Chapter 05Transparency 3-*
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Chapter Overview
Quality Improvement: The American Way
The Malcolm Baldrige National Quality Award (MBNQA)
Quality Improvement: The Japanese Way
Quality Improvement: The European Way
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Chapter Overview
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Introduction
Certainly, the task of managing quality is affected by the
increased globalization.
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Managing Quality for the MNF
Figure 3.1 shows that although the trade deficit has remained
relatively constant over time (until recent), both imports and
exports of products have been steadily increasing.
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Licensing
By licensing, a U.S. corporation can allow foreign firms to sell in
restricted markets while using the design of the original
designer.
Partnering( or Joint Ventures)
This agreement is often reached when two firms have technology,
product, or access to markets that each other wants.
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Managing Quality for the MNF
With both licensing and partnering, the risk to the company is loss
of proprietary technology.
In this case, the Deming attribute of trust is key to a successful
working relationship.
The benefits of licensing and partnering were that the exporting
firm did not have to globalize to make sales in international
markets.
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Slide 2 of 5
Globalization
. Globalization means that a firm fundamentally changes the nature
of its business by establishing production and marketing facilities
in foreign countries.
We refer to these firms as multinational corporations.
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- Globalization
. By globalizing, firms significantly change the physical
environment, the task environment, and the societal environment in
which they operate.
. By changing their physical environment firms locate themselves
near to or far away from natural resources.
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Physical environment
- The advantage of saving labor costs often overemphasized when
deciding to change the physical environment.
- Figure 3.2 shows the fiscal contrast between making an automobile
in Mexico and in the United States.
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Task environment
- The task environment of the firm has to do with the operating
structure that the firm encounters when globalizing.
- The economic structures, skills of the employees, compensation
structure, technologies, and government agencies, all vary when
globalizing.
- The regulatory structures that firms encounter when globalizing
require an understanding of international law.
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Social environment
- The social environment facing globalizing corporations refers to
cultural factors such as language, business customs, customer
preferences, and patterns of communication.
- The cultural factors facing globalizing firms are often the most
complex and difficult issues they will encounter.
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Social environment
- From a quality point of view, the efficiency-minded American way
of moving customers through a system may not translate well to
South American. Customer who are used to more personalized
service.
- As shown in Figure 3.3, physical, task, and societal environments
have implications for the choices made in improving quality,
particularly in the area of quality management.
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Figure 3.3 Globalizing Factors That Affect Quality-Related
Decisions
Physical Environment
Task Environment
Quality Management
Social Environment
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Market diversity drives the need for culture-specific research and
development.
This greatly increase the complexity of international marketing and
R&D.
Often globalized firms also must apply for patents in different
places in the world to protect their domestic patents.
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Mechanisms That Firms Use In Globalization
As shown in Table 3.1, only three of the top 11 applicants for
patents in the United States in 1996 were American companies.
The other eight were Japanese companies.
Quality Highlight 3.1 shows how one company has adapted itself to
provide high quality service on a worldwide basis.
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Exporter
- Another means of entering international marketing is to not
globalize but become an exporter.
- Many times pure exporters are subject to limitations that
resident companies do not have in terms of import tariffs and
import restrictions.
- Companies wishing to export to Japan have found it easier to
establish operations in Japan than pure exportation.
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Exporter
- Another issue with exporting is that the United States developed
a negative quality image during 1970s and 1980s.
- This image improves greatly in the 1990s as America reached
quality levels similar to Japan’s in many markets.
- Recent research by Macy, Foster, and Barringer shows that quality
still a significant factor in helping U.S. exporters achieve
success.
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Exporter
- Figure 3.4 shows an empirically derived model for quality-based
success for exporting companies.
- For exporting firms, quality leads to low price and greater
export success.
- The global market is a reality that must be addressed.
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Slide 5 of 5
Firm Characteristics
Product Strategy
Quality improvement: The American Way
American can be called the birthplace of modern quality management
because it is home to Shewhart, Deming, Juran, and others.
The U.S. military also has been an early adopter of many quality
techniques.
Originally, the main interest in quality in the United States was
in the application of statistics to solve quality problems.
In recent years, the approach has become much more behavioral as
teams and other approaches have been applied.
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Malcolm Baldrige National Quality Award
One of the most powerful self-assessment mechanisms is the Malcolm
Baldrige National Quality Award.
