESU Standardize Sanitize
  75. 75. 2.7.4. Kaizen:KAIZEN :• "Kai" means change, (school) and• "Zen" means good ( for the better ) (wisdom)• Basically Kaizen is for small improvements , but carried out on a continual basis and involve all people in the organization.• Kaizen is opposite to big spectacular innovations.• Kaizen requires no or little investment.• The principle behind is that "a very large number of small improvements are more effective in an organizational environment than a few improvements of large value.• This is aimed at reducing losses in the workplace that affect our efficiencies.• By using a detailed and thorough procedure we eliminate losses in a systematic method using various Kaizen tools.• These activities are not limited to production areas and can be implemented in administrative areas as well.
  76. 76. Kaizen• Kaizen is a system of continuous improvement in quality, technology, processes, company culture, productivity, safety and leadership.• Kaizen was created in Japan following World War II.• Kaizen is a system that involves every employee - from upper management to the cleaning crew.• Everyone is encouraged to come up with small improvement suggestions on a regular basis.• This is not a once a month or once a year activity. It is continuous.• Japanese companies, such as Toyota and Canon, a total of 60 to 70 suggestions per employee per year are written down, shared and implemented.• In most cases these are not ideas for major changes.• Kaizen is based on making little changes on a regular basis: always improving productivity, safety and effectiveness while reducing waste.
  77. 77. Kaizen• " The Kaizen philosophy is to "do it better, make it better, improve it even if it isnt broken, because if we dont, we cant compete with those who do."• Kaizen in Japan is a system of improvement that includes both home and business life even includes social activities.• It is a concept that is applied in every aspect of a persons life.• In business Kaizen encompasses many of the components of Japanese businesses that have been seen as a part of their success. Quality circles, automation, suggestion systems, just-in-time delivery, Kanban and 5S are all included within the Kaizen system of running a business.• Kaizen involves setting standards and then continually improving those standards.• To support the higher standards Kaizen also involves providing the training, materials and supervision that is needed for employees to achieve the higher standards and maintain their ability to meet those standards on an on-going basis.
  78. 78. Continuous process improvementKaizen: Kaizen Philosophy Improvement activities • Customer motivation • Kanban • TQC (Total Quality • Quality Improvement Control) • Just in time • Robotics • Zero defects • Quality Circles • Small group activities • Suggestion system • Co- operative • Automation labour management • Discipline within relations work place • Productivity • TPM (Total improvement Productive • New product Maintenance) development Kaizen umbrella
  79. 79. Continuous process improvementComparison between Kaizen and Kairyo Small steps Many small improvements KAIZEN . One or two great improvement Large step/s KAIRYO (Innovation)Japanese- “Kaizen” - is process oriented way of thinkingWestern- “Innovation” – result oriented thinkingJapanese word for “Innovation” is “Kairyo”Kaizen- improvements are accomplished gradually, ie., in small increments (constant, slowly)Kairyo – improvements in one or two great jumps. Does not allow constant improvements (in spurts, through major, but regular changes.
