Operations Management: Honda's Quality Management - Term Paper Example

Operations Management: Honda's Quality Management Table of Contents Operations Management: Honda's Quality Management 1 Table of Contents 1 Executive Summary 2 Introduction 2 Company Overview 3 Literature Overview 4 TQM Implementation By Honda 7 Benefits of TQM 7 Bottlenecks in implementing TQM 9 Suggestions 10 Conclusion 10 Executive Summary Implementation of Total Quality Management (TQM) demands stringent and effective changes all through the company. The decision of implementing TQM in operations management can affect the functioning of the company in a significant way. It is a strategic decision and has lot of implications. The decision completely depends on the company regarding the kind of level they want to set up in the market. Few companies are satisfied in being as good as their competitors whereas others strive for excellence. Implementation of TQM demands stringent changes in all the other supporting departments of operations management. All the supporting process including product designing, job responsibilities, production process and product delivery have to be redesigned in such a way that in minimal time maximum quality work can be shaped. This report analyses the TQM implementation in Honda Motors in brief. Introduction Total quality management deals with implementing small steps to make the quality of the product better and to gain the most out of the limited resource. TQM focuses mainly on cutting down specific expenditures that leads to minimisation of profit. A company that decides to implement TQM has to first recognise those process which are not productive and do not play much role in adding to the quality of the product. Producing a product without wasting any resource including time in such an efficient way that the product has excellent quality is the main purpose of TQM. To implement TQM first the company has to rearrange the process that is directly related to the production and the delivery of the product (Rawlins, 2008, p.25). Honda Motors an established Japanese Automaker was one of the first companies to recognise the importance of TQM in increasing the quality quotient of their products. The TQM applied by Honda helped the automaker to save a lot of money which was spent on inventory and production process. The Japanese Automakers created a team of engineer who worked with one of their main suppliers Parker Hannifin. The team of selected engineers from Hondo Motors went to the Cleveland based plant of Parker Hannifin Corp. and helped them cut down on process which were both time and money consuming. The engineers worked in six plants and were able to install process that earned efficiency of worth $ 1.6 million per year. Most of the changes that were instilled were very basic yet effective in nature. Focus was given on cutting the number of time each part was dealt with. The new layout had cut down the time of several processes which used to previously take 19 days to 5 minutes. The Honda team worked with all the plants of their suppliers and made them more effective. Making the layout process of their supplier’s plant fast and effective ultimately helped Hondo motors to be more efficient have better quality(Thornton & Spence,1994,p.8). Company Overview Honda Motor Co. Ltd was established on September 24, 1948 in Japan. The current CEO of the company is Takanobu Ito. The company has around 176,815 employees world wide. They have operations well spread across the globe. The head office is based in Japan but they have operational set up in most countries. Honda Motors has around 390 subsidiaries. The main products of the company are Motorcycles, Automobiles and Power products. The company functions with the basic principle of respect for all beings. The company also emphasises on the three specific joys, the joy of purchasing, the joy of selling and the joy of creating something new. The company has always valued the efficiency of operation system. Hondo Motors was one of the first few companies to implement programs to make their process more efficient. Hondo Motors places equal importance on quality and cost of the product. They recognize the fact that that when the production extra cost is lowered by making the process efficient and error proof the customers end up acquiring a product that is of higher quality and cost effective. These simple yet useful views have made Honda motors the leading manufacturer of Motorcycle and automakers. Honda motors have a global network of 492 subsidiaries and affiliates. Honda is not only in manufacturing, they also have a reputable Research and development where many new technology is developed. Honda Motor also manufactures small purpose engines, sports car and speciality scooters to earn a world wide range of customers (Honda, 2011). Literature Overview Total quality management (TQM) implemented by companies require a proper planning by the company. The management has to first realise some key issues before embarking on implementation of TQM. The management has to address the key factors like the importance of quality improvement, diagnosis of blockages in production lay out, steps that need to be incorporated to achieve the quality desired( Allotey, 2008,p.7). The basis of implementation of TQM in the production process is to produce a premium quality product and offer it at a reasonable price. To implement a process like this certain strategies must be formulated (Oakland, 2003, p.339). The company has to first recognise the output they want to achieve in terms of quality and quantity. The design of the lay out has to be then designed accordingly. Once