STRATEGIC QUALITY PLANNING

QUALITY MANAGEMENT (UFA 1004)

CHAPTER OBJECTIVES

After completing this chapter, you should be able to:

1. Understand the differences between strategy content and process.
2. Discuss strategy content and strategic considerations in quality.
3. Analyze quality costs.
4. Understand the role of quality in the competitiveness of the firms.
5. Plan quality improvement using Hoshin planning.
Strategic Planning has two
important dimensions: Content And Process.

 Strategy Content
 Quality improvement is a planned managerial activity

 quality improvement involves - identifying potential improvements, prioritizing potential areas for improvement,
and planning the implementation of projects and improvements.
 content variables that should be included in strategic quality planning are leadership, quality costs, generic
strategies (cost, differentiation, and focus), order winners, and quality as a core competency
 These content variables outline key considerations when developing a strategic plan
THE IMPORTANCE OF TIME IN QUALITY IMPROVEMENT
 Time is a key variable in improving quality
 There are two aspects of time: the time it takes to achieve business goals as a result of quality and the speed at which companies
improve.
 A major study of best quality-related practices undertaken by Ernst and Young was critical of total quality management (TQM)
programs for not providing bottom-line results.
 on average, 3.5 years were required for companies to begin to see significant results from quality improvement programs.
 Eg; U.S. auto industry, Narasimhan, Ghosh, and Mendez2 found a 2.26-year lag between quality improvement and customer
recognition of quality improvement.
 eg: Shingo stated that 25 years were required for Toyota Motor Company to achieve significant improvement and that this time
could be reduced to 10 years for competitors.
 Deming4 consistently stated that continuous quality improvement was a slow process that required commitment of resources and
time.
 time is an important variable to consider when managing successful quality improvement programs. Time is also
an important component of strategy. Strategic planning implies planning for the long term.
 Firms will seek and attempt to attain rapid quality improvement in order to obtain the benefits associated with
improved quality, such as greater market share and increased sales. However, setting short-term goals for higher
quality levels and managing toward those goals actually may prove detrimental to the firm. Managerial action that
will lead to an optimal rate
 of quality improvement requires an understanding of the effects of rapid quality improvement
 We call one of the approaches that some managers use the “management by dictate” model. Using
management by dictate, we set numeric goals for the coming year. For example, top management might
say, “I want to see a 50% reduction in defects during the coming year.” Thus a numerical goal has been
put in place for lower-level managers to meet. This is analogous to what Deming (discussed in Chapter
2) referred to as creating goals and not providing systems to achieve the goals. According to Donald
Wheeler, a quality expert, when goals such as these are set, one of three things will occur:
 1. People will achieve their goals and positive results.
 2. People will distort the data.
 3. People will distort the system.
 Achieving the goals is what management hopes will occur. Management truly wants to think that a goal can be attained
without providing systems. Distorting the data may range from creative “cooking of the data” to finding honest data that
sheds the best light on the system in question. Distorting the system also can occur.
 For example, if we set a goal for defect reduction, we can define defects as those occurring in the final inspection. We can
then implement a more rigorous in-process inspection that will eliminate defects before they arrive at the final inspection.
Voilà! A simultaneous reduction in defects and increase in costs. This is an example of distorting the system.
 The key, then, is for firms to put in place a process that will allow learning to occur. We still do not know the optimal time
for learning to take place. Indeed, there are stories of companies that have had the capacity to achieve rapid improvement.
However, one suspects that each of these companies also provided enormous amounts of support for employees to
achieve their goals. Providing such an infrastructure is the work of management because they have the budget and
authority to do it.
LEADERSHIP FOR QUALITY

 Leadership is a key strategic variable for quality management. A leader organizes, plans, controls, communicates,
teaches, advises, and delegates. The existence of a leader implies the existence of a follower. Therefore, the
leading involves a power-sharing relationship between two or more individuals in which the power is distributed
unevenly. For example, the leader will have more monetary and organizational authority than the follower. Thus,
the leader will need to share authority for the follower to complete work assignments.
 Leadership is the process by which a leader influences a group to move toward the attainment of superordinate
goals.
 Superordinate goals are those goals that pertain to achieving a higher end that benefits not just the individual but
the group
For followers to have power, leadership must share its power. As a result, leadership is about the sharing of power.
this power takes many forms:

Power of Reward Coercive

expertise power power.

Referent Legitimate
power. power
LEADERSHIP
DIMENSIONS

 trait dimension.

 leader skills.
 Employees must trust that if they make recommendations for improvement, the recommendations will be taken
seriously and considered for implementation by management. Nothing can damage a quality improvement effort
faster than management’s failure to consider implementing changes that employees recommend. Employees may
begin to think “nothing will really change.”
 Commitment to quality means that leaders provide funding, slack time, and resources for quality improvement
efforts to be successful. This commitment is measured in decades, not quarters or budget cycles. One company
embarked on an expensive training process, only to throw all its past efforts away by deciding to cut training in a
budget cycle two years later. At last glance, this company’s quality and process improvement efforts had all but
disappeared.
QUALITY AND ETHICS

 Quality appears to be good business. Quality is also good ethics. is unethical to ship defective products knowingly
to a customer. Reliable products and low defect rates reflect an ethical approach of management’s care for its
customers.
 Companies focusing on their customers often develop a set of ethics that includes valuing employees. This is
reflected in education, training, health, wellness, and compensation programs that show empathy for the
employees. environmental friendliness is seen as an ethical concern.
 Good quality management is good ethics. Would we want to knowingly provide poor service or ship bad product?
QUALITY AS A STRATEGY

high-quality quality is still an

production is an effective tool for
essential ingredient successfully
for participation in exporting in the
the market. international market.
COSTS OF QUALITY
 lowest-priced items in the industry.
 Consider the summation of costs over the life of a product. They include service, maintenance, and operating costs for the product
 There are two broad categories of cost: costs due to poor quality and costs associated with improving quality