  80. 80. 2.8. Supplier partnership• An organization spends about 50% of the sale value on purchase of raw materials, components and services• Therefore supplier quality can substantially affect the overall cost of the product or service• One of the keys to obtain high quality products and services is for the consumer to work with suppliers in a partnering atmosphere to achieve the same quality level as attained with the organization• Customers and Suppliers should have the same goal to satisfy the END USER• They must work together as partners to maximize their return –on-investment• True partnering relationship- exists with long term commitment, trust and shared visionNumber of forces that have changed supplier relations are:1. Deming’s philosophy2. JIT- Just In Time3. Kaizen- or continuous improvement4. ISO 9000 QMS5. SCM- Supplier Chain Management
  81. 81. Supplier partnershipPrinciples of Customer / Supplier relation:10 principles suggested by Dr. Kaoru Ishikawa preaches a family type relationship to ensure quality products / service and to eliminate unsatisfactory condition1. Both – responsible for COQ2. Both- independent each other, respect each other’s independence3. Customer-responsible for clear and sufficient requirements4. Supplier- responsible for quality- satisfying the customer5. Both- decide the method to evaluate the quality to satisfy both6. Both- enter into non-adversarial contract w.r.t quality, quantity, price, delivery method and terms of payment7. Both- establish – in the contract- amicable settlement of disputes8. Both- continuously- exchange information, sometimes using MFT9. Both- perform business activities to maintain amicable and satisfactory relationship, viz., procurement, production, inventory planning, clerical work and systems10. Both- have the best interest of the END USER in mind in all business transactions
  82. 82. Strategic Partnership Process
  83. 83. 2.8.1. PartneringGraphic interpretation of partnering
  84. 84. Partnering• is a long term commitment between two or more organizations for the purpose of achieving specific business goals and objectives by maximizing the effectiveness of each participant’s resources.• The relationship is based on trust, dedication to common goals and objectives, and an understanding of each participant’s expectations and values.Benefits include1. Improved quality2. Increased efficiency3. Lower cost4. Increased opportunity for innovation5. Continuous improvement of products/services6. Increased market shareJapanese view on Partnering: Concept is KEIRESTUKey point – develop long term relationships with a few key suppliers rather than short term relationships with many suppliers
  85. 85. PartneringKey elements to a partnering relationship1. Long term commitment2. Trust3. Shared vision1. Long term commitment:-both S and C to work towards continuous improvement-total organizational involvement from CEO to the workers-each party contributes its unique strengths to the processes2. Trust-enables the resources and knowledge of each partner to be combined-mutual trust forms the basis for strong working relationship-open and frequent communication avoids misdirection and disputes-mutually motivated when Win-Win rather than Win-lose solutions3. Shared vision-must understand the need to satisfy the final customer-shared goals and objectives ensure common direction and must be aligned with each party’s vision-sharing of business plans aids in mutual strategic planning
  86. 86. Partnering with clients
  87. 87. Types 2.8.2. Sourcing1. Sole sourcing2. Multiple sourcing3. Single sourcingSole source is a non-competitive purchase or procurement process accomplished after soliciting and negotiating with only one source, so-called sole source, thus limiting Full and Open Competition (FOC).Sole Source is also known as: sole source procurement, sole sourcing, sole-sourced contract, direct sourcing, sole supplier, direct source,Sole Source?Specific products or services available from only one source, also called sole source, sole provider, sole supplier, sole vendor, or sole distributor.Single Source?A single source is a source specifically selected amongst others, if any, due to specific reasons, i.e. replacement parts, compatibility, quality, service, support, etc.Sole Brand?• Products or services from a specific manufacturer, whether available from one or more than one source or distributor.
  88. 88. Sourcing• Multiple Sourcing is the purchasing policy of using two or more or even many suppliers to purchase certain components, products, product groups or services. Key advantages of Multiple Sourcing when compared to Single Sourcing include:1.  Low dependency of suppliers.2. Spreading risks.3. Encourages price competition.Single Sourcing Vs. Multiple Sourcing• Single sourcing may not be the optimal strategy of a buyer facing suppliers with strictly convex costs.• In the original setting where suppliers bid, single sourcing is only beneficial for a buyer that controls a large fraction of the whole procurement market;• in contrast, if suppliers organize auctions, then large buyers prefer multiple sourcing while it is now small buyers that prefer single sourcing.
