Virtual and Innovative Quality Management Across the Value Chain: Industry Insights, Case Studies and Best Practices 3031300882, 9783031300882

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Management for Professionals

Marc Helmold

Virtual and Innovative Quality Management Across the Value Chain Industry Insights, Case Studies and Best Practices

Management for Professionals

The Springer series Management for Professionals comprises high-level business and management books for executives, MBA students, and practice-oriented business researchers. The topics span all themes of relevance for businesses and the business ecosystem. The authors are experienced business professionals and renowned professors who combine scientific backgrounds, best practices, and entrepreneurial vision to provide powerful insights into how to achieve business excellence.

Marc Helmold

Virtual and Innovative Quality Management Across the Value Chain Industry Insights, Case Studies and Best Practices

Marc Helmold IU International University of Applied Sciences Berlin, Berlin, Germany

ISSN 2192-8096     ISSN 2192-810X (electronic) Management for Professionals ISBN 978-3-031-30088-2    ISBN 978-3-031-30089-9 (eBook) https://doi.org/10.1007/978-3-031-30089-9 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Preface

Mega trends, the global COVID-19 pandemic, globalization, the increasing (especially the digital) interconnection, and the unlimited exchange of data and information have led to a maximized transparency of value-adding activities and global supply chains. This is leading to the question how to generate a competitive advantage for companies in the producing, trading, service, or information industries. In this context and as a consequence, there is a paradigm shift nowadays to manage the value chain from the supply side over the entire production toward the customers. Only the integrative approach with optimum combination of strategies, methods, and concepts from the customer order, planning, procurement, production, and logistics up to the reverse logistics process will enable enterprises to make decisions for the management of their business actions. Quality can be described as the combination of customer satisfaction with a specified state of a product or service. In this context, modern Quality Management(QM) plays a crucial role to manage customer satisfaction. Quality Management (QM) can therefore be considered as the major competitive advantage against competition to achieve the ultimate customer-satisfaction. QM, sometimes also defined as Comprehensive Quality Management, refers to the continuous, ongoing areas, and all of an organization (company, institution, etc.) that capture, record, view, organize, and control activity that serve to introduce quality as a system goal and guaranteed permanently. QM was further developed in the Japanese automotive industry and finally made a successful model. Total Quality Management (TQM) needs the full support of all employees to be successful. The key principles of the QM philosophy include: • • • • • •

Quality is based on the customers’ needs and expectations. Quality is achieved by employees of all areas and levels. Quality includes many dimensions that must be operationalized by criteria. Quality is not a goal, but a process that never ends. Quality refers to products and services. Above all, however, to the processes used to produce them quality requires active action and must be worked for.

The most widespread QM concept in Europe is the EFQM model for Excellence of the European Foundation for Quality Management. This book provides a holistic and practical approach to Quality Management (QM) and Total Quality Management v

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Preface

(TQM). It combines all functions of the value chain and contains best practices in performance. It explains, comprehensively, how these new paradigms enable companies to concentrate on value-adding activities and processes to achieve a long-­ term sustainable and competitive advantage. The book contains a variety of best practices, industry examples, and case studies. Focusing on best-in-class examples, the book offers the ideal guide for any enterprise to achieve a competitive advantage across all business functions focusing on value-adding activities. Berlin, Germany April 2023

Marc Helmold

If you can’t explain it simply, you don’t understand it well enough. (Albert Einstein)

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Contents

1

Quality Management (QM)��������������������������������������������������������������������    1 1.1 Scope and Definition of QM ������������������������������������������������������������    1 1.1.1 What Is Quality? ������������������������������������������������������������������    1 1.1.2 Quality Definition by Deming����������������������������������������������    2 1.1.3 Q-C-D Plus Alpha ����������������������������������������������������������������    4 1.2 Fit, Form, and Function��������������������������������������������������������������������    5 1.3 Quality Definition According to the ISO 9001:2015������������������������    5 1.4 Quality Across the Supply Chain Management (SCM)��������������������    7 1.4.1 Scope and Definition of SCM ����������������������������������������������    7 1.4.2 Supply Risk Prevention and Mitigation��������������������������������    8 1.4.3 Methods of SCM Risk Evaluation����������������������������������������   11 1.4.4 Sustainability in the SCM ����������������������������������������������������   11 1.4.5 Fair Trade in the Supply Chain ��������������������������������������������   12 References��������������������������������������������������������������������������������������������������   12

2

 Integrated Management Systems (IMSs)����������������������������������������������   15 2.1 Scope of IMS������������������������������������������������������������������������������������   15 2.2 Advantages and Disadvantages when Using an IMS������������������������   16 2.2.1 Advantages of IMS ��������������������������������������������������������������   16 2.2.2 Disadvantages of IMS����������������������������������������������������������   18 2.3 Realization of IMS����������������������������������������������������������������������������   19 References��������������������������������������������������������������������������������������������������   20

3

 Extended Reality (XR) in QM����������������������������������������������������������������   21 3.1 Definition of Extended Reality (XR)������������������������������������������������   21 3.2 Creation of XR����������������������������������������������������������������������������������   23 3.3 Augmented Reality (AR)������������������������������������������������������������������   24 3.4 Mixed Reality (MR)��������������������������������������������������������������������������   24 3.5 Virtual Reality (VR)��������������������������������������������������������������������������   25 References��������������������������������������������������������������������������������������������������   26

4

 Total Quality Management (TQM)��������������������������������������������������������   27 4.1 Introduction to TQM������������������������������������������������������������������������   27 4.2 TQM Strategy ����������������������������������������������������������������������������������   30 4.3 TQM Principles��������������������������������������������������������������������������������   30 ix

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4.3.1 Principle 1: Holistic Approach����������������������������������������������   30 4.3.2 Principle 2: Team Activity Approach������������������������������������   31 4.3.3 Principle 3: Contribution of Employees�������������������������������   32 4.3.4 Principle 4: Execution of Risk Analysis ������������������������������   33 4.3.5 Principle 5: Data Visualization���������������������������������������������   33 4.4 TQM Success Factors ����������������������������������������������������������������������   34 4.4.1 Introduction to TQM Success Factors����������������������������������   34 4.4.2 Customer-Driven and Customer-Centric Focus��������������������   35 4.4.3 Full Employee Involvement and Communication����������������   36 4.4.4 100% Commitment of Leadership and Communication������   37 4.4.5 Cross-Functional Improvement Teams ��������������������������������   37 4.4.6 Process Approach������������������������������������������������������������������   38 4.4.7 Integrated System������������������������������������������������������������������   39 4.4.8 Strategic and Systematic Approach��������������������������������������   39 4.4.9 Continual Improvement��������������������������������������������������������   40 4.4.10 Fact-Based and Evidence-Based Decision-Making��������������   40 5

 History and Evolution in Quality Management (QM) ������������������������   43 5.1 Quality History and Developments��������������������������������������������������   43 5.2 Advanced Quality and Product Planning (APQP)����������������������������   44 5.3 Quality Assurance (QA)��������������������������������������������������������������������   45 5.4 Quality Control (QC)������������������������������������������������������������������������   46 5.4.1 Introduction to QC����������������������������������������������������������������   46 5.4.2 Testing as Element of QC ����������������������������������������������������   46 5.4.3 QC Methods��������������������������������������������������������������������������   47 5.4.4 Role of QC Inspectors����������������������������������������������������������   48 5.4.5 Benefits of QC����������������������������������������������������������������������   48 5.4.6 Examples of QC��������������������������������������������������������������������   48 5.5 Differences of QA and QC����������������������������������������������������������������   48 5.6 Quality Improvement (QI)����������������������������������������������������������������   49 5.7 Milestones in QM ����������������������������������������������������������������������������   49 5.7.1 Deming, Juran, and Japan ����������������������������������������������������   50 5.7.2 The American Total Quality Management Response ����������   50 5.7.3 From QM Towards Total Quality Excellence ����������������������   50 5.7.4 Quality Function as Central Interface in the Enterprise��������   51 5.7.5 TQM in Virtual and Digitized Value Chains������������������������   51 5.7.6 From QMS Towards Quality Improvement (QI)������������������   52 Reference ��������������������������������������������������������������������������������������������������   54

6

 Quality Management as Part of the Corporate Strategy ��������������������   55 6.1 Strategic QM������������������������������������������������������������������������������������   55 6.2 Levels of Strategy ����������������������������������������������������������������������������   55 6.2.1 Corporate Strategy����������������������������������������������������������������   56 6.2.2 Business Strategy������������������������������������������������������������������   57 6.2.3 Functional Strategy ��������������������������������������������������������������   57 6.2.4 Alignment of Strategies��������������������������������������������������������   58

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6.3 Strategic Triangle������������������������������������������������������������������������������   59 6.4 Strategic Analysis: Where Are We?��������������������������������������������������   59 6.4.1 Analyzing Important Factors������������������������������������������������   59 6.4.2 Analyzing the Environment��������������������������������������������������   60 6.4.3 Analyzing the Industry����������������������������������������������������������   60 6.4.4 Analyzing the Strengths and Weaknesses ����������������������������   61 6.4.5 Analyzing the Core Competencies���������������������������������������   62 6.5 Strategic Choice: Where Are We Going to?��������������������������������������   63 6.5.1 Generic Strategies ����������������������������������������������������������������   63 6.5.2 5P Model by Henry Mintzberg ��������������������������������������������   64 6.5.3 Boston Consulting Matrix (BCG Matrix)����������������������������   64 6.5.4 Ansoff Matrix������������������������������������������������������������������������   66 6.5.5 Blue and Red Ocean Strategies��������������������������������������������   68 6.6 Strategic Implementation: How Do we Achieve this?����������������������   69 6.6.1 Assessment of Suitability, Acceptability, and Feasibility ����   69 6.6.2 Suitability������������������������������������������������������������������������������   70 6.6.3 Acceptability ������������������������������������������������������������������������   70 6.6.4 Feasibility������������������������������������������������������������������������������   71 6.7 Strategic Pyramid������������������������������������������������������������������������������   71 6.8 Mission and Vision����������������������������������������������������������������������������   72 6.9 Goals and Objectives������������������������������������������������������������������������   72 6.10 Core Competencies ��������������������������������������������������������������������������   72 6.11 Strategies������������������������������������������������������������������������������������������   73 6.12 Strategic Architecture������������������������������������������������������������������������   73 6.13 Control and Execution����������������������������������������������������������������������   73 References��������������������������������������������������������������������������������������������������   74 7

 Audits and Quality Management Systems (QMS)��������������������������������   75 7.1 Quality Management Systems (QMS)����������������������������������������������   75 7.1.1 Definition and Scope of QMS����������������������������������������������   75 7.1.2 Different Types of QMS��������������������������������������������������������   76 7.2 QMS: DIN EN ISO 9001:2015��������������������������������������������������������   77 7.3 Aviation QMS: EN/AS 9100������������������������������������������������������������   77 7.4 Automotive QMS: IATF 16949:2016 ����������������������������������������������   78 7.5 Railway QMS: ISO/TS 22163 (IRIS) ����������������������������������������������   79 7.6 Healthcare QMS: DIN EN 15224 ����������������������������������������������������   80 7.7 Medical QMS: ISO 13485����������������������������������������������������������������   81 7.8 Telecommunications QMS: TL 9000������������������������������������������������   81 7.9 What Is an Audit?������������������������������������������������������������������������������   82 7.10 System Audits ����������������������������������������������������������������������������������   83 7.11 Process Audits����������������������������������������������������������������������������������   83 7.12 Product Audits����������������������������������������������������������������������������������   84 7.13 Control Audits����������������������������������������������������������������������������������   85 7.14 Other Audits��������������������������������������������������������������������������������������   85 7.15 International Organization for Standardization��������������������������������   85 References��������������������������������������������������������������������������������������������������   86

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Quality Excellence Models����������������������������������������������������������������������   87 8.1 BSC, Balanced Scorecard ����������������������������������������������������������������   87 8.2 Better Strategic Planning������������������������������������������������������������������   90 8.3 Improved Strategy Communication and Execution��������������������������   91 8.4 Better Alignment of Projects and Initiatives ������������������������������������   91 8.5 Better Management Information������������������������������������������������������   91 8.6 Improved Performance Reporting����������������������������������������������������   91 8.7 Better Organizational Alignment������������������������������������������������������   91 8.8 Better Process Alignment������������������������������������������������������������������   92 8.9 EFQM, European Foundation for Quality Management������������������   92 8.9.1 Concept of the EFQM Excellence Model����������������������������   92 8.9.2 Continuous Process��������������������������������������������������������������   93 8.9.3 Self-Assessment��������������������������������������������������������������������   94 8.9.4 Application of the EFQM Excellence Model ����������������������   94 8.10 Baldridge Excellence Model������������������������������������������������������������   94 8.11 Business Performance Improvement Resource Model (BPIR)��������   95 8.12 P2E Excellence Model����������������������������������������������������������������������   96 References��������������������������������������������������������������������������������������������������   97

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 Cost of Quality (COQ)����������������������������������������������������������������������������   99 9.1 What Are Cost of Quality (CoQ)������������������������������������������������������   99 9.2 COQ Measurement and Identification����������������������������������������������  101 9.2.1 COQ Calculation Method ����������������������������������������������������  101 9.2.2 Cost of Good Quality (COGQ) ��������������������������������������������  103 9.2.3 Cost of Poor Quality (COPQ) ����������������������������������������������  103 9.3 COQ Optimization����������������������������������������������������������������������������  104 9.3.1 Analyzing Prevention, Appraisal, and Failure����������������������  104 9.3.2 The Effect of Improving the QMS Processes on Quality Costs��������������������������������������������������������������������������������������  105 9.4 Reduction of COQ and Quality Prevention��������������������������������������  105 9.4.1 Failure Prevention Initiatives������������������������������������������������  105 9.4.2 Improving Work Instructions and Process Management������  105 9.4.3 Implementing the Appropriate Training and Qualification Initiatives������������������������������������������������������������������������������  106 9.4.4 Verifying Eqiupment Calibration������������������������������������������  106 9.5 Reduction of Quality Cost of Appraisal��������������������������������������������  106 9.5.1 Initiatives for Reducing Quality Costs of Appraisal ������������  106 9.5.2 Reducing Reliance on 100% Inspection ������������������������������  106 9.5.3 Introducing Automated Inspection����������������������������������������  107 9.5.4 Automatic SPC ��������������������������������������������������������������������  107 9.6 Appraisal Cost on Supplier Side ������������������������������������������������������  107 9.6.1 Introducing Measures on the Supplier Side��������������������������  107 9.6.2 Source and Receiving Inspection Checks ����������������������������  108 9.7 Reducing Cost of Failures����������������������������������������������������������������  108 9.7.1 Initiatives for Reducing the Cost of Quality Failures ����������  108

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9.7.2 Discrepancy Documentation������������������������������������������������  108 9.7.3 Workflow Routing and Flow Principle of Tasks ������������������  108 9.7.4 Failure Prevention and Rework��������������������������������������������  109 9.8 Cost of External Failures������������������������������������������������������������������  109 9.9 Claim Management��������������������������������������������������������������������������  110 9.10 Recalls and Retrofits ������������������������������������������������������������������������  110 Reference ��������������������������������������������������������������������������������������������������  112 10 5S  Concept in Quality Management������������������������������������������������������  113 10.1 Value-Added and Waste������������������������������������������������������������������  113 10.2 Muda, Muri, and Mura��������������������������������������������������������������������  114 10.3 Ishikawa Diagram ��������������������������������������������������������������������������  115 10.4 5S Concept��������������������������������������������������������������������������������������  116 10.5 TIMWOOD: Seven Types of Waste������������������������������������������������  118 10.5.1 Transportation ������������������������������������������������������������������  118 10.5.2 Inventory ��������������������������������������������������������������������������  119 10.5.3 Motion������������������������������������������������������������������������������  120 10.5.4 Waiting������������������������������������������������������������������������������  120 10.5.5 Overproduction ����������������������������������������������������������������  121 10.5.6 Overprocessing ����������������������������������������������������������������  122 10.5.7 Defects������������������������������������������������������������������������������  122 References��������������������������������������������������������������������������������������������������  126 11 Lean  Production as Part of QM��������������������������������������������������������������  127 11.1 Lean Production and Toyota Production System (TPS) ����������������  127 11.1.1 Introduction to the Lean Production System��������������������  127 11.1.2 Pull Principle��������������������������������������������������������������������  128 11.1.3 Tact Principle��������������������������������������������������������������������  128 11.1.4 Flow Principle������������������������������������������������������������������  129 11.1.5 Zero-Defect Principle�������������������������������������������������������  130 11.2 Andon����������������������������������������������������������������������������������������������  130 11.3 Poka-Yoke ��������������������������������������������������������������������������������������  131 11.4 Gemba and Shop Floor Management ��������������������������������������������  132 11.5 Shadow Boards ������������������������������������������������������������������������������  132 11.6 Health, Safety, Environment (HSE)������������������������������������������������  133 11.7 Overall Equipment Effectiveness (OEE)����������������������������������������  134 11.8 Kanban��������������������������������������������������������������������������������������������  135 11.9 Supermarkets����������������������������������������������������������������������������������  135 11.10 Shisa Kanko������������������������������������������������������������������������������������  136 References��������������������������������������������������������������������������������������������������  136 12 Quality  Management on the Supply Side����������������������������������������������  139 12.1 Supply Side ������������������������������������������������������������������������������������  139 12.2 QM Objectives in Supply����������������������������������������������������������������  142 12.3 Managing the Supply Side��������������������������������������������������������������  142 12.3.1 Supply Management Process��������������������������������������������  142

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12.3.2 Supply Management Strategy ������������������������������������������  144 12.3.3 Supply Management Selection and Evaluation����������������  145 12.3.4 Control Via Supplier Dashboard or Cockpit ��������������������  148 12.3.5 Supply Risks ��������������������������������������������������������������������  149 12.3.6 Method of Evaluation ������������������������������������������������������  150 References��������������������������������������������������������������������������������������������������  153 13 Quality  Management on the Demand Side��������������������������������������������  155 13.1 QM on the Demand Side����������������������������������������������������������������  155 13.1.1 Introduction to Quality Management on the Demand Side����������������������������������������������������������  155 13.1.2 Quality by Using Efficient Consumer Response (ECR)����������������������������������������������������������������  156 13.1.3 Vendor-Managed Inventory (VMI) ����������������������������������  157 13.1.4 Enterprise Resource Planning Integration (ERP) ������������  157 13.1.5 Quick Response (QR) ������������������������������������������������������  157 13.2 Incoterms 2020��������������������������������������������������������������������������������  158 Reference ��������������������������������������������������������������������������������������������������  159 14 Leadership  in Quality Management������������������������������������������������������  161 14.1 Leadership in QM ��������������������������������������������������������������������������  161 14.1.1 Tells����������������������������������������������������������������������������������  162 14.1.2 Sells����������������������������������������������������������������������������������  163 14.1.3 Suggests����������������������������������������������������������������������������  163 14.1.4 Consults����������������������������������������������������������������������������  164 14.1.5 Joins����������������������������������������������������������������������������������  164 14.1.6 Delegates��������������������������������������������������������������������������  164 14.1.7 Abdicates��������������������������������������������������������������������������  164 14.2 Empowerment and Jidoka in Modern QM��������������������������������������  165 14.3 Autonomous Work Groups ������������������������������������������������������������  166 14.4 Job Rotation������������������������������������������������������������������������������������  166 14.5 Job Enlargement and Job Enrichment��������������������������������������������  167 References��������������������������������������������������������������������������������������������������  167 15 Transformation  and Change Management in QM ������������������������������  169 15.1 Transformation and Change Management��������������������������������������  169 15.2 Internal and External Reasons for Change Management����������������  170 15.3 Kotter’s Change Management Model ��������������������������������������������  171 15.4 ADKAR Change Management ������������������������������������������������������  173 References��������������������������������������������������������������������������������������������������  174 16 Environmental,  Social, and (Corporate) Governance (ESG) as Part of Quality Management��������������������������������������������������������������  175 16.1 Definition of ESG ��������������������������������������������������������������������������  175 16.2 UN Initiative: Who Cares Wins������������������������������������������������������  176 16.3 Standards and Regulations in ESG ������������������������������������������������  182 References��������������������������������������������������������������������������������������������������  185

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17 N  egotiations in QM����������������������������������������������������������������������������������  187 17.1 Negotiations in QM������������������������������������������������������������������������  187 17.1.1 Negotiation Competencies and Skills in QM��������������������  187 17.1.2 The A-6 Negotiation Concept for Successful Negotiations����������������������������������������������������������������������  187 17.2 Negotiation Manuscript in QM as Key Success Factor������������������  189 17.3 Personalities and Roles in Negotiations������������������������������������������  190 17.4 Summarizing the Success Factors for Negotiations in QM������������  191 References��������������������������������������������������������������������������������������������������  192 18 Problem-Solving,  Process, and Idea Creation Tools ����������������������������  193 18.1 Problem-Solving Tools ������������������������������������������������������������������  193 18.2 A3 Method��������������������������������������������������������������������������������������  193 18.3 8D Method��������������������������������������������������������������������������������������  196 18.4 Kepner–Tregoe��������������������������������������������������������������������������������  197 18.5 TRIZ������������������������������������������������������������������������������������������������  199 18.6 PDCA����������������������������������������������������������������������������������������������  201 18.7 Six Sigma����������������������������������������������������������������������������������������  203 18.8 Value Stream Mapping��������������������������������������������������������������������  204 18.9 RPR Method�����������������������������������������������������������������������������������  204 19 Creativity Tools in QM����������������������������������������������������������������������������  205 19.1 Brainstorming ��������������������������������������������������������������������������������  205 19.2 Mind Mapping��������������������������������������������������������������������������������  205 19.3 Design Thinking������������������������������������������������������������������������������  205 19.3.1 The Concept of Design Thinking��������������������������������������  205 19.3.2 Understanding and Empathizing��������������������������������������  206 19.3.3 Defining a Point of View��������������������������������������������������  207 19.3.4 Finding Ideas��������������������������������������������������������������������  207 19.3.5 Prototyping������������������������������������������������������������������������  207 19.3.6 Testing������������������������������������������������������������������������������  207 19.3.7 Implementing��������������������������������������������������������������������  207 19.4 Scribble ������������������������������������������������������������������������������������������  208 19.5 Pecha Kucha������������������������������������������������������������������������������������  208 19.6 Action Learning������������������������������������������������������������������������������  208 References��������������������������������������������������������������������������������������������������  209 20 IT-Based QM��������������������������������������������������������������������������������������������  211 20.1 Industry 4.0 in QM��������������������������������������������������������������������������  211 20.2 Artificial Intelligence (AI) in QM��������������������������������������������������  213 20.2.1 AI Tools in QM ����������������������������������������������������������������  213 20.2.2 Autonomous Robots ��������������������������������������������������������  213 20.2.3 Virtual Production and Supply Chains������������������������������  214 20.2.4 Lean Simulations��������������������������������������������������������������  214 20.2.5 System Integration������������������������������������������������������������  214 20.2.6 Internet of Things��������������������������������������������������������������  214

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20.2.7 Cybersecurity��������������������������������������������������������������������  214 20.2.8 Cloud Computing��������������������������������������������������������������  214 20.2.9 Additive Manufacturing����������������������������������������������������  215 20.2.10 Extended, Mixed, and Augmented Reality ����������������������  215 20.2.11 Big Data����������������������������������������������������������������������������  215 References��������������������������������������������������������������������������������������������������  215 21 Future  Outlook and Trends in QM��������������������������������������������������������  217 21.1 Agility and Adaptability in QM������������������������������������������������������  217 21.2 Focus on Efficiency in QM ������������������������������������������������������������  217 21.3 Centralized Data Management in QM��������������������������������������������  218 21.4 QM Backed by Lean Management and Six Sigma������������������������  218 21.5 Focus on Sustainability, ESG, and CSR in QM������������������������������  218 21.6 Use of Sophisticated QM Software, AR, VR, and XR��������������������  218 21.7 Expanding Boundaries of QM��������������������������������������������������������  219 21.8 Accountability of QM as Driver of Customer Satisfaction in the Value Chain ��������������������������������������������������������������������������  219 21.9 Virtual Quality Management (VQM)����������������������������������������������  220 References��������������������������������������������������������������������������������������������������  220

About the Author

Marc Helmold IU Intern. Hochschule, Berlin, Germany Dr. Marc Helmold (MBA) is Professor at IU International University of Applied Sciences in Berlin. He teaches Bachelor, Master, and MBA in Operations, Quality Management, Supply Management, General Management, Strategic Management, and Leadership. From 1997 until 2017, he had several positions in top management positions in the automotive and railway industry. Between 1997 and 2010, he worked in several companies like Ford, Ford-Mazda Japan, Porsche, and Panasonic Automotive in managerial functions and executed lean workshops throughout the value chain. From 2013 until 2016, he was the General Manager of Bombardier Transportation in China and led the sourcing and spare parts sales activities. Since 2016 he is Professor at the IU and has his own consultancy. In this capacity, he improves companies in performance.