The MBNQA process is open to small (less than 500 employees) and
large firms (more than 500 employees) in the manufacturing and
service sectors.
In 1999, the criteria were adapted for health care and educational
institutes.
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It is not open to public-sector and not-for-profit
organizations.
The criteria is available for assessment under a variety of
different mechanisms.
There can be only two winners per category each year. That limits
the number of yearly awards to six.
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Key Characteristics of the MBNQA
The criteria focus on business results. Companies must shown
outstanding results in a variety of areas to win.
The Baldrige criteria are non-prescriptive and adaptive. Although
the focus on the Baldrige is on results, the means for obtaining
these results are not prescribed.
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Slide 3 of 10
The criteria support company-wide alignment of goals and processes.
Alignment between strategic goals and operational sub-plans help
foster a learning-based system.
The criteria permit goal-based diagnosis. The criteria and scoring
guidelines provide assessment dimensions.
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Baldrige Award Framework
The model for the Malcolm Baldrige National Quality Award consists
of seven interrelated categories that compose the organizational
system for performance, shown as Figure 3.5.
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The Malcolm Baldrige National Quality Award
The inter-related categories are varies from year to year as
modification from the award winner.
Each of these seven categories is divided into items and areas to
address.
The number of items and areas are varies from year to year as the
award criteria are constantly updated by the Baldrige staff,
examiners, and judges.
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Slide 5 of 10
Category 1 shows the award criteria for leadership
Category 2 focuses on how the company establishes strategic
directions and how it sets it tactical actions plans to implement
the strategic plans
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Slide 6 of 10
Category 3 addresses the customer and market focus.
Category 4, information and analysis, relates to the firm’s
selection, management, and use of information to support
company
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Slide 7 of 10
Category 6 examines the key aspects of process management.
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MBNQA Categories
Category 7(Table 3.8)
Documents the results of the other six categories and requires a
series of tables and graphs that demonstrate the operational and
business results of the firm
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A Closer Look at Quality 3.1
A Closer Look at Quality 3.1 gives some details about MBNQA’s
life.
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Slide 8 of 10
The first step is eligibility determination.
Firms that are granted Baldrige site visits sometimes refer to
themselves as “Baldrige Qualified.”
The site visit consists of a team of 4 to 6 examiners visiting a
company over a period not to exceed one week.
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The Malcolm Baldrige National Quality Award
The purpose of the site visit is to verify and clarify those
portions of the Baldrige application having the greatest impact on
the judges’ scores.
One of the most important outcomes of the Baldrige process is
examiner feedback to applicant companies.
As shown in Figure 3.6, feedback reports are provided to the
applicants as part of the assessment process.
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Baldrige Evaluation Process(Figure 3.6)
The Malcolm Baldrige National Quality Award
Many firms have found these comments of feedback reports helpful in
identifying gaps in deployment in their improvement
processes.
The feedback reports have become more useful for improving overall
management of processes and systems.
The feedback report is one of the major benefits of the Baldrige
process.
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The feedback report includes:
- The scoring summary which is a synthesis of the most important
strengths and areas for improvement for each of the seven Baldrige
categories.
- The individual scoring range which provides a 20-point scoring
range.
- The scoring distribution provides the percentage of applicants
for a particular year that scored in each of the eight scoring
bands.
- The examiner comments give feedback concerning the
organization.
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The Baldrige applications are scored with supporting written
guidelines.
These guidelines are provided in Table 3.9. (1999, old, not newest
)
If you are doing everything according to the Baldrige criteria, you
will score 50%.
To score in the higher scoring bands, you must demonstrate in the
application that you not only have all of the major aspects of a
quality system, the quality system must have been refined and
improved over an extended period of time.
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The Malcolm Baldrige National Quality Award
Quality highlight 3.2 shows how Dana Corporation won the Baldrige
by improving and refining its processes.
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Slide 10 of 10
Being a Baldrige Examiner
Appointment to the board of Trustees for the MBNQA Board of
Examiners is a very prestigious designations.
Examiners are unpaid volunteers, and must be willing to give up
approximately 10% of their year to serve as an examiner.
All of these people have one thing in common: They are committed to
the core values of the Baldrige award.