  89. 89. 2.8.3. Supplier selectionBefore supplier selection - it must be decided whether to produce or outsource particular item - the decision is a strategic one that must be made during the design stageQuestions: - how critical the item is? - does we have the technical knowledge? - if not, can we develop? - do we have suppliers specialized in producing the the item? - if not, can we develop such a specialized supplier?These questions must be answered in terms of cost, delivery, quality, safety and the acquisition of technical knowledgeIf we decide outsourcing is better and cheaper, then the supplier must be selectedStages1. Survey stage2. Enquiry stage3. Negotiation and selection stage4. Experience stage
  90. 90. Supplier selectionConditions for selection and evaluation of suppliers listed by Dr. Kaoru IshikawaSUPPLIER1. understands and appreciates the management philosophy of the organization2. have a stable management system3. maintains high technical standards4. provide raw materials / parts required by the purchaser5. capability to produce the amount of production needed6. should not breach corporate secrets7. right price, right delivery time, easily accessible in transportation and communication, should have system to trace the product or lot8. sincere in implementing the contract provisions9. Should have an effective quality system and improvement program such as ISO / QS 900010. Should have a track record of customer satisfaction and organization credibility
  91. 91. 2.8.4. Supplier rating• A Supplier rating (sometimes referred vendor rating) - a business term used to describe the process of measuring an organizations supplier capabilities and performance. - Supplier rating forms part of an organizations program. - Such systems can vary in the criteria that are assessed; - falls into quantitative and qualitative types - the process varies from one organization to another Common criteria often include:1. Quality – (including Delivery schedule adherence )2. Cost/Price3. Capability4. Service• Results of each variable are then weighted into a final score – usually a percentage, allowing suppliers to be ranked. - an ongoing activity - suppliers are often assessed continuously or periodically (i.e. assessing the last years trading).
  92. 92. Supplier rating- various criteria can be analyzed- a common approach is to utilise Cost Quality and Delivery- apply weighting against criteria in accordance with company requirements-brand suppliers according to results- highlight poor performing suppliers so that they can be removed from use.- trigger improvement programs on suppliers that score low.- trend analysis is often applied to supplier rating- it allows organizations to monitor changes in supplier performance over time.- both suppliers and buyers should utilise supplier ratings system to drive performance and improve the business relationship. (An example of supplier score card)
  93. 93. Problems with vendor rating• Problems with vendor rating• Effective supplier rating requires a consistent and objective approach - where rating criteria are open to interpretation inaccuracy can be introduced. This is especially true where subjective criticism from buyers is introduced into the rating process. It must be remembered that past history is not always a guide to future performance and that suppliers should be consulted as part of the assesment.• EXAMPLE KEY PERFORMANCE INDICATORS (KPIs)• TOTAL COST OF OWNERSHIP (TCO)Cost Reduction Opportunities No.of targeted cost-reduction activities identified in advance [per month/quarter/six months/year]Cost Reduction Realization Realization of cost-reduction targets (savings / initial total contract value) x 100Price Competitiveness Product/service is competitively priced against market ratesDiscounts Volume or other discounts post-award (savings / initial total contract value) x 100Cost Disclosure Full cost breakdown given when requested (inc. profit margin)
  94. 94. Problems with vendor rating• DELIVERY Delivery in Full Quantity supplied matches the quantity ordered and• each line of the order has been supplied. (inaccurate deliveries / total no. of deliveries) x 100• Delivery on Time Delivery to be made within the agreed time (missed deliveries / total no. of deliveries for period) x 100• Average Lead Time Current lead time compares favourably with previous lead time(improvement of lead time for this period / lead time for previous period) x100• Average Time to fill Emergency Orders Time must be in line with agreed SLA turnaround or within agreed timescales for these particular orders.• Consignment Stock Availability Contractor holds adequate range/no. of units of stock to offer a reliable service to the SPCB (no. of stock-outs / total no. of requests for consignment stock) x 100
  95. 95. Problems with vendor rating• PRODUCT/SERVICE QUALITY Product/Service Compliance Product/service to meet the agreed, documented standards and also be fit for purpose (during whole life cycle).(acceptable items / total no. of items ordered) x 100• Reliability /Durability Product/service to have been reliable /durable throughout its use.• Usability The product is user-friendly when in use• User Survey Users perception of product / service taken from agreed user survey.• Technical Support Acceptable quality of technical information/support provided by contractor for goods supplied• Contractor Response Time Timely attendance on site in response to initial fault report)(SLA “response” times missed/ no. of calls logged) x 100• Repair Lead Time Compliance with agreed lead times for repairing the product or restoring service (SLA “fixed or resolution” times missed/ total no. repairs carried out) x 100• Equipment Downtime If “downtime” of the system is required, contractor provides x days notice (notification missed / total no. of downtimes) x 100