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Acronyms and Abbreviations

A3 Problem-Solving Method A6 A-6 Negotiation Concept ADKAR Awareness, Desire, Knowledge, Ability, Reinforcement AI Artificial Intelligence AM Additive Manufacturing APA Advanced Purchasing Agreement AR Augmented Reality BCG Boston Consulting Matrix BSC Balanced Score Card BME Bundesverband Materialwirtschaft, Einkauf und Logistik BMW Bayerische Motorenwerke BOS Alstom (formerly Bombardier) Operating System COGQ Cost of Good Quality COQ Cost of Quality COPQ Cost of Poor Quality CSR Corporate Social Responsibility DIN Deutsche Industrienorm DSCM Downstream Supply Chain Management ECR Efficient Consumer Response EFQM European Foundation of Quality Management ERP Enterprise Resource Planning EXW Ex works IOP Internet of Things IOP Internet of People IPO International Procurement Office ISO International Organization for Standardization IUBH International University Bad Honnef JIT Just-in-Time KPI Key Performance Indicator MPS Mercedes Benz Production System OEE Overall Equipment Effectiveness OKR Objectives Key Results PDCA Plan, Do, Check, Act PDSA Plan, Do, Study, Act xix

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PE Physical Education PESTEL Macro Analysis PPS Production Planning System QFD Quality Function Deployment QM Quality Management QPMC Quality Performance Management Cycle QR Quick Response SFM Shop floor Management SCM Supply Chain Management SQC Supplier Qualification Cost SWOT Strengths, Weaknesses, Opportunities, Threats TIMWOOD Seven Types of Waste in Manufacturing TQE Total Quality Excellence TQM Total Quality Management TÜV Technischer Überwachungsverein UN United Nations USCM Upstream Supply Chain Management USP Unique Selling Propositions VD Virtual Design VR Virtual Reality VW Volkswagen XR Extended Reality 5S Seiri, Seiton, Seiso, Seiketsu, Shitsuke 7R 7 Rights

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Quality Management (QM)

1.1 Scope and Definition of QM 1.1.1 What Is Quality? Quality and quality management (QM) are terms, which are used across the supply chain in enterprises and industry. Although the term quality is quite widely used by practitioners and academics, there is no generally agreed definition of it, since different definitions of quality are appropriate under different circumstances (Helmold, 2023). In the quality management system (QMS) ISO 9001, quality is defined as the international standard that specifies requirements for a quality management system (QMS). Organizations use the standard to demonstrate the ability to consistently provide products and services that meet customer and regulatory requirements (ISO, 2023). ISO 9001 sets out the criteria for a quality management system and is the only standard in the family that can be certified to (although this is not a requirement). It can be used by any organization, large or small, regardless of its field of activity. In fact, there are over one million companies and organizations in over 170 countries certified to ISO 9001. This standard is based on a number of quality management principles including a strong customer focus, the motivation and implication of top management, the process approach, and continual improvement (Brugger-Gebhardt, 2016). These principles are explained in more detail in ISO’s quality management principles. Using ISO 9001 helps ensure that customers get consistent, good-quality products and services, which in turn brings many business benefits (ISO, 2023).

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Helmold, Virtual and Innovative Quality Management Across the Value Chain, Management for Professionals, https://doi.org/10.1007/978-3-031-30089-9_1

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1  Quality Management (QM)

1.1.2 Quality Definition by Deming Quality is the designation of a perceptible state of systems and their characteristics, which is defined in a certain period of time based on certain properties of the system in this state. In general usage, quality stands for characteristics or properties. In business, quality describes the value or quality of a product or service from the user’s point of view (Helmold, 2022). The quality of a product is its suitability for its intended use. In individual cases, quality is an overall impression of various partial qualities (functional quality, technical quality, permanent quality, execution quality, concept quality). The concept of quality always includes objective and subjective characteristics that are decisive for a product or service. The American Deming is one of the most important pioneers in the development of quality assurance and has had a significant influence on quality management with his statements (Sihn et al., 2016). His ideas found wide acceptance in numerous industries in North America and Europe and also in the implementation in the Japanese economy. Deming refrains from an overarching definition of the term quality because, for him, raising employee awareness of the quality requirements in the company is crucial. Deming emphasizes two aspects: • Deming states that quality cannot (absolutely) be checked in terms of results, and therefore, he focuses his considerations on the value-added process and thus statistical methods of process control and regulation through systematic and quantitative statistical quality control. • Deming attaches great importance to the management style and thus to the behavior of employees with regard to motivation, cooperation, communication, freedom of expression, and an open working atmosphere (Deming et al., 2012). An important element and tool in quality management is the PDCA cycle in Fig. 1.1. The PDCA cycle describes the phases in the continuous improvement process (CIP). CIP is the basis of all quality management systems and aims for constant Quality Management: Deming Cycle (PDCA)

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Quality Management

Continuous Improvements

Fig. 1.1  PDCA cycle. (Source: Author’s source)

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1.1  Scope and Definition of QM

3

improvements (Helmold, 2022). In this way, a constant improvement of processes and procedures is pursued in the company with the aim of improving the efficiency and customer and employee satisfaction of the company (Helmold, 2022). The German Society for Quality (DGQ) in Frankfurt was involved in the design of the DIN standards in Germany and defines the term quality as the sum of properties and characteristics of a product or an activity that relate to their suitability for fulfilling given requirements (DIN 55350 Part 11: Terms of quality assurance and statistics; Terms of quality assurance, basic terms, Berlin). The purpose of the series of standards is for quality to be assessed and assessed in relation to requirements, which can include a large number of characteristics and properties. A quality assurance system (quality assurance) should implement the quality requirements in a cost-effective manner and strengthen the competitive position (DGQ, 2022). A view of quality often cited in science comes from Harvard Professor Garvin (Garvin, 1984). In the practical application of the concept of quality, according to Garvin, a distinction can be made between five different perspectives (Pfeifer & Schmitt, 2010): 1. The transcendent understanding of quality: Refers to the colloquial view of quality. Accordingly, quality is a person’s subjective experience of the special, unique properties or characteristics of a product or service. Quality can neither be measured nor specified, just as the term beauty cannot be defined in general. 2. The product-related understanding of quality: If the product-related perspective is used as a basis for the quality assessment, the quality of a product results from the fulfillment of generally defined requirements and specification features. A classic example is the realization of smaller gap dimensions in automobile construction compared to competing vehicles. Another example is the aging period of a wine, which, in simple terms, applies: the longer the wine rests, the higher the quality. However, product-related requirements are not entirely useful. So, e.g., B. the reduction of the gap size in an off-road vehicle with high demands on the body tends to lead to higher repair costs. 3. The customer-related understanding of quality: This perspective defines quality as the perfect realization of all customer requirements for a product and corresponds to the quality definition of DIN EN ISO 9000:2015 (see Fig. 1.4). The lack of features (lack of implementation of a customer requirement) has a negative effect on the quality of the product. Adding further features that are not desired by the customer cannot positively influence the quality, since they are useless for the customer. It is therefore also not possible to compensate for missing features by adding other functions. One problem with this approach lies in the complete identification of customer requirements. While the customer is aware of explicit requirements, implicit (unconscious) requirements must be “extracted from a person” using suitable methods. So, e.g., B. represent a customer unaware of the prestige of a motor vehicle requirement, which is acquired through the purchase. The identification of requirements and their implementation in products are carried out by the research area of marketing ​​ or market research. Since the requirements can differ between people, no product can exist

4

1  Quality Management (QM)

with absolute quality. Rather, the quality of a product can be rated positively by one person and negatively by another. 4. The value-oriented understanding of quality: According to this view, a quality product is present when a product can be purchased at a reasonable price with regard to the realized features (cost-benefit ratio). This view is taken as a basis for product tests by magazines and takes place in categories such as price, performance, reliability or life-time. However, the relevance of the product’s characteristics for the customer must be considered in this method and definition (cf. customer-related understanding of quality). A higher price cannot be justified by useless product features for the customer. 5. The production-related understanding of quality: Fulfillment of drawing specifications, agreements, and standards according to agreed performance characteristics.

1.1.3 Q-C-D Plus Alpha Quality forms the basis for security and mutual trust. In lean management, quality, along with delivery service and costs, is the essential basic dimension that influences customer satisfaction. In the so-called QCD triangle, it becomes transparent how these three basic dimensions influence each other. An often underestimated influencing factor is employee motivation. Unmotivated employees due to a lack of framework conditions—for example, due to a lack of training or integration—have a decisive influence on quality. Within the Q-C-D approach, costs (total costs; English: total cost of ownership) and delivery performance also represent a central point. Especially in the last crises, it has been shown that quality also includes supply chains and availability of primary and semifinished products (Helmold et al., 2020). Figure 1.2 shows the Q-C-D plus alpha concept. This definition of quality focuses on quality, costs, and delivery performance alongside other elements (alpha) such as sustainability or safety (Helmold & Terry, 2021).

Fig. 1.2  QCD plus alpha. (Source: Author’s source)

Quality (Q) Alpha Delivery (D)

Cost (C)

1.3  Quality Definition According to the ISO 9001:2015

5

1.2 Fit, Form, and Function Fit, form, and function in Table 1.1 (German: passen, form, und funktion) is a quality definition that describes a quality for products, services, processes, or information that meets the expectations of stakeholders, e.g., customers, users, or clients. Freely translated into German, fit can be understood as “fulfills the purpose.” Form means that the product has all the external characteristics that the customer asks for. Function means that all functions agreed between manufacturer and customer are fulfilled. Figure 1.3 shows the fit, form, and function concept:

1.3 Quality Definition According to the ISO 9001:2015 According to the ISO 9001, quality is defined as the international standard that specifies requirements for a quality management system (QMS). Organizations use the standard to demonstrate the ability to consistently provide products and services that meet customer and regulatory requirements. The term quality is defined in ISO 9000 as the degree to which a set of inherent characteristics of an object fulfils requirements. • “Degree” implies quality is a variable. • “A set of” implies quality is not a single characteristic. • “Inherent” as opposed to “assigned” means existing in the object; therefore, neither price nor delivery is a quality characteristic of a product but can be a characteristic of a service. • “Object” means anything perceivable or conceivable; therefore, the term quality can be used relative to both tangible and intangible objects, e.g., the quality of commitment. • “Requirement” means a need or expectation that is stated, generally implied, or obligatory.

Table 1.1  Fit, form, and function Term Fit

Description Ability of an item to be physically connected to all other components. This also includes tolerance changes. Form Shape, size, dimensions, mass, or other visual parameters that uniquely characterize an item. It defines the appearance of the part or item. Sometimes weight, balance, and center of mass also play a role. Function The function refers to the specific action(s) that an object is intended to perform or for what purpose it was developed. Source: Author

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Fig. 1.3  Fit, form, and function. (Source: Author’s source)

Fit

Quality

Function

Fig. 1.4  ISO 9001:2015. (Source: Author’s source)

The ISO 9001:2015 consist of 10 clauses as shown in Fig. 1.4. Clause 0–3—Introduction and scope of the standard. Clause 4—Context of the organization. Clause 5—Leadership. Clause 6—Planning. Clause 7—Support. Clause 8—Operation. Clause 9—Performance evaluation. Clause 10—Improvement.

Form

1.4  Quality Across the Supply Chain Management (SCM)

7

1.4 Quality Across the Supply Chain Management (SCM) 1.4.1 Scope and Definition of SCM Supply chain management (SCM) can be described as the process of planning managing, executing, and improving the key business process that ensures effective delivery of products and services from suppliers through to the end customer as shown in Fig. 1.2 (Helmold & Terry, 2021). SCM involves the process of enabling the effective flow of information, materials, and services from suppliers from upstream supply chain with raw materials and materials to operation and to finally deliver products and services to end customer or the downstream supply chain. SCM allows the simultaneous integration of customer specifications which is an important aspect that helps in enhancing better performance of the internal process, which ultimately influences greater upstream supplier performance. Based on these definitions, it is evident that the common feature of SCM is to enhance end-to-end coordination as a result of effective integration of both internal and external processes in the supply chain in order to deliver value to the end customer. Therefore, it can be argued to suggest that the potential benefits of an enhanced SCM can be considered to provide higher quality of products or services, effective cost savings, shorter and more reliable delivery times, fewer disruptions, and risk reduction. Customer satisfaction and effective service delivery can be seen to be the key factors that enable a business to survive in the highly competitive market (Bozarth & Handfield, 2013). Effective supply chain management (SCM) practices have become valuable in enhancing competitive advantage by reducing waste, increasing efficiency, therefore improving overall organizational performance and its strategy (Fig. 1.5). By concentrating on core competencies and shifting services to supplier networks that are in competition with one another, new models, strategies, and processes emerge, which lead supplier management into a central role in every company. For a long time now, the focus in the future has not only been on increasing company-internal cost advantages, but much more on the exchange of information and the exploitation of global cross-company potential. The scope of added value can no longer be handled by the manufacturer alone, but must rely on innovative, efficient, and flexible supplier structures. Increasing competition, global trends, the COVID-19 pandemic, sustainability elements, technological change, and shortened product life cycles place ever higher demands on companies and their suppliers in numerous industries. The increasing variety of products, shorter innovation cycles, and cross-sector business models with digital business processes also increase the complexity of future control of value networks. However, the planning, control, and monitoring of the upstream value creation networks, i.e., the supplier networks, become more difficult, so that these tasks have to be covered by holistic, standardized and innovative supplier management. But modern supplier structures are becoming increasingly volatile. The control of the external value-added

8

1  Quality Management (QM) Supply Chain Management (SCM) Tier 3

Tier 2

Tier 1

Supplier

Supplier

Tier 1

Tier 2

Supplier Supplier Supplier Supplier Supplier Supplier

Supplier Supplier

Customer

Customer

Supplier Supplier

Operations

Customer

Customer

Supplier Supplier

Customer Customer

Supplier

Upstream Supply Chain Management Supply Side

Customer

Downstream Supply Chain Management Demand Side

Quality Management (QM)

Fig. 1.5  Quality management in the supply chain. (Source: Author’s source)

networks must therefore also adapt to the new requirements. Risk prevention in the supply chain is therefore of central importance to every company, but only 17% of companies operate preventive supplier management with early and standardized involvement of their suppliers, and more than two-thirds only assess a selection of suppliers (Dust, 2016). These alarming figures emerge from the study “Total Supplier Management - Strategic Competitive Advantages through Risk Prevention in Supplier Management.” The representative survey of 221 companies from different sectors from industry, trade, and services was carried out by the Technical University of Berlin in cooperation with the BME region Berlin-Brandenburg (Dust, 2016). Figure  1.2 shows the proportion of peripheral competencies being transferred to external suppliers to more than 80% (outsourcing). In contrast, own core competencies, i.e., processes and skills from which competitive advantages are developed for your own company, are around 20% (Fig. 1.6).

1.4.2 Supply Risk Prevention and Mitigation Supply disruptions are defined as “unplanned and unanticipated events that disrupt the normal flow of goods and materials within the supply chain.” They distinguish between coordination risks and disruption risks. Supply chain complexity is

1.4  Quality Across the Supply Chain Management (SCM)

9

Fig. 1.6  Shifting activities to the upstream supply chain management. (Source: Author’s source, adopted from Dust (2016))

described by Adenso-Diaz et al. (2012) as “the sum of the total number of nodes and the total number of forward, backward and within-tier material flows” in the upstream supply chain network. Such complexity has a huge impact on supply chain reliability and supply chain stability. The overall recommendation made in several papers is to reduce the number of suppliers, since supply chain complexity increases the risk of disruption. Adenso-Diaz et al. (2012) highlighted the definitions of various authors, using a variety of criteria: (1) function, (2) type of risk, (3) drivers of risks, and (4) likelihood of occurrence. While the literature on supply management and risk management is growing, there is no organized structure regarding the sources of causal factors for supply chain risks and supply disruptions. Several papers show that supply disruptions can lead to high monetary recovery cost, waste, and sharp decreases in sales as pointed out in one of the previous sections by Haslett (2011), Jing (2011), and Grant (2010). As well as findings in literature, other sources such as field research, internal reports, and interviews display that supply disruptions have severe impacts on companies in the analyzed European transportation industry. Supply disruptions and their associated risks have been classified in the literature using a variety of criteria, e.g., function type of risk, and drivers of risk. Hendricks and Singhal (2005) pointed out that enterprises without operational slack and redundancies in their supply chains experience negative stock effects. They also revealed the tremendous impacts of supply chain disruptions on stock price performance and shareholder value. Causal factors for supply disruptions are automatically associated with risks in the supply network, as as stated by Zsidisin (2003), Tomlin (2006), and Wieland and Wallenberg (2012). Several authors outline incidents in which supply disruptions caused production standstill or temporary stops in manufacturing companies in the European industry.

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1  Quality Management (QM) Strategic Supply Chain Risk Management

Supply Chain Risk Analysis

Supply Chain Risk Simulation

Preventive Supply Chain Risk Management

Supply Chain Risk Identification

Reactive Supply Chain Risk Management

Supply Chain Risk Prevention

Supply Chain Risk Actions

Supply Chain Risk Mitigation

Supply Chain Risk Feedback Cycle

Fig. 1.7  SCM risk management as part of the quality function. (Source: Author’s source)

Other authors refer to capacity management in terms of supply disruptions as being a crucial risk factor for supply chain discrepancies. Due to such risks, specific measures are necessary in terms of overcoming potential supply disruptions caused by supplier capacity shortages. Mitigations and preventive measures can take the form of diverse capacity management, backup equipment, or alternative manufacturing locations, as recommended by Hittle and Leonard (2011) (Fig. 1.7). It is useful to compare the supply chain strategies of companies and their resulting ability to cope with some of the abovementioned disruptions. Zsidisin (2003) and Rao and Goldsby (2009) created models which can be used by managers to measure and assess the vulnerability of their company and supply chain in relation to the associated risks. Typology may also provide avenues for future research and thus guide practitioners in the management of their supply chain risk portfolio. Such a classification is a useful tool for supply chain managers in differentiating between independent and dependent variables and the mutual relationships which would help them to focus on those key variables that are most important for effective risk minimization in a supply chain. Zsidisin typologized causal factors for supply disruptions into different categories—high, medium, and low risk—based on managerial perception. Other authors besides Zsidian have built on this typology and outlined causal factors for supply disruptions as follows, which comprise the following: –– –– –– –– –– –– –– –– ––

Capacity shortages. New product launches. Disaster issues (e.g., earthquake, flood). Lack of supply chain transparency. Labor-related issues (e.g., strike). Constraints on market capacity. Pricing instabilities. Quality discrepancies. Transport issues.

1.4  Quality Across the Supply Chain Management (SCM)

11

–– Product transfers to sites or plants. –– Inflexible production capacities.

1.4.3 Methods of SCM Risk Evaluation Once a company has decided what it is going to evaluate, the next step is to establish how it will evaluate the performance of the supplier. There are many ways to do this and some are more costly, time-consuming, and resource intensive than others. By quantifying the level of risk and the projected benefit of a method of evaluation, company personnel can determine the most appropriate method or combination of methods that should be used. Some methods that companies commonly use to evaluate and measure supplier performance include the following: –– –– –– –– –– –– –– –– –– –– –– ––

Site visits by cross functional teams. Supplier audits (process, special process, or product audits). Paper supplier questionnaires. Web-based supplier questionnaires. Organizing existing data. Internal questionnaires. Requiring external certifications. Developing own certifications. Third-party reviews. Phone call with a supplier. Independent ratings. Contacts with other supplier customers.

1.4.4 Sustainability in the SCM Organizations and enterprises have the responsibility to use and transform resources and other input factors in a sustainable way. Sustainability can be defined as meeting the needs of current generations without compromising the needs of future generations, while ensuring a balance between economic growth, environmental care, and social well-being. Sustainability has therefore three main pillars: economic, environmental, and social. These three pillars are informally referred to as people, planet, and profits. A sustainable quality management system (SQMS) is an approach to quality management that emphasizes continuous improvement and innovation. It focuses on the long term and aims to improve the overall performance of the organization. Sustainability is essential in quality improvement because it helps to reduce waste and increase efficiency. If organizations want to be successful in business, they must learn how to use resources efficiently. This means reducing the amount of waste produced and increasing the amount of output per unit of input (Dathe et al., 2022).

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1.4.5 Fair Trade in the Supply Chain Fair trade is a controlled trade in which the producers receive a minimum price for their products, which is determined by a fair-trade organization. This is intended to enable producers to earn a higher and more reliable income than in conventional retail even at lower market prices. The amount of a fair price has been a topic of business ethics that has been discussed for decades. In addition, this form of trade tries to build long-term “partnership” relationships between traders and producers. In production, international environmental, and social standards as well as those prescribed by the organizations should also be complied with. The very heterogeneous fair-trade movement mainly focuses on goods that are exported from developing countries to industrialized countries. Fair trade encompasses agricultural products as well as products from traditional handicrafts and industry and is increasingly expanding into new areas such as tourism under the name “fair travel.” Fairly traded products are offered in natural food and world shops as well as in supermarkets and restaurants. According to the umbrella organization Fairtrade International, over 1.5 million farmers took part in such programs in 2015 (Helmold, 2022).

References Adenso-Diaz, B., Mena, C. H., Garcia, S., & Liechty, M. (2012). Supply chain management: The impact of supply network characteristics on reliability. An International Journal, 17(3), 1–36. Bozarth, C. C., & Handfield, R. B. (2013). Introduction to operations and supply chain management (3rd ed.). Harlow Pearson. Brugger-Gebhardt, S. (2016). Die DIN EN ISO 9001:2015 verstehen: Die Norm sicher interpretieren und sinnvoll umsetzen. Springer. Dathe, T., et al. (2022). Corporate Social Responsibility (CSR), Sustainability and Environmental Social Governance (ESG). Approaches to ethical management. Springer. Deming, W., et al. (2012). Leadership principles from the: Leadership principles from the father of quality. McGrawHill. Deutsche Gesellschaft für Qualität (DGQ). (2022). www.dgq.de Dust, R. (2016). Lieferanten−/Risikomanagement. Bislang wenig Risikoprävention in der Supply Chain. In BME.  Abgerufen am 28.9.2020. https://www.bme.de/bislang-­wenigrisikopraevention-­in-­der-­supply-­chain-­1468/ Garvin, D.  A. (1984). What does product quality really mean? Sloan Management Review, 1984, 25–43. Helmold, M. (2022). Strategic performance management. Achieving Long-term Competitive Advantage through Performance Excellence. Springer. Helmold, M. (2023). Qualität neu denken. - Innovative, virtuelle und agile Ansätze entlang der Wertschöpfungskette. Springer. Helmold, M., & Terry, B. (2021). Operations and supply management 4.0. Industry insights, case studies and best practices. Springer. Helmold, M., Einmahl, R., Rassmann, K. & Carvalho, L. (2020). In IUBH discussion paper. Lessons from the COVID-19 situation: Rethinking global supply chain networks and strengthening supply Management in Public Procurement in Germany. Abgerufen 31.10.2020. https:// www.iubh-­university.de/wp-­content/uploads/DP_Logistik_Helmold_4_2020fin.pdf

References

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ISO. (2023). ISO 9001 family. Quality Management. Retrieved 10.12.2022. https://www.iso.org/ iso-­9001-­quality-­management.html Pfeifer, T., & Schmitt, R. (2010). Qualitätsmanagement. Strategien-Methoden-Techniken. 4. Auflage. Hanserverlag. Rao, S. & Goldsby, T. J. (2009). Supply chain risks: A review and typology. International Journal of Logistics Management, 20(1), 97–123. Sihn, W., et  al. (2016). Produktion und Qualität. Organisation, Management, Prozesse. Hanserverlag. Zsidisin, G. A. (2003). Managerial perceptions of supply risk. Journal of Supply Chain Management, 39(1), 14–25.

2

Integrated Management Systems (IMSs)

If you can’t describe what you are doing as a process, you don’t know what you’re doing. W. Edwards Deming

2.1 Scope of IMS Organizational complexity has increased dramatically in recent years. The result is a lot of low value-adding activities and a high level of administrative tasks. In the medium term, this leads to lower employee motivation, which can set a dangerous downward spiral in motion. Management systems have been developed to better deal with these framework conditions. The term management system originally comes from the field of quality management. Basically, this is a methodically consistent approach by organizations to achieve their goals. The essential business processes and their interfaces are described. Management systems are described and standardized by management system standards (MSS). The description of the business processes also lays the foundation for an organizational culture that promotes continuous improvement. For this purpose, performance must be regularly evaluated and weaknesses corrected. This requires clear guidelines from management and a high level of employee commitment. The use of management systems offers the following advantages in particular: –– –– –– ––

Reduced use of resources and improved results. Increased transparency of business processes and their interfaces. Improved risk management. Increased customer satisfaction through holistic consideration of requirements and their targeted implementation.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Helmold, Virtual and Innovative Quality Management Across the Value Chain, Management for Professionals, https://doi.org/10.1007/978-3-031-30089-9_2

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Management system standards are developed by international experts with experience in global management, leadership strategies, and efficient and effective processes and approaches and can be used by organizations large and small. There are over 80 different management system standards in total, with the following being particularly well known: –– –– –– ––

ISO 9001: Quality Management Systems. ISO 14001: Environmental Management Systems. ISO 45001: Occupational Health and Safety Management Systems. ISO 50001: Energy Management Systems.

In addition to these general management system standards, there are three other document types for organizational management: –– Sector-specific management system standards: management system standards that specify additional and specific requirements for application in a specific industry such as medical devices. –– Management system-related standards and implementation guidelines: standards that provide further guidance or requirements for the implementation of a management system. –– Management standards: standards that support the implementation of specific aspects of a management system. The specific context of an organization defines the complexity of a management system. A smaller organization can do without extensive documentation of the management system thanks to strong management with clear goals for the individual employees. On the other hand, more complex organizations in strictly regulated areas and high documentation requirements also require more extensive documentation of the management system. Figure 2.1 shows the three IMSs, ISO 9001, ISO 14001, and ISO 45001, covering quality, energy, environment, and health and safety. Figure 2.2 shows the structure of management systems into standards for management systems, industry-specific management systems, management system-­ related norms and management standards.

2.2 Advantages and Disadvantages when Using an IMS 2.2.1 Advantages of IMS An IMS combines all aspects of an organization’s systems, processes, and standards into one smart system. This merger allows a business to streamline its management, save time, and increase efficiency by addressing all elements of the management system as a whole. IMSs help organizations to conduct integrated audits and assessments, as well as optimize processes and resources. When enterprise can

2.2  Advantages and Disadvantages when Using an IMS

Health & Safety

ISO 45001

17

Energy

ISO 50001

Internal Audits, Reviews, Contineous Improvements

ISO 9001

ISO 14001

Quality

Environment

Fig. 2.1  Integrated management systems (IMSs). (Source: Author’s source)

Standards for Management Systems

• ISO 9001: Quality Management System (QMS) • ISO 14001: Environmental Management System • ISO 45001: Management System for Health, Safety, Environment

Industry specific Management Systems

• ISO 13485: Medical Qualiy Management System • ISO/TS 22163: Raiway Qualtiy Management System

Management Systems related Norms and Directives

• ISO 19011: Guideline for Auditing • ISO/TS 22003: Fodd Saftey Management System

Management-Standards

• ISO 26000: Sustainability Management Systems • ISO 31000: Risik Management Systems

Fig. 2.2  Management systems. (Source: Author’s source)

successfully integrate these systems into the company culture, it can help reduce the time it takes to do certain activities, eliminate the amount of time interrupted, and therefore reduce costs.