the process is implemented than the efficacy of the process has to be assessed. The blockages in the new process have to be understood and improvements in the process must be incorporated to get better result. To have consistent quality in products and service regular control of the process is required. The regular planning and control to accommodate the current demand of the production process must be done cautiously (Petty & Harrison, 2002, p.274). Quality is described by many in various terms; many acknowledge quality as a measurement of standard which is free of defects. Quality circle often recognised as QCs is a regular meeting between the workers of the company to discuss work related problems. This weekly meeting between the workers helps them to understand certain blockages at work and look for their solution. QCs became a trend in Japan manufacturing industry in the early 1960’s. By the end of 1980 there were around 100,000 QCs in Japan organisations. The workers would often make it a point to meet before or after their working hours to assess all the production problems and to find solution for these problems. Based on the elaborate discussions the workers would formulate possible solutions and propose these solutions to the senior management for their consideration (Kiser & Sashkin, 1993, p.5). Another main aspect of implementing TQM is to curtail the production cost without compromising on the quality to maximise the profit. The cost incurred by the inventory and scrap materials are brought down with the help of TQM measures. Instilling TQM in the production process has direct implications on service cost, rework cost, inspection cost , warranty cost and all the other related costs which taken together unnecessarily increase the cost of production. Reducing the production cost has in turn has direct implication on the profit margin. The lesser the cost of production is the more profit the company is able to make (Wright & Basu, 2005, p.6-14). TQM also provides the company an avenue to decrease the Gap between the customer’s expectation of the product and the actual product. This in turn in turn increases the customer satisfaction towards the product increasing the sale of the product. When the expectation of the customer exceeds the perception of the customer regarding a product than this denotes poor quality perceived by customers. When the customer’s perception regarding a product exceeds the customer’s expectation then the perceived value of the product can be accounted as good quality product. However when the expectation of the customer is similar to the perception of the customer then the quality of the product can be termed as acceptable. The implementation of TQM is to gain better perception of the product than the expectation of the product by the customers. To achieve this goal it is very essential to understand the expectation of the customers. Many company lack in comprehending the expectations of the customers increasing the Gap between the expected and the perceived product by the customers (Cotts & Friday, 1994, p.18). The characteristics of quality in goods and services can be measured by the functionality, appearance, reliability, durability, recovery and the customer’s experience regarding the company experience. Functionality gauges the performance of the product and the service. It measures whether the product is able to perform at par with the expectations attached to it. Appearance, is the first factor by which a product it weighed by the customer. The entire feel of the product, the aesthetics etc contribute a lot of value to the product. Reliability is also a key factor, whether a product or service in consistent in nature makes a huge difference in the quality of the product. Durability of a product or service states about the utility factor of the product. A product or service with high utility is considered as a high quality purchase. Recovery of the product, establishes the quality of the product in terms of reparability of the product. A product which can be easily repaired and serviced is held as a high quality product by the customers. The experience that a customer has during the interaction with the company representative also adds to the value of the product and the service (Basu, 2004, p.5). TQM Implementation By Honda Benefits of TQM The implementation of TQM by Honda Motors in their production process have reaped the company many benefits. Following are few benefits- Curtailing extra production cost. Cutting the extra cost in production- Honda Motors realised that many lay out process are unnecessary repeated due to lack of planning. A particular machinery or product parts is handled several times. Handling of one part several times utilises a lot of time and incurs extra cost. On implementing TQM Honda motors were able to cut down their unnecessary production layout cost. Having a proper cost effective layout, where all the parts are handled with minimum delay and cost incurrence can really add to the profit margin of the company. In case of Honda there implementation of TQM has provided them with a huge profit margin. Omission of errors in production. Honda Motors realised that implementing TQM also dealt with strategically lay out plans for each process including the human resources. When a certain section is responsible for a specific job and becomes specialised in that job, the margin of error reduces. Error reduction reduces the cost incurred on defective parts. The cost that is incurred by non-conformance such as accidents, poor product quality and late production has come down in all Honda plants ever since the implementation of