Sub-Topic

Strategy
Content for
Leadership
Quality
Quality
and Ethics
Quality as Strategic
Deploying Quality (Hoshin
Kanri)
Does
Quality Lead to Better
Business Result?
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Strategy Content
Quality is not just a control
system;
system quality is a management
function.
function -- David Garvin
Quality is strategic. Strategic
planning has two important
dimensions content and
process.
process Strategy process
consists of the steps used to
develop the strategy Foster, T.
S.

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What must a business do to survive ?

Grow ? Beat the competition? Satisfy
customers better? Be the low-cost
producer? Provide higher quality? Furnish
faster delivery? Design a higherperformance product?

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The answer to what a company must do in order to

survive is difference for every company and every
market.
market
Each company, in order to maximize its success, must
decide what to emphasize and must allocate its
resources accordingly.
To do this, an effective organization must study the
market and the competition and create a
strategic plan for how it will compete in its industry
or market (Summers, 2009)

What are strategies?

Strategies are broad statements
that set the direction for the
organization to take in realizing
its mission and vision.
(Summers, 2009)
Strategies are the process of
envisioning an organizations
future and developing the
necessary goals, objectives, and
action plans to achieve that
future. (Summers, 2009)
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Strategic Planning is a process of

involving everyone in matching the
vision, mission, and core values of an
organization with the current situation
to focus, tactical activities now and in
the future. Strategic plans set the
direction and pace for the entire
organization.
(Summer, 2009)
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A strategy is a pattern or plan that

integrates an organizations major
goals, policies, and action
sequences into a cohesive whole.
Evans,
2009
Formal strategy includes:
Goals

to be achieved
Policies to guide or limit
action
Action sequences, or
programs, that accomplish
the goals

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Strategic planning
1.
2.
3.
4.
5.
6.
7.
8.
9.

Focus on customers
Leaders determine critical success factors
Goals and objectives are process and results oriented
Goals and objectives are based on data and are driven
by trend or pattern analysis
Focus in on processes
Alignment exists between CSF, mission, vision, goals,
objectives, and day-to-day activities.
Everyone knows how his or her day-to-day activities
align with CSF, mission, vision, goals, objectives.
Improvement activities are focused on activities CSF
Improvement activities are both within and across
functional areas.

Summers,
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2009

Why is quality planning

important?
Quality improvement is a planned
managerial activity.
Quality improvement involves
identifying potential improvements,
prioritizing areas for improvement,
and planning the implementation of
projects and improvement.

Foster, 2010
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How are strategic plans created?

The organizations business (what

business are they really in)
The principal findings from the internal
and external assessment:
Strengths and weaknesses
Customer information
Economic environment information
Competition information
Government requirements
Technological environment

Summers, 2009.
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Strategic Planning Process

(Evans, 2009)
Reason for existence Future intent
Mission

Vision

Environmental assessment

Strategies

Strategic Objectives

Action Plans

Attitudes and
policies
Guiding Principles

Capabilities and risks

Broad statements of direction

Things to change or
improve

Implementation

Mission
Definition of products and services,
markets, customer needs, and
distinctive competencies
Solectron: to provide worldwide
responsiveness to our customers by
offering the highest quality, lowest
total cost, customized, integrated,
design, supply chain, and
manufacturing solutions through
long-term partnerships based on
integrity and ethical business
practices.

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Vision
Where the organization is headed and
what it intends to be
Brief and memorable - grab attention
Inspiring and challenging - creates
excitement
Descriptive of an ideal state - provides
guidance
Appealing to all stakeholders - employees
Solectron:
Be the best and
can identify with

continuously improve

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What is Strategy Content?