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2  Integrated Management Systems (IMSs)

–– A thoroughly planned and executed IMS will help the company and organization to operate more cost-effectively than separate management systems and facilitate decision-making that best reflects the overall needs of the organization. –– An IMS offers the prospect of more rewarding career opportunities for specialists post holders in each discipline. –– The objectives and processes of management system are essentially the same. –– Integration should lead to the avoidance of duplication, e.g., in personnel, meetings, electronic record keeping software, audits, and paperwork. –– Integration should reduce the possibility of resolving problems in one area at the expense of creating new difficulties in other disciplines. –– An IMS should involve timely overall system reviews where momentum in one element of an IMS may drive forward other elements that might otherwise stagnate. In contrast, independent systems could develop without regard to other management system elements, leading to increased incompatibility. –– A positive culture in one discipline may be carried over to others.

2.2.2 Disadvantages of IMS In certain organizations the separate management system in each department might be functioning properly and its results could be considered acceptable; however, once the integrated management system gets introduced and implemented, many departments fail to catch up and the following occurs as a result of the integrated management system process: –– Existing system may work well already. Integration may threaten the coherence and consistency of current arrangements that have the support of everyone involved. –– Relevant specialists may continue to concentrate on the area of their core expertise and further specialist training may not be needed. –– Uncertainties regarding key terms, already a problem in occupational health and safety, would be exacerbated in an IMS. –– System requirements may vary across topics covered, e.g., an organization may require a simply quality system, but a more complex health and safety or environmental performance system. An IMS could introduce unreasonable bureaucracy into, in this case, quality management. –– Health, safety, and environment performance are underpinned by legislation and standards, but quality management system requirements are largely determined by customer specification. –– Regulator and single topic auditor may have difficulty evaluating their part of the IMS when it is interwoven with other parts of no concern to the evaluator. –– A powerful, integrated team may reduce the ownership of the topics by line management. –– A negative culture in one topic may unwittingly be carried over the others.

2.3  Realization of IMS

19

–– Due to integration, the probability of lengthy document reviews and team meetings is usually unavoidable. Lengthy documents are practically never seen by anyone. If integration process is not planned and implemented correctly, significant aspects of individual standard can be absent, and finally, if all concerns raised by workforce are not addressed by the management team, then probably the benefits of IMS certification will not be achieved within the organization, and more worst, it could lead to management system stagnation.

2.3 Realization of IMS The ISO manual “The Integrated Use of Management System Standards (IUMSS)” (ISO, 2018) provides important guidelines for setting up integrated management systems. In addition to basic considerations about the context of the organization, its goals, processes, and resources, the essential steps in the integration of management systems are discussed (see Fig. 2.3): –– –– –– ––

Prepare. Link (connect). Incorporate. Sustain.

In addition to the ISO, the Association of German Engineers (VDI) also provides instructions for the practice-oriented introduction of integrated management systems with the guideline VDI 4060 (VDI, 2005). However, due to the fact that it was published some time ago, the latest developments in management systems are not taken into consideration. Further support is offered by a number of standard works on this topic, such as in (Koubek & Pölz, 2014).

Integrated Management Systems (IMS)

Prepare

Definition of Scope Planning of Integration

Connect

Structuring of IMS Definition of Requirements for IMS

Incorporate

Gap Analysis Corrective Actions to mitigate Deviations

Sustain

Control & Execution Improvement Actions

Fig. 2.3  Realization of IMS into real life in organizations. (Source: Author’s source)

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References ISO. (2018). ISO Handbook – The integrated use of management system standards (IUMSS), ISO, www.iso.org, Geneva, Switzerland. Koubek, A., & Pölz, W. (2014). Integrierte Managementsysteme: Von komplexen Anforderungen zu zielgerichteten Lösungen. Hanser Verlag. VDI. (2005). VDI 4060 – Integrierte Managementsysteme (IMS) – Handlungsanleitung zur praxisorientierten Einführung. www.vdi.de, Düsseldorf.

3

Extended Reality (XR) in QM

Clearly, the thing that’s transforming is not the technology — the technology is transforming you. Jeanne W. Ross, MIT Sloan’s Center for Information Systems Research.

3.1 Definition of Extended Reality (XR) Extended reality (XR) is an umbrella term encapsulating augmented reality (AR), virtual reality (VR), mixed reality (MR), and everything in between. Although AR and VR offer a wide range of revolutionary experiences, the same underlying technologies are powering XR. XR applications are used in industries like healthcare, defense, education, construction, engineering, gaming, or manufacturing (Lang & Müller, 2020). Extended reality advances the potential of AR, VR, and MR and merges our real and virtual worlds to create new environments and visualizations where physical and digital objects coexist, interact, and communicate (Marr, 2021). Instead of removing users completely from the real world, or simply layering flat content on top of their immediate view, MR adds intelligence, even personality, to digital content relative to the world around them. As part of the technological evolution of how we engage with the digital world, in both our personal and work lives, we are smashing through the barriers that interfere with our ability to make smart decisions quickly; absorb, retain, and process critical information; visualize possible scenarios before acting; or share knowledge and tasks. The XR trend is ushering in a new world of simulated experiences grounded in the ways business gets done and how customers actually use products.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Helmold, Virtual and Innovative Quality Management Across the Value Chain, Management for Professionals, https://doi.org/10.1007/978-3-031-30089-9_3

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Augmented reality (AR) or extended reality (XR) enables a gradual full or partial virtual representation of reality, which can either closely resemble reality or completely deviate from it. The boundaries between reality and the virtual world are becoming increasingly blurred thanks to new hardware and computing power as well as high-performance networks with high bandwidth, opening up new, breathtaking impressions that until recently could only be imagined in science fiction films. Augmented reality is also a key technology for what is known as the metaverse, the third major generation of the Internet, also known as Web 3.0. This follows on from documents and their linking based on the first generation and the second generation shaped by social media. Augmented reality systems have been researched and developed for quite some time. The first systems for computer games were already commercially available in the 1990s. However, only in the last 10  years have systems been developed that enable good performance while remaining cost-effective. The simplest systems consist of cardboard constructions into which the smartphone can be installed. Figure 3.1 shows a first overview of the augmented reality systems (virtual, mixed, and augmented reality), which are described in detail in the next sections.

User views static digital or visual elements integrated into the real world

User interacts with responsive virtual elements integrated into the real world Augmented Reality (AR)

Mixed Reality (MR)

Virtual Reality (VR)

User is immersed in an interactive, digitally-generated environment

Fig. 3.1  Extended reality (XR). (Source: Author’s source)

3.2  Creation of XR

23

3.2 Creation of XR The realities mentioned above are generated by suitable hardware. First of all, these include glasses, which are also referred to as head-mounted displays (HMDs). There are three categories: connected (tethered), wireless (mobile), and fully autonomous (standalone) devices. –– Tethered: These glasses must be tethered to a powerful computer. –– Wireless (mobile): This solution consists of an attachment in which smartphones approved for this purpose can be used. A cable connection is no longer required, which significantly increases the range of use and enables new applications. –– Autonomous (standalone): Devices that do not require a connection to a computer or the use of a smartphone are referred to as autonomous or standalone. They offer the greatest possible flexibility and the implementation of demanding applications. Regardless of this category, the following parameters are important when choosing a suitable solution: –– –– –– –– ––

Display: resolution and type (AMOLED, OLED, LCD, etc.) Resolution (per eye). Connections (USB, Bluetooth). Position tracking. Field of view.

In standalone systems, the processor (e.g., Intel, Snapdragon or Nvidia) and the platform (Windows MR, Google Daydream) play a particularly important role. Of course, different systems are possible for VR applications and AR applications. In the field of VR, HTC Vive and Oculus Rift are very popular systems. Microsoft HoloLens is a leading system for AR applications. For the realization of AR on mobile phones, Apple’s ARKit and Google’s ARCore are very widespread and powerful systems. In order to bring the virtual world closer to reality, HMD can be supplemented with wearable elements such as tactile gloves, suits, or vests. The impression in the virtual world is thereby again clearly strengthened. Haptic gloves enable the position of fingers and hands to be recorded, thereby creating another interface for control between humans and machines. Such gloves also enable feedback such as vibrations, impressions of force, or even the feeling of surface structures. Holding and interacting with objects can be simulated with controllers. Only the combination of these hardware elements with suitable software then enables the creation of a suitable XR system. The current forecasts for market growth from 12 billion dollars in 2020 to over 72 billion dollars in 2024 show the great potential of this technology (cf. Statista 2021). Of course, this development is supported by the games market, but these systems are also increasingly found in production environments. However, some

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3  Extended Reality (XR) in QM

prerequisites must be created for their smooth use. This includes, for example, sufficient lighting conditions or the detection and removal of highly reflective parts.

3.3 Augmented Reality (AR) Augmented reality is an interactive experience that combines the real world and computer-generated content. The content can span multiple sensory modalities, including visual, auditory, haptic, somatosensory, and olfactory. AR incorporates three features: a combination of digital and physical worlds, interactions made in real time, and accurate 3D identification of virtual and real objects. Quality assurance could be done in real time by a human or even by an AI with AR applications as shown in Fig. 3.2. Either AR glasses could place 3D models on the products or the comparison can be left to an AI.

3.4 Mixed Reality (MR) Mixed reality enables interaction with and manipulation of digital or virtual and real objects in real time. Mixed reality is sometimes also referred to as hybrid reality and makes it possible to interact with virtual objects. Mixed reality requires a suitable headset (e.g., Microsoft HoloLens) and significantly more computing power than VR or AR. Virtual objects can then be placed in space, rotated, and further interacted with. MR applications can also be implemented on smartphones or tablets, although the boundaries between AR and MR are becoming increasingly blurred here. One example is Google 3D Experience, which allows virtual objects such as animals to be placed and scaled in real space. This can be used for training, for example. It is also possible to get an idea of how certain objects, such as furniture, fit into a room.

Fig. 3.2  Augmented and virtual reality (VR) in QM

3.5  Virtual Reality (VR)

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3.5 Virtual Reality (VR) Virtual reality (VR) is a simulated experience that employs pose tracking and 3D near-eye displays to give the user an immersive feel of a virtual world. VR is the use of computer technology to create a simulated environment which can be explored in 360 degrees. Unlike traditional interfaces, VR places the user inside the virtual environment to give an immersive experience. VR enables users to explore and interact with a virtual surrounding in a way that approximates reality, as it is perceived through the users’ senses. The environment is created with computer hardware and software, although users might also need to wear devices such as helmets or goggles to interact with the environment. The more deeply users can immerse themselves in a VR environment. The VR industry still has far to go before realizing its vision of a totally immersive environment that enables users to engage multiple sensations in a way that approximates reality. However, the technology has come a long way in providing realistic sensory engagement and shows promise for business use in a number of industries. VR systems can vary significantly from one to the next, depending on their purpose and the technology used, although they generally fall into one of the following three categories: • Non-immersive. This type of VR typically refers to a 3D simulated environment that is accessed through a computer screen. The environment might also generate sound, depending on the program. The user has some control over the virtual environment using a keyboard, mouse, or other device, but the environment does not directly interact with the user. A video game is a good example of non-­ immersive VR, as is a website that enables a user to design a room’s decor. • Semi-immersive. This type of VR offers a partial virtual experience that is accessed through a computer screen or some type of glasses or headset. It focuses primarily on the visual 3D aspect of virtual reality and does not incorporate physical movement in the way that full immersion does. A common example of semi-immersive VR is the flight simulator, which is used by airlines and militaries to train their pilots. • Fully immersive. This type of VR delivers the greatest level of virtual reality, completely immersing the user in the simulated 3D world. It incorporates sight, sound, and, in some cases, touch. There have even been some experiments with the addition of smell. Users wear special equipment such as helmets, goggles, or gloves and are able to fully interact with the environment. The environment might also incorporate such equipment as treadmills or stationary bicycles to provide users with the experience of moving through the 3D space. Fully immersive VR technology is a field still in its infancy, but it has made important inroads into the gaming industry and to some extent the healthcare industry, and it is generating a great deal of interest in others.

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3  Extended Reality (XR) in QM

References Lang, M., & Müller, M. (2020). Von Augmented Reality bis KI - Die wichtigsten IT-Themen, die Sie für Ihr Unternehmen kennen müssen. Hanserverlag. Marr, B. (2021). Extended reality in practice: 100+ amazing ways virtual, Augmented and mixed reality are changing business and society. Wiley.

4

Total Quality Management (TQM)

Without changing our patterns of thought, we will not be able to solve the problems that we created with our current patterns of thought. (Albert Einstein)

4.1 Introduction to TQM Total quality management (TQM) refers to the continuous, ongoing activity that covers, records, inspects, organizes, and controls all areas of an organization (company, institution, etc.) and serves to introduce quality as a system goal and guaranteed permanently (Oakland et  al. (2020). Total quality management (TQM) is a management strategy that emphasizes a continuous, organization-wide effort to maintain quality customer service and satisfaction. The goal of TQM is to foster customer loyalty by delivering service levels that keep customers from coming back again. The strategy requires consistent feedback from employees and customers to determine how services and products can be improved across the organization and is designed to help companies find a path to strengthen their position in the market, increase productivity, improve customer loyalty and satisfaction, boost employee morale, and improve processes. Whereas many quality management strategies focus on specific departments, TQM includes every department in continually improving a company’s products and services. According to the TQM philosophy, the more you improve processes in every department, the easier it will be to deliver higher-­ quality products and services to customers. With TQM, everyone in the company should be focused on quality improvement with the shared goal of boosting customer loyalty and satisfaction. TQM is the approach to implement a customer-­ focused and centric quality mindset across all functions in the company and across all areas in the value chain as shown in Fig. 4.1. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Helmold, Virtual and Innovative Quality Management Across the Value Chain, Management for Professionals, https://doi.org/10.1007/978-3-031-30089-9_4

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4  Total Quality Management (TQM)

Focus on Customers Total Quality Management (TQM) Connuous Improvement

Total Integraon into Company

Fig. 4.1  TQM approach. (Source: Author’s source)

TQM was further developed in the Japanese automotive industry and finally made a successful model. TQM needs the full support of all employees to be successful. The key principles of the TQM philosophy include the following: • • • • • • •

Quality is based on the customer. Quality is achieved by employees of all areas and levels. Quality includes many dimensions that must be operationalized by criteria. Quality is not a goal, but a process that never ends. Quality refers to products and services. Above all, however, to the processes used to produce them. Quality requires active action and must be worked for.

The most widespread TQM concept in Germany is the EFQM model for excellence of the European Foundation for Quality Management (Helmold & Terry 2021). This model has a holistic, result-oriented approach. The criteria of this model are used to award the most important German-quality prize, the Ludwig Erhard Prize. In traditional management, quality is the adherence to internal specifications and standards. Inspection is required to control defects. In TQM, quality is defined as products and services that go beyond the present needs and expectations of customers. Innovation is required for improving the quality continuously. Table 4.1 compares TQM with the traditional approach of quality management. Total quality management (TQM) is a process-related management approach with a focus on quality. It builds on the quality management created by William Edwards Deming (Rothlauf 2014). Toyota, as a Japanese company with many

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4.1  Introduction to TQM Table 4.1  TQM versus traditional quality management (QM) TQM Processes provoke mistakes and errors All employees are responsible for errors Zero defect goal TQM is a team and holistic approach TQM must be rolled out throughout the value chain Suppliers are partners Companies are configured towards customer satisfaction

Traditional QM Human beings make mistake and errors Individual employees are responsible for errors Zero defect is not achievable Quality is managed in every department Every part in the value chain has its own quality management system Suppliers are necessary Customers have to accept what companies deliver in terms of quality

Source: Author’s source

Quality

Total

• • • •

Integration of Suppliers Integration of own Operations Integration of Customers Application throughout the Value Chain

Total

Quality

• • • •

Quality of Work Quality of Processes Quality of the Enterprise Quality as Part of the Corporate Strategy

Management

Management • • • •

Leadership Tasks Leadership Blueprint Team and Group Dynamics Endurance and Durability

Fig. 4.2  TQM characteristics. (Source: Author’s source)

technical functions, adopted Deming’s theses early on and operationalized the criteria. The Deming Prize, which is awarded to companies with particular success in TQM, is also named after him. TQM is a consistent process orientation, which ultimately leads to the fulfillment of the needs of customers, employees, suppliers, and society. Maximum customer satisfaction, which was not always the focus before, provides the basis for sales growth. The prerequisite for this is the holistic orientation of the corporate philosophy towards absolute customer orientation. Figure 4.2 shows the major elements of the TQM concept. TQM integrates all stakeholders, internal employees in production, other departments, and suppliers into the quality system. TQM is a concept which spans over the entire value chain from the upstream value chain (supply side) over the own operations to the downstream value chain (demand side) and customers (Helmold & Terry 2022).

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4  Total Quality Management (TQM)

4.2 TQM Strategy Total quality management (TQM) is a strategy for continuously improving performance at every level and in all areas of responsibility. It combines fundamental management techniques, existing improvement efforts, and specialized technical tools under a disciplined structure focused on continuously improving all processes. Improved performance is directed at satisfying such broad goals as cost, quality, schedule, and mission need and suitability. Increasing user satisfaction is the overriding objective. There are several goals associated with TQM: 1. Detect, reduce, and eliminate manufacturing errors. 2. Prevent problems before they occur. 3. Streamline supply chain management. 4. Improve customer service. 5. Make sure employees are trained in quality. 6. Increase employee productivity. 7. Focus on continual process improvement of procedures.

4.3 TQM Principles 4.3.1 Principle 1: Holistic Approach Total quality management is the practice of promoting and ensuring excellence and safety in products by involving all relevant stakeholders, including but not limited to: • • • • •

Employees. Leadership. Suppliers. Manufacturers. Customers.

This practice involves all internal and external stakeholders (manufacturing, marketing, product development, research and design, sales, purchasing, or human resources) working towards improvements to the business’ creation of goods and services. When successful, this unified approach makes it easier to monitor quality-­ related issues, no matter what department they originate in (Fig. 4.3). Let us say someone on the production line notices a device part is faulty after it has already been sent to packaging. This person reports this issue to their manager, who then reports it to your quality team. The quality team finds a possible solution to the problem: the device will require either cooler storage conditions or a new adhesive. Without strong total quality management practices in place, your team may not have reported this problem in the first place and the faulty part may never have been fixed.

4.3  TQM Principles

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Fig. 4.3  TQM principles. (Source: Author’s source)

Holistic Approach

Visualisation

TQM Principles

Risk Analysis

Team Activity

Employee Contribution

There is more to total quality management than simply telling your team about the importance of quality. Implementation of TQM requires scalable quality management tools, like QMS software purpose-built to serve the unique needs of the medical device industry. Total quality management tools make prioritizing quality more feasible by streamlining various aspects of quality and quality-related processes.

4.3.2 Principle 2: Team Activity Approach Total quality management is a structured and systematic approach, which must be initiated by the top management and which must be integrated into the company’s culture and values. Engaged teams are a must for TQM to be performed successfully and engagement starts at the higher management. The leadership team must fully understand the processes involved in TQM. Moreover, it must understand and stay on top of training their teams and, ultimately, act as coaches, mentors, and ambassadors for total quality management (Zairi 2021). The Deming cycle in Fig. 4.4 is a scientific approach to product management, emphasizing continuous improvement and learning. The Deming cycle involves four main steps that guide your management team through identifying, analyzing, and acting on quality issues: • Plan: To plan the process must be planned before it is actually planned: the plan includes identifying potential for improvement (usually by the employee or team leader on site), analyzing the current status, and developing a new concept (with intensive involvement of the employee). • Do: Contrary to widespread opinion, do does not mean the introduction and implementation on a broad front, but trying out or testing and practical optimization of the concept with simple, quickly realizable means (e.g., temporary devices) at a workplace with strong involvement of the employees. • Check: The process flow implemented on a small scale and its results are checked and, if successful, generally approved for implementation on a broad front. • Act: In the act phase, the new general requirement is introduced across the board, laid down and regularly checked for compliance (audits). This is actually a “big action” that in individual cases involves extensive organized activities (e.g.,

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4  Total Quality Management (TQM)

Fig. 4.4  Deming cycle

Act

Plan

P-D-C-A Cycle

Check

Do

changing work plans, NC programs, master data, conducting training courses, adapting the structural and process organization) as well as considerable investments (in all comparable jobs, in all plants). Improving this standard begins with the plan phase. The preceding steps play a pivotal role in a manager’s ability to quickly identify flaws, perform tests, analyze the findings, and act on the best course of action, in other words, create higher-quality products and processes.

4.3.3 Principle 3: Contribution of Employees Total quality management is “total” only if everyone is on the agenda of the executive management board. This includes all single employees, teams, and departments, not only those in management roles. Do not worry; there is a pillar for that. The right training goes a long way when it comes to rolling out total quality management. It should include guidance on applicable regulations and standards as well as any company policies around quality practices. For example, if your company is using a new project management tool to track quality-related issues, implement proper training practices to ensure that the tool is used properly. Next, build a process around using that tool and build it into your employees’ routines. The best way to simplify and manage training is by integrating training into your quality management system. Connecting training activities to other areas within your QMS allows your team to easily manage related tasks, check the status and history of those activities, and gain valuable knowledge about the latest policies or compliance requirements. Regulatory knowledge plays a large role in ensuring quality, making a formal training management tool a must. Beyond integrating a training into a company’s QMS, there are a few additional aspects and aids, which enterprises can initiate to involve employees: • Implementing a suggestion scheme, which gives employees a way to submit ideas and improvements, no matter their job title. Quality-related improvements can come from anywhere, which is why a suggestion scheme is important. A suggestion scheme gives everyone a chance to help.

4.3  TQM Principles

33

• Laying out clear measurements for success. Employee quality wins could range from little victories, like promptly completing quality forms, to larger achievements, like identifying a quality- or risk-related issue. • Hiring and recruiting quality experts and trainers to drive strategic quality initiatives. Quality professionals can educate your management on best practices, making it easier for them to guide and support your entire team. • Treating the task of training your staff on total quality management like any other training Staying vigilant and run refresher courses on an ongoing basis.

4.3.4 Principle 4: Execution of Risk Analysis Risk analysis is a cornerstone of both quality and good decision-making. The risk analysis process involves calculating the pros, cons, and potential cost (financial or otherwise) of any decision. With proper risk analysis practices in play, you can more accurately determine if a decision is safe enough to make. Going back to our earlier scenario with the faulty product part, risk analysis would allow you to compare the risks of either changing the adhesive or the storage conditions of the product. A different storage facility might prevent the adhesive from coming undone. But will the adhesive still hold when the device is in someone’s home or in a hospital? And if the adhesive is replaced, will there be other climate-related impacts or potential allergen risks with the new adhesive? Effective risk analysis methods will give you the framework to plan for, mitigate, and manage any risks that arise throughout the product life cycle. By pairing the Deming cycle with thorough risk analysis practices, you can better predict and manage change so you are not working from a reactive state. You can create your own risk management strategy or use an existing one. Whichever route you choose, ultimately you want to ensure you have a clear-­ cut process in place that guides your team towards educated decision-making that yields high-quality products.

4.3.5 Principle 5: Data Visualization Visualizations make data easier to interpret and quicker to present to any stakeholders involved with your medical device. When you are running numerous tests, analyzing results, and weighing risks, proper data interpretation is huge. After all, what good are tests if you cannot fully discern any meaningful trends from them? There are a number of quality data tools that are used for total quality management, but few are as reliable and renowned as the statistical tools listed below. These seven statistical tools are a set of visual aids that make it easier to identify quality-related issues and dive into risk analysis: • A cause-and-effect diagram (or fishbone diagram) provides a streamlined view of various scenarios and tests and the outcome of the action taken. This diagram

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• • •

• • •

4  Total Quality Management (TQM)

is especially useful during the planning phase, because it provides a quick overview of potential inputs and outputs. A check sheet is a basic chart that allows an observer or participant to keep track of how many times something takes place. The check sheet is particularly helpful in the early phases of testing out a theory or looking for a cause. A control chart is a line graph that details how a manufacturing or business process shifts over time. This chart is great to use after changes are implemented, because it provides a look at the impact of those shifts. A histogram shows how often particular events happen during a set event, like an experiment or process. It simplifies the process of analyzing how one change impacts the outcomes within a single process. This is especially helpful if you are trying to determine how process changes impact outcomes. A Pareto chart is a type of bar graph used for examining similar data points across various sample sets. For example, you could use a Pareto chart to compare the number of manufacturing defects that occur when using different adhesives. A scatter diagram is a visual that depicts two variables on an X/Y axis to look for patterns or correlations. This visualization is particularly useful when you are trying to look for any relation between two different events or sets of data. Stratification is a method used to compare numerous data sets from different sources. This technique is useful for comparing data after experiments, but it is also helpful when trying to find any risk-related trends while looking for a root cause.

The best QMS platforms for TQM have visual tools already embedded within its software architecture to allow for fast, data-driven decision-making. For example, Greenlight Guru Visualize makes it possible to see all connected processes and artifacts within a single view so that teams can ensure they are working in the most informed, up-to-date environment.

4.4 TQM Success Factors 4.4.1 Introduction to TQM Success Factors Total quality management is a structured system for satisfying internal and external customers and suppliers by integrating the business environment, continuous improvement, and breakthroughs with development, improvement, and maintenance cycles while changing organizational culture. During the global recession of the late 1970s and early 1080s, the United States (and the rest of the world) faced stiff competition from Japan. The Japanese had captured the world automotive and electronics markets because they found a way to produce high-quality goods at lower prices. And as a result, corporations in the United States looked more closely at the quality of Japanese goods and services, trying to find ways to improve production and recapture market share. Their solution was total quality management (TQM) including ten fundamental principles as shown in Table 4.2.