 PAF paradigm - translates quality costs into three broad categories, which are then subdivided into other categories. The
three categories are prevention, appraisal, and failure costs (hence the acronym PAF)
 Prevention costs - costs associated with preventing defects and imperfections from occurring. (such as training, quality
planning, process engineering, and other costs associated with ensuring quality beforehand)
 Appraisal costs - direct costs of measuring quality. (lab testing, inspection, test equipment and materials, losses because
of destructive tests, and costs associated with assessments for ISO 9000 or quality awards)
 Failure costs - Internal failure costs - online failure
- external failure costs - product failure after the production process
ACCOUNTING FOR
QUALITY-RELATED
COSTS
 One of the barriers to the
collection of quality cost data has
been the lack of acceptable
accounting standards for these
costs.
 failure costs are very high
compared with the prevention
and appraisal costs. Increasing
prevention and appraisal
activities (and costs) could
result in a significant decrease
in failure costs.
LUNDVALL–JURAN
QUALITY COST
MODEL
 law of diminishing marginal returns, quality
costs can be modeled to show the trade-offs
between these costs. This trade-off model,
called the Lundvall–Juran model
 is a simple economic model.
 expenditures in prevention and appraisal
activities increase, quality conformance
should increase.
 For example,the more we spend on training
and developing our employees, the more
benefit we should get. As conformance
improves, failure costs will lessen as well.
 This is an interesting case because if these
statements are true, there should be an
economic quality level that minimizes
quality-related costs, and this flies in the
face of the idea of continuous improvement
proposed by Deming and others
DIFFERENTIATION THROUGH QUALITY

 Think of a product you have been desiring for some time that is priced significantly above the average market
price for such a product. It might be a very expensive, brand-name cell phone or TV that you want because of its
special appeal. Chances are that such a product benefits from differentiation.
 Differentiation is achieved by a competitor if the consumer perceives the product or service to be unique in an
important way.
 Eg: Neiman-Marcus, the retailer, charges many times the prices charged by its competitors for some products. A
Rolex watch or iPhone invests the owner with a certain status that other products do not. These are examples of
differentiated products
FOCUS THROUGH QUALITY

 focus the product

 think of a product that is particularly regional or is marketed to a particular segment of the population.

 This limited customer group or segment of the market is the object of the focus strategy. more fitness clubs for
seniors are springing up around the country. Such a focus strategy can be very profitable.
QUALITY AS A CORE COMPETENCY

 A core competency has three aspects:

 1. It helps a company access markets.
 2. It benefits customers.
 3. It is difficult for other firms to imitate
 quality—in and of itself—, the capability to change can be more important than the actual changing technology of
the moment. Hence organizations producing outstanding products or services with a good understanding of
processes are better positioned to operate in the changing market because they can introduce new products rapidly
and with fewer quality-related holdups. Therefore, core competency is built on the foundation of a long-term
commitment to quality and continual process improvement
QUALITY STRATEGY PROCESS
Process Consists Of The Steps For
Developing Strategy Within An
Organization.

 forced-Choice model

 simplicity and its usefulness for

firms that are beginning strategic
planning.
 generic and is used simply for
explanation purposes
 useful for companies that are
relatively inexperienced in
strategic planning
The process begins by sequestering 6 to 12 members of upper

management at a retreat. An organizational assessment is performed to

identify strengths and weaknesses within the firm.

Next, management performs an environmental assessment to evaluate the

company’s relative position in the marketplace.

In the wrap-up session, alternative strategies are developed by executives

DEPLOYING QUALITY (HOSHIN KANRI)

 Hoshin is Japanese for a compass, a course, a policy, or a plan. This is to indicate a vision or purpose to an
existence. Kanri refers to management control.
 In English, this is generally referred to as policy deployment.

 Hoshin has been used in Japan since the 1960s as a means of implementing policy. Implicit in the Hoshin Kanri (or
Hoshin, for short) is the use of the basic seven tools of quality (discussed in Chapter 10), the new tools of quality,
and quality function deployment.
In the Hoshin process, the
company develops a three-
to five-year plan, and Catchball involves
senior executives develop reporting from teams and
the current year’s Hoshin feedback from
objectives. management.

Then the process of The development of the

catchball occurs. Catchball Hoshin plan results in the
is the term used to cascading of action plans
describe the interactive that are designed to
nature of the Hoshin achieve corporate goals
planning process.
DEPLOYING
QUALITY (HOSHIN
KANRI)
DOES QUALITY LEAD TO BETTER BUSINESS RESULTS?

 many variables affect profitability besides quality. - If you produce a high-quality product or service that no one
wants to buy, quality management systems likely will not save you
 many companies implement quality incorrectly - Quality improvement takes a long time, and many firms desire
quick returns on investment for quality training programs. When these returns are slow in coming. the companies
give up in midstream and wonder why their quality efforts were ineffective. At the same time, quality programs
have been shown to be effective in a variety of cultures and industries when implemented correctly. Hence the
mixed results. As a result, we need to understand the relationships between quality and other variables.
functional managers should also develop hoshins in conjunction with upper management.
this results in the development of specific plans for action and a postimplementation review of Hoskins to evaluate the
success of the process.

Quality and Quality and Quality and

price Cost productivity

Quality and Quality and

profitability Sustainability
SUPPLY CHAIN
STRATEGIC
PLANNING
THANK YOU Farah Syazreena Azmi
[email protected]
0133887448

UMCCED UFA 1004