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Being a Baldrige Examiner
Besides scoring applications, examiners are asked to write cases,
update the criteria, and help to improve the Baldrige process
The examiners are expected to exhibit the highest professionalism,
maintain absolute confidentially, and be prompt and organized in
responding to the requirements of the position.
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State Awards
First Approach: Full-Baldrige Approach (e.g. Missouri, New York,
and Florida)
Second Approach: Baldrige-Lite Approach, Use Baldrige Criteria but
with a simplified Process ( e.g. Massachusetts and
California)
Third Approach: Multilevel Approach
- Top level: Full-Baldrige Criteria
- Second level: :Baldrige-Lite Approach
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Quality Improvement: The Japanese Way
The Japanese must be credited for raising worldwide quality to a
new level of competitiveness.
Using quality as a competitive weapon to win orders in the
marketplace, the Japanese initiated a response from the rest of the
world that has benefited producers and customers all over the
world.
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Deming Prize
The Deming Prize for quality was established in 1951 by the
Japanese Union of Scientists and Engineers (JUSE).
Unlike the Baldrige, there is no limit on the number of companies
that can receive the award in a given year.
The Deming Prize is much more focused on processes than is the
Baldrige.
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Deming Prize
Table 3.10 compares categories of the Deming , Baldrige, and
European Quality Award competitions.
A review of these categories shows the Baldrige is more general and
managerial. At the same time, the Deming Prize is more
prescriptive.
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Org. and Development
The first category of the Deming Prize addresses the areas of
management of quality policy, quality formation, policy correctness
and consistency, and related topics.
The organization and operation portion of the Deming application
requires the applicant to document processes for clarifying
authority and responsibility, and related topics.
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Information
Analysis
The information that is collected for this item includes
information that is gathered on the outside and inside.
The analysis category of the Deming Prize covers the areas of
selection of priority problems and themes, correct use of
analytical methods, and use of statistical methods.
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Education & Training
To plan well for the future, firms must understand their present
condition well, which is the documentation required for this
category.
Applicants document plans and accomplishments relating to education
and training.
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Quality Assurance
Quality Effects
As discussed in Chapter 1, quality assurance has to do with the
design of products and the new product development process.
Quality effects relate to the documentation of benefits, outcomes,
and results of quality improvement.
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The Deming Prize rewards standardization.
Finally, the last category of the Deming Prize is control.
Essentially, the applicants describe how they are using SQC,
control points, control items, and related quality tools.
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Quality Improvement: The Japanese Way
A can be seen, the focus of the Deming Prize is quite different
from that of the Baldrige.
Although the Baldrige has become very managerial in nature, the
Deming focuses more on the nuts and bolts of the quality
improvement.
The Deming is focused on the statistical methods, a complete
picture of the management system may not emerge.
At the same time, because the Baldrige is so diffuse in its focus,
some of the fundamentals of quality improvement may be overlooked
by examiners.
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Just-in-Time Production
Two views emerge in the literature that pertain to just-in-time
(JIT) manufacturing.
The first view of JIT is a philosophical view of waste reduction.
This view asserts that anything in the process that does not add
value for the customer should be eliminated.
The second view of JIT is a systems view stating the JIT is a group
of techniques or systems focused on optimizing quality
processes.
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Just-in-Time Production
We combine the philosophical and systems views to define JIT as a
productive system whose focus is on optimizing processes through
the philosophy of continual improvement.
Shigeo Shingo identified a group of seven wastes that workers could
address in improvement processes (Table 3.11).
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Other Japanese Contributions to Quality Thought– JIT as a
Philosophy
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Japanese Total Quality Control (TQC)
Just as the Japanese JIT approach requires attention to detail in
every aspect of the process, so does the TQC approach.
This attention to detail runs deep in the Japanese culture.
Beyond Deming’s 14 points, there are several Japanese contributions
to quality thought and practice that we outline next.
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Visibility
In the Japanese approach to quality, problems must be made visible
before they can be addressed.
Andon or warning lights
Line-stop authority
In-Process Inspection
With work in-process inspection, all work is inspected at each
stage of the process, and the workers inspect their own work.
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N = 2 Technique (only the first and last pieces are needed for
acceptance inspection)
The N = 2 technique is an alternative to acceptance sampling.
Usually, an acceptance sampling plan involves rules such as:
1.If 2 or fewer defects, accept the lot.