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4.4  TQM Success Factors Table 4.2 TQM success factors

No. Description 1. Customer -driven and customer-­ centric focus 2. Employee commitment and new leadership 3. Full employee involvement and communication 4. 100% commitment of leadership and communication 5. Cross-functional improvement teams 6. Process approach 7. Integrated system 8. Frequent auditing, including internal and external audits 9. Continual improvement 10. Fact-based and evidence-based decision-making Source: Author’s source

4.4.2 Customer-Driven and Customer-Centric Focus Central to all successful TQM systems is an understanding that quality is determined by the customer. No matter what measures you introduce to improve the quality of your products and services, the only way of knowing if they have been successful is customer feedback, whether in the form of reviews, return rates, or satisfaction surveys. This principle puts the focus back on the people buying a company’s product or service (Herrmann & Fritz 2021). Clients and consumers determine the quality of the product and service of a company. If a company’s product fulfills a need and lasts as long or longer than expected, customers know that they have spent their money on a high- and superior-quality product (Kamiske 2000). When companies understand what their customer wants or needs are, they have a better chance of figuring out how to get the right materials, people, and processes in place to meet and exceed their expectations. To implement this TQM principle, it is important to implement the following elements a spart of the principal customer focus: • Conducting market research and understanding the customers’ needs and expectations. • Aligning the organization’s mission, vision, and strategic objectives with customer needs. • Communicating with customers via direct or indirect market channels, measuring satisfaction. • Using the results of market research to find ways to improve processes and customer satisfaction. • Managing customer relationships in a proactive way.

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4  Total Quality Management (TQM)

• Finding a balance for satisfying customers and other interested parties (such as owners, employees, suppliers, and investors). The benefits of being customer-focused include: • More sales, increased revenue, market share, and mindshare. • Strong customer loyalty leading to repeat business. • Increased possibility that satisfied customers will tell others about your products and services.

4.4.3 Full Employee Involvement and Communication Every person in an organization, from entry-level workers to management, has a responsibility for the quality of products and services. However, employees can only be invested if they feel empowered to make their own decisions, something that depends on management creating the right workplace environment. Any company cannot increase productivity, processes, or sales without the total commitment of all employees. They need to understand the mission, vision, and goals that have been communicated. They must be sufficiently qualified and trained and given the proper resources to complete tasks in order to be committed to reaching goals on time. Companies must therefore do the following to achieve the full commitment of employees: • Clearly communicating and acknowledging the importance of each individual contribution to the completed product. • Stressing that each team or individual accepts ownership and giving them the responsibility and opportunity to solve problems when they arise. • Encouraging employees to self-evaluate performance against personal goals and objectives and making modifications as necessary to improve workflow. • Acknowledging successes and optimized performance to build confidence in employees and your stakeholders. • Making roles and responsibilities transparent and clear. • Providing adequate training and making sure that resources are used and configured as efficiently as possible. • Encouraging people to continually seeking opportunities to learn and move into other roles to increase their knowledge, competence, and experience. • Creating an environment where employees can openly discuss problems and suggest ways to solve them. The key benefits of total employee commitment include: • Increased employee retention because employees are motivated, committed, and actively involved in working towards customer satisfaction.

4.4  TQM Success Factors

37

• Individual and team innovation and creativity in problem-solving and process improvement. • Employees who take pride and accountability for their own work. • Enthusiasm for active participation and contribution to continual improvement.

4.4.4 100% Commitment of Leadership and Communication Organization applying TQM must have good and effective leaders who provide unity of action and direction to all those working in the organization. The leaders should strive the organizational efforts towards achievement of overall goals. Everybody in your organization needs to be aware of plans, strategies, and methods that will be used to achieve goals. There is a greater risk of failure if you do not have a good communication plan. To implement this TQM principle, companies and leaders have to apply the following aspects: • Establishing an official line of communication so that all employees know about updates, policy changes, and new processes. • Empowering employees in all functional areas. • Involving employees in decision-making. • Making sure everybody in every department understands their roles and how they fit in with the rest of the company. Benefits include: • Boost in morale and motivation when employees understand how their contributions help the company achieve its goals. • Interdepartmental coordination and cooperation. • Elimination of silos. • Ability to more accurately measure the effectiveness of current policies and procedures. • Higher motivation from employees to achieve goals because they are part of the decision-making process.

4.4.5 Cross-Functional Improvement Teams A TQM company will have a steering committee made from top management. The committee creates projects, forms project teams, and monitors the teams’ improvement efforts. The projects will have significant and long-term benefits to the company. Improvement does not happen by itself or from one person’s ideas. Every person contributes a unique and valuable point of view to the team. Train team members in the process improvement tools. There are two types of teams:

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4  Total Quality Management (TQM)

1. Functional teams are from one area or department. They focus on issues that are internal to that area only. 2. Cross-functional teams are created from members from multiple departments or areas. Empower members of cross-functional teams to make changes. They focus on processes, systems, and problem projects.

4.4.6 Process Approach A process is a high-level description of the quality requirements, summarizing the objectives, specifications, and required resources. A procedure adds more detail, specifying the responsibilities, the tools to be used, what is to be measured, and how. A work instruction is a step-by-step guide of the process and procedure, written for the person who will be doing the work. In general terms, a process can describe any input that is turned into an output using defined resources. Process quality refers to the degree to which an acceptable process, including measurements and criteria for quality, has been implemented and adhered to in order to produce the goods. A process should define measurable objectives, inputs, outputs, activities, and resources. This includes: • The information needed to start working and from where that information comes. • The processes have an input, process, and output. • The basic jobs involved in the department and a description of the operations, activities, and subprocesses required to produce the output. • The requirements of a finished output. • The recipient of the output. • The objectives for a job well done. A basic process for processing a sales order could involve filling out an order form (input), ensuring the client’s account is in good standing, emailing the order to the client for verification, and then emailing the purchasing department with a copy of the verified order (output). Adhering to processes is critical in quality management. Processes ensure that the proper steps are taken at the right time to ensure consistency and speed up production. To implement this TQM principle, companies must follow the rules: • Use quality tools such as process flowcharts to define and delineate clear roles and responsibilities so everybody knows who does what at certain times. • Create a visual action plan so everybody can easily see the specific activities that need to be completed to achieve the desired result. • Analyze and measure current activities to see where improvements can be made or where steps in the process are creating bottlenecks. • Evaluate the impact your processes and activities may have on your customers, suppliers, and all stakeholders.

4.4  TQM Success Factors

39

Benefits of a process approach include: • Faster development and production cycles, lower costs, and increased revenue. • More consistency and predictable outcomes. • Focus on continued improvements and success.

4.4.7 Integrated System Typically, a business has many different departments, each with their own specific functions and purposes. These departments and functions should be interconnected with horizontal processes that should be the focus of total quality management. But sometimes these departments and functions operate in isolated silos. In an integrated system, everybody in every department should have a thorough understanding of policies, standards, objectives, and processes. Integrated systems help the company to look for continual improvement in order to achieve an edge over the competition. To implement this TQM principle as part of an integrated system, it is necessary to comply with the following guidelines: • Promote a work culture focused on quality. • Use flowcharts and other visual aids to help employees understand how their functions fit in with the rest of the company. • Use as-is process analysis to see where improvements can be made. • Make training available for employees who need to learn new processes and who want to explore opportunities for advancement. Benefits include the focus on quality that will help a company’s business achieve excellence and meet or exceed customer expectations.

4.4.8 Strategic and Systematic Approach The International Organization for Standardization (ISO) describes this principle as: “Identifying, understanding and managing interrelated processes as a system contributes to the organization’s effectiveness and efficiency in achieving its objectives” (ISO 2022). Multiple processes within a development or production cycle are managed as a system of processes in an effort to increase efficiency. To implement this TQM principle as part of an integrated system, it is necessary to comply with the following elements: • Provide your people with the proper training and resources that will help them complete their individual steps in the process. • Continually improve processes and products, and upgrade equipment as necessary to reach goals.

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4  Total Quality Management (TQM)

• Make continual improvement a measurable objective for all employees. • Recognize, acknowledge, and reward innovations and process improvements. Benefits include: • An ability to quickly identify, react, and fix process bottlenecks or breakdowns. • Overall improved organizational capabilities and improved performance.

4.4.9 Continual Improvement Optimal efficiency and complete customer satisfaction will not happen in a day. A company’s business should continually find ways to improve processes and adapt your products and services as customer needs shift. Companies that deliver products and services of substandard quality are bound to lose out to competition. To stay ahead of the game and to keep up with the ever-­ changing trends in the market, they need to accept and act on the importance of continuous improvement. According to TQM principles, all departments of the organization must contribute and work hard to improve the quality of their respective operations. To implement this TQM principle, it is necessary to apply the following aspects: • Implementing policies to establish product, process, and system improvements as measurable goals fo.r individuals, teams, and departments. • Recognizing, acknowledging, and encouraging innovation to improve processes and development. • Encouraging employees to participate in available training sessions to learn and take on new and additional roles. Benefits include: • Improved knowledge and capabilities to increase performance. • Improvement goals strategically aligned with organizational capabilities and goals. • Quick reaction times to recognize and fix bottlenecks and broken processes.

4.4.10 Fact-Based and Evidence-Based Decision-Making Analysis and data gathering lead to better decisions based on the available information. Making informed decisions leads to a better understanding of customers and your market. To implement this TQM principle, companies must follow the rules: • Analyzing and checking data to ensure that it is reliable and accurate. • Making relevant data available to stakeholders.

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4.4  TQM Success Factors

TQM Success Factors

Customer Centric Focus

Employee Empowerment

Process Management

Improvement Teams

Long-term Thinking

Management and Control

Continual Improvement

Auditing System

100 % Commitment

Measuring Success

Fig. 4.5  TQM success factors

• Using valid methods to gather and analyze data. • Making decisions based on the facts learned from the data in addition to your experience and intuition. Benefits include: • Ability to make informed decisions. • Ability to analyze and defend past decisions by referencing factual records. • Ability to change past decisions based on data review. Figure 4.5 summarizes the 10 principles for successful implementation of total quality management (TQM).

5

History and Evolution in Quality Management (QM)

Quality needs to be constantly improved, but it is just as necessary to make sure that quality never deteriorates. (Shigeru Mizuno)

5.1 Quality History and Developments The quality movement started with Shewhart control charts in the 1940s. But quality has always been present in our historical monuments, artwork, and literature. There are various aspects of quality such as consumer’s viewpoint of quality, producer’s viewpoint of quality, personal quality, behavioral quality, quality practices, and other tools. Reliability, education, training, teamwork, and management communication are other important aspects which are also included in quality discussions. Overall demand for most of the goods and services has been on the increase, year after year. Due to rise in the purchasing power of people, effective demand for many products and services has also been ever increasing. In many areas there is also scarcity of goods and services. Present-day consumer or the customer is better informed and enlightened. He is no longer prepared to accept things on their trace value or to take things for granted thanks to spread of general education and awareness, mass media, TV, radio, and other marketing and publicity techniques. He wants genuine return for the money he is prepared to part with. Consumers have nowadays a wide variety of products and attractive to choose from among a wide range of variety. People are interested in a better alternative of value and worth, for the money they are prepared to expend, rather than to compromise with cheap substitutes or products of inferior quality and standard. After the ravages of World War II, Japan was obsessed with the desire to rebuild the nation on the ashes of the war in general and of Hiroshima in particular. It was keenly felt by the Japanese that © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Helmold, Virtual and Innovative Quality Management Across the Value Chain, Management for Professionals, https://doi.org/10.1007/978-3-031-30089-9_5

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5  History and Evolution in Quality Management (QM)

experts were the only hope for putting their tattered economy back on its feet. For this, they also realized that they must wipe out their earlier reputation for producing cheap and shoddy goods if at all they hope to find a place for their products in the international markets. It was then that General Douglas McArthur in command of the allied forces in Japan felt that something had to be done to improve the nation’s image, and for that purpose, he requested the US government to send some management experts to help the Japanese to rejuvenate their industries. Dr. Edward Deming, the eminent expert on statistical quality control techniques of the United States, was sent to train management personnel in Japan from 1940 to 1950. During the period 1954 to 1955, another famous management consultant, Dr. J.M.  Juran, started visiting Japan to lecture on “quality management.” Based on the teachings of these two Americans, the beginnings of the quality movement in Japan were made in 1949. Dr. Deming was the guiding support behind the introduction of statistical quality control, which could substantially improve product quality. He believed in the philosophy of entrusting the responsibility for quality improvement in the hands of a few. Dr. Juran’s proposal was of total quality control with the responsibility for improving quality with the management and not with a special depart.

5.2 Advanced Quality and Product Planning (APQP) Quality planning (QP) is the task of determining what factors are important to a project and figuring out how to meet those factors. Such factors often include the resources that will be used, the steps needed to complete the project, and any other specifications. Advanced product quality planning is a process developed in the late 1980s by a commission of experts who gathered around the “Big Three” of the US automobile industry: Ford, GM, and Chrysler. Representatives from the three automotive original equipment manufacturers (OEMs) and the Automotive Division of American Society for Quality Control (ASQC) created the Supplier Quality Requirement Task Force to develop a common understanding on topics of mutual interest within the automotive industry. This commission worked 5 years to analyze the then-current automotive development and production status in the United States, Europe, and especially Japan. At the time, the Japanese automotive companies were successful in the US market. APQP is utilized by US automakers and some of their affiliates. Tier 1 suppliers are typically required to follow APQP procedures and techniques and are also typically required to be audited and registered to IATF 16949. This methodology is also being used in other manufacturing sectors. The Automotive Industry Action Group (AIAG) is a nonprofit association of automotive companies founded in 1982. The basis for the process control plan is described in AIAG’s APQP manual. These tools include the following methods: • Design of experiments (DoE). • Failure mode and effects analysis (FMEA).

5.3  Quality Assurance (QA)

• • • • •

45

Statistical process control (SPC). Measurement system analysis (MSA). Production part approval process (PPAP). Quality function deployment (QFD). Production control plan (PCP).

5.3 Quality Assurance (QA) Quality assurance (QA) is a way of preventing mistakes and defects in manufactured products and avoiding problems when delivering products or services to customers, which ISO 9000 defines as “part of quality management focused on providing confidence that quality requirements will be fulfilled.” This defect prevention in quality assurance differs subtly from defect detection and rejection in quality control and has been referred to as a shift left since it focuses on quality earlier in the process (i.e., to the left of a linear process diagram reading left to right). The terms “quality assurance” and “quality control” are often used interchangeably to refer to ways of ensuring the quality of a service or product. For instance, the term “assurance” is often used as follows: Implementation of inspection and structured testing as a measure of quality assurance in a television set software project at Philips Semiconductors is described. The term “control,” however, is used to describe the fifth phase of the define, measure, analyze, improve, and control (DMAIC) model. DMAIC is a data-driven quality strategy used to improve processes. Quality assurance comprises administrative and procedural activities implemented in a quality system so that requirements and goals for a product, service, or activity will be fulfilled. It is the systematic measurement, comparison with a standard, monitoring of processes, and an associated feedback loop that confers error prevention. This can be contrasted with quality control, which is focused on process output. Quality assurance includes two principles: “fit for purpose” (the product should be suitable for the intended purpose) and “right first time” (mistakes should be eliminated). QA includes management of the quality of raw materials, assemblies, products, and components, services related to production, and management, production, and inspection processes. The two principles also manifest before the background of developing (engineering) a novel technical product: The task of engineering is to make it work once, while the task of quality assurance is to make it work all the time. Historically, defining what suitable product or service quality means has been a more difficult process, determined in many ways, from the subjective user-based approach that contains “the different weights that individuals normally attach to quality characteristics” to the value-based approach which finds consumers linking quality to price and making overall conclusions of quality based on such a relationship.

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5  History and Evolution in Quality Management (QM)

5.4 Quality Control (QC) 5.4.1 Introduction to QC Quality control (QC) is a process by which entities review the quality of all factors involved in production. QC is a process through which a business seeks to ensure that product quality is maintained or improved. Quality control requires the company to create an environment in which both management and employees strive for perfection. This is done by training personnel, creating benchmarks for product quality, and testing products to check for statistically significant variations. A significant aspect of quality control is the establishment of well-defined controls. These controls help standardize both production and reactions to quality issues. Limiting room for error by specifying which production activities are to be completed by which personnel reduces the chance that employees will be involved in tasks for which they do not have adequate training. The ISO 9001 defines quality control as “A part of quality management focused on fulfilling quality requirements” (ISO, 2022). The key elements of QC are as follows: • Quality control (QC) is a process through which a business seeks to ensure that product quality is maintained or improved. • Quality control involves testing units and determining if they are within the specifications for the final product. • The quality control used in a business is highly dependent on the product or industry, and several techniques exist for measuring quality. • The food industry uses quality control methods to ensure customers do not get sick from their products. • Quality control creates safe measures that can be implemented to make sure deficient or damaged products do not end up with customers.

5.4.2 Testing as Element of QC Quality control involves testing units and determining if they are within the specifications for the final product. The purpose of the testing is to determine any needs for corrective actions in the manufacturing process. Good quality control helps companies meet consumer demands for better products. Quality testing involves each step of the manufacturing process. Employees often begin with the testing of raw materials, pull samples from along the manufacturing line, and test the finished product. Testing at the various stages of manufacturing helps identify where a production problem is occurring and the remedial steps it requires to prevent it in the future. The quality control used in a business is highly dependent on the product or industry. In food and drug manufacturing, quality control includes ensuring the product does not make a consumer sick, so the company performs chemical and

5.4  Quality Control (QC)

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microbiological testing of samples from the production line. Because the appearance of prepared food affects consumer perception, the manufacturers may prepare the product according to its package directions for visual inspection. In automobile manufacturing, quality control focuses on how parts fit together and interact and ensure engines operate smoothly and efficiently. In electronics, testing might involve using meters that measure the flow of electricity.

5.4.3 QC Methods There are several methods of measuring the performance of quality control. A quality control chart is a graphic that depicts whether sampled products or processes are meeting their intended specifications—and, if not, the degree by which they vary from those specifications. When each chart analyzes a specific attribute of the product, it is called a univariate chart. When a chart measures variances in several product attributes, it is called a multivariate chart.

5.4.3.1 X-Bar Chart Randomly selected products are tested for the given attribute or attributes the chart is tracking. A common form of a quality control chart is the X-bar chart, where the y-axis on the chart tracks the degree to which the variance of the tested attribute is acceptable. The x-axis tracks the samples tested. Analyzing the pattern of variance depicted by a quality control chart can help determine if defects are occurring randomly or systematically. 5.4.3.2 Taguchi Method The Taguchi method of quality control is another approach that emphasizes the roles of research and development, product design, and product development in reducing the occurrence of defects and failures in products. The Taguchi method considers design to be more important than the manufacturing process in quality control and tries to eliminate variances in production before they can occur. 5.4.3.3 100% Inspection Method This 100% inspection method is a quality control process that involves looking at and assessing all parts of a product. This type of quality control is done to rule out flaws in products. This method is often used to evaluate valuable metals and produce. Conducting the 100% inspection method calls for data about the manufacturing process and software to analyze inventory. The challenge for using this method is that looking at every single item that makes up a product is expensive, and it could destabilize or render the product unusable. For example, if you use this method to examine organic strawberries, you would risk the delicate berries being bruised or mushed, rendering them unsellable to customers. Quality control methods help standardize both production and reactions to quality issues in various industries from food production to automobile manufacturing.

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5  History and Evolution in Quality Management (QM)

5.4.4 Role of QC Inspectors Quality control inspectors protect the consumer from defective products and the company from damage to its reputation due to inferior manufacturing processes. If the testing process reveals issues with the product, the inspector can fix the problem himself, return the product for repairs, or tag the product for rejection. When issues arise, the inspector notifies supervisors and works with them to correct the problem.

5.4.5 Benefits of QC Implementing quality control procedures ensures you are selling the best products to your customers. In addition, practicing quality control has a positive impact on employee conduct. Quality control can inspire employees to create high-quality goods leading to greater customer satisfaction. Quality control protocols may help you lower your inspection costs and use your resources in a more cost-effective manner, too.

5.4.6 Examples of QC In 1986, Motorola, Inc. created a quality control methodology called Six Sigma, which uses data-driven review to keep defects to a minimum. The process focused on cycle-time improvement to reduce defects in its manufacturing of products to no more than 3.4 occurrences per million units. This methodology was created to minimize mistakes while documenting all the manufacturing procedures. Motorola introduced this method because, at the time, they faced fierce competition from similar companies overseas, primarily the success of the Japanese manufacturing market, and complaints by Motorola’s customers were high. After implementing this then-new form of quality control, the company’s performance improved dramatically. By the end of the initial five-year period (1986–1991), Motorola had reached its target for improvement in every sector of business. The continued use of Six Sigma and Lean Six Sigma (another form) occurs in the twenty-first century and is used by Microsoft and local governments. Six Sigma uses a five-factor approach (DMAIC) to define, measure, analyze, improve, and control to help companies identify and address quality control problems and fix them.

5.5 Differences of QA and QC Quality assurance can be defined as part of quality management focused on providing confidence that quality requirements will be fulfilled. The confidence provided by quality assurance is twofold—internally to management and externally to customers, government agencies, regulators, certifiers, and third parties. An alternate definition is all the planned and systematic activities implemented within the quality

5.7  Milestones in QM

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system that can be demonstrated to provide confidence that a product or service will fulfill requirements for quality. Quality control can be defined as part of quality management focused on fulfilling quality requirements. While quality assurance relates to how a process is performed or how a product is made, quality control is more the inspection aspect of quality management. An alternate definition is “the operational techniques and activities used to fulfill requirements for quality.”

5.6 Quality Improvement (QI) Quality improvement is a structured approach to evaluating the performance of systems and processes and then determining needed improvements in both functional and operational areas. Successful efforts rely on the routine collection and analysis of data. A quality improvement plan describes an ongoing, or continuous, process through which an organization’s stakeholders can monitor and evaluate initiatives and results. Based on the thinking of such experts as W. Edward Demings, QI principles were developed in manufacturing in the 1940s. In the last two decades, QI processes have also become popular in healthcare and education. Although organizations take many approaches, QI at its foundation concerns process management. If organizations operate according to many processes, by reviewing and improving one process at a time and leveraging the Pareto principle, they can more easily and gradually improve their entire system. Quality improvement aims to create efficiencies and address the needs of customers. In healthcare, the main purpose of quality improvement is to improve outcomes. In healthcare settings, quality improvement may be associated with continuous quality improvement, the method used to identify problems and implement, monitor, and provide corrective action. Quality improvement processes share these characteristics: • Quality improvement is data-driven and regards the quantitative approach as the only reliable means to influence the qualitative elements. This principle is expressed in the following saying of quality improvement guru W.  Edwards Deming: “The right data in the right format in the right hands at the right time.” • QI focuses on processes, not people. In other words, the individual is never at fault. • QI involves people as part of the improvement solution and looks for what is attributed to Deming as “the smart cogs,” the employees who are directly involved in and best understand the processes in an organization.

5.7 Milestones in QM The birth of total quality in the United States was in direct response to a quality revolution in Japan following World War II, as major Japanese manufacturers converted from producing military goods for internal use to producing civilian goods for trade. At first, Japan had a widely held reputation for shoddy exports, and their

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5  History and Evolution in Quality Management (QM)

goods were shunned by international markets. This led Japanese organizations to explore new ways of thinking about quality.

5.7.1 Deming, Juran, and Japan The Japanese welcomed input from foreign companies and lecturers, including two American quality experts: W. Edwards Deming, who had become frustrated with American managers when most programs for statistical quality control were terminated once the war and government contracts came to an end. Joseph M. Juran, who predicted the quality of Japanese goods would overtake the quality of goods produced in the United States by the mid-1970s because of Japan’s revolutionary rate of quality improvement. Japan’s strategies represented the new “total quality” approach. Rather than relying purely on product inspection, Japanese manufacturers focused on improving all organizational processes through the people who used them. As a result, Japan was able to produce higher-quality exports at lower prices, benefiting consumers throughout the world.

5.7.2 The American Total Quality Management Response At first, US manufacturers held onto their assumption that Japanese success was price-related and thus responded to Japanese competition with strategies aimed at reducing domestic production costs and restricting imports. This, of course, did nothing to improve American competitiveness in quality. As years passed, price competition declined while quality competition continued to increase. The chief executive officers of major US corporations stepped forward to provide personal leadership in the quality movement. The US response, emphasizing not only statistics but approaches that embraced the entire organization, became known as total quality management (TQM). Several other quality initiatives followed. The ISO 9000 series of quality-management standards, for example, were published in 1987. The Baldrige National Quality Program and Malcolm Baldrige National Quality Award were established by the US Congress the same year. American companies were at first slow to adopt the standards but eventually came on board. Table 5.1 shows major quality milestones in the recent history.

5.7.3 From QM Towards Total Quality Excellence QM has evolved over time and methods or principles for quality improvement have been gradually introduced. Figure  5.1 shows how QM has improved over time. Currently, there is a movement from TQM towards customer-centric and

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5.7  Milestones in QM Table 5.1  Milestones in quality management Terminology Statistical quality control (SQC) Total quality control (TQC)

Year 1930s

Statistical process control (SPC)

1960s

Company-wide quality control (CWQC) Lean production and lean management (LM) Total quality management (TQM) Six Sigma (6σ)

1968

Lean Six Sigma (L6σ)

2001

1956

Description The application of statistical methods (specifically control charts and acceptance sampling) to quality control Popularized by Armand V. Feigenbaum in a Harvard Business Review article and book of the same name stresses involvement of departments in addition to production (e.g., accounting, design, finance, human resources, marketing, purchasing, sales) The use of control charts to monitor an individual industrial process and feedback performance to the operators responsible for that process; inspired by control systems Japanese-style total quality control including all areas of the value chain

1980

Lean management application beyond Toyota and Japanese companies

1985

Quality movement originating in the US Department of Defense that uses (in part) the techniques of statistical quality control to drive continuous organizational improvement Statistical quality control applied to business strategy; originated by Motorola Six sigma applied with the principles of lean manufacturing and/ or lean enterprise; originated by wheat et al.

1986

Source: Author’s source

customer-­focused total quality excellence (TQE). Enterprises aim to implement excellence principles throughout the value chain. Moreover, sustainability is becoming more and more important as part of quality and quality excellence. The EFQM model supports here many enterprises to achieve this goal.

5.7.4 Quality Function as Central Interface in the Enterprise Figure 5.2 shows that quality must be executed throughout the value chain from raw materials suppliers towards the end customers. The quality function must be the central interface to all functions and departments.

5.7.5 TQM in Virtual and Digitized Value Chains The TQM function must be deployed throughout the value chain as shown in Fig. 5.3. Fig. 5.3 displays the quality responsibilities and roles in the value chain.

