It takes Quality to Qualify

Intensive quality-oriented management is key to a company’s success

Many companies attempt to implement ISO 9000 before starting a world-class quality programme either because the customer expects it, or because a competitor has done so. In these cases, there is a very high risk that the company will introduce the standard, not because it believes in the concept but because it is forced to do so. The company, in this case, will almost certainly end up with two systems, the one they show the auditor, and the one they actually use. Cynicism will be rampart, and senior management will be accused of lack of quality-mindedness.

These problems can be overcome if ISO 9000 is introduced as part of a world-class quality programme. With this objective, ISO 9000 may or may not be the first item on the agenda as in the case of Punjab Tractors, Tata Steel, Citibank, and many more. Each of these companies initially focused on making a habit of quality improvement, company-wide, and simultaneously harvesting the benefits of lower costs of poor quality. The primary objective of world-class quality management is to make organisations competitive.

Items that would be subject to audit according to ISO 9000 may not even exist in a true world-class quality organisation. For example, there is the case of the ISO 9000 auditor who went to a Japanese supplier to make an audit. After the audit, the company asked whether he had seen everything he wanted to see.

“Well almost” he said “I haven It been able to find your goods inwards stores and finished goods stores. I would also like to see the store for reject or substandard parts.”

“We don It have any of these,” was the reply! Dr Joseph M. Juran the quality guru, is at least partially responsible for the very wide circulation of the Motorola-Matsushita/Quasar story, in manufacturing circles. He explains the concepts behind costs of poor quality with this example, in his foundation lectures on ‘Management of Quality’. In the mid ‘70s, the Japanese electronics giant bought out a colour TV plant that had formerly been run by Motorola. Before coming under Japanese management, the Motorola factory had been running at a rate of 150 to 180 defects per 100 sets. Three years later, the defect rate had dropped to three or four per 100 sets. As a result, the costs of poor quality dropped from $22 million to less than $4 million, the number of in-plant repair and service employees was reduced from 120 to 15, and personnel turnover dropped from 30 per cent to 1 per cent per annum.

All this happened with effort and marginal investment, including modified product designs, changes in manufacturing processes to make them less prone to defect generation, and more reliable defect-free parts. They did not use a revolutionary new technology, or a new workforce. The key was intensive quality oriented management that brought with it targeted increases in quality and simultaneous and concomitant decreases in cost.

The NUMMI (New United Motors Manufacturing Incorporated) quality story is also vitally important to manufacturers across the globe. NUMMI is a joint venture of General Motors (GM) and Toyota Motor Company. In this venture, Toyota makes a version of the Toyota Corolla, and GM sells them under the Chevrolet Nova label. Toyota does the manufacturing in a GM plant at Fremont, California, which had been closed by GM due to low quality and low productivity.

Then, Toyota took over the operations and now NUMMI has the highest quality and productivity of the entire GM system. How was this accomplished? It was largely through implementing ideas similar to those used at the Quasar plant and a series of quality management techniques that relied on innovative employee relations and workplace reorganisation. Yet, NUMMI is not a particularly high-tech operation. In fact, actual manufacturing technology used in the plant is not as advanced as that utilised currently at some other GM plants.

There are similar stories of manufacturing successes achieved by leading Japanese companies, including Sony and Honda. World class quality begins and ends with the profit and loss account and the balance sheet. Current world-class management models, such as, the Malcolm Baldrige, European Quality Award and IMC Ramkrishna Bajaj National Quality Award, reinforce the same. In the context of these models, the cost relationships that have the greatest impact are:

• Quality costs as a percentage of sales
• Quality costs compared to profit
• Quality costs as a percentage of total manufacturing costs
• Effect of-quality costs on break-even point.