Foster, 2010
content refers to the
variables, definitions,
components, and concepts
that are included in the
strategy
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Foster, 2010
What are the content variables that should
be included in strategic planning? Among the
variables are :
Time
Leadership
Quality Costs
Generic strategies (cost,
differentiation, and focus)
Order winners
Quality as a core competency.
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SQP- The importance of time in

quality improvement.
Time is important component of strategy.
Strategic planning implies planning for the
long term. Thus strategic planning is
important for continuous quality
improvement.
Firms will seek after and attempt to attain
rapid quality improvement in order to
attain the benefits associated with
improved quality, such as greater market
share and increased sales.
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There are two aspects of time:

1. The time it takes to achieve

business goals as a result of
quality.
2. The speed at which
companies improve.

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 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.

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SQP- Leadership for Quality

Leadership is a key strategic variable for

quality improvement

A leader organizes, plans, controls,

communicates, teaches, advices, and
delegates.
The existence of a leader implies the
existence of a follower, Therefore

Leadership is the process by which a leader

influences a group to move towards the
attainment of superordinate goals.
(Foster,2010)
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 For followers to have power, leadership

must share power. As a result leadership is
about the sharing of power.
Leadership powers take many forms such as
:
The power of expertise
Reward power
Coercive power
Referent power
Legitimate power

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 Leadership for quality is leadership from the

perspective of total quality.
It is about applying the principles of
leadership to continually improve work
methods and processes.
Leadership for quality is based on the
philosophy that continually improving work
methods and processes will, in turn,
improve quality, cost, productivity, and
return on investment.
(Goetsch and Davis,2010)
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Deming Value Chain

Improve Quality
Cost Decrease (Less
rework, fewer
mistakes, fewer
delays, snags, better
use of machine time
and materials)

Productivity
Improves
Capture the Market
Stay in Business
Provide Jobs and
More Jobs
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Principles of Leadership for

Quality

1. Customer Focus

The organizations primary

goal is to meet or exceed
customer expectations.

In total quality setting, there

are both internal and external
customers.

Internal / external
customer

2. Recognizing the Structure

of Work

Menganalisa proses kerja bagi

belum mantap memastikan
kesesuaiannya seperti bersesuaian
dengan tools.

Menganalisa proses kerja sudah

mantap bagi tujuan
penambahbaikan.

3. Obsession with Quality

Is an attitude that leaders must be

instilled and continually nurtured in
organization.
It means that every employee
aggressively pursues quality in attempt to
exceed the expectations of customers.

4. Freedom Through Control

Iaitu merujuk kepada kawalan sumber

manusia.

Kawalan dari segi kaedah bekerja dan

proses yang dilakukan.

Bermakna pemimpin memastikan

kakitangan berkeja dengan kaedah dan
proses yang seragam.

5. Unity of Purpose

Matlamat organisasi yang jelas dan

tepat supaya semua kakitangan
faham dan komited.

6. Looking for Faults in Systems.

85% kesilapan dalam organisasi

disebabkan oleh kegagalan dalam
kawalan sistem pengurusan
(Deming & Juran)

Pemimpin perlu elak dari

mengutuk masalah kepada
menilai / perbetulkan sistem.

7. Teamwork

Pemimpin perlu mewujudkan konsep

kerja berpasukan dalam organisasi.

Teamwork vs Team Building

8. Continuing Education and

Training

Sekarang adalah zaman teknologi

tinggi.

Perlu pendidikan dan latihan berterusan.

Education VS Training

Quality and Ethics

1. Quality appears to be good
business.
2. Quality is also good ethics.
3. It is unethical to ship defective
products knowing to a customer.
4. Reliable products and low defect
rates reflect an ethical approach
of managements care for its
customers.

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 Organizations focusing on their customers

often develop a set of ethics that includes
valuing customers.
This is reflected in education, training,
health, wellness, and compensation
programs that show empathy for the
employees.
Good quality management is good ethics.

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SQP- Quality as Strategic

From the perspective of

generic strategies.

These strategies are :

1.
2.
3.

Cost
Differentiation
Focus

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1. Cost of Quality

One of generic means of

competing is COST.

Traditionally, this meant the

LOWEST-PRICED items in the
industry.