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Total Quality

Quality Management (QM) Quality Control (QC) • Product Timing • Statistics, e.g. Number of Defects • Workmanship Control • Complaints

1960 - 1970

Quality Assurance (QC) • Quality Assurance • Process Documentations and Qualifications • Quality Standards • End of Line Quality Checks

1970 - 1980

• Quality Processes • Process Manuals • Software QM • Quality Assurance and Standards, e.g ISO 9001 • Everybody responsible • Quality Improvement Actions • Quality Awreness • Measuring of Cost of Quality (CoQ)

1980 - 1990

Total Quality Management (TQM)

Excellence (TQE)

• Customer Satisfaction • Customer-centric Quality Strategy • Striving for Excellence • Empowerment and Leadership Change • Impact on Society • TQM as Part of the Corporate Strategy • QMS and Quality Audits • Quality Awards, e.g. EFQM Model

• Customer and stakeholdercentric Quality Strategy • Striving for Excellence • Environmental Social Governance (ESG) & Impact on Society • Empowerment and New Leadership Change • Excellence as Part of the Corporate Strategy and Culture, e.g. EFQM Model

1990 - 2020

2020 - 2030 Outlook

Fig. 5.1  Evolution of TQM and outlook to TQE. (Source: Author’s source)

5.7.6 From QMS Towards Quality Improvement (QI) Quality management (QM) ensures that an organization, product, or service is consistent. It contains the five main elements, quality management system (QMS), quality planning (QP), quality assurance (QA), quality control (QC), and quality improvement as (QI) shown in Fig. 5.4. Quality management is focused not only on product and service quality, but also on the means to achieve it. Quality management, therefore, uses quality assurance and control of processes as well as products to achieve more consistent quality. What a customer wants and is willing to pay for it determines quality. It is a written or unwritten commitment to a known or unknown consumer in the market. Thus, quality can be defined as fitness for intended use or, in other words, how well the product performs its intended function.

5.7  Milestones in QM

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Strategy function

Corprate Social Responsibility function

Understanding of the capabilities and constraints of the operations process

Engineering/ Technical function Analysis of new technology options

Finance function

Supplied Goods

Understanding of process technology needs

New product and service ideas

Provision of relevant data

Quality Function

Financial analysis for performance and decisions

Supply Chain Management

Reaearch & Design function

Procurement

Understanding of the capabilities and constraints of the operations process

Market requirements

Marketing & Sales

Understanding of human Provision of systems for resource needs Understanding of design, planning and control infrastructural and and improvement system needs Recruitment development and Zero Defect Policy and training Lean Management

Information Technology (IT) function

Human Resources

Lean Management

Operations Management

Logistics function

Fig. 5.2  Quality function as central interface in the enterprise. (Source: Author’s source)

Quality Management in the Value Chain

Tier 3

Tier 2

Tier 1

Quality Management

Tier 1

Tier 2

Quality Planning

Supplier

Quality Control

Supplier

Supplier

Customer

Quality Assurance

Supplier

Quality Improvement

Distributor Customer

Supplier Supplier

Supplier Supplier

Supplier

Supplier

Operations Quality Consultancies

Customer Customer Customer Customer

External Auditors

Supplier Logistics Provider

Supplier

Enterprise

Systems Audits Process Audits

Supplier Quality Assurance (SQA)

Products Audits

Quality Auditors

Other Audits

Supplier Side Supply

Customer Quality Assurance (CQA) Quality Auditors

Customer Side Demand

Fig. 5.3  Evolution of TQM and outlook to TQE. (Source: Author’s source)

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5  History and Evolution in Quality Management (QM)

Fig. 5.4  Quality management elements. (Source: Author’s source)

Reference ISO. (2022). International Organization for Standardization. https://www.iso.org/standards.html

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Quality Management as Part of the Corporate Strategy

The Essence of Strategy is choosing what not to do. (Michael Porter)

6.1 Strategic QM Strategy is the process of overseeing tasks and activities that should be executed to achieve the desired level of excellence in QM across the value chain. It involves developing a quality policy, quality control and improvement, and quality assurance throughout the organization. The proper QM strategy will help to ensure that all the organization’s stakeholders work together to improve processes, products, services, and culture. QM strategies are the techniques and standards that are aimed at following the set plan and achieving the desired outcome. Strategic management is the formulation and deployment of QM tools, procedures, and tools within the overall framework of strategic planning, in a way that is aligned with all the other initiatives such as process reengineering, cost management, inventory control, and target analysis. Quality management has therefore to be aligned with the corporate strategy on all levels and properly coordinated (Srinidhi, 1998).

6.2 Levels of Strategy A corporate quality strategy is a broad marketing plan that creates guidelines to be used throughout the company. Part of this strategy can include suppliers, operations, and the after-service. A quality strategy is typically designed at the senior management level (Helmold, 2021). The three levels of strategy, developed by Gerry Johnson and Kevan Scholes along with other major managerial thinkers, are a way © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Helmold, Virtual and Innovative Quality Management Across the Value Chain, Management for Professionals, https://doi.org/10.1007/978-3-031-30089-9_6

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of defining the different layers of strategy which, in tandem, orient the direction of the organization and define its success (Johnson et al., 2017). The three levels are as follows: 1. Corporate and strategic quality level. 2. Business and tactical quality level. 3. Functional and operational quality level. When synchronized and coordinated, successful quality and TQM strategies at each of these levels will contribute to successful overall organizational strategy including right measures to prevent and avoid inefficiencies in the supply chain and other functions of an enterprise (Khojasteh, 2018). This is the top layer of strategic planning and is often associated with the organization’s mission and values, though it is developed in much more significant depth (Helmold, 2021). Corporate strategy is defined by those at the very top of the organization and is an outline of the overall long-term direction and allocation of resources. Questions related to the strategy are normally: • • • • • • • • • •

Generally, overall strategy and direction in terms of quality management. How do we align our QM system with the overall corporate strategy. Which markets the organization will operate in. What marketing tools and concepts to apply. How do we implement QM or TQM Principles. What quality management tools can be used. Which suppliers and supply chains to procure from. How the markets will be entered and the general activities of the organization. How to prevent risks in the upstream or downstream supply chains. How to apply risk management plans and initiatives.

6.2.1 Corporate Strategy Corporate strategy is crucial as it will define all other decisions that are made within the organization along the line. Smaller, newer organizations which are targeting a very specific niche market, or operate with a small set of unique products/services, will find it far easier to develop a corporate strategy as there are fewer variables to consider. However, larger and more developed organizations will find the process much simpler, as they may need to diverge from activities and behaviors which define who they are in order to reach out into new markets and to take new opportunities.

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6.2.2 Business Strategy The business strategy generally emerges and evolves from the overarching corporate strategy which has been set by those at the helm (Tomczak et al., 2018). They are usually far more specific than corporate strategy and will likely be unique to different departments or subdivisions within the broader organization. In general, they use corporate strategy as an outline to: • Define specific tactics and strategies for each market the organization is involved in. • Define how each business unit will deliver the planned tactics. Due to their nature, they are more common in larger firms that engage in multiple activities, than they are in small businesses. However, they can still be engaged in smaller organizations who wish to define how they go about each different subsection of their operations, by breaking down the overall scope of the corporate strategy.

6.2.3 Functional Strategy The functional long-term strategy, also defined as market-level strategy, refers to the day-to-day operation of the company, which will keep it functioning and moving in the correct direction. While many organizations fail because they do not have an overarching corporate strategy, others fail because they have not developed plans for how to engage in everyday activities. Even with an overall direction you wish to head in, without a plan for how to successfully operate, an organization will be unable to progress. These will be numerous and will define very specific aspects and operations within smaller departments, teams, groups, and activities. Overall, they define: • Day-to-day actions which are required to deliver corporate and business strategies. • Relationships needed between units, departments, and teams. • How operational goals will be met and how they will be monitored. It is at this level, the lowest in strategic development, that leaders should define how different departments and functions will work together to achieve higher goals. There will be managers that will oversee departments (e.g., manufacturing and HR) that do not perform the same functions, but need to be synchronized in order to achieve the goals set out by the corporate and business strategies.

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6.2.4 Alignment of Strategies Though corporate strategy will get all of the attention, it is success at the bottom of the hierarchy—through day-to-day functions—which will truly define where the organization as a whole will succeed. Companies must build from the ground up, in small steps, in order to keep moving forward. If operations break down, so does the organization. As mentioned previously, it is crucially important that each level of strategy is synchronized, both from top to bottom and horizontally across the organization. Feedback should be down from both corporate strategy and functional strategy, and vice versa, in order for all three levels to ensure that they are operating in line with one another (Helmold, 2021). Strategy itself will not define organizational success; however, it is a very good place to start. Once sound strategies are in place, an organization can move forward and begin to execute said strategies. They may need some adjustment along the way—and you should be prepared to do so, in response to feedback from different levels and from the external environment—but they should be initially developed in such a way that they will keep the organization in line with its long-term objectives.

Quality Management (QM) Strategy

Strategic Analysis How to achieve? Introduction of sustainable and long-term Strategies that provide a competitive advantage

Where are we? Mission Vision Strategic Objectives

Analysis of Elements that Impact my Organisation and the Future

Corporate Level Business Level Funconal Level

Strategic Implementation

Strategic Where are we going?

Choice

Selection of suitable Strategic Options

Fig. 6.1  Strategic triangle. (Source: Author’s source, adapted from Johnson et al., 2017)

6.4  Strategic Analysis: Where Are We?

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6.3 Strategic Triangle The process of strategic management cycle is a process with three elements as outlined in Fig. 6.1 (strategic triangle or strategic cycle). The three steps are (1) the strategic analysis, (2) the strategic choice, and (3) the strategic implementation and will be described in the following sections. The triangle is raising the following questions: 1. Where are we? What is our strategic location or position? 2. Where do we want to go? What options do we have? 3. How do we achieve this? What measures to take to execute our targets?

6.4 Strategic Analysis: Where Are We? 6.4.1 Analyzing Important Factors The strategic analysis of an organization is about understanding the strategic position of the organization in terms of lean management. This stage requires a profound analysis where the organization stands in terms of lean management tools and processes. The existing competencies and resources of the organization need to be assessed to determine if there are any opportunities to be gained from these and to determine if they need to be enhanced in order to pursue strategic objectives and goals. The major stakeholders which influence the organization and the opinions or viewpoints must be taken into consideration as the purpose of all of the strategic analysis is to define the potential future direction of the organization. The purpose of this phase (strategic analysis) is to create a suitable starting position and to understand the key influences on the present and future state of the organization and what opportunities are afforded by the environment and the competencies of the organization. Assessing the strategic position consists of evaluating the following elements as shown in Table 6.1. Strategy is concerned with the position a business takes in relation to its environment; an understanding of the environment’s effects on an organization is of central Table 6.1  Tools for the strategic analysis

Tools PESTEL analysis Industry analysis SWOT analysis Cultural analysis Benchmarking analysis Stakeholder analysis Source: Author’s source

Description Environmental or macro analysis Porter’s five forces (P5F) or micro analysis Internal and external factors Environmental or macro analysis Comparing the own company with the best competitor Understanding the groups involved

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importance to the strategic analysis. The historical and environmental effects on the business must be considered, as well as the present effects and the expected changes in environmental variables. The analysis of the environment can be done via macro and micro analyses (PESTEL, Porter’s 5 forces). Additionally, strengths, weaknesses, opportunities, and threats complete the assessment of the environment (SWOT). This step is a major task because the range of environmental variables is so great. Another area of the strategic analysis is the evaluation of the strategic capability of an organization and where it is able to achieve a competitive advantage. Considering the resource areas of a business such as its physical plant, its management, its financial structure, and its products may identify these strengths and weaknesses. The expectations of stakeholders are important because they will affect what will be seen as acceptable in terms of the strategies advanced by management. Stakeholders can be defined as people or groups inside or outside the organization, who have an interest in the activities of the organization. A typical list of stakeholders for a large company would include shareholders, banks, employees, managers, customers, suppliers, government, and society. Culture affects the interpretation of the environmental and resource influences (Helmold & Terry, 2021).

6.4.2 Analyzing the Environment A PESTEL analysis or PESTLE analysis is a framework or tool used to analyze and monitor the macro-environmental factors that may have a profound impact on an organization’s performance. This tool is especially useful when starting a new business or entering a foreign market. It is often used in collaboration with other analytical business tools such as the SWOT analysis and Porter’s five forces to give a clear understanding of a situation and related internal and external factors. PESTEL is an acronym that stands for political, economic, social, technological, environmental, and legal factors. However, throughout the years people have expanded the framework with factors such as demographics, intercultural, ethical, and ecological resulting in variants such as STEEPLED, DESTEP, and SLEPIT. In this article, we will stick simply to PESTEL since it encompasses the most relevant factors in general business. Each element will be elaborated as shown in Fig. 6.2.

6.4.3 Analyzing the Industry Porter is best known for his strategic frameworks and concepts in his paper, which was published in 1980 (Porter, 1980). The five forces model (industry analysis) has five elements that can be utilized to assess the attractiveness and competitive situation of the industry as outlined in Fig. 6.3. The five elements are as follows: 1. Rivalry among competitors. 2. Bargaining power of suppliers.

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Fig. 6.2  PESTEL analysis. (Source: Author’s source)

3. Bargaining power of buyers. 4. Threat of new market entrants. 5. Threat of new substitutes. The stronger the threat posed by these five competitive forces, the less attractive the industry under consideration and the more difficult it is to achieve a sustainable competitive advantage. Companies should therefore try to be active in an industry with an attractive industry structure and to build up a defensible position in their industry, i.e., a position in which the five competitive forces are as less threatening as possible. Companies can also influence the five forces with the help of appropriate strategic orientation. This can increase the attractiveness of an industry. If, however, companies influence the distribution of competitive forces to the advantage of their own competitive position without being aware of the long-term effects or consciously accepting them, this can also destroy the structure and profitability of an industry.

6.4.4 Analyzing the Strengths and Weaknesses The SWOT (strengths, weaknesses, opportunities, and threats) analysis in Fig. 6.4 is a framework used to evaluate a company’s competitive position and to develop strategic planning. SWOT analysis assesses internal and external factors, as well as current and future potential. This technique, which operates by peeling back layers of the company is designed for use in the preliminary stages of decision-making processes and can be used as a tool for evaluation of the strategic position of organizations of many kinds (for-profit enterprises, local and national governments, NGOs, etc.). It is intended to specify the objectives of the business venture or

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6  Quality Management as Part of the Corporate Strategy Threat of new Substitutes

Porter´s 5 Forces Analysis (Micro) Bargaining Power of Suppliers

Bargaining Power of Buyers

Rivalry amongst Competitors

Threat of new Market Entrants

Fig. 6.3  Industry analysis. (Source: Author’s source)

Internal

Fig. 6.4  SWOT analysis. (Source: Author’s source)

Strengths

Weaknesses

External

SWOT Analysis Opportunities

Threats

project and identify the internal and external factors that are favorable and unfavorable to achieving those objectives. Users of a SWOT analysis often ask and answer questions to generate meaningful information for each category to make the tool useful and identify their competitive advantage.

6.4.5 Analyzing the Core Competencies The core competency concept describes a product, feature, process, skill, brand, or activity that a company can perform better than the competition and has thus achieved a competitive advantage. It is determined by the certain characteristics like customer value or benefits, protection against imitation, differentiation, diversification, and innovation or unique features as shown in Fig. 6.5. In business, a competitive advantage is the attribute that allows an organization to outperform its competitors.

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Value for Customers

Core Competencies Protection against Imitation

Unique Features and Innovation

Diversification

Dif ferentiation

Fig. 6.5  Core competencies. (Source: Author’s source)

6.5 Strategic Choice: Where Are We Going to? 6.5.1 Generic Strategies Strategic choice typically follows strategic analysis. Strategic choice involves a whole process through which a decision is taken to choose a particular option from various alternatives. There can be various methods through which the final choice can be selected upon. Managers and decision-makers keep both the external and internal environment in mind before narrowing it down to one. It is based upon the following three elements: first, the generation of strategic options, e.g., growth, acquisition, diversification, or concentration; second, the evaluation of the options to assess their relative merits and feasibility; and third, the selection of the strategy or option that the organization will pursue. There could be more than one strategy chosen but there is a chance of an inherent danger or disadvantage to any choice made. Although there are techniques for evaluating specific options, the selection is often subjective and likely to be influenced by the values of managers and other groups with an interest in the organization. The generic strategies differentiation and cost leadership in Fig. 6.6 are a good method to define, in which direction a company should go to increase profitability and to acquire a competitive advantage (Porter, 1980, 1985; Helmold, Dathe & Hummel 2019). Companies can strive for a differentiation strategy and provide superior quality. On the other hand, cost leaders must make sure that quality practices are properly applied, too. Figure 6.6 depicts the generic strategies.

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Fig. 6.6  Generic strategies. (Source: Author’s own figure, adapted from Porter, 1985)

6.5.2 5P Model by Henry Mintzberg Mintzberg provides five definitions of strategy, plan, ploy, pattern, position, and perspective (Mintzberg et al., 1995). First, strategy is always a plan. A plan integrates intended action activities based on previous assessment of the situation. Second, as a plan, a strategy can be a ploy too, really just a specific maneuver intended to outwit an opponent or competitor. If strategies can be intended (whether as general plans or specific ploys), they can also be realized. In other words, defining strategy as a plan is not sufficient; we also need a definition that encompasses the resulting behavior. Third, strategy is a pattern. The definitions of strategy as plan and pattern can be quite independent of one another. Plans may go unrealized, while patterns may appear without preconception. Plans are intended strategy, whereas patterns are the realized strategy. Fourth, strategy is a perspective. A perspective is not just of a chosen position, but consists of an ingrained way of perceiving the world.

6.5.3 Boston Consulting Matrix (BCG Matrix) The BCG matrix is named after the Boston Consulting Group (BCG), whose founder Bruce Henderson developed this matrix in 1970 (Fig. 6.7). This concept should clarify the connection between the product life cycle and the cost experience curve. The matrix is often visualized as a scatter or bubble diagram; the area of a circle then represents the sales of the respective product. The BCG matrix is, put simply, a portfolio management framework that helps companies decide how to prioritize their different businesses and supply chains. It is a table, split into four

6.5  Strategic Choice: Where Are We Going to? Low Market Share High Market Growth

Fig. 6.7 Boston Consulting Group (BCG) matrix. (Source: Author’s source)

65 High Market Share

Question Marks

Stars

Low Market Growth

BCG Matrix Dogs

Cash Cows

quadrants, each with its own unique symbol that represents a certain degree of profitability: question marks, stars, dogs, and cash cows. By assigning each business to one of these four categories, executives could then decide where to focus their resources and capital to generate the most value, as well as where to cut their losses. The products or business units of a company are assigned to one of the four areas based on their values. Each area embodies a standard strategy. It should give a good recommendation on how to proceed. The life cycle of a typical product runs from the question mark to the star and cash cow to the poor dog. There are also products that do not follow this ideal path. Many product failures and flops do not even reach the star range. An imitating product, on the other hand, may skip the question mark area. The question marks, normally young products, are the newcomers among the products. The market has growth potential, but the products only have a small relative market share. Management is faced with the decision of whether to invest or abandon the product. In the case of an investment, the product requires liquid funds, which it cannot generate itself. A typical strategy recommendation is selection and possibly an offensive penetration strategy to increase market share. The stars are the company’s most promising products. You have a high relative market share in a growth market. They already cover the investment needs resulting from market growth with their own cash flow. The strategy recommendation is investment and possibly a skimming strategy to increase profit margins without endangering market share. The cash cows (milking cows) have a high relative market share in an only slightly growing or static market. They produce stable, high cash flows and can be “milked” without further investment. A fixed price strategy or price competition strategy is appropriate. The poor dogs are the discontinued products in the company. They have low market growth, sometimes market contraction, and low relative market share. At the latest as soon as the contribution margin for these products is negative, the portfolio should be adjusted (disinvestment strategy). In addition to assessing the individual products using the standard strategies, the entire portfolio should also be considered. Pay attention to the static financial equalization—the products in the portfolio should support and finance each other. A question mark can

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only expand if a cash cow finances this expansion. Future developments can also be seen. The products should be evenly represented in the individual areas—a company without question marks would have little chance in the future market. The matrix reveals two factors that companies should consider when deciding where to invest, company competitiveness, and market attractiveness, with relative market share and growth rate as the underlying drivers of these factors. Each of the four quadrants represents a specific combination of relative market share and growth: • Low growth, high share. Companies should milk these “cash cows” for cash to reinvest. • High growth, high share. Companies should significantly invest in these “stars” as they have high future potential. • High growth, low share. Companies should invest in or discard these “question marks,” depending on their chances of becoming stars. • Low share, low growth. Companies should liquidate, divest, or reposition these “dogs.”

6.5.4 Ansoff Matrix The product-market matrix in Fig. 6.8 (also Ansoff matrix, after its inventor Harry Igor Ansoff or Z-matrix) is a tool for the strategic management of companies. It can be used by a management (= company management) who has decided on a growth strategy as an aid for planning this growth. When it comes to market penetration, the focus is on gaining additional market shares with existing products. The company is trying to sell more of its products to existing, new, and competitive customers. Existing marketing activities usually have to be adapted to achieve this goal. Although the product portfolio does not change, companies often have to experiment with new advertising concepts in order to further promote product adoption in the existing market. Fig. 6.8  Ansoff matrix. (Source: Author’s source)

New Markets

Existing Markets

Existing Products

Superior Quality On new Markets

New Products

Market Penetration

Superior Quality for new Products

Product Development

Ansoff Matrix Market Development

Diversification

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However, this market penetration can only be successfully implemented up to the point at which the market has not yet been fully saturated. The focus of the market development strategy is on creating new sales markets for existing products. By entering new market segments or opening up further geographical regions, a company puts itself in the position of attracting new target groups for its existing products. A regionally operating bakery can also offer its own products nationwide, for example, by setting up digital sales channels, and thus generate growth. Of course, the implementation of this strategy is initially offset by considerable investment costs. The chances of success should therefore first be assessed by means of careful planning and a comprehensive risk analysis. If opening up new markets is not an option, it is often worth taking a look at the product development strategy. The existing range is expanded through product innovations or the creation of product variants in the existing market. The resulting added value should encourage consumers to buy. This strategy is particularly attractive for companies in niche markets in which acquiring new customers and upselling would be almost impossible with a pure market penetration strategy. The reluctance to enter new markets is reinforced by high development costs and the risk of failure of the newly developed product. The most risky quadrant of the Ansoff matrix is that of diversification. This requires the development of a new product while at the same time opening up a new market. The associated investment costs in terms of product development, business analyses, setting up local subsidiaries, etc. can quickly mean the end of a company if the corresponding ROI is not achieved. The diversification strategy can be broken down into horizontal, vertical, and lateral diversification, depending on the degree of risk tolerance of a company: • Vertical diversification. • Horizontal diversification.

6.5.4.1 Horizontal Diversification Horizontal diversification describes the development of a new product that is still factually related to the product range previously offered. The existing value chain can continue to be used with minimal adjustments. With horizontal diversification, a company expands its offerings at the same economic level to reach new customers. An example of this type of diversification is the development of the iPad, which with its introduction gradually expanded Apple’s existing smartphone and computer portfolio. 6.5.4.2 Vertical Diversification With vertical diversification, a company deepens its commitment to sales-oriented activities (forward integration) and/or the actual manufacturing process of its products (backward integration). Diversification does not take place on the same level of the value chain as with horizontal diversification, but on the upstream or downstream one. With forward integration, a company takes the sales of its products and services into its own hands, for example, by opening its own branches or an online

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shop. Backward integration describes the safeguarding of a company’s reference markets, for example, by taking over production processes that were previously outsourced to external companies. While horizontal diversification aims to reduce dependency on one product line, vertical diversification focuses on reducing dependence on suppliers and dealers. The acquisition of the necessary skills and know-­ how for the successful implementation of sales and production processes is in turn associated with high investment costs and thus increased financial risks.

6.5.4.3 Lateral Diversification With the lateral diversification strategy, companies expand into completely new markets that have no material connection with the existing business. The aim and purpose of this alignment is to minimize the dependence on developments in the existing market segment. Google can be mentioned as a good example in this context: In addition to the search engine core business, the company expanded early on into other market segments such as telecommunications (fiber), biotechnology (Calico), or autonomous automotive technology (Waymo). The lateral diversification strategy is used by multinational companies in particular to respond flexibly to changes and trends in the market. The necessary know-how is usually acquired through the acquisition of specialized companies that are already represented in the market of interest. Accordingly, this strategy requires enormous investment costs and harbors not only financial but also immaterial risks, such as a diluted brand image due to product offerings that are too diversified.

6.5.5 Blue and Red Ocean Strategies Blue ocean strategy is a method for developing permanently profitable business models from the field of strategic management (Table 6.2). The basic idea is that only through the development of innovative and new markets, which really differentiate and relevant benefits for the broad mass of customers or noncustomers, “blue oceans” offer lasting successes. Among other things, this is to be achieved through competition that has become meaningless, new customer acquisitions, and optimized cost structures. The concept of the blue ocean strategy was developed by W. Chan Kim and Renée Mauborgne at the Insead Business School, where it was Table 6.2  Red ocean and blue ocean strategy Red ocean strategy Compete in existing market spaces Defeat the competition Apply differentiation or cost leadership Achieve a competitive advantage Segment smartly existing customers Exploit existing demand

Blue ocean strategy Create uncontested market spaces Make the competition irrelevant Apply differentiation and cost leadership Achieve value innovations Attract new customers Create and capture new demands

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initially referred to as value innovation. Based on empirical studies over a period of 15 years and based on the analysis of more than 100 leading companies, examples of companies were found that opened up new, previously unused submarkets and thus made the previous competition irrelevant. The term ocean describes a market or branch of industry in connection with the blue ocean strategy. “Blue oceans” are understood as untouched markets or branches of industry with little or no competition. Anyone who plunged into the blue ocean would find undiscovered markets or industries. “Red oceans,” on the other hand, designate saturated markets, characterized by tough competition, overcrowded with competitors who all offer the same service or the same products. The term “red ocean” is based on the image of bloody fights of predatory fish (the competitors), while the “blue ocean” is free from bloody fights. Table 6.2 shows the red and blue ocean strategy.

