Managing for Quality and Performance Excellence in the Auto Industry - Toyota - Case Study Example

Managing for Quality and Performance Excellence in the Auto Industry The paper highlights the importance of adopting total quality management (TQM) in automobile industry. The history of TQM has been explained followed by eight major principles that are necessary to adopt in order to achieve the desired level of improvement in the production process. The eight principles are Customer focus, Leadership, Involvement of people, Process approach, System approach to management, Continual Improvement, Factual approach to decision making and mutually beneficial supplier relationships. There are certain statistical measures introduced as part of TQM, which help in the statistical modeling of the manufacturing process. Six Sigma is an important measure introduced by Motorola to do away with the production inefficiencies and improve the process. Hereafter, a comparison is done pertaining to the quality control practices adopted in Japan and the USA. The Japanese firms with their excellent technological innovations and low cost productions have excelled and made a significant mark in the automobile industry. They have heightened the global standards and their good practices are increasingly being adopted all over the world. Table of Contents Introduction 4 Origin of Total Quality management 4 Principles of Quality Management 4 Six Sigma 9 Six Sigma Studies in the Automobile Sector 10 Total Quality Management practices in Japan and the USA 10 Conclusion 11 Introduction In the present world, business is based on quality of the products and services offered. This measure has been adopted in order to maintain a standard quality in the management and the processed outputs. Failure to adhere to quality norms can lead to legal consequences. Total Quality Management can be explained as a management system for a customer focused organization that is involved in continuous improvement of all business aspects. In order to integrate the principles of quality management into the work culture and production process of an organization, Total Quality management takes into account strategy, data and effective communication. Origin of Total Quality management The total quality management methods were developed during the First World War so as to ascertain quality standards. During the war, there was large scale manufacturing that led to poor quality standards. As a controlling measure, quality inspectors were brought in to check for any failure in the quality standard (Patel, 2009). Thereafter, during the late 1970s and 1980s, in the face of stiff competition from Japan who could produce high quality goods at competitive cost, the developed countries of North America and Western Europe started to suffer huge economic losses. Since the start of Industrial Revolution, for the first time, the United Kingdom became a net importer of finished goods. The U. S. government also began to conduct research in order to identify its technological drawbacks. The firms started re-examining the techniques of quality control and analyzed ways in which the Japanese so successfully used the same to their advantage. In the midst of this economic turmoil, TQM took its roots. Principles of Quality Management Toyota Motor Co. Ltd won the Deming Application Prize in 1965 and the Japan Quality Control award in the 1970. Based on the corporate philosophy of “customer first” and “quality first”, Toyota introduced Statistical Quality Control (SQC) in 1949 and has applied TQM based on the aforementioned principles. The basic principles of TQM, coupled with Toyota’s philosophy of providing customers with the best quality products, are spread at all organizational levels and ranks, which contributes to higher productivity, product quality and work quality (Toyota Motor Corporation, 2012). The principles of quality management that allow the senior management to steer the organization towards improved performance and achieve excellence are mentioned below. Customer Focus – An organization is dependent on their customers and hence, the customer’s needs and their satisfaction should be the primary focus. The application of this principle is subject to few steps. Gain an understanding of the customer’s needs and expectations for products, price, delivery and dependability. Maintain a balanced approach between needs and expectations of the customers and other stake holders like, owners, suppliers, local communities and the society at large. Communicate these needs and expectations throughout the organization and work towards achieving the same Measure customer satisfaction and act on results. Maintain a cordial relationship with the customers. The benefits that a company enjoys on abides by these rules are; Increased revenue and market share due to flexible and fast responses to the market opportunities Effective use of the organization’s resources to enhance customer satisfaction Satisfied customers are retained and the customer loyalty leads to repeated business opportunities Workforce Focus – This aspect can be disintegrated into two parts: leadership and involvement of people. Leadership – In every organization, in order to establish unity of purpose and set the direction, the leaders must guide the workforce in such a manner that the desired goal is achieved. They should be able to create and maintain a healthy internal environment, where people can get fully involved and achieve the organizational objectives. The steps involved in application of this principle are; To be proactive and develop a practical approach by setting an example Be adequately dynamic to be able to understand and respond quickly to changes in the external environment Establish a clear vision of the company’s future Understand needs of the customers as well as the work force Build trust among the organization and eliminate fear Entrust people associated with the organization with appropriate responsibility The leaders should have appropriate authority to command accountability from the workers Set challenging goals and implement strategies in order to achieve the same Encourage honest and open communication Provide proper training to staff Involvement of people – The work force of an organization is its strength and must be utilized to the full capacity. Following are the steps involved in the application of this principle. Accept the ownership and take up responsibilities Constantly seek opportunities to enhance performance, knowledge base and experience Constantly strive to create value for customers Have a team based approach and be able to