MS 96 Total Quality Management Model Paper

1. Explain the following, citing research evidence/examples, if any.
(a) "TQM requires a different kind of thinking about customers, suppliers and shareholders/owners."
(b) "Born in Japan, the concept of Quality Circles if culture-specific and may therefore not work in another country."

2. (a) What is meant by "Customer Value? Explain the concepts of 'Value Realized, "value Sacrificed' and 'Net Value'.
(b) Discuss any three tools and techniques that can be useful in budgeting., control and reporting of quality costs.

3. (a) What is robust design? Comment upon its usefulness?
(b) What is 'six-sigma'? How can it be helpful in achieving quality objectives of a firm?

4. Examine the role of leaders in transformation or changing the organisation. What principal reasons. You think, might be responsible for many leaders not being able to succeed in managing change in the context of TQM?

5. What are the core elements of an EMC? How could you develop an EMS based on ISO 14001?

SECTION B

6. Read the following case study carefully and answer the questions given at the end:

AKASH ELECTRICALS LTD. (AEL)

Minutes of the meeting of the Executive Committee, Akash Electrical Ltd (AEL).

Date: May 3, 1997
Time: 5 P.M.
Venue: AEL House, Bangalore

PARTICIPANTS: Gaurav Sarin, managing Director, Chrisropher David, director (Marketing); Satindra Goel, director (operations); Rajesh kapoor, coordinator (total quality management) and vice-president (human resources); and Satish Mehta, director (finance)

Gaurav Sarin: Good Evening Gentleman. As you all are aware we have an important item. AEL's customer teams, on our agenda today. You are also aware that this is a problem area I have been talking to a number of people in the organisation --- including of course each of you ---- on AEL's customer teams. From what I could gather, the problems are four-fold. Customer teams are inflating our overheads, fragmenting our competencies, driving everyone to think small and ops sight of the big picture and generating, pun intended, inadequate attention to long-term planning, even within individual teams.

We need to examine why, and how, these problems have come up, and what we intend to do about them. I am sure you have a number of suggestions, but, let me provide a recap. Our company has been manufacturing and marketing a variety of electrical equipment for over two decades now. For many years, we had been growing at par with the industry rate of around eight per cent Then came the watershed in 1992-93. At a time when the industry was becoming competitive, margins were under pressure, and customer focus was becoming a critical factor for survival, we took several initiatives.

Setting up dedicated customer teams was one of the, Over the next two years, customers teams became the sheet-anchor of our business growth. Each of our products --- generators, turbines, boilers, motors, transformers (all part of AEL's Power Generation Division) and, brakers, tapchangers, signalling relays, substation equipment, and remote control systems (all part of our Transportation Division) --- was supported by several cross-functional teams. Today we have 53 customer teams at AEL, each serving a large customer or set of customers, Rajesh, would you like to explain the origins?

Rajesh Kapoor: Thanks, Gaurav. The beginning can be traced to the Total Quality Management (TQM) drive we started in late-1991 and more specifically, to the Special Group Activities (SGAs) we set up to deal with ongoing shift on the Shopfloor, much to the surprise of AEL's senior managers. To most of us, manufacturing meant breaking down a process to its lowest repetitive components. The worker was no more than c dog in the manufacturing wheel. SGAs proved otherwise.

They showed us that employees could be a vital resources in the new value chain. When grouped together they could be far more productive than the sum of their individual initiatives. Soon we were able to step up productivity, reduce time-cycles, boost quality, and improve labour-management relation. Today, we have about 30 SGAs at any given point of time, and they are doing a great job. The members of an SGA get straight to the core of a problem, resolve it without delay, and disband to find their individual ways to another SGA and another problem. In fact, a large part of the success of an SGA lies in its amoebic structure.

Sarin: It was the demonstrative effect of SGAs that egged us on towards setting up customer teams. These teams were designed as small and variable units that could expand, contract, and adapt quickly to the changing nature of customer needs. The objectives were threefold: serve the customer better; build resilience in the organisation; and maintain a balance between different functions. Otherwise, it was entirely possible that areas like R&D would have taken precedence in the management priorities of a technology intensive business like ours.

SGAs VERSUS CUSTOMER TEAMS

	ACTIVITY	Structure	Parameters of assessment	Success
Special Group Activities	Manufacturing	Shoplift workers	Productivity	High
			Time cycles	High
			Quality	High
			Labour management relations	High
			Customer Satisfaction	High
Customer teams	Customer service	Cross–finctional	Revenue Growth	High
			Costs	Low
			Profits	Low

Notwithstanding the fact that problems have now surfaced, customer teams have enabled AEL to institutionalize a decentralized responsibility for turnover end profits. Our unaudited financial results for the year ending March 31, 1997 are now available. We've recorded profits of Rs. 60 crore on a turnover of RS. 750 crore. That translates into a 12 per cent compounded growth in turnover for three years in a row. Frankly, if there is one factor responsible for beating the industry average of 10 per cent during the period, it is the dedication that our customer teams have brought to bear on the job. Now for the bad news Rajesh?

Kapoor: Yes, I'm afraid that we have not been able to replicate the success of SGAs in our customer teams. Both are cross-funtional in their composition. But a customer team, unlike an SGA, is a revenue centre. The performance of its members is assessed annually on the turnover and profits that the team has generated. By contrast, an SGA has no responsibility for either margins or cross. Besides, an SGA has a short tenure of a few weeks. A customer team is, by and large, dedicated and permanent, It allows for mobility of members, but, the generally enduring nature of a customer teams has often led to he growth of vested interests.