6.6 Strategic Implementation: How Do we Achieve this? 6.6.1 Assessment of Suitability, Acceptability, and Feasibility Strategic implementation is concerned with the translation of the selected strategy into action. The ways in which strategies are implemented are described as the strategic architecture or framework of the organization. Successful implementation of the chosen strategy will be dependent on several factors such as stakeholder’s expectations, the employees, the company culture, the will to change, and the cooperation within the organization. These elements and how the management and employees work together to adopt the new plan will decide about how successful the strategy implementation is. The available skills and/or the ability to develop new skills when required for the planned change and issues like the structural reorganization and resulting cultural disturbance would also affect success. Resource availability and planning for the utilization of such resources need to be addressed as part of the implementation plan. The entire process necessitates the management of strategic change and will concern handling both hard and soft factors of the organization, i.e., structure and systems and culture and motivation. Implementing a strategy has three elements. • Organizational structure and layout: Where and how should the organization be split into European, US, and Asian divisions? How autonomous should divisions be? What parenting style should be applied? • Resources: Enabling an organization’s resources should support the chosen strategy. What are the appropriate human and nonhuman resources? What assets are needed to be acquired? • Change management: Most strategic planning and implementation will involve change, so managing change, in particular employees’ fears and resistance, is crucial.

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Johnson and Scholes argue that for a strategy to be successful, it must satisfy three criteria. These criteria can be applied to any strategy decision such as the competitive strategies, growth strategies, or development strategies: 1. Suitability—whether the options are adequate responses to the firm’s assessment of its strategic position. 2. Acceptability—considers whether the options meet and are consistent with the firm’s objectives and are acceptable to the stakeholders. 3. Feasibility—assesses whether the organization has the resources it needs to carry out the strategy.

6.6.2 Suitability Suitability is a useful criterion for screening strategies, asking the following questions about strategic options: • Does the strategy exploit the company strengths, such as providing work for skilled craftsmen or environmental opportunities, e.g., Does it help in establishing the organization in new growth sectors of the market? • How far does the strategy overcome the difficulties identified in the analysis? For example, is the strategy likely to improve the organization’s competitive position, solve the company’s liquidity problems, or decrease dependence on a particular supplier? • Does the option fit in with the organization’s purposes? For example, would the strategy achieve profit targets or growth expectations, or would it retain control for an owner-manager?

6.6.3 Acceptability Acceptability is essentially about assessing risk and return and is strongly related to expectations of stakeholders. The issue of “acceptable to whom?” thus requires the analysis to be thought through carefully. Some of the questions that will help identify the likely consequences of any strategy are as follows: • How will the strategy impact shareholder wealth? Assessing this could involve calculations relating to profitability, e.g., net present value (NPV). • How will the organization perform in profitability terms? The parallel in the public sector would be cost/benefit assessment. • How will the financial risk (e.g., liquidity) change? • What effect will it have on capital structure (gearing or share ownership)?

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• Will the function of any department, group, or individual change significantly? • Will the organization’s relationship with outside stakeholders, e.g., suppliers, government, unions, or customers, need to change? • Will the strategy be acceptable in the organization’s environment, e.g., higher levels of noise?

6.6.4 Feasibility Assesses whether the organization has the resources it needs to carry out the strategy. Factors that should be considered can be summarized under the M-word model. • Machinery. What demands will the strategy make on production? Do we have sufficient spare capacity? Do we need new production systems to give lower cost, better quality, more flexibility, etc.? • Management. Is existing management sufficiently skilled to carry out the strategy? • Money. How much finance is needed and when? Can we raise this? Is the cash flow feasible? • Manpower. What demands will the strategy make on human resources? How many employees are needed, what skills will they need, and when do we need them? Do we already have the right people or is there a gap? Can the gap be filled by recruitment, retraining, etc.? • Markets. Is our existing brand name strong enough for the strategy to work? Will new brand names have to be established? What market share is needed for success—how quickly can this be achieved? • Materials. What demands will the strategy make on our relationships with suppliers? Are changes in quality needed? • Makeup. Is the existing organizational structure adequate or will it have to be changed?

6.7 Strategic Pyramid A useful tool for the translation of the corporate strategy and strategic objectives into negotiations is the strategic pyramid in Fig. 6.9. Strategy in this context is the long-term positioning as well as the decision of the enterprise, which business fields, and which strategies to choose. Strategy is therefore “the fundamental, longterm direction of three to five years and organization of a company in order to gain competitive advantages in a changing environment through the use of resources and competences and to realize the long-term goals of the stakeholders”.

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Mission

Quality Management (QM)

Lean Vision Goals & Values Objectives (specific) Core Competencies Marketing and Sales Strategies Strategic Architecture Control & Execution (KPI System)

Fig. 6.9  Strategic pyramid. (Source: Author’s own figure)

6.8 Mission and Vision Enterprises must manifest in their strategy to strive for lean excellence. The mission is the starting point of the strategic pyramid. The mission statement of an enterprise is the long-term purpose of the company and the strategic direction as defined by Johnson and Scholes (1997). The vision or strategic intent describes more specifically what an organization aims to achieve and the long-term aspirations.

6.9 Goals and Objectives The mission and vision are followed by generic goals and specific objectives. Generic goals are not quantified and more general, but specific objectives are quantified and specific (Helmold, Dathe & Hummel 2019). The strategists Johnson and Scholes distinguish in longer-term and generic (English: goals) as well as shorter and quantified objectives (English: objectives) for the company. Quantified goals can include sales, financial, quality, logistics, cost, and alpha goals.

6.10 Core Competencies The next level in the strategic pyramid is the identification of core competencies. Core competences are those competences which allow companies to gain a superior or competitive advantage and that are very difficult for your competitors to emulate.

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These describe the resources, skills, knowledge, or any other feature that leads to a competitive advantage. Core competencies must be perceived by customers and clients.

6.11 Strategies After defining mission, vision, goals, and core competencies, the elements must be translated into strategic objectives and key performance indicators (KPI). The long-­term implementation of these elements is defined as the formulation of strategic objectives and important for the negotiations (Helmold, Dathe & Hummel 2019). In implementing the strategic goals, negotiations will take place with many stakeholders. Become a lean differentiator by answering customer demands: Reduce operating cost by 25% in 12 months from now, and increase customer satisfaction by 10%.

6.12 Strategic Architecture In addition to buildings, machines, plants, offices, resources, or employees, the infrastructure in the sense of strategic management also includes knowledge and innovations of the company that ensure long-term success (Helmold, Dathe & Hummel 2019). This requires facilities, buildings, factories, or offices that represent the strategic infrastructure. In addition, however, other success criteria such as resources, knowledge, experts, name recognition, network, or innovations are of central importance.

6.13 Control and Execution The final element of the strategic pyramid is the performance control (control and execution) and a target-performance comparison. A suitable tool for this step is the balance score card (BSC) or an action plan. The instrument of the BSC was already developed in 1992 by the professors Norton and Kaplan. The BSC is an instrument in strategic management and includes four categories: 1. Customer satisfaction. 2. Financial category. 3. Internal processes and improvements. 4. Learning organization. In practice, it seems that companies are adapting or expanding the original four dimensions to their specific needs.

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References Helmold, M. (2021). Successful management strategies and tools. Industry insights, case studies and best practices. Springer. Helmold, M., & Terry, B. (2021). Operations and supply management 4.0. Industry insights, case studies and best practices. Springer. Johnson, G., et al. (2017). Exploring strategy (11th ed.). FT Prentice Hall. Khojasteh, Y. (2018). Supply chain risk management. Advanced tools, models, and developments. Springer. Mintzberg, H., Quinn, J. B., & Ghoshal, S. (1995). The strategy process. Revised Euro-pean edition. Prentice Hall. Porter, M. E. (1980). Competitive strategy: Techniques for analyzing industries and competitors. Free Press. Porter, M.  E. (1985). Competitive advantage. Creating and sustaining superior performance. Free Press. Srinidhi, B. (1998). Strategic quality management. International Journal of Quality Science, 3(1), 38–70. Tomczak, T., Reinecke, S., & Kuss, A. (2018). Strategic marketing. Market-oriented corporate and business unit planning. Springer.

7

Audits and Quality Management Systems (QMS)

There are two kinds of people, those who do the work and those who take the credit. Try to be in the first group; there is less competition there. (Indira Gandhi)

7.1 Quality Management Systems (QMS) 7.1.1 Definition and Scope of QMS A quality management system (QMS) is the combination of methods, principles, and processes of quality excellence applied in an organization. A QMS focuses always on meeting and overachieving customer requirements. The QMS has a set of guidelines that are defined by a collection of policies, processes, documented procedures, and records. This system defines how a company will achieve the creation and delivery of the product or service they provide to their customers. When implemented in your company, the QMS needs to be specific to the product or service you provide, so it is important to tailor it to your needs. However, in order to help ensure that you do not miss elements of a good system, some general guidelines exist in the form of ISO 9001 (Quality Management System—Requirements), which is intended to help standardize how a QMS is designed. ISO 9001 is the international standard for quality management systems (QMSs), published by ISO (the International Organization for Standardization). The standard was most recently updated in 2015 and is referred to as DIN EN ISO 9001:2015. In order to be released and updated, ISO 9001 had to be agreed upon by a majority of member countries so that it would become an internationally recognized standard, which means it is accepted by a

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Helmold, Virtual and Innovative Quality Management Across the Value Chain, Management for Professionals, https://doi.org/10.1007/978-3-031-30089-9_7

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majority of countries worldwide. ISO has a range of standards for quality management systems that are based on ISO 9001 and adapted to specific sectors and industries. QMs are accredited by globally applied standards. The advantages of a QMS can be outlined as follows: • Increasing customer satisfaction by using a globally applied standard and improvement system. • Becoming more cost-efficient, increasing credibility, and securing competitiveness. • Optimizing costs and creating shorter cycle times through effective use of resources. • Enhanced customer satisfaction and improved customer loyalty leading to repeat business. • Increased revenue and market share obtained through flexible and fast responses to market opportunities. • Integration and alignment of internal processes which will lead to increased productivity and results. • Ensuring a consistent and streamlined delivery of the products or services requested by customers. • Improved communication, planning, and administration processes throughout the organization.

7.1.2 Different Types of QMS A quality management system (QMS) describes in enterprises and organizations the management function and all organizational activities, which serve the improvement of the process quality, the work quality, and thus the product and service quality. QMSs are using lean features for process improvements. Table 7.1 outlines the most common standards of QMS in certain industries.

Table 7.1 Quality management systems (QMSs)

Name DIN ISO 9001:2015 EN/AS 9100 IATF 16949:2016 DIN EN 15224 ISO/TS 22163 ISO 13485 TL 9000

Industry General quality management system Aviation Automotive Health care Railway, replacing IRIS Medical industry Telecommunications

Source: Author’s source

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7.2 QMS: DIN EN ISO 9001:2015 The DIN EN ISO 9001:2015 (ISO 9001) quality management system (QMS) is the world’s most popular quality management standard, with over one million certified organizations in 180 countries worldwide. ISO 9001 provides a quality management framework that companies can use to ensure the quality of their products and services is consistent. Companies choose ISO 9001 certification to show that they have taken due care to maintain high standards. This reduces the chance of product faults and recalls or service shortcomings and ensures that your customers can buy with confidence. ISO 9001 certification demonstrates your organization’s ability to consistently meet and exceed customer expectations. Many enterprise buyers and retailers require their suppliers to be ISO 9001-certified in order to minimize their risk of purchasing a poor product or service—being ISO 9001-certified boosts your sales potential. A business that achieves ISO 9001 certification can attain significant improvements in organizational efficiency and product quality by minimizing waste and errors and increasing productivity. Our comprehensive guideline on ISO 9001 provides useful information on requirements and benefits. The elements of the ISO 9001:2015 are as follows: • • • • • • • • • •

Section 1: Scope. Section 2: Normative references. Section 3: Terms and definitions. Section 4: Context of the organization. Section 5: Leadership. Section 6: Planning. Section 7: Support. Section 8: Operation. Section 9: Performance evaluation. Section 10: Continual improvement. Figure 7.1 depicts the DIN ISO 9001:2015 elements.

7.3 Aviation QMS: EN/AS 9100 Aviation thrives on safety like hardly any other industry. Therefore, quality management systems according to EN/AS 9100ff are becoming increasingly important in the aviation industry. They enable your company to meet all quality requirements and to continuously improve. ISO 9001 forms the basis for the formulation of EN/ AS 9100ff. Certification according to EN/AS 9100ff therefore also includes certification according to ISO 9001. The EN/AS 9100 series of standards includes the following requirements in the appendix.

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DIN EN ISO 9001:2015 • • • • • • • • • •

Section 1: Scope Section 2: Normative references Section 3: Terms and definitions Section 4: Context of the organization Section 5: Leadership Section 6: Planning Section 7: Support Section 8: Operation Section 9: Performance evaluation Section 10: Continual Improvement

Fig. 7.1  DIN EN ISO 9001:2015. (Source: Own source according to PTC)

• Completely traceable recording procedure over the entire supply chain of a product. • Definition of the interfaces to customers and aviation authorities in the procedures. • Definition, implementation, and documentation of verification and validation activities. • Execution, implementation, and documentation of initial sample tests.

7.4 Automotive QMS: IATF 16949:2016 The International Automotive Task Force (IATF) is a group of automotive manufacturers which aims at providing improved quality products to automotive customers worldwide. The standard IATF 16949 contains general requirements for quality management systems of the mostly North American and European automotive industry. They were developed jointly by the IATF members and published based on EN ISO 9001. About 30% of the more than 100 existing car manufacturers agree with these harmonized requirements of the seven IATF members (BMW, Daimler, Ford, General Motors, Renault, Stellantis, and VW)—but the large Asian car manufacturers in particular have differentiated, own requirements for the quality management systems of your group and your suppliers. The IATF16949:2016 can be applied throughout the automotive supply chain. Certification is based on the certification specifications (rules) issued by the IATF (International Automotive Task Force). The certificate is valid for 3 years and must be confirmed annually by IATF-­ certified auditors (third-party auditors) from accredited certification companies. This is followed by recertification for a further 3 years with renewed annual confirmation. IATF16949:2016 must not be regarded as an independent QMS standard, but is to be understood as a supplement to ISO 9001:2015. Certifications must

7.5  Railway QMS: ISO/TS 22163 (IRIS)

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therefore include both standards. The certification may only be carried out by bodies that have been approved by the IATF (so-called certification bodies). A certificate according to IATF16949:2016 should justify the trust of the (potential) customer in the system and process quality of a (possible) supplier. Today, a supplier without a valid certificate has little chance of supplying a Tier 1 automotive supplier and certainly not an automotive manufacturer (OEM) with series parts. Certification according to the previous ISO/TS 16949 standard was only possible until September 2017. Since October 1, 2017, certifiers are only allowed to carry out audits and issue certificates according to the new standard IATF 16949. This applies to initial audits, surveillance audits, and recertification audits. The previous certificates according to ISO/TS 16949 lost their validity in September 2018. The 10 chapters of the IATF 16949 standard (high-level structure) are as follows: • • • • • • • •

Chapter 0–3: Introduction, scope, normative references, terms. Chapter 4: Context of the organization. Chapter 5: Leadership. Chapter 6: Planning. Chapter 7: Support. Chapter 8: Operation. Chapter 9: Evaluation of performance. Chapter 10: Improvement.

7.5 Railway QMS: ISO/TS 22163 (IRIS) End of May 2017, the Association of the European Rail Industry (UNIFE) announced the release of the new global standard for quality management systems in the rail industry, ISO/TS 22163, by the Technical Committee 269 of the International Organization for Standardization (ISO). ISO/TS 22163 is based on the structure and requirements of the ISO 9001:2015 standard, but also includes additional requirements for the rail industry. Within the timeframe of the defined transition phase, ending in September 2018, organizations certified according to IRIS Rev. 02 will have to undergo transition audits to update their certificates to ISO/TS 22163. As IRIS Rev.02 certificates will expire after September 14, 2018, and all nonconformities need to be closed for all audits before a new ISO/TS 22163 certificate can be issued, the last transition audits should be completed by July 2018. The International Railway Industry Standard (IRIS) is based on the ISO 9001 standard and is tailored to the requirements of the international rail industry. IRIS certification ensures uniformity of language and guidelines for evaluation, as well as mutual acceptance of audits, ensuring a high level of transparency across the supply chain. IRIS is applicable to companies engaged in the manufacture and/or design and/or maintenance of rolling stock and signaling systems: equipment manufacturers, systems integrators, operators, or business partners. IRIS has been developed by the European Railways Association (UNIFE) with the aim of becoming a commonly recognized

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system for assessing the quality of rolling stock suppliers and related equipment and components, internationally recognized. For sales in Europe, IRIS certification is mandatory. The certification procedure is as follows: • • • • • • • •

Organization registers for membership at the UNIFE portal. Compilation of the information questionnaire. Preaudits to verify potential gaps in compliance with the IRIS standard. Readiness review audits to verify compliance with IRIS prerequisites. Certification audit. Issue of the certification. Annual supervision audits. Recertification audit (after 3 years).

The successful implementation of the IRIS certification creates a win-win situation for all stakeholders in the rail sector, be they equipment manufacturers, system integrators, operators, or business partners. More broadly, the IRIS certification scheme helps to develop the attractiveness of rail moving our daily mobility toward more sustainable modes of transportation. ISO/TS 22163:2017 is the standard specifying business management system requirements for rail organizations. ISO/TS 22163:2017 is largely based on ISO 9001:2015 that is a general quality management system standard used by millions of companies around the world. In addition, the ISO/TS 22163:2017 includes specific requirements tailor-made for the high-­ quality business management in the railway sector. The standard functions as a formula describing the best practices for business management in the rail sector.

7.6 Healthcare QMS: DIN EN 15224 Healthcare providers today rely on the ISO 9001 quality management system as a framework for success. However, in order to truly achieve organizational efficiency, drive productivity, and profitability, the continued reliance on ISO 9001 is insufficient. Healthcare providers seeking to differentiate themselves to ensure that the core health-related issues such as patient safety and management of clinical risks are addressed and properly handled as well. This particular point is not covered under the ISO 9001 standards. The DIN EN 15224 quality management system is a sector-specific standard of quality management for healthcare organizations. It is based on the ISO 9001 standard and it includes tangible requirements for patient safety and management of clinical risks in the planning, realization, and management processes. The DIN EN 15224 system brings together the advantages of ISO 9001 with comprehensive healthcare quality requirements. It defines issues ranging from the effectiveness and suitability of care to the safety and reliability of care processes. In DIN EN 15524, there are 11 quality features which characterize the quality of

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healthcare and must be verified as part of a certification. The 11 central features of DIN EN 15224 are as follows: 1. Appropriate, correct care. 2. Availability. 3. Continuity of the care. 4. Effectiveness. 5. Efficiency. 6. Consistency. 7. Evidence-based, knowledge-based care. 8. Patient care, including physical and psychological integrity of the care. 9. Integration of the patient. 10. Patient safety. 11. Timeliness and accessibility. Compliance with the DIN EN 15224 quality management system allows your business to commit to a long-term goal of providing the best in healthcare services. By adhering to the requirements for the certification, not only do you increase organizational efficiency and product quality, you also minimize waste and mistakes made, thereby increasing overall productivity.

7.7 Medical QMS: ISO 13485 QMS elements of the ISO 13485 in the medical industry are crucial for safety and security reasons. The ISO 13485 is a harmonized standard, which lays down the requirements for quality management systems (QMSs) for medical devices. Medical device manufacturers have to therefore, above all, according to ISO 13485 be certified, because, according to Appendix II of the Medical Device Directive MDD, they can explain the compliance of their products themselves. For medical devices which incorporate software or standalone software, the IEC 62304 also demands a QMS and recommends an ISO 13485. The validity of the quality management system will be examined by external auditors (usually notified bodies) and internal audits.

7.8 Telecommunications QMS: TL 9000 The telecommunication industry is a fast-growing industry and established the TL 9000 as QMS in this industry. TL 9000, based on the ISO 9001 system, is a quality management system (QMS) designed to meet supply chain requirements of the telecommunication industry. The system ensures quality by defining system requirements central to design, development, production, delivery, deployment, and maintenance of telecommunication products and services. It also provides a measurement system for tracking performance and improving results. TL 9000 certification eliminates the need for multiple quality management standards, making it a

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one-stop solution for telecommunication industry providers who are looking to demonstrate their commitment to quality standards. Adopting the TL 9000 management system allows your company to demonstrate its compliance to the high standards required by the ICT and telecommunication industry. It also aids in the validation of the quality of your processes, products, and services. TL 9000 enables your company to create value for customers and stakeholders through continuous improvement, strategic partnerships, and high standards achieved through a solid measurement system.

7.9 What Is an Audit? Audits can be described as a systematic and structured performance evaluation and assessment of a system, process, or product or any other area by internal or external auditors. The aim of an audit is to evaluate and approve or disapprove the assessed area by standardized criteria and questions, to define areas for actions, and to ensure the sustainable implementation of the actions and improvement areas. Assessment criteria in audits are based on customer and stakeholder expectations. Audits can be clustered in systems, process, product, control, and special audits as shown in Table 7.2. Lean audits are conducted to determine if the business is properly implementing and signaling lean management methodologies are implemented into the company and value chain (Helmold & Terry, 2016). This is achieved by a detailed 360-degree analysis of lean processes with a goal toward recognizing opportunities to improve processes and to eliminate waste (Helmold, 2022). Table 7.2  Audit types Audit type System audit Process audit

Product audit

Control audit Other audits

Description Evaluation of the (quality management) system of the organization by external certification agencies (TÜV, DEKRA, Bureau Veritas). Examples: DIN EN ISO 9001:2015, IATF 16949, International Railway Industry Standard (IRIS) Evaluation of a (manufacturing or service) process (input-transformation-output) to qualify or disqualify a process-oriented example of a product or service by assessing a reference process from the supply side, incoming material to the dispatch (also from other customers). Examples: VDA 6.3, SEAP (supplier evaluation approval process—Railway). Planning and execution of the assessment of a finished product to be delivered to the customer. The audit consists of checking the specification, drawings, capacity, and other important aspects and normally involves the trial run of the entire manufacturing process (e.g., 300 parts, run at rate). Examples: VDA 6.5, part production approval process (PPAP), production approval process (PAP). Control audits (normally after 1, 3, or 6 months) with the aim to control (verify or falsify) the progress of previously conducted audits. Control audits normally target the reduction of the previously found corrective action requests (CARs). Any other audits in areas like safety, health, environment, tax, and financials. Examples: 5S audits, tax audits, environmental audits (ISO 14001), IT audits (ISO 27001), financial audits, or health, safety, and environment (HSE) audits.

Source: Author’s source

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7.10 System Audits The system audit evaluates the standard requirements for quality management systems (QMSs). The term system audit, the auditing of a management system, e.g., according to DIN EN ISO 9001:2015, is referred to as a system audit. This can also be a combination of several management systems such as environment, quality, and occupational safety, which are then referred to as an integrated management system. DIN EN ISO 9001 specifies the minimum requirements for a quality management system for the manufacture of products or services (QM system [QMS]), which an organization must meet in order to be able to provide products and services that meet customer expectations and any official requirements. At the same time, the management system should be subject to a continuous improvement process. Although the process-oriented approach was already introduced with the 2000 revision, there were considerable problems with the implementation. This should be made easier by the revision. The standard also calls for a more risk-based approach. A formal QM manual will no longer be necessary if the organization otherwise provides adequate documentation. There will also no longer have to be a “top management representative” in the formal sense. The current version of ISO 9001 was last revised in 2015. Based on EN ISO 9001, IATF 16949 exists for series production in the automotive industry. Compared to EN ISO 9001, it places more extensive requirements on the quality management system. The basic idea of ISO 9001:2015 is that for long-term success, companies must consider the requirements of their stakeholders (Brugger-Gebhardt, 2015). That is why the standard emphasized the interested parties even more as a separate point. In contrast to ISO 9001:2008, the focus is no longer just on the customer, but on the interest groups (interested parties). In addition to customers, this includes also the suppliers, owners, employees, authorities, business partners, or even competitors. ISO 9001 continues to follow the approach of planning (plan), performing (do), checking (check), and acting (act), or the PDCA cycle for short, in order to continuously and effectively improve the quality management system as a whole and its processes (Weidner, 2020).

7.11 Process Audits A process audit is used in supplier management to assess the quality and performance of input factors, processes, and their outputs (Helmold, 2022). The process audit is a central part of supplier management and is intended to lead to capable and controlled processes at suppliers that are robust to disruptions. By stabilizing the processes, the product quality is increased and complaints are prevented (Helmold, 2021). The following objectives are pursued with process audits: • Prevention: recognizing, pointing out, and initiating measures that prevent deficits from occurring. • Correction: analyzing known deficiencies and taking actions to correct and prevent recurrence.

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• Continuous improvement process: further improve implemented measures from a process audit to make the process more capable and robust. Process audits can be applied throughout the product life cycle. This includes internal and external processes, e.g., the entire supply chain. By using process audits, possible process risks in the entire product development process (PEP) can be identified at an early stage. Process audits evaluate company process chains from input through transformation to output. Due to the process-oriented approach, the standard is easy to apply and independent of the size of the company and the purpose of the company. The effectiveness and efficiency of the organization in achieving the set goals is improved and customer satisfaction is also increased by meeting expectations. A process is a set of interrelated or interacting activities that convert inputs into results (output). The process approach enables an organization to understand requirements better and meet them more consistently (improved, consistent, and predictable outcomes). A product audit focuses: • • • • • •

On quantitative and qualitative characteristics. In physical products. After completion of a production step. Before passing it on to the next customer (internal/external). Based on target specifications. By an independent auditor.

7.12 Product Audits As part of the product validation and the testing of a defined number of products, the product audit confirms the quality capability of the production process based on the quality characteristics of a product. It is checked whether the product corresponds to the specified specifications, special customer, and supplier agreements. A product audit is the planning, implementation, evaluation, and documentation of tests (Helmold 2020). A product audit is used to assess compliance with the company’s own quality requirements. In addition, it aims to assess compliance with the expressed and unspoken customer requirements (with the “eyes of a very critical customer”): The product audit represents a measure to check the effectiveness of quality checks and control measures carried out and leads directly and in the short term to process and product improvements. Finally, it creates an internal basis of trust with regard to the requirements of product liability and checks the conformity of the products, also with legal requirements. Within the automotive industry, the PPAP is a common product qualification process (Helmold, 2011). The production part approval process (PPAP) (Engl.: production part approval process [PPAP]) is a procedure from the QS 9000, which has now been replaced by ISO/TS 16949, in which series parts are sampled. This procedure originates from the automotive industry and has been successfully implemented there for years It is all about the quality of the parts

7.15  International Organization for Standardization

85

supplied, which means that the parts from the series tools or series processes must correspond to the drawings. In addition to the parts delivered for inspection, the part submission warrant (PSW) is a central element of the sampling process.