Many companies compete

on COST.
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New definitions of COST are

expensive. Considering the
summation of costs over the
life of a product. One of
This includes
service, is
generic means
of competing
maintenance, and operating
COST.

costs for the product.

Two broad categories of cost:

Cost due to poor quality.

Costs associated with
improving quality.
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Three dimensions of Costs of

Quality.

PAF Paradigm
Accounting for Quality-Related
Costs
Lundvall-Juran Quality Cost
Model

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PAF Paradigm

PAF paradigm translates

quality costs into three broad
categories.
1. Prevention Cost
2. Appraisal Costs
3. Failure Costs

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Prevention Cost
(PC)

PC costs are those costs

associated with preventing
defects and imperfections from
occurring.
PC costs are the most
subjective of the three
categories of costs..
PC costs include costs such as
training, quality planning,
process engineering, and other
costs associated with assuring
quality beforehand.
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Prevention Costs
1. The cost of setting, planning, and maintaining a
documented QMS.
2. Quality planning: establishing production process
conformance to design specification procedures, and
designing of test procedures and test equipment.
3. Quality and process engineering (including preventive
maintenance)
4. Calibration of quality-related production equipment.
5. Supplier QA
6. All training
7. Robust design
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8. Defect data analysis for corrective action purposes

Appraisal Costs

Are associated with the

direct costs of measuring
quality.

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Appraisal Costs
1. Laboratory acceptance testing
2. Inspection and tests by inspector
3. Inspection and tests by noninspectors
4. Setup for inspection and test
5. Inspection and test materials
6. Product quality audits
7. Review of test andc inspection data
8. On-site performance tests
9. Internal test and release
10.Evaluation of materials and spares
11.Supplier monitoring
12.ISO 9000:2008
13.Quality award assessments
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Failure Costs

FCs are roughly

categorized into TWO areas
costs: Failure Costs
ofInternal
(IFCs)
External

Failure with on-line

IFCs associated
failure
Costs(EFCs)

EFCs are associated with

product failure after
production process
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Failure Costs

IFC/EFC

1. Costs of troubleshooting
2. Reinspection of stock after defect detection
3. Disruption of production schedules
4. Complaint handling and replacements plus
extra time with customers
5. Warranty
6. Cost of holding higher levels of stock as a
buffer against quality failure
7. Cost of corrective maintenance to plant
8. Cost of corrective action to product (design,
repair)
9. Lost production because of labor availability
problems

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Failure Costs

IFC/EFC

10. Lost of production caused by system

problems
11. Concession
12. Process waste
13. Cost of product scrapped at product audit
14. Cost associated with disposition of all
scrap.
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Accounting for QualityRelated Costs (AQRC)

AQRCs are all about the calculation

of incurred costs.

Example Prevention, Appraisal,

and Failure.

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Example Annual
Quality Costs

Annual Quality Cost

Failure Cost
Defective products
Engineered scrap
Nonengineering scrap
Consumer adjustments
Downgrading products
Lost goodwill
Customer policy changes
TOTAL

RM
5276
17265
125274
623980
1430678
Not evaluated
Not evaluated
2202473

Appraisal costs
Receiving inspection
Line 1 inspectionm
Line 2 inspection
Spot checking
TOTAL
Prevention costs
Quality training
Process Engineering
Corporate
Plant
Product redesign
TOTAL
Grand TOTAL

35765
42234
53567
63766
195332
14500
125678
39124
16422
195724
2593529
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Solution
Ratio of appraisal to failure costs:
195332 / 2202473 = .0887
Ratio of prevention to failure costs
195724 / 2202473 = .0889
Ratio of prevention and appraisal to failure
costs
(195332 + 195724) / 202473 = .1776
Proportion of total quality costs
Prevention : 195724 / 2593529 = .0755
Appraisal : 195332 / 2593529 = .0755
Failure
: 2202473 / 2593529 = .8492
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The table shows that failure costs

(2202473) are very high compared
with the prevention (195724) and
appraisal (195332).