2.If more than 2 defects, reject the lot.
. If the supplier’s processes are in control and if the first and
last pieces in the lot meet specification, then it is concluded
that the entire lot of materials will meet specification.
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Total Involvement of Workforce
We all become responsible for the aspects of quality we influence
in a day’s work.
Horizontal deployment means that all departments are involved in
quality.
Vertical deployment means that all levels of management and workers
are actively involved in quality.
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The Five S’s. The five Ss are a sequential process that companies
follow to literally “clean up their acts.” The Five Ss are:
Seri: organizing by getting rid of the unnecessary.
Seiton: neatness that is achieved by straightening offices and work
areas.
Seiso: cleaning plant and equipment to eliminate dirtiness that can
hide or obscure problems.
Seiketsu: standardizing locations for tools and other
materials.
Shetsuke: discipline in maintain the prior four Ss.
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Quality Circles
Are natural work teams made up of workers that are empowered to
improve processes and are use by Japanese companies to involve
employees in improving processes and process capability.
Preventive Maintenance (PM)
The idea behind this concept is that the worst condition a machine
should ever by is on the day you purchase it.
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Quality Improvement: The European Way
- ISO 9000 is the European standard for quality that has been
expanded worldwide.
- There is a perception in the quality community that Europe is
falling further behind the Japanese and the United States in
improving quality.
- Culture plays a greater role in European quality practices than
it does in the United States.
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Quality Improvement: The European Way
- There are only two examples of why, if service is to be improved,
not only business practices will have to change in parts of Europe
but also ingrained culture must change.
- Two types of quality recognition are widely used in Europe.
- These are the European Quality Award (EQA) and ISO 9000
certification.
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European Quality Award (EQA)
The EQA has two levels. The highest level is the EQA for the most
accomplished applicant in a given year. The second level given in
the European Quality Prize for other firms that meet the award
criteria.
The model for the EQA is shown in Figure 3.7. (2000, old, not
newest)
The differences between EQA and MBNQA are found primarily in the
categories of people satisfaction, impact on society, and business
results.
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European Quality Award (EQA)
Quality Improvement: The European Way
A comparison of the Baldrige, Deming, and European awards is
presented in Table 3.12.
Like the Baldrige, the category of business results focuses on
operational and financial results.
However, the EQA focus also on corporate social responsibility in
the corporate results category.
This includes an assessment of results relating to social and
ecological factors.
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What is ISO 9000?
ISO 9000 is the European standard for quality that has been
expanded worldwide. ISO stands for Organization for International
Standards.
What is the Purpose of ISO 9000?
The purpose of ISO 9000 is to provide a mechanism for firms to
document their quality systems in a series of manuals to facilitate
trade through supplier conformance.
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ISO 9000
Selecting a Registrar
- To many who have implemented ISO 9000, the selection of the
registrar is the most important step in the ISO 9000 process.
- There is no centralized authority that qualifies ISO
registrars.
- When selecting a registrar, firms must be careful. They should
check with customers and departments of commerce and customers
within the countries to which they plan to export.
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ISO 9000
Limitations of ISO 9000
- Among the criticisms of ISO are that it is mainly for exporting
firms, is a barrier to trade, is time consuming, is costly, is
difficult for small firms to afford, eats up human resources,
discourages free thinking and employee empowerment, and the fact
that not all countries accept all ISO registrars (see Table
3.13).
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ISO 9000
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ISO 14000
ISO 14000 is an international standard for environmental
compliance.
The compliance standard is ISO 14001, Environmental Management
Systems.
This system may provide the basis for developing a comprehensive
environmental management system.
Table 3.14 presents the ISO 14001 Elements
A key process has to do with selecting the appropriate
registrar.
It is expected that firms with little environmental exposure will
adopt ISO 14000 first.
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ISO 14000
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The US approach has historically been command-and-control
oriented.
The Japanese approach is based on an ethic of consistency and
emphasis on reduction of waste.
The Europeans have adopted broad standards that can be adapted to
the diverse nation states of the EC.
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Are Quality Approaches Influenced By Culture?
Are other cultures developing quality methods that will be
instructive for world competitors?
Several Asian Tiger nations, such as Malaysia, South Korea, and
Singapore, have begun to make inroads in the field of quality and
will become formidable competitors in the future.
We will keep watching.