7.13 Control Audits The control audit is a special type of audit outside the regular audit plan within the value chain to verify and control the progress of audits and can have the following reasons: • • • •

Progress control. Special process audits, e.g., for processes such as gluing, painting, welding, etc. Escalation audit. Audits based on customer requests.

7.14 Other Audits Other audits include all possible assessments of standard requirements in subareas through 5S audits, environmental audits, financial audits, security audits, etc. Other audits can be the environmental standard ISO 14001, IT standards like ISO 27001, or others (Heras-Saizarbitoria, 2018).

7.15 International Organization for Standardization The International Organization for Standardization (ISO) is an independent, nongovernmental international organization with a membership of 167 national standard bodies (Geiger & Kotte 2008). Through its members, it brings together experts to share knowledge and develop voluntary, consensus-based, market-relevant international standards that support innovation and provide solutions to global challenges. • Full members (or member bodies) influence ISO standard development and strategy by participating and voting in ISO technical and policy meetings. Full members sell and adopt ISO international standards nationally. • Correspondent members observe the development of ISO standards and strategy by attending ISO technical and policy meetings as observers. Correspondent members that are national entities sell and adopt ISO international standards nationally. Correspondent members in the territories that are not national entities sell ISO international standards within their territory. • Subscriber members keep up to date on ISO’s work but cannot participate in it. They do not sell or adopt ISO international standards nationally.

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References Helmold, M. (2021). Kaizen, Lean Management und Digitalisierung. Mit den japanischen Konzepten Wettbewerbsvorteile für das Unternehmen erzielen. Springer. Helmold, M. (2022). Strategic performance management. Achieving long-term competitive advantage through performance excellence. Springer. Helmold, M., & Terry, B. (2016). Global sourcing and supply management excellence in China. Procurement guide for supply experts. Springer. Heras-Saizarbitoria, I. (2018). ISO 9001, ISO 14001, and new management standards. Springer.

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Quality Excellence Models

Get closer than ever to your customers. So close that you tell them what they need well before they realize it themselves. (Steve Jobs)

8.1 BSC, Balanced Scorecard The balanced scorecard (BSC) in Fig. 8.1 is a strategic planning and performance management tool and was first introduced by the accounting academic Dr. Robert Kaplan and business executive and theorist Dr. David Norton. It was first published in 1992 in a Harvard Business Review article (Helmold, 2022). Dr. Kaplan and Dr. Norton took previous metric performance measures and adapted them to include nonfinancial information. The BSC is the performance metric used in strategic management to identify and improve various internal functions of a business and their resulting external outcomes. It is used to measure and provide feedback to organizations. Data collection is crucial to providing quantitative results, as the information gathered is interpreted by managers and executives and used to make better decisions for the organization. The BSC system connects the strategic elements like mission, vision, core values, and strategic objectives with the more operational elements such as performance measures, key performance indicators, targets, and actions (projects that help you reach your targets) of the enterprise or organization (Kaplan & Norton, 1992, 1996). The BSC suggests that management views the organization from four perspectives in order to develop objectives, measures (KPIs), targets, and initiatives (actions) relative to each of these points of view:

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Helmold, Virtual and Innovative Quality Management Across the Value Chain, Management for Professionals, https://doi.org/10.1007/978-3-031-30089-9_8

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Actions

Targets

Measurables

Objectives

Financial Perspective

Actions

Strategic Planning

Targets

Strategic Objectives

Measurables

Actions

Vision

Objectives

Internal Business Processes Perspective Mission

Targets

Measurables

Objectives

Customer Perspective

Actions

Targets

Measurables

Objectives

Organisational Perspective

Fig. 8.1  Balanced scorecard (BSC). (Source: Author’s own figure)

• Financial: often renamed stewardship or other more appropriate name in the public sector, this perspective views organizational financial performance and the use of financial resources. • Customer/stakeholder: this perspective views organizational performance from the point of view the customer or other key stakeholders that the organization is designed to serve. • Internal process: views organizational performance through the lenses of the quality and efficiency related to our product or services or other key business processes. • Organizational capacity (originally called learning and growth): views organizational performance through the lenses of human capital, infrastructure, technology, culture, and other capacities that are key to breakthrough performance. Figure 8.1 outlines the BSC including objectives, measurable, targets, and actions. For each objective on the strategy map, at least one measure or key performance indicator (KPI) will be identified and tracked over time. KPIs indicate progress toward a desirable outcome. Strategic KPIs monitor the implementation and effectiveness of an organization’s strategies, determine the gap between actual and targeted performance and determine organization effectiveness and operational efficiency. The BSC ensures the following areas:

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Advantages of the BSC are as follows: • It provides an objective way to see if the strategy is working. • It offers a comparison that gauges the degree of performance change over time. • It focuses the employees’ attention on what matters most to the success in the organization. • It allows measurement of accomplishments, not just of the work that is performed. • It provides a common and simple language for communication by using numeric indicators. • It helps to reduce intangible uncertainty by applying tangible and hard figures. • It shows clarity of mission, vision, and strategy as part of the strategic pyramid. • It is a transparent way in cascading down corporate objectives to all areas in the organization. • It uses customer and stakeholder expectations as focal point and starting point. • It enables permanent and endurable monitoring of performance, objectives, and outcomes. • It ensures a cross-disciplinary and hierarchy traversing communication process. • It enables the integration of performance measure objectives and an appropriate level. • It displays cause-and-effect relationships as instrument for functions and management. • It results in a sustainable action plan and functional action plan, which can be easily reviewed. Disadvantages of the BSC are as follows: • It is based on historical data from the past and may thus lead to a distorted picture. • It can lead to a lack of long-term commitment and leadership for management due to short-term objectives (micromanagement). • It does not always express the interests of all stakeholders, but on few stakeholders. • It uses only quantitative key performance indicators and the approach may not show the real world. • It has the danger to overload the system with key performance indicators (KPIs). • It may have a potential lack of employee awareness or a failure to communicate information to all employees. • It is constructed as a management reporting tool rather than an improvement tool. • It shows the benchmarking based on KPIs in BSC and specific measures difficult. Figure 8.2 outlines the logic between the four perspectives. The balanced scorecard is used to improve the performance by strengthening the organization. The improvements will lead to a better Q-C-D plus alpha ratio throughout the organization and thus satisfy the customers. As a result, financial performance will be outstanding. The BSC is used to attain objectives, measurements, initiatives, and goals that result from these four primary functions of a business. Companies can easily identify factors hindering company performance and outline strategic changes

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Financial Results

Financial perspective

Customer Satisfaction

Q-C-D + alpha

Customer perspective

Process Know How

Product and Service Know How

Internal business process perspective

Knowledge and Skills

Organisational perspective

Fig. 8.2  Logic behind the BSC. (Source: Author’s own figure)

tracked by future scorecards. With the balanced scorecard, they look at the company as a whole when viewing company objectives (Kühnapfel, 2019). An organization may use the balanced scorecard to implement strategy mapping to see where value is added within an organization. A company also utilizes the balanced scorecard to develop strategic initiatives and strategy objectives. Cascading a balanced scorecard means to translate the corporate-wide scorecard (referred to as Tier 1) down to first business units, support units, or departments (Tier 2) and then teams or individuals (Tier 3). The end result should be focused across all levels of the organization that is consistent. The organization alignment should be clearly visible through strategy, using the strategy map, performance measures and targets, and initiatives. Scorecards should be used to improve accountability through objective and performance measure ownership, and desired employee behaviors should be incentivized with recognition and rewards. There are several factors that are linked to the usage of the BSC.

8.2 Better Strategic Planning The balanced scorecard provides a powerful framework for building and communicating strategy. The business model is visualized in a strategic map which helps managers to think about cause-and-effect relationships between the different strategic objectives. The process of creating a strategy map ensures that consensus is reached over a set of interrelated strategic objectives. It means that performance

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outcomes as well as key enablers or drivers of future performance are identified to create a complete picture of the strategy.

8.3 Improved Strategy Communication and Execution Having a one-page picture of the strategy allows companies to easily communicate strategy internally and externally. We have known for a long time that a picture is worth a thousand words. This “plan on a page” facilitates the understanding of the strategy and helps to engage staff and external stakeholders in the delivery and review of the strategy. The thing to remember is that it is difficult for people to help execute a strategy which they do not fully understand.

8.4 Better Alignment of Projects and Initiatives The balanced scorecard helps organizations map their projects and initiatives to the different strategic objectives, which in turn ensures that the projects and initiatives are tightly focused on delivering the most strategic objectives.

8.5 Better Management Information The balanced scorecard approach helps organizations design key performance indicators for their various strategic objectives. This ensures that companies are measuring what actually matters. Research shows that companies with a BSC approach tend to report higher-quality management information and better decision-making.

8.6 Improved Performance Reporting The balanced scorecard can be used to guide the design of performance reports and dashboards. This ensures that the management reporting focuses on the most important strategic issues and helps companies monitor the execution of their plan.

8.7 Better Organizational Alignment The balanced scorecard enables companies to better align their organizational structure with the strategic objectives. In order to execute a plan well, organizations need to ensure that all business units and support functions are working toward the same goals. Cascading the balanced scorecard into those units will help to achieve that and link strategy to operations.

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8.8 Better Process Alignment Well-implemented balanced scorecards also help to align organizational processes such as budgeting, risk management, and analytics with the strategic priorities. This will help to create a truly strategy-focused organization.

8.9 EFQM, European Foundation for Quality Management 8.9.1 Concept of the EFQM Excellence Model The EFQM excellence model is a nonprescriptive business excellence framework for organizational management, promoted by the European Foundation for Quality Management (EFQM) and designed to help organizations to become more competitive. Regardless of sector, size, structure, or maturity, organizations need to establish appropriate management systems to be successful. The EFQM excellence model is a tool to help organizations do this by measuring where they are on the path to excellence, helping them understand the gaps, and promoting solutions. EFQM is an acronym that stands for European Foundation for Quality Management. EFQM was founded in 1988 with the objective to create a platform where organizations can learn from each other to continuously improve their performance. Benchmarking with other European organizations will lead to sustainable economic growth. The EFQM wants to open the chance to the organizations to define their current “level of excellence” and where they need to focus improvement efforts. Moreover, the model helps to ensure that organization decisions incorporate the needs of all stakeholders and are aligned with the organization’s objectives. That in turn support managers and directors in training, sharing ideas, and innovating with the aid of the so-called EFQM model as a common framework. The EFQM model or EFQM business excellence model is the most popular quality management tool in Europe, used by more than 30.000 organizations to improve performance. It supports you to self-­ assess and reflect. Eighty-four percent of the EFQM members say that the EFQM model helps to improve their organization. This quality management model aims at sustainable excellence in which quality, efficiency, and sustainability are the key elements. The basis of the EFQM model consists of the total quality management (TQM) concept (Peris-Ortiz et al., 2015). It consists a universal framework of concepts, thus enabling organizations to share information in an effective way, irrespective of the different sectors, cultures and life stages in which they are located. Organizations can thus take other organizations as a model, so that they obtain insight into how far they meet the image of a high-quality organization. The EFQM model consists of nine criteria that are subdivided into five enablers and four results: This is the model behind the European Business Excellence Award, an award process run by the European Foundation for Quality Management (EFQM) (Fig. 8.3). This framework is used as the basis for national business excellence and quality awards across Europe. The model consists of nine categories:

8.9  EFQM, European Foundation for Quality Management Results

Enablers People 10% Leadership 10%

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Strategy 10% Partnerships & Resources 10%

Processes, Products & Services 10%

People Results 10% Customer Results 15% Society Results 10%

Business Results Key Performance Results 15%

Innovation, Learning and Improvements

Fig. 8.3  EFQM excellence model. (Source: Author’s own figure, adjusted from the EFQM model)

• • • • • • • • •

Leadership Policy and strategy People Partnerships and resources Processes Customer results People results Society results Key performance results

The fundamental concepts that underpin the EFQM excellence model are as follows: • • • • • • • •

Results orientation Customer focus Leadership and constancy of purpose Management by processes and facts People development and involvement Continuous learning, innovation, and improvement Partnership development Corporate social responsibility

8.9.2 Continuous Process The EFQM model must be read from right to left, as a result of which it becomes clear that the result areas focus on “what can be achieved?,” after which it becomes clear that these organizational areas focus on “how can these results be achieved?”

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The bottom arrow, “learning, creativity, and innovation” indicates that measuring, evaluating, and adjusting are not one-off actions but a continuous process. In the same process organizations complete a step-by-step development.

8.9.3 Self-Assessment The EFQM model consists of an EFQM assessment that enables an organization to determine where they are in the quality process. The assessment starts with a review of the results. This is the underlying principle of this model. To improve results, measures should be taken in at least one of the organizational areas: the EFQM model and the assessment. This is represented in five development stages.

8.9.4 Application of the EFQM Excellence Model The assessments allow an organization to gain insight into the quality of its current operational management. Improvements are formulated and these can be implemented by an organization in stages. The assessment itself consists of five steps: • • • • •

Setting standards for all of the nine key areas Determining the current quality of operational management Formulating and prioritizing of improvements Application and inclusion of improvements in the various (annual) plans Actual implementation and monitoring of the remedial actions

8.10 Baldridge Excellence Model This is the model behind the US Malcolm Baldrige National Quality Award, an award process administered by the American Society for Quality (ASQ) and managed by the National Institute of Science and Technology (NIST), an agency of the US Department of Commerce. This framework is used as the basis for over 70 other national business excellence/quality awards around the world. The model consists of seven categories: 1. Leadership 2. Strategic planning 3. Customer and market focus 4. Measurement, analysis, and knowledge management 5. Workforce focus 6. Process management 7. Business results

8.11  Business Performance Improvement Resource Model (BPIR)

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The core concepts of the Baldrige criteria for performance excellence are as follows: • • • • • • • • • • •

Visionary leadership Customer-driven excellence Organizational and personal learning Valuing employees and partners Agility Focus on the future Managing for innovation Management by fact Social responsibility Focus on results and creating value Systems perspective

8.11 Business Performance Improvement Resource Model (BPIR) The Business Performance Improvement Resource (BPIR) model provides an alternative, comprehensive, and simple way to classify benchmarking and best practice information within the website. The model classifies information through over 250 business processes. The high-level processes are shown below: • • • • • • • • • • • • • • •

Understand markets and customers Develop vision and strategy Design products, processes, and services Market and sell Produce and deliver for manufacturing-oriented organizations Produce and deliver for service-orientated organizations Invoice and service customers Deliver leadership Develop and manage human resources Manage information and knowledge Manage financial and physical resources Execute environmental management program Manage external relationships Manage improvement and change Measures of organizational performance

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Primary value contributors

Supply side (Suppliers)

Purchasing Management

Value chain

Operations Management

Marketing & Sales

Demand side (Customers)

PM2E

Corporate strategy Organisationl improvement Supply management

Supplier and partnerships Cooperation and collaboration Value chain visiblity

B2B and B2C collaboration Risk management

Secondary value contributors

Demand scheduling & operations

Quality performance Learning and growth Leadership and management

Global activities

Information systems

Human resources

Finance and controlling

Business ethics

Digitalisation and AI

Legal

Contineous improvement

Fig. 8.4  PM2E excellence model by Dr. Marc Helmold. (Source: Author’s own figure)

8.12 P2E Excellence Model The PM excellence model by Dr. Helmold focuses on the value chain with its primary and secondary functions as outlined in Fig. 8.4. Primary functions are supply, operations, and marketing and sales. Secondary or support functions are IT, HR, or finance. The model is process oriented and focuses on the following 15 categories, where value is generated: • • • • • • • • • • • • • • •

Corporate strategy Organizational improvement Supply management Supplier and partnerships Cooperation and collaboration Value chain visibility B2B and B2C collaboration Risk management Demand scheduling and operations Quality performance Learning and growth Leadership and management Global activities Digitalization and artificial intelligence (AI) Continuous improvement

References

97

References Helmold, M. (2022). Strategic performance management. Achieving long-term competitive advantage through performance excellence. Springer. Kaplan, R., & Norton, D. P. (1992). The balanced scorecard (BSC). Measures that drive performance. In: Harvard Business Review, 01-02/1992. Kaplan, R., & Norton, D. P. (1996). Using the balanced scorecard as a strategic management system. In: Harvard Business Review, 01-02/1996. Kühnapfel, J. (2019). Balanced scorecards im vertrieb. Springer. Peris-Ortiz, M., et  al. (2015). Achieving competitive advantage through quality management. Springer.

9

Cost of Quality (COQ)

The biggest cost of poor quality is when your customer buys it from someone else because they didn’t like yours. (W. Edwards Deming)

9.1 What Are Cost of Quality (CoQ) Cost of quality (COQ) is defined as a methodology that allows an organization to determine the extent to which its resources are used for activities that prevent poor quality, that appraise the quality of the organization’s products or services, and that result from internal and external failures. The cost of quality consists of four categories such as prevention cost, appraisal cost, internal failure, and external failure (see Fig. 9.1). The cost of quality consists of two categories of cost of conformance and cost of nonconformance and four subcategories such as prevention cost, appraisal cost, internal failure, and external failure. Another purpose the cost of quality information can serve is to help management evaluate the relative importance of quality problems and identify opportunities for cost reduction. They can also aid in budgeting and cost control activities. The central theme of quality improvement is that larger investments in prevention drive even larger savings in quality-related failures and appraisal efforts. Feigenbaum’s categorization allows the organization to verify this for itself. When confronted with mounting numbers of defects, organizations typically react by throwing more and more people into inspection roles. But inspection is never completely effective, so appraisal costs stay high as long as the failure costs stay high. The only way out of the predicament is to establish the “right” amount of prevention. Once categorized, quality costs can serve as a means to measure, analyze, budget, and predict. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Helmold, Virtual and Innovative Quality Management Across the Value Chain, Management for Professionals, https://doi.org/10.1007/978-3-031-30089-9_9

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9  Cost of Quality (COQ)

Actions

Targets

Measurables

Objectives

Financial Perspective

Actions

Strategic Planning

Targets

Strategic Objectives

Measurables

Actions

Vision

Objectives

Internal Business Processes Perspective Mission

Targets

Measurables

Objectives

Customer Perspective

Actions

Targets

Measurables

Objectives

Organisational Perspective

Fig. 9.1  Cost of quality (COQ)

Cost of quality is a methodology used to define and measure where and what amount of an organization’s resources are being used for prevention activities and maintaining product quality as opposed to the costs resulting from internal and external failures. The cost of quality can be represented by the sum of two factors. The cost of good quality and the cost of poor quality equal the cost of quality, as represented in the basic equation:

CoQ  CoGQ  CoPQ

The cost of quality equation looks simple, but in reality, it is more complex. The cost of quality includes all costs associated with the quality of a product from preventive costs intended to reduce or eliminate failures, cost of process controls to maintain quality levels, and the costs related to failures, both internal and external. Feigenbaum defined the following quality cost areas: COQ: cost of quality COGQ: cost of good quality COPQ: cost of poor quality

COQ  COGQ  COPQ

9.2  COQ Measurement and Identification

101

The cost of quality equation looks simple, but in reality, it is more complex. The cost of quality includes all costs associated with the quality of a product from preventive costs intended to reduce or eliminate failures, cost of process controls to maintain quality levels, and the costs related to failures, both internal and external. Effective use and implementation of the cost of quality methodology enables an organization to accurately measure the amount of resources being used for cost of good quality and cost of poor quality. With this valuable information, the organization can determine where to allocate resources to improve product quality and the bottom line. To further illustrate the value of cost of quality, review the following example. The name of the company has been changed but the content represents actual events and results. Alpha Company once measured the cost of quality as the amount of warranty cost versus total sales. This method only examined the cost of poor quality. This data did reveal a problem area in the facility. It was discovered that customer part shortages originating from one work cell were resulting in warranty costs of over $400,000 in 1 year. A team was formed to investigate and perform root cause analysis (RCA) of the shortages and a plan was developed to redesign the work cell for an estimated cost of $60,000. With management approval, the work cell was redesigned with a revised layout, pick bins, and dedicated locations for all the parts, process controls were defined and implemented, and several additional improvements were made. The changes reduced tact times and the number of operators required for the process. This provided resources for the addition of quality technicians to regularly audit and maintain the process on all shifts. Within the first year of operation, shortages were reduced by 50% equaling a $200,000 reduction in warranty costs. The project resulted in a positive impact on the bottom line of $140,000 in the first year. Alpha Company has since implemented processes to measure and reduce scrap, improved process controls, and introduced new quality metrics throughout the organization. They are now actively measuring and evaluating both the cost of good quality and poor quality. In the example above, the cost of poor quality (CoPQ) was having a major impact on the bottom line. Through an investment in the cost of good quality (CoGQ), Alpha Company achieved a significant reduction in the cost of quality. There are opportunities for improvement in processes at most organizations. It has been estimated that the cost of quality usually amounts to between 15% and 40% of business costs. The goal of implementing the cost of quality methodology is to maximize product quality while minimizing cost. The cost of quality methodology provides the detailed information that management needs to accurately evaluate the effectiveness of their quality systems and identify problem areas and opportunities for improvement.

9.2 COQ Measurement and Identification 9.2.1 COQ Calculation Method The methods for calculating cost of quality vary from company to company (Table  9.1). In many cases, organizations, like the one described in the previous example, determine the cost of quality by calculating total warranty dollars as a

9  Cost of Quality (COQ)

102 Table 9.1  COQ overview Cost area Costs of control (costs of conformance)

Costs of failure of control (costs of nonconformance)

Description Prevention costs

Arise from efforts to keep defects from occurring at all

Appraisal costs

Arise from detecting defects via inspection, test, audit

Internal failure costs

Arise from defects caught internally and dealt with by discarding or repairing the defective items Arise from defects that actually reach customers

External failure costs

Examples Quality planning Statistical process control Investment in quality-related information systems Quality training and workforce development Product design verification Systems development and management Test and inspection of purchased materials Acceptance testing Inspection Testing Checking labor Setup for test or inspection Test and inspection equipment Quality audits Field testing Scrap Rework Material procurement costs Complaints in warranty Complaints out of warranty Product service Product liability Product recall Loss of reputation

Source: Author’s source

percentage of sales. Unfortunately, this method is only looking externally at the cost of quality and not looking internally. In order to gain a better understanding, a more comprehensive look at all quality costs is required. The cost of quality can be divided into four categories. They include prevention, appraisal, internal failure, and external failure. Within each of the four categories, there are numerous possible sources of cost related to good or poor quality. Some examples of typical sources of cost of quality are listed below.

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103

9.2.2 Cost of Good Quality (COGQ) The cost of good quality (COGQ) consists of the cost of quality conformance, including any associated costs with both appraisal and prevention. The Cost of Good Quality (CoGQ) Prevention costs—costs incurred from activities intended to keep failures to a minimum. These can include, but are not limited to, the following: • • • • •

Establishing product specifications Quality planning New product development and testing Development of a quality management system (QMS) Proper employee training

Appraisal costs—costs incurred to maintain acceptable product quality levels. Appraisal costs can include, but are not limited to, the following: • • • • •

Incoming material inspections Process controls Check fixtures Quality audits Supplier assessments

9.2.3 Cost of Poor Quality (COPQ) The cost of poor quality (COPQ) involves all the nonconformance costs that are both internal and external to the company. The Cost of Poor Quality (CoPQ) Internal failures—costs associated with defects found before the product or service reaches the customer. Internal failures may include, but are not limited to, the following examples: • • • • •

Excessive scrap Product rework Waste due to poorly designed processes Machine breakdown due to improper maintenance Costs associated with failure analysis

External failures—costs associated with defects found after the customer receives the product or service. External failures may include, but are not limited to, the following examples:

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• • • • • • •

9  Cost of Quality (COQ)

Service and repair costs Warranty claims Customer complaints Product or material returns Incorrect sales orders Incomplete BOMs Shipping damage due to inadequate packaging

These four categories can now be applied to the original cost of quality equation. Our original equation stated that the cost of quality is the sum of cost of good quality and cost of poor quality. This is still true; however, the basic equation can be expanded by applying the categories within both the cost of good quality and the cost of poor quality. The cost of good quality is the sum of prevention cost and appraisal cost (CoGQ = PC + AC). The cost of poor quality is the sum of internal and external failure costs (CoPQ = IFC + EFC). By combining the equations, the cost of quality can be more accurately defined, as shown in the equation below:

COQ   PC  AC    IFC  EFC 

One important factor to note is that the cost of quality equation is nonlinear. Investing in the cost of good quality does not necessarily mean that the overall cost of quality will increase. In fact, when the resources are invested in the right areas, the cost of quality should decrease. When failures are prevented/detected prior to leaving the facility and reaching the customer, the cost of poor quality will be reduced.

9.3 COQ Optimization 9.3.1 Analyzing Prevention, Appraisal, and Failure The most widely accepted method for measuring and classifying quality costs is the prevention, appraisal, and failure (PAF) model which divides quality costs into the four categories in Fig. 9.1. The PAF model is a combination of ideas developed in the 1960s by multiple quality gurus including Crosby and Juran. Their concepts emphasized that it is better to have more upfront investment utilizing preventive activities to minimize the costs caused by quality failures later in the product life cycle. Research shows that the cost of poor quality (including rework, returns, and reduced repeat sales) can range from 15% to 35% of business costs.

9.4  Reduction of COQ and Quality Prevention

105

9.3.2 The Effect of Improving the QMS Processes on Quality Costs There is a natural cost tradeoff between how much an organization spends on prevention versus how much it spends on fixing failures. A traditional way to tackle reducing the cost of quality is to reduce the number of defects. This is the focus of most six sigma projects. The following diagram shows how improving the sigma level would reduce defects and reduce the costs of the related failures, but at some point, the cost of quality will go up to achieve higher levels of six sigma unless the cost of quality is tackled directly. A second way to reduce the cost of quality is to make the processes for handling preventions and failures more efficient. The use of an MES (manufacturing execution system) which fully integrates an EQMS (enterprise quality management system) can make a big difference on the efficiency of quality management processes. The following are some specific examples on how to reduce the cost of quality with improved quality management processes.