share knowledge and experience in the teams Be dynamic and innovative in order to meet the company’s objectives Representation of the organization to customers should be constantly improvised Identify constraints to problems and perform accordingly Evaluate performance against personal goals and objectives (Nicoleta, 2010) Process Focus – In order to achieve desired results, available resources and activities are to be managed as a process in an efficient manner. The steps involved in application of this principle are; The process should be well-defined in order to achieve desired results Proper identification and measurement of the inputs and outputs of a process are needed. Identify and relate interfaces of the process with functions of the organization Evaluation of possible risks, consequences and impacts of the defined processes on the customers, suppliers and other stakeholders While designing processes, the constituting steps, activities, flows, control measures, training needs, equipment and information should be considered (ISO, 2012) System Approach to Management – In order to contribute to an organization’s effectiveness and efficiency in achieving set objectives, it is necessary to recognize, understand and manage the interrelated processes as a system. This process entails the following: Formulate a well-defined structure so as to achieve the organizational objectives in an efficient and cost effective manner Have a thorough understanding of the interdependencies of the system processes Integration and harmonization of processes are required Providing with a better perception of the roles and responsibilities in order to accomplish common objectives, thereby minimizing cross-functional barriers Constant measurement and evaluation of the system is necessary for improving the system Specific activities within system should be clearly mentioned and directed towards achieving the end results in an competent manner Understanding the capabilities of an organization and to establish the resource constraints before action Adherence to this principle brings about proper integration and alignment of the processes that are directed towards attaining the desired results and effort is focused on the key process (Recoveri, 2014). Mutually beneficial supplier relationships – The inter-dependent relation between a company and its suppliers is mutually beneficial and creates value for both. The application of this principle related to mutually beneficial supplier relationships entails: Flexibility and speed of joint responses for altering market or consumer needs and expectations Optimization of costs and resources Establishment of balanced relationships between short-term profits and long-term plans Pooling of expertise and assets with partners The identification and selection of key suppliers Clear and open communication Sharing of information and future plans Establishment of improvement activities leading to joint development The improvements and achievements made by suppliers must be inspired, encouraged and recognized Creation of value for both parties Factual Approach – Proper analysis of data and information helps in effective decision making. Applying the principle of factual approach to decision making contributes in the following ways; Informed decisions An increased ability to express effectiveness of the past decisions by referring to factual records Improved ability to review, challenge and alter opinions and decisions Ensures that data and information are accurate and consistent Making data available and analyzing the same Making decisions and taking action based on accurate analysis, balanced with knowledge, experience and intuition. Continual Improvement - A permanent objective of an organization should be to strive towards facilitating improvement of the overall organizational performance. Applying this principle of continual improvement helps to achieve the following: Adopt a consistent organization-wide approach to support improvement of the company’s performance Training people on the methods and tools of constant improvement Establishment of goals to guide and procedures to track continual development The objective for every individual in an organization should be to make continual improvement of products, processes and systems (Recoveri, 2014) Six Sigma Motorola had introduced the concept of Six Sigma in 1987 in order to reduce the frequency of faults in designed products and to improve quality of the production system. The concept of Six Sigma has not been adopted by many companies such as, Hyundai, Samsung and POSCO. However, there have been others who have successfully implemented Six Sigma, which acts as an important part of Statistical Process Control (SPC). There is a common misconception about Six Sigma that it can only be implemented in the manufacturing sector; but in reality, the key ingredients of Six Sigma decide upon the context of its applicability and it can be used in other sectors as well (Zomerdijk & de Vries, 2007). Six Sigma is modeled to seek and remove the causes of defects and minimize variability in the production process, thereby improving quality of the processed output. Most of the studies regarding Six Sigma have relied only on descriptive statistical concepts like, mean, median, mode and standard deviation, so as to set up the framework of Six Sigma and analyze the data. It has been found that the goodness of fit test corresponds considerably well with the Six Sigma model and helps in determining quality gaps in the production process (Roy, n.d). Ford demonstrated its long-term commitment to Six Sigma by implementing the same at all organizational levels, including the senior management levels where nearly 350 executives of Ford received Six Sigma training or certification. In order to solve the problem of rising cost and environmental hazards, a team of Six Sigma professionals came up with unexpected solutions that led to a shift from robotic to manual process (Jacobsen, 2011). The term Six Sigma is derived from the terminology associated with manufacturing, in particular with terms related to statistical modeling of the manufacturing process. The products of a manufacturing process are tested and maturity of the process is described by the sigma rating, which indicates the yield or percentage of products that are defect-free. In Six Sigma process, it is statistically expected that almost 99.99966% of the products manufactured are free of defects. Nonetheless, this level of defect corresponds only to a 4.5 sigma level. Six Sigma is a proven programme, which translates continuous improvements in the production