TOPIC 3

Strategic
Quality
Planning
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Sub-Topic

Strategy Content
Leadership for 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 Strategic planning has
two important dimensions content and
process.
process Strategy process consists of the
steps used to develop the strategy
Foster, T. S.
BJMQ3013-Quality Management: Dr Che Azlan1Taib
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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 higher-performance product?

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)

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 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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Evans, 2009

A strategy is a pattern or plan that

integrates an organizations major
goals, policies, and action sequences
into a cohesive whole.

Formal strategy includes:

Goals to be achieved
Policies to guide or limit
action
Action sequences, or
programs, that accomplish
the goals 1-7
Summers, 2009 strategic planning takes a broad view
of planning process.
1. Focus on customers
2. Leaders determine critical success factors
3. Goals and objectives are process and results oriented
4. Goals and objectives are based on data and are
driven by trend or pattern analysis
5. Focus in on processes
6. Alignment exists between CSF, mission, vision, goals,
objectives, and day-to-day activities.
7. Everyone knows how his or her day-to-day activities
align with CSF, mission, vision, goals, objectives.
8. Improvement activities are focused on activities CSF
9. Improvement activities are both within and across
functional areas.

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Foster, 2010
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.
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Summers, 2009..
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 weakress

Customer information
Economic environment information
Competition information
Government requirements
Technological environment

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 Strategic Planning Process Evans, 2009
Reason for existence Future intent Attitudes and policies

Mission Vision Guiding Principles

Environmental assessment Capabilities and risks

Strategies Broad statements of direction

Strategic Objectives Things to change or improve

Action Plans
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. 1 - 12
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 can
identify with

Solectron: Be the best and 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:
The time it takes to
achieve business goals
as a result of quality.

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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Improve Quality Deming Value Chain
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
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
 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.
 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.
 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.
 Unity of Purpose

Matlamat organisasi yang jelas

dan tepat supaya semua
kakitangan faham dan komited.
 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.
 Teamwork

Pemimpin perlu mewujudkan

konsep kerja berpasukan dalam
organisasi.

Teamwork vs Team Building

 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. Cost
2. Differentiation
3. 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 generic means
of competing is COST.

This includes service, maintenance, and

operating 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
8. Defect data analysis for corrective action purposes
9. Time spent on quality system audit

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 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 of costs:

Internal Failure Costs (IFCs)

External Failure Costs(EFCs)
IFCs associated with on-line
failure
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 Quality-Related
Costs (AQRC)

AQRCs are all about the

calculation of incurred costs.
Example Prevention, Appraisal,
and Failure.

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 Annual Quality Cost RM
Failure Cost 5276

Example Annual Quality Costs

Defective products 17265
Engineered scrap 125274
Nonengineering scrap 623980
Consumer adjustments 1430678
Downgrading products Not evaluated
Lost goodwill Not evaluated
Customer policy changes 2202473
TOTAL

Appraisal costs
Receiving inspection 35765
Line 1 inspectionm 42234
Line 2 inspection 53567
Spot checking 63766
TOTAL 195332

Prevention costs
Quality training 14500
Process Engineering
Corporate 125678
Plant 39124
Product redesign 16422
TOTAL 195724
Grand TOTAL 2593529

BJMQ3013-Quality Management: Dr Che Azlan

1 Taib
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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.

BJMQ3013-Quality Management: Dr Che Azlan

1 Taib
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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 will
lessen as well.

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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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Example

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Quality Cost

read ????
Wen-Hsien Tsai
Quality cost measurement under activity-based
costing.
International Journal of Quality
& Reliability Management,
Vol. 15 No. 7, 1998, pp. 719-752,

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Quality Strategic Process

KAIZEN ????
POKA-YOKE???

HOSHIN ????

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Foster, 2010
Process consists of the steps developing
strategy within an organization.
There are many different processes
strategy the simple and the
comprehensive.

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Simple Strategic Model

Foster, 2010
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.

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FC Simple Strategic Model

Organizations Position Environmental Assessment

1. Statement of mission.
6. Broad economic
2. Interrelated set of
assumption.
financial & nonfinancial
7. Key government
objectives.
and regulatory issues
3. Statement of
8. Major technological
strengths and
forces.
weakness.
9. Significant market
4. Forecast of operation
opportunities and
needs.
treats
5. Major future
Explicit strategic of
programs 11. Strategic options; competitors.
requirements for 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 position.
Company discusses their competencies
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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 Step 1 : Mission, Vision, Values,
and Current Strategy

Prepare for Next Planning Cycle

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)

Foster, 2010
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.
refers to
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Bedi, 2006
Hoshin is Japanese Strategic Quality
Mangement (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.
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 Development of 3 5 year
Hoshin Goals

Senior Management
Review Hoshin Process Devbelops 1 Year Hoshin Goals

Product Management
Develops 1 Year Hoshin Goals

Senior Management Product Management

Action Plans Action Plans

Review By Senior
Revfiew By CEO
Management

Yes Yes
Problems

Np
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Does Quality Lead to
Better Business Result?
Foster, 2010
the answer was provided by W. Edward
Deming in value chain concept.

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Foster, 2010
Quality lead to better business in terms of :

Quality and Price

Quality and Cost
Quality and
Productivity
Quality and
Profitability.
Quality and
environment

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