  96. 96. Problems with vendor ratingClient-site Monitoring Effort: Minimal SPCB resource dedicated to monitoring contractor performance (actual time spent / goal) x 100Supply Disruption: Contractor to provide notification of any supply problems for orders placed with X days.(notification missed / total no. of supply problems) x 100HEALTH AND SAFETYEndangering Health and Safety : Zero reports in relation to the product/service endangering the H&S of MSPs, staff or visitors.ADMINISTRATIONNo. of Credit Notes per month : Contractor issues no more than x credit notes per monthInvoice Presentation : Invoices presented in a timely manner to allow on-time payment
  97. 97. Problems with vendor ratingProvision of Quotations:Quotations requests are turned around within x daysDocumentation:Full supporting documentation received for all installations/updates within x days of acceptance of installation/update.BEST PRACTICE & CONTINUOUS IMPROVEMENTContractor Innovation : Contractor is proactive in suggesting innovative, workable solutions (No of innovations actioned) List of targeted value-added activities No. of targeted value-added activities identified in advanceValue added activities : High success rate in bringing value added ideas to fruition % targets achieved/ total no. of activities)Pro-activity: Contractor is proactive in managing its relationship with the SPCBResponsiveness: Responds rapidly to requests for information & support without having to be chased.Responsive to Change/ Flexibility: Contractor is flexible in response to changing SPCB requirements
  98. 98. Problems with vendor ratingOpenness & Cooperation: Contractor is open and co-operative in its relations with the SPCB, e.g. in terms of joint problem solvingUnderstanding of accountabilities & responsibilities : Contractor has a clear understanding of its accountabilities & responsibilities under the contractBest PracticesBest PracticesMany of the ten best practices that are included below grow out of the C5 (connect, coordinate, check, control, and cultivate) Aberdeen operational supplier management framework, as discussed in Aberdeen Group’s “Supplier Performance Measurement Benchmark Report”.Open CommunicationThe first best practice is open communication and data sharing between parties to make sure that everyone is on the same page.
  99. 99. Problems with vendor ratingStrategic Supplier SelectionThe second best practice is strategic supplier selection (often known as supplier rationalization) for strategic engagements. This generally means concentrating purchases with a small set of suppliers to provide the buyer with greater leverage and fewer suppliers to proactively manage in performance and quality improvement initiatives. This does not mean single sourcing, as that is wrought with riskMutual Performance TargetsThe third best practice is the definition of mutually agreed upon performance targets and mutually agreed upon metrics. Create joint action plans with suppliers to meet these targets.
  100. 100. Problems with vendor rating• Continual Scorecarding• The fourth best practice is continual scorecarding to insure that the metrics are continuously up to date. Scorecarding should be done at least monthly, data tracked at a granular level by location, trade lane and product family, and linked to customer facing metrics. Linking primary KPIs across processes helps supply managers understand how their metrics link up with those of their customer facing peers.• Proactive Monitoring• The fifth best practice is proactive monitoring of the supply chain on a regular basis. This is usually done by way of business process management (BPM) technology that can alert stakeholders to exceptional conditions, assign accountability, track resolution progress, and automatically update affected systems.
  101. 101. Problems with vendor rating• Cross-Functional Problem Resolution• The sixth best practice is the implementation of cross-functional problem resolution consistent with overall business objectives. Considering that there is a huge opportunity cost associated with human productivity losses from resolving supplier performance problems, it is vital that problems are resolved quickly and correctly. Leading companies use pre-programmed rule-management systems to guide them through intelligent resolution strategies. These systems are updated regularly with best practices.• Control Points• The seventh best practice is the implementation of control points at suppliers to minimize mistakes. Utilize technology to check that items and quantities on supplier’s shipping documents on open order lines reflect those on the most up-to-date purchase order.• Predictive Analytics• The eighth best practice is the use of predictive analytics and KPIs to transform supplier scorecards into forward looking risk management instruments to identify potential problems well before they materialize. Best in class firms scorecard, but leading firms are now using predictive analytics to spot inflection points and KPI correlations that identify potential capacity issues, lead time variability, quality, or supplier financial issues before they show up as a metric on a scorecard.