Satindra Goel: All the problems that Rajesh has mentioned have to do with the sheet-anchor of our business. In other words, their dynamic, competitive, small spectrum, short-tange approach. Consider the increase in overheads. Over the last three years, we have gradually pushed autonomy so far down the line that it has encouraged customer teams to acquire specialists for various functions regarded of whatever the team is large enough to require their full time services. For instance, the need for moreprocessor technology is common to all our products but each team is souring it independently. Satish has just done a study, which indicates that we can save up to 6 per cent on product costs if we could have single-point access for requirements cutting across product boundaries. Isn't that right, Satish?

Satish Mehta: Exactly, another area that is inflating overheads is quality checks. Take the overload relays, which we supply as part of our industrial motors. A relay trips the power supply and disconnects the motor when the stock of electricity exceeds certain levels. Customers are more demanding today and what stringent compliance with tripping bands. This necessitates quality checks on each and every relay. And all the teams in motors are every relay. And all the teams in motors are going overboard pilling up costs like additional testing equipment, more people to do the calibration, and as a result, assembly line hold-ups.

Christopher David: Rajesh, Forgive me, but one might ask, what TQM is doing to reduce this problem?

Kapoor: True, But TQM requires fundamental changes in mindset and that takes time. We are on track but….

David: Sorry, but I'm not sure if the gains of customer teams are sustainable in the long run. Sure they differentiated us from the competition. In fact, at one stage, it appeared to me that customer orientation could be our competence. But today, every competitor has caught up with teams in some form on the other. Besides, customer teams are so strongly turned to the present that they do not look beyond meeting the revenue targets of a particular financial year: Gaurav talked about inadequate attention to long-term planning within a customer team members is linked to annual team results. Imagine all the 53 customer teams looking inward with no external a one-year time-span. Think also of all those spaces between teams and each team fighting over territory.

Goel: But David, the reason for the gains not being sustainable is more fundamental. We are pointing all our strategies towards the customer. We are developing technical expertise only with reference to a set of customers. Our strategies should be tied to our products, to our technologies, and to our competencies, not to customers. The risk is obvious: the business potential from an existing customer may change over time and no customer is likely to be with us forever. If, however customer teams have delivered in the past, it is due to four factors. First, our level of operations has been low. Second, the number of teams has been small. Third, the number of teams has been small. Third, the number of customers is small. Lastly, our existing product range is not volume-led. AEL is planning diversification into power transmission products, like switchgears and contractors, which are high-colume and dealer-driven products. Customer teams make no sense there.

David: What we need are product teams. That would not only provide the right strategies focus across the board, but would also ensure that our technical competencies are consolidated and not fragmented. Perhaps we should disband customer teams. Instead we should go in for a judicious mix of both product teams and customer teams. The product teams should focus on developing markets, technologies and core competencies, and serve as an umbrella within which customer teams could function, focused strictly on sales efforts,

Sarin: Gentleman, I think the problems have surfaced because our operations have reached a critical mass. But disbanding teams is hardly a solution. Our customer teams are not failure. They ate incomplete. Their inadequacies did not matter so far because a few TQM facilitators could personally guide the efforts, question the assumptions, and coordinate the activities of various teams. But now we need to integrate their diversity in order to drive AEL towards a common future. One way of doing it would be through a vision statement. We will be working towards it in our annual retreat scheduled next month and I think we should perhaps call overselves an electrical engineering solutions company, rather than an electrical equipment company. That would reinforce our long-tern strategic positioning in the industry.

David: That would indeed be a good starting point Gaurav. It will provide the preliminary linkage between short-range goals and long-term goals. The problems with the customer teams will be taken care of this linkage is pushed all the way down.

THE SWOT

STRENGTHS	WEAKNESSES
Three consecutive years of above industry growth rates	Existing structures not coping with rapid growth
Strong wel–established, customer orientation	Strategy not driver by core competencies
Dynamic and forward–thinking management	Absence of long–term planning
OPPURTUNITIES	THREATS
Leveraging goo customer relations for growth	Emergence of new competitive pressure
New consumers for power transmission products	Risk of collapsing under high–cost structure
Increase of demand in existing lines of business	Inability to develop product competencies

The vision statement should be followed by divisional objectives for each of the two --- and, very soon, three --- business divisions. Covering a long timespan of 10 to 15 years, the divisional objectives will provide both the frameworks for directing ongoing objectives and an indication of priorities to accomplish these objectives. We must have product goals --- on revenues and costs --- meeting which should be the responsibility if cross-functional product teams. Each product team would work at two levels: establish a five-year objective, state the premises, explore the contingencies and identify key success factors. It would also evolve current action programmes, short-range operational programmes laying out a detailed schedule identifying responsible people, and the measures with which to monitor their progress.

Mehta: you know, there is a tendency among operating managers to economies on long-range programmes that do not have an impact on the current year's results. This is where we need to segregate the funding for strategic and operational tasks. That will eleminate the tension between long and short term priorities, the root cause of the trouble with our customer teams.

Sarin: Thankyou, gentleman.

Questions:

(a) Has Orient Ltd. Identified the objectives of TQM? If yes, what are they?
(b) How can Orient CEO galvanize the organisation to bolster of quality and overall performance? What kind of approach would it need?
(c) How can Verma ensure that the quality movement will not be drailed in the company? Should TQM be a stuff function? What roads map should Verma choose and why?

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