process into business results. The extension of the product to the supply base becomes attractive because of the cost saving nature of Six Sigma. The concept of Six Sigma as means of reducing errors and improving process has been around for several years, but it is only recently that the concept of Green Six Sigma has gained momentum. This latest development allows the companies not only to deal with customary issues within the manufacturing and non-manufacturing process, but also to minimize their hazardous environmental impact (Chakrabarty & Tan, 2007). Six Sigma Studies in the Automobile Sector The implementation of Six Sigma in the automobile industry is an innovative idea. Previously conducted studies have revealed that several automobile industries are widely using the Six Sigma tools and techniques. Even so, they solely focus on quality control checks of their products and ignore the environmental hazards. These companies are adopting the environmental standards primarily in order to maintain cleanliness in the internal environment by the 5S, 6S and TPM standards. They often do not take into account other factors such as, the amount of hazardous effluent material discharged into the water polluting the environment. With increasing awareness about the environment and growing concern over the deteriorating standards, this has become a real issue that should be attended to at the earliest (M.S. Ansari, A.H. Ansari & A.A. Ansari, 2013). Total Quality Management practices in Japan and the USA It is seen that Japanese firms that are led by Toyota have made their mark in the global automobile industry by way of achieving the highest levels of manufacturing efficiency. Physical productivity reflects the throughput speed for manufacturing products and the amount of labor required in the same. This factor has been found to be significantly higher in Toyota than that of most U.S. plants. However, with recent improvements made by the U.S firms, these differences have minimized.  Inventory turnover is a useful measure of efficiency as it reflects manufacturing ability of the firms in order to meet market needs, rather than production schedules. It also demonstrates their capability at effectively reducing the number of parts and semi-finished goods. These then add to the operating costs and often cover up inefficient practices or process errors. Inventory turnover is defined as the ratio of sales to work-in-process and finished goods, or the cost of goods sold divided by work-in-process. The Japanese automobile industry has reflected that rate of inventory turnover is several times more than that of the U.S. firms (Cusumano, 1988). High productivity and other aspects of process efficiency such as, rapid inventory turnover, help to solve problems of mass production. Although consumers demand different products at low prices, the factory tends to produce standardized components in large amounts. The Japanese firms have solved this problem in a very efficient manner. Their performance in automobile production is not dependant on the employment of Japanese workers, rather on technological innovations and management. Over the years, Japanese innovations have challenged fundamental assumptions about mass production, thereby leading to revisions in American and European equipments, production techniques and labor and supplier policies that were primarily introduced in the 1950s and 1960s. At that period of time, total Japanese manufacturing volumes and volumes per model were particularly low by the U.S. (or European) standards. While Japanese “good practices” are potentially applicable to any market, the U.S. managers must firstly obtain a thorough understanding of these practices and subsequently consider adopting these techniques (Cusumano, 1988). There has been a continuous emphasis on product quality control, which is gradually becoming a general notion in the U.S automobile industry. Not only the Japanese, but the Koreans are also maintaining quality controls in respect to domestic manufacturing (Maheshwari, et al., 2011). Conclusion There has been an upsurge in the number of companies adopting TQM measures. However, there is still scope for considerable improvement. TQM helps a company rectify mistakes and adopt measures for improvement in the production process. More companies should incorporate total quality management and ISO 9000 so as to protect needs of their customers. It helps in production of the goods and services as well as uplifts the standard of living, thereby affecting demand and supply of the goods and tastes and preferences of the consumers in a positive manner. References Ansari, M.S., Ansari, A.H. & Ansari, A.A. (2013). Scope of six sigma study in automobile industries to control pollution due to heavy metals and other pollutants. Ultra Chemistry, 9(2), 181-196 Chakrabarty, A. & Tan, K. (2007). The current state of six sigma application in services. Managing Service Quality, 17(2), 191-208. Cusumano, M.A. (1988). Manufacturing Innovation: Lessons from the Japanese Auto Industry. Retrieved from http://sloanreview.mit.edu/article/manufacturing-innovation-lessons-from-the-japanese-auto-industry/ ISO. (2012). Quality management principles. Retrieved from http://www.iso.org/iso/qmp_2012.pdf Jacobsen, J. (2011). Ford Team Uses Six Sigma to Reduce Costs While Improving Environmental Impact. Retrieved from http://asq.org/public/wqm/ford-team-reduce-costs-environmental-impact.pdf Maheshwari, H., Mittal, S., Sharma, A., Gore, R., Shah. A., Shah. A. & Prakash, D. (2011). Quality Practices in Automobile Industry. Retrieved from http://www.scribd.com/doc/24482761/Quality-Management-and-Practises-in-Automobile-sector Nicoleta, I. (2010). Principles of Tqm in Automotive Industry. Romanian Economic Business Review, 5(4), 187-197. Patel, G. (2009). Total quality management in healthcare. Retrieved from http://hdl.handle.net/10380/3062 Recoveri. (2014). Quality Management System. Retrieved from https://www.recoveri.net/content/quality-management-system#Top8 Roy, M. (no date). Application of TQM to improve production and services Retrieved from http://www.academia.edu/3436001/TQM_in_Automobile_Industry Toyota Motor Corporation. (2012). Changes and Innovations (include the Creative Idea Suggestion System). Retrieved from http://www.toyota-global.com/company/history_of_toyota/75years/data/company_information/management_and_finances/management/tqm/change.html#header Zomerdijk, L. G. & de Vries, J. (2007). Structuring front office and back office work in service delivery systems. International Journal of Operations & Production Management, 27(1), 108-313. Read More