TQM. Rework, calling back defective parts cost company a lot of money and also delays the actual assembly work. Accidents or sudden blockage at production process also leads to extra cost and production time. Having a specialised department which has specially trained employees to handle a certain part of production helps in speeding the process and avoiding such delays in production. Enhancement of quality of products. The most important aspect of implementing TQM has been the contribution towards quality. Honda Motors are known to provide quality products but at an affordable cost. This has become their main USP and competitive advantage. Honda Motors realised that the ability to provide good quality products at a reasonable cost will earn them more market share. Honda Motors have been trying to capture maximum market share and instilling TQM in their production has provided them with it. TQM has given Honda Motors the ability to offer premium products but at an affordable range. This strategy applied by Honda Motors has given them a cutting edge over many other companies. Bottlenecks in implementing TQM The main bottleneck that is faced by any company that wants to implement TQM during nascent stages is the resistance towards change. In some companies it is the board members, whereas in some companies the employees resist the change in work plan. Honda Motors initiated their implementation of TQM with their core suppliers. They realised that only when the suppliers start their production plan economically the company will be able to benefit from TQM. To convince their suppliers regarding the TQM implementation was a huge barrier successfully taken up Honda Motors. Following are few important bottlenecks that Honda Motors came across during their implementation of TQM- Lay out planning. The layout planning done by Honda Motors was a challenge. The lay out of production had to be devised in such a way that all the parts produced by Honda could be processed by a common lay out route. Having a separate lay out for parts with different design and specification would again delay the process and incur the cost. The strategic planning of making a lay out that was applicable to all the parts manufactured to certain extent was a huge hold-up. Training the employees. Training an employee in a specific field in such a way that minimum accidents and cost is incurred also requires time. Acquiring skilled lines man was not an easy task for Honda and training each section in such a way that they were specialised in handling many production process at a time required a lot of effort. Understanding the skill of the employees and training them accordingly was also a barrier. Initial cost to implement TQM. The initial cost of implementing TQM was also a concern for Honda Motors. Changing the entire process of the production requires an initial investment. Setting up a new lay out and production plan, reorganising the functioning of the company initially did incur cost. Implementing the new TQM process in all the operation set up initially caused a lot of cost outflow. Suggestions Honda Motors have been very successful in executing the TQM implementation in all their operations management. The TQM implemented by Honda Motors are mainly in their production process. They have been concentrating more on their economical production. Honda motors have spread their network world wide, they must apply TQM model to their other departments like sales, marketing and servicing. Honda Motors need to step up their sale and marketing in such a way that it adds to the efficiency of their operations. Conclusion Honda Motors have benefited a lot from the implementing TQM in their production process. They are one of the pioneers in auto-industry to bridge the gap between the customer’s expectation and the product produced by the company. Honda motors have successfully able to shift the production paradigm towards more customer centric approach. Their approach of always trying to produce quality products economically so as to offer the customer a premium product at a reasonable cost has given them a good hold on the auto industry. The company keeps changing their designs and production plans according to demands and specification of the market. They also give ample emphasise on developing quality technology to make their product more cost effective for their customers. The company has always set their goal acquiring maximum market share instead of maximum profit margin. They have also been successful in spreading the network world wide their efficient way of production has given them an edge over their other competitors. Honda Motors have been able to establish themselves as a global brand due to their successful implementation of TQM measures in their production plan. References Allotey. A. (2008). Implementing Total Quality Management (TQM) - The Issue of National Culture. GRIN Verlag Basu. R. (2004). Implementing quality: a practical guide to tools and techniques: enabling the power of operational excellence. Cengage Learning EMEA Cotts D. G and Friday. S. (1994). Quality facility management: a marketing and customer service approach. John Wiley and Sons. HONDA. (2011). Company Overview. [Online]. Available at: http://world.honda.com/profile/overview/. [Accessed on May 24, 2011] Kiser. K.J and Sashkin . M. (1993). Putting total quality management to work: what TQM means, how to use it, & how to sustain it over the long run. Berrett-Koehler Publishers Oakland S. J. (2003). Total quality management: text with cases. Butterworth-Heinemann. Petty. D. J and Harrison. D. K. (2002). 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