  102. 102. Problems with vendor rating• Supplier Development• Predictive analytics are good, but supplier improvement is better. Work with suppliers to help them improve their processes, systems, and capabilities. This will improve quality, reduce deviations, and increase a supplier’s capability to meet customer needs.• SPM Systems• Finally, it should go without saying that the best way to achieve supplier performance management is to implement appropriate systems built on best practices that manage data, provide standardized tools and templates, and come with useful, relevant reporting.• Steps to Success• In Aberdeen’s “Supplier Performance Measurement Benchmark Report”, they identified Steps to Success for laggards, average performers, and best-in-class enterprises alike. As these steps were thought out, generally applicable and on-target, they will be repeated as-is and the reader referred to Aberdeen’s report for additional insights.
  103. 103. Problems with vendor rating• Laggard Steps to Success:• Measure supplier performance constantly, and at least monthly. This is one of our best practices and key to continued success.• Improve visibility into supplier activity and inbound shipments. This will insure that the data is not only up to date but reliable.• Measure the downstream impact of supply disruptions. This will assist in the creation of actionable contingency plans that will minimize the cost of such disruptions when they can not be avoided.• Create a cross-functional review team. A key to sourcing success in general, it is especially true in supply risk management and supplier performance management.
  104. 104. Problems with vendor rating• Industry Norm Steps to Success:• Transform procurement and material managers into supply base developers. This is the essence of strategic sourcing best practices and improves supplier performance management efforts across the board.• Implement supply chain management technology and manage supply disruptions based on business goals. This is another best practices that ensures that downtime and costs associated with a disruption are kept to a minimum.• Insert control points at suppliers. Yet another best practice, this helps catch potential mistakes that could be costly before they happen and streamlines operations.• Make scorecarding more granular. Good scorecards are granular scorecards and allow an organization to quickly zoom in on the root cause of a problem.
  105. 105. Problems with vendor rating• Best in Class Next Steps:• Apply statistical process control techniques and kick it up a notch.• Adopt business process management technology. A best practice that allows an organization to catch exceptions as soon as the relevant data enters the system and stop small problems before they blossom into large problems.• Evolve the scorecard into a forward-looking risk management instrument. This best practice can assist the organization in identifying potential supply chain problems before they happen, giving the organization time to take corrective action before its monitoring systems even notice a blip. It is the ultimate evolution of supply performance management.• Next Steps for Everyone:• Ask an expert. As the great Sir Isaac Newton once said, “If I have seen further, it is by standing on the shoulders of giants.” The best learn from the best. Look externally for best-in-class providers that can help the organization become best-in-class in supplier performance management.
  106. 106. 2.8.5. Relationship developmentPrevious information on• Partnering• Supplier selection,• Principles of customer/supplier relations,• Supplier rating - contribute to the establishment of the relationshipAdditional topics of• Inspection• Training• Teams• Recognition and reward - contribute to the maintainability and growth of relationship
  107. 107. Relationship development1. Inspection : Phases : (i)100% inspection- critical quality characteristics (ii) Sampling - after gaining confidence in Q (iii) Audit - continuing SPC- initiates its own auditing (iv) Identity check - verify item No. and Q for accounting & IC2. Training Small Orgns., - C or Consultant must start the training process Larger Orgns., - invite S to attend their courses or present the course at the S’s plant - is a requirement for partnership - should be viewed as an investment; not an expense 3. Team approach C/S teams are established in number of areas, viz., Product design, Process design, and the Quality system - involve Ss when the team is first assembled rather than at the end of its activities - Team meetings should occur at both parties’ plants so they obtain a greater understanding of the processes
  108. 108. Relationship development4. Recognition:- suppliers should be recognized for the commitment of Quality improvement journey- incentives may be in the form of a “preferred supplier category” with its rewardsusually the supplier is interested in recognition such as publication of outstanding contributions in- the Customer’ s newsletter- a letter of commendation that can be pasted on the TQM bulletin board- or mounted in the supplier’s reception area- PERFORMANCE FOCUSED- CUSTOMER DRIVEN- PERFORM to PLAN

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