Increasing prevention and

appraisal activities could result in a
significant decrease in failure cost.

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Lundvall-Juran Quality Cost

Model

Using the law of diminishing marginal

returns, quality costs can be modeled
to show the tradeoffs between these
costs = called Lundvall Juran Model.

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The Lundvall Juran Model is a

simple economic model.
It states that as expenditure in
prevention and appraisal
activities increase, quality
conformance should increase.

Example the more organization spend

on training and developing employees,
the more benefit organization should
get.
As conformance improves, failure costs
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will lessen as well.

2. Differentiation trough
Quality

The product price is significantly

above the average market price
for such product.
It might be a very expensive,
brand-name that the customer
want.
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.

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Example - motorcycle

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3. Focus trough
Quality

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.
By focusing on the particular
group of consumer will the
organization will get more
business.
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Examples

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Quality Strategic Process

KAIZEN ????
POKA-YOKE???

HOSHIN ????
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 Process consists of the steps

developing strategy within an
organization.
There are many different processes
strategy the simple and the
comprehensive.

(Foster, 2010)

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Simple Strategic
Model

Known as Forced-Choice Model.

FCM is a generic and is used simplify
for explanation purposes.
FCM is very simple and very useful for
firms that are beginning /
inexperienced in strategic planning.

Foster, 2010
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FC Simple Strategic
Model
Organizations Position

Environmental
Assessment

1. Statement of
6. Broad economic
mission.
assumption.
2. Interrelated set of
7. Key government
financial &
and regulatory
nonfinancial
issues
objectives.
8. Major
3. Statement of
technological forces.
strengths and
9. Significant market
weakness.
opportunities and
4. Forecast of
treats
operation needs.11. Strategic options;
Explicit strategic of
5. Major future
requirements for
competitors.
programs
implementing options;
contingency plans.

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A Mature Strategic Quality Planning

The strategic planning process

contains quality concerns at every
step of the process.
Using professional facilitators, the
strategic management team reviews
the current years performance
against projections .
The team makes adjustments to the
current years plan.
Once completed, the mission, vision,
and values are reviewed and
updated.

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The company forecast market

demand and reassessing company
position.
The
company forecast market
demand and reassessing company

Company discusses their competencies

position.

and develop visions and expectations

for each of its product.
Makes revenue projection and plan to
extent competencies.

Assessment future market

Company analysis of capacity needs for

the coming year
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Develop broad goals and plans

To develop separate missions, visions,

values, and plans.

Develop the coming years annual

strategic plan.

Include market and product projections,

plant and equipment projections, labor
projections,
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Prepare for Next Planning Cycle

Step 1 : Mission, Vision,

Values, and Current
Strategy
Step 2: Market
Assessment

Step 3 : Set Goals by

Assessing Future Markets
Step 4 : Devbelop Broad
Goals and Plans by
Production Line
Step 5 : Review and
Monitor Implementation
of Strategic Plan
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Comprehensive developing strategic

- Deploying Quality (Hoshin Kanri)

DQ is a comprehensive quality strategic

process.
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 or
POLICY DEPLOYMENT.

Foster, 2010
1 - 65

 Hoshin is Japanese Strategic Quality Management (QM).

The Japanese translation of hoshin kanri as:
ho method
shin shiny metal showing direction
kanri - planning
A useful interpretation of the literal translation is that
hoshin kanri is a methodology for setting strategic
direction.
It also known as hoshin planning, policy management,
and policy deployment.

Bedi, 2006

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Development of 3 5
year Hoshin Goals

Review Hoshin Process

Senior Management
Devbelops 1 Year Hoshin
Goals
Product Management
Develops 1 Year Hoshin
Goals
Senior
Management
Action Plans

Product
Management
Action Plans

Revfiew By CEO

Review By Senior
Management

Yes

Problem
s

Yes

No
1 - 67

Does Quality Lead to Better

Business Result?

The answer was provided by W. Edward

Deming in value chain concept.

Foster, 2010

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