9.4 Reduction of COQ and Quality Prevention 9.4.1 Failure Prevention Initiatives Prevention costs are incurred to prevent or avoid quality problems. These costs are associated with the design, implementation, and maintenance of the quality management system. They are planned and incurred before actual assembly of the product at the shop floor. The prevention costs include specifications and inspection requirements for incoming materials, processes, and finished products and worker training and gauge calibration.

9.4.2 Improving Work Instructions and Process Management The manufacturing of a complex product (such as an aircraft, satellite, medical device) involves the management of a continuous stream of engineering changes directed at work in process. On a shop floor with a paper system, changes to work instructions are written into the margins with red ink and stamped by a liaison planner. A copy of the redlined document is routed back to a process planner to get the changes incorporated into future releases of the work instructions. An MES can combine (1) the redlining of the work instructions on the shop floor, (2) the update of the template work instructions maintained by the manufacturing engineers, and (3) the notice to the shop floor operator who must acknowledge the change to the work instructions.

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9.4.3 Implementing the Appropriate Training and Qualification Initiatives Personnel must be certified as competent based on education, training, skills, and experience. Personnel qualification processes must be standardized and documented. On paper, certification of an employee for the task is left for the supervisor to verify. An MES can validate each employee’s skills and certifications against the latest training records before they can sign on to a job. In addition, it warns the employee if the certification needs to be renewed in the next 30 days.

9.4.4 Verifying Eqiupment Calibration Equipment resources must be maintained to assure their optimal performance to capabilities, especially measurement equipment used to verify the product. The maintenance and calibration processes for equipment and tools must be standardized and documented. An MES can verify calibration status for equipment and gauges specified to be used for data collection. Tools can be calibrated more efficiently based on actual usage instead of using the traditional date-driven expiration scheme which ends up in more calibration work than is needed. Each work center is notified of tools that need to be checked in for calibration.

9.5 Reduction of Quality Cost of Appraisal 9.5.1 Initiatives for Reducing Quality Costs of Appraisal Quality appraisal activities are the most conventional quality practice and these activities have the most visible expenses. It is easy to see the cost of inspectors, testers, and their equipment in the balance sheet. Appraisal is an expensive and unreliable way of achieving quality. Appraisal in its best form is a verification that the production processes and preventive measures are working. Appraisal in its least productive form is separating the good from the bad product, counting defects, scrapping, and calculating yield. While this is a necessary part of the quality program, it is important to move toward more preventive methods to reduce the cost of failures—the cost of poor quality.

9.5.2 Reducing Reliance on 100% Inspection Ideally, the preference is to move away from 100% inspection and toward more inspection by production personnel, leaving only a small percentage of random overinspection for quality management personnel. An MES enables these types of strategies.

9.6  Appraisal Cost on Supplier Side

107

One way to reduce inspection levels from 100% inspection, 100% of the time, is to only trigger a comprehensive inspection based on production process validation (PPV) or first article inspection (FAI) rules when there is (a) a change in design, affecting fit, form, or function of the product, or (b) a change of manufacturing sources, processes, inspection methods, location, tooling, or materials, which affects fit, form, or function.

9.5.3 Introducing Automated Inspection Where inspection is needed, and a lot of data needs to be collected, there might be possibility of reducing manual clerical effort using automated inspection methods such as CMM (coordinate measurement machines) or visual inspection machines that are integrated directly into the MES inspection data collection records.

9.5.4 Automatic SPC Inspection and test results coming out of measurement and inspection machines can be imported directly into the MES. Critical measures and results can be tied to data collection points and to SPC (statistical process control) run charts to monitor control levels. The automation and integration allow new levels of efficiency over the traditional processes of inspectors running spreadsheets and separate SPC software on the side.

9.6 Appraisal Cost on Supplier Side 9.6.1 Introducing Measures on the Supplier Side For assemblies manufactured internally, a company takes great care to specify detailed inspection and data collection requirements, to verify in-process the quality of a product to engineering specifications. But today, companies depend more and more on suppliers for critical subassemblies. How do you ensure that the quality of subassemblies provided by suppliers is managed and given the same level of attention? Companies spend a lot of time evaluating suppliers before honoring contracts and periodically auditing them. But this type of oversight comes way short of the kind of oversight given to internally manufactured subassemblies. What if we could manage quality into the supply chain similar to how it is done internally? How can this be done efficiently with fewer personnel? A supplier portal is more than a place to post files for the supplier. It is a place to collaborate online with suppliers by exchanging communications and dispatching tasks, tasks requiring action including source inspection orders, audits, and response to discrepancies and corrective actions. Besides outstanding tasks, the portal also provides visibility to the supplier status and supplier performance ratings.

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9.6.2 Source and Receiving Inspection Checks Current practices for supplier quality appraisal focus on supplier certification and receiving inspection. However, companies are also minimizing inventory levels and pushing delivery dates as close as possible to the point of use. What happens when an issue is discovered during receiving inspection? Oops, instant impact on production schedule! This is why companies today are looking to move more inspection requirements into the supply chain using more source inspections. Inspection templates allow requirements to be managed for both source and receiving locations. Source inspection orders are then dispatched to suppliers through the supplier portal.

9.7 Reducing Cost of Failures 9.7.1 Initiatives for Reducing the Cost of Quality Failures During inspections performed at production, receiving, or supplier site, it is possible to find some aspects of products, materials, and components to be nonconforming to specifications. These nonconformances could lead to rework, scrapping, returns, and recalls, all of which should be documented in nonconformance or discrepancy reports and classified in a database in such a way that the organization can use the data to determine costs and areas for improvement.

9.7.2 Discrepancy Documentation The cost of filling out a nonconformance report on manufactured or purchased parts includes the cost of good problem identification. The use of standard codes and descriptions for symptom, defect, and cause types can simplify (and speed up) the documentation process and provide more consistent data for analysis.

9.7.3 Workflow Routing and Flow Principle of Tasks The costs of routing a discrepancy for disposition through a workflow process across multiple departments can be controlled by limiting the participants in each discrepancy. Limit the participants to those who are needed, instead of including the entire multidiscipline material review board (MRB) in every review. By adjusting the workflow with a different escalation process for different types of issues and disposition actions, it is possible to make the best use of everyone’s time.

9.8  Cost of External Failures

109

9.7.4 Failure Prevention and Rework One of the advantages of the integration of the EQMS and MES is the handling of rework instructions to correct an issue. The integration makes it easy to use the same process planning tools, to either append work to the work order or edit the instructions for the affected units only. This is done as part of the integrated discrepancy disposition workflow. The resulting rework instructions and operations appear in the same job list, along with the planned work, so technicians at the shop floor do not have to learn a different process for rework, reinspection, and retesting. However, these activities do get classified (and segregated in reporting) to the financial system as cost of poor quality.

9.8 Cost of External Failures The intangible costs of external quality failures (including customer dissatisfaction, loss of reputation, and loss of future sales) might be hard to calculate, but are not hard to picture as having a huge negative impact on the future of the business. The best way to reduce external failure cost is to not have them at all! The best way to avoid external quality failure costs is to focus on improving the other three costs of quality. Figure  9.2 depicts the failure costs in relation to the prevention and appraisal costs.

Financial Results

Financial perspective

Customer Satisfaction

Q-C-D + alpha

Customer perspective

Process Know How

Product and Service Know How

Internal business process perspective

Knowledge and Skills

Fig. 9.2  Total cost of quality (TCOQ)

Organisational perspective

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9  Cost of Quality (COQ)

9.9 Claim Management A claim is a legally grounded demand or assertion for commercial and monetary compensation, payment, or reimbursement by a claimant for an error, disturbance, disorder, disruption, or failure of an agreed state of a product, a process, or a function in performance under a contract or agreement. Claims can be divided into offensive or defensive claims (Helmold & Terry, 2021). The characteristics of claims are as follows: • Deals with bad performance, nonconformities, deficiencies, or disruptions. • Legally contractually agreed specifications and characteristics. • A claim is the legally grounded demand or assertion for commercial and monetary compensation, payment, or reimbursement by a claimant for a disturbance, disorder, disruption, or failure of an agreed state of a product, a process, or a function in performance under a contract or agreement. • Synonyms are nonconformity management, compensation management, or quality management. • Often claim management is conducted by the legal, sales, or procurement department (Fig. 9.3).

9.10 Recalls and Retrofits A product recall is a request from a manufacturer to return a product after the discovery of safety issues or product defects that might endanger the consumer or put the maker/seller at risk of legal action. The recall is an effort to limit ruination of

Results

Enablers People 10% Leadership 10%

Strategy 10% Partnerships & Resources 10%

Processes, Products & Services 10%

People Results 10% Customer Results 15% Society Results 10%

Innovation, Learning and Improvements

Fig. 9.3  Offensive and defensive claims. (Source: Author’s source)

Business Results Key Performance Results 15%

9.10  Recalls and Retrofits

111

the corporate image and limit liability for corporate negligence, which can cause significant legal costs. It can be difficult, if not impossible, to determine how costly can be releasing to the consumer a product that could endanger someone’s life and the economic loss resulting from unwanted publicity. Recalls are costly. Costs include having to handle the recalled product, replacing it, and possibly being held financially responsible for the consequences of the recalled product. A country’s consumer protection laws will have specific requirements in regard to product recalls. Such regulations may include how much of the cost the maker will have to bear, situations in which a recall is compulsory (usually because the risk is big enough), or penalties for failure to recall. The firm may also initiate a recall voluntarily, perhaps subject to the same regulations as if the recall were compulsory. A product recall usually involves the following steps, which may differ according to local laws: • Maker or dealer notifies the authorities responsible of their intention to recall a product. In certain situations, it is possible that the government can also request a recall of a product. • Consumer hotlines or other communication channels are established. The scope of the recall, that is, which serial numbers or batch numbers are recalled, is often specified. • Product recall announcements are released on the respective government agency’s website (if applicable), as well as in paid notices in the metropolitan daily newspapers. In some circumstances, heightened publicity will also result in news television reports advising of the recall. • When a consumer group learns of a recall, it will also notify the public by various means. • Typically, the consumer is advised to return the goods, regardless of condition, to the seller for a full refund or modification. • Avenues for possible consumer compensation will vary depending on the specific laws governing consumer trade protection and the cause of recall. Retrofit is understood to mean the modernization or expansion of existing (usually older and no longer produced) systems and equipment. Reasons for retrofits can be as follows: • • • • • •

Extension of life span Increase in production volume or product quality Higher system efficiency, e.g., by saving energy Fulfillment of legal requirements (e.g., emission reduction, occupational safety) Ensuring the supply of spare parts Creating the possibility of embedding old machines in a modern IT environment (Industry 4.0) monument protection

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Primary value contributors

Supply side (Suppliers)

Purchasing Management

Value chain

Operations Management

Marketing & Sales

Demand side (Customers)

PM2E

Corporate strategy Organisationl improvement Supply management

Supplier and partnerships Cooperation and collaboration Value chain visiblity

B2B and B2C collaboration Risk management

Secondary value contributors

Demand scheduling & operations

Quality performance Learning and growth Leadership and management

Global activities

Information systems

Human resources

Finance and controlling

Business ethics

Digitalisation and AI

Legal

Contineous improvement

Reference Helmold, M., & Terry, B. (2021). Operations and supply management 4.0. Industry insights, case studies and best practices. Springer.

5S Concept in Quality Management

10

Most Business Processes Are 90% Waste and 10% ValueAdded Work. (Jeffrey Liker)

10.1 Value-Added and Waste Added value can be defined as products, services, processes, and activities, which generate a certain value to the organization and enterprise. Value-added must be regarded from the customer viewpoint and is everything for which the customer is willing to pay for. It is important that value-added is recognized and perceived as value by the client (Bertagnolli, 2020). Many studies have shown that we only add value to a product for less than 5–15% of the time; the rest of the time is wasted (Helmold & Terry, 2021). The opposite is non-adding value or waste. Waste (Japanese: muda, 無駄) is anything which adds cost or time without adding any value or any activity which does not satisfy any of the above conditions. Value-­ added is a waste or a non-value-adding activity in a process. The focus of operations management must therefore be in eliminating such activities like waiting time or rework. Enterprise must target value-added process and eliminate or reduce waste, whereby waste can be visible (obvious) or invisible (hidden) as shown in Fig. 10.1 (Lehmann, 2021). The main idea of lean management is about highlighting the things that add value by reducing or eliminating everything else (waste) (Sahoo, 2019). As a proven consequence, when you eliminate waste, the quality of products improves, while production time and costs are reduced. Figure 10.2 illustrates that waste must be ideally eliminated or reduced.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Helmold, Virtual and Innovative Quality Management Across the Value Chain, Management for Professionals, https://doi.org/10.1007/978-3-031-30089-9_10

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10  5S Concept in Quality Management

Fig. 10.1 Value-added and waste. (Author’s source)

Hidden Waste (reduce)

Value-added Activities (increase)

Obvious Waste (eliminate)

Category Value add

Task

Hidden waste

Task

Obvious waste

Task

Impact

Principle

• • •

Added value for product Customer pays for it Customer recognizes this a value add

•

No added value for product or service Task is necessary for production

Minimize

• No added value for product or service • Task not necessary for production

Eliminate

•

Increase

Fig. 10.2  Actions for value-added and waste. (Author’s source)

10.2 Muda, Muri, and Mura The Toyota Production System, and later on the concept of lean, was developed around eliminating the three types of deviations that show inefficient allocation of resources. The three types are muda (無駄) (waste), muri (無理) (overburden), and mura (斑) (unevenness). Muda means wastefulness, uselessness, and futility, which is contradicting value addition. Value-added work and activities are process that add value to the product or service that the customer is willing to pay for. There are seven categories of waste under muda type 2 that follow the abbreviation TIMWOOD. The seven wastes are (1) transport, i.e., excess movement of product;

10.3  Ishikawa Diagram

115

Muda Waste

Mura

Muri

Uneveneness

Overburden

Fig. 10.3  Muda (無駄), muri (無理), and mura (斑). (Author’s source)

(2) inventory, i.e., stocks of goods and raw materials; (3) motion, i.e., excess movement of machine or people; (4) waiting; (5) overproduction; (6) overprocessing; and (7) defects. Muri means overburden, beyond one’s power, excessiveness, impossible, or unreasonableness. Muri can result from mura and in some cases be caused by excessive removal of muda (waste) from the process. Muri also exists when machines or operators are utilized for more than 100% capability to complete a task or in an unsustainable way. Muri over a period of time can result in employee absenteeism, illness, and breakdowns of machines. Standardize work can help avoid muri by designing the work processes to evenly distribute the workload and not overburden any particular employee or equipment. Mura means unevenness, nonuniformity, and irregularity. Mura is the reason for the existence of any of the seven wastes. In other words, mura drives and leads to muda. For example, in a manufacturing line, products need to pass through several workstations during the assembly process. When the capacity of one station is greater than the other stations, you will see an accumulation of waste in the form of overproduction, waiting, etc. The goal of a lean production system is to level out the workload so that there is no unevenness or waste accumulation. Figure 10.3 shows the elements muda, muri, and mura.

10.3 Ishikawa Diagram Ishikawa diagrams (also called fishbone diagrams, herringbone diagrams, cause-­ and-­effect diagrams, or Fishikawa) are causal diagrams created by Kaoru Ishikawa (Japanese: 石川 馨 Ishikawa Kaoru, 1915–1989) that show the cause-effect

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Man

Material

Machine

Value add (Quality)

Method (Process)

Milieu (Environment)

Money

Fig. 10.4  Ishikawa diagram. (Source: Author’s source)

situation of a specific event. Common uses of the Ishikawa diagram are areas of design, supply, production, and quality defect prevention to identify potential factors causing an overall effect. Each cause or reason for imperfection is a source of variation. Causes are usually grouped into major categories to identify and classify these sources of variation. The target of value-add and quality is shown as the fish’s head, facing to the right, with the causes extending to the left as fishbones; the ribs branch off the backbone for major causes, with subbranches for root causes, to as many levels as required. Figures 10.4 and 10.5 show two examples of the Ishikawa diagram. Advantages of using this method are the application of a highly visual brainstorming tool which can spark further examples of root causes. It serves to quickly identify if the root cause is found multiple times in the same or different causal tree. The Ishikawa diagram is also a good visualization tool for presenting issues to stakeholders.

10.4 5S Concept The 5S concept in Fig. 10.6 is the name of a workplace organization method that uses a list of five Japanese words: seiri, seiton, seiso, seiketsu, and shitsuke. Transliterated into Roman Script, they all start with the letter “S.” 5S is used to stabilize, maintain, and improve the safest, best working environment thus supporting sustainable QCD-plus alpha. 5S is a systematic and structured workplace optimization, originally developed and used by Toyota. The objective is the identification and elimination of waste. In simple terms, the five S methodology helps a workplace remove items that are no longer needed (sort), organize the items to optimize efficiency and flow (straighten), clean the area in order to more easily identify problems (shine), implement color coding and labels to stay consistent with other areas (standardize), and develop behaviors that keep the workplace organized over the long term (sustain) (Pinto et al. 2018). 5S is a workplace organization method that

117

10.4  5S Concept

Man

Material

Machine X insufficient maintenance √ capacity of machine

X defects from suppliers

X missing qualification X insufficient training

√ engagement operators

Value add (Quality) X Sequence not logical √ Process description X Process intransparent

Method (Process)

X Insufficient flow X Distance too long X Layout deficiencies

Milieu (Environment)

X material cost X Work in progress X Loss

Money

Fig. 10.5  Ishikawa diagram with waste and value-added. (Source: Author’s source) Fig. 10.6  5S system. (Source: Author’s source)

1. Sort (Seiri

)

2. Set in Order

5. Sustain (Shitsuke

)

(Seiton

5SConcept

4. Standardise

3. Shine

(Seiketsu

(Seiso

)

)

)

uses a list of the five Japanese words seiri (sort), seiton (set in order), seiso (shine), seiketsu (standardise) and shitsuke (sustain).  1. 2. 3. 4. 5.

Seiri (整理) Seiton (整頓) Seisō (清掃) Seiketsu (清潔) Shitsuke (躾)

These five words can be translated as “sort,” “set in order,” “shine,” “standardize,” and “sustain.” The 5S methodology describes how to organize a work space for efficiency and effectiveness by identifying and storing the items used, maintaining

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the area and items, and sustaining the new order (Niemann, Reich & Stöhr 2021). The decision-making process usually comes from a dialogue about standardization, which builds understanding among employees of how they should do the work. In some quarters, 5S has become 6S, the sixth element being safety or self-discipline. The advantages of the 5S system are the following: • Creation of transparent layout • Visualization of processes • Transparency of hidden and obvious waste • Eliminates unnecessary activities • Improvement of efficiency • Focus on safety measures • Increases employee motivation through simplification of the work environment • Ensuring that all materials are instantly available • Ensuring that tools are available at the right time in the right place (screwdriver, devices) • Ensuring that required (work procedures, work sequence etc.) information is instantly available • Reduction of waste The first element in the 5S concept is sorting (seiri). In this step it is important to distinguish between necessary and unnecessary things. Things in this context are materials, components, tools, gauges, information, things, and people. Unnecessary things must disappear. Removing these items which are not used in the working area may take a reasonable amount of time. Classification of all equipment and materials by frequency will help to decide if these items can be removed or not. The second step is the setting in order (seiton), the practice of orderly storage so the right item can be picked efficiently at the right time, easy to access for the operators. Identification and allocation of materials, information, tools, and necessary things at fixed and visualized locations are important in this step. In the next and third step (seiso), it is mandatory to create a clean worksite without garbage, dirt, and dust, so problems can be more easily identified (leaks, spills, excess, damage, etc.). In the fourth step (seiketsu), standards for a neat, clean, workplace and operations will be set up through visual management. In the fifth and last stage (shitsuke), it is important to create the environment, patterns, management style, and behaviors that established standards are executed over the long term and making the workplace organization the key to managing the process for success (Helmold & Terry, 2017).

10.5 TIMWOOD: Seven Types of Waste 10.5.1 Transportation Excess transportation is a significant waste because the time, manpower, energy, efforts, and resources required to move items are something the customer does not care and does not want to pay (Ohno, 1990). Examples of wastes of transport are the

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119

Transportation Definition • Unnecessary transport of material • Transport is a necessary type of waste however it should be reduced to a minimum

Possible reasons • Insufficient arrangement of needed material and devices • Physical distance between material delivery and usage • Interim storage of material (buffer)

Consequences • Additional space for transport

Examples • Long or additional transport of:

• Blocking of capacity due to additional logistic effort

• Raw material

• Possible damage of products

• Finished goods • Tools and devices

Fig. 10.7  Transportation. (Source: Author’s source)

transport of product from one functional area such as pressing to another area such as welding or the use of material handling devices to move batches of material from one machine to another within a work cell. It wastes time because operators are dedicating the available time of the workday to moving items from one place to another. It wastes energy and resources in that employee time could be better utilized and because some tools used for transportation (forklifts, trucks, pallet jacks) consume energy like electricity or propane. Also, by dedicating machines and operators’ time to waste activities, they are no longer free and available to take on value-­added activities. Figure 10.7 shows transportation waste. Reasons can be insufficient layouts and long distances between individual operations. The consequences of this waste are the increased time requirements and the decreased productivity. Decreased productivity will result in higher operating cost and can harm the profitability of the enterprise.

10.5.2 Inventory Inventory consists of excessive material of finished goods, semifinished goods, or raw material. Finished goods inventory is generally the most expensive inventory as it has labor and other overhead attached to it along with the cost of material consumed during production. In order to reduce this inventory, process improvements as well as a higher accuracy in forecasting customer requirements is required. Inventory waste refers to the waste produced by unprocessed inventory. This includes the waste of storage, the waste of capital tied up in unprocessed inventory, the waste of transporting the inventory, the containers used to hold inventory, the lighting of the storage space, etc. Moreover, having excess inventory can hide the original wastes of producing the said inventory. The environmental impacts of

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Inventory Definition

Possible reasons

• More material than needed according to planning in terms of: • Raw material • Semi-finished parts • Work in progress (WIP) • Finished goods

• Problems regarding planning and logistic processes • Bad supplier delivery performance and quality • High product variety

Consequences • Capital costs • Double handling, possible damages based on double handling, rework • Genuine problems won’t be discovered and therefore not solved • Search effort • Scrap

Examples • • • • •

Overfilled warehouses Overfilled place in production areas Buffer stocks in production Crammed corridors Crammed desks

Fig. 10.8 Inventory

inventory waste are packaging, deterioration, or damage to work-in-process, additional materials to replace damaged or obsolete inventory, and the energy to light, as well as either heat or cool, inventory space. Figure  10.8 displays the definition, reasons, consequences, and examples for inventory. Inventory will have a negative impact on working capital and on cash flow, so that sophisticated production planning must focus on the optimum levels of inventory throughout the value chain and operations (Helmold et al., 2022).

10.5.3 Motion Motion waste is the excessive movement of man, material, or machines within the workspace. Motion waste will lead to higher cost as the productivity decreases. Another problem of motion is the necessity for more time and capacity in operations than actually required. A proper workflow analysis and value stream mapping help to minimize this waste. Figure 10.9 outlines the definition, possible reasons, consequences, and examples of this waste.

10.5.4 Waiting Idle time of operators or other employees in operations and waiting for work to arrive or to be told what to do is a significant waste. Waiting or standstill times must be avoided as waiting results into reduced efficiency and productivity. Other outcomes are longer lead times and decreasing engagement and motivation of employees as illustrated in Fig. 10.10.

10.5  TIMWOOD: Seven Types of Waste

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Motion Definition • Every type of movement that doesn‘t directly serve value creation

Possible reasons • Inaccurate analysis of all workflows Inappropriate layout • Insufficient delivery of material and arrangement of tools

Consequences • Decrease of productivity • Increase of lead time and capacity • Insufficient ergonomics

Examples • Long ways between tools, material and product or machine • Missing material or tools

Fig. 10.9  Motion. (Source: Author’s source)

Waiting Definition • A period in which no activities take place. • The employee is forced to wait and can‘t fulfil any value added activities. During the holding period the product is waiting for processing

Possible reasons • Insufficiently synchronised material and information flows • Insufficient line balancing of all processes • Missing material or tools • Lack of documentation • Waiting for quality approval

Consequences

Examples

• Reduced productivity

• Waiting for material or tools e.g. crane

• Decreasing efficiency

• Quality employees are not available

• Increased lead time

• Stopped processes due to missing resources (employees, defective machines, IT,...)

• Increase of capacity • Decreased of employee motivation

Fig. 10.10  Waiting. (Source: Author’s source)

10.5.5 Overproduction Overproduction waste is defined as producing too many products too early and in advance. That means that parts in a big quantity are existing inside operations management, even though these parts are not needed. Figure  10.11 displays possible

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Overproduction Definition Definition • If more is produced than the internal or external customer needs

Possible reasons Possible reasons • Insufficient transparency of real demand • Production according to supposed optimal batch sizes • Instable processes • Early use of available capacity

Consequences Consequences • Generation of inventory (warehouse, WIP) • Additional use of space

• Blocking of capacities (machines, employees)

Examples • A lot of material in front of machines or assembly lines • Crowded warehouses

• Double handling, decrease of product quality

Fig. 10.11  Overproduction. (Source: Author’s source)

reasons such as demand nontransparency or inadequate batch sizes. A consequence of this waste is that inventory increases drastically and that work-in-progress cost rises significantly.

10.5.6 Overprocessing Overprocessing is related to all activities and processes in operations, which are more than the customer really needs. Figures 10.12 highlights possible reasons such as insufficient technology, bad design, inefficiencies, or unawareness of customer-­ specific requirements. Overprocessing refers to any component of the process of manufacture that is unnecessary. Painting an area that will never be seen or adding features that will not be used are examples of overprocessing. Essentially, it refers to adding more value than the customer requires. The environmental impact involves the excess of parts, labor, and raw materials consumed in production. Time, energy, and emissions are wasted when they are used to produce something that is unnecessary in a product; simplification and efficiency reduce these wastes and benefit the company and the environment.

10.5.7 Defects Defects as shown in Fig. 10.13 refer to a product deviating from the standards of its design or from the customer’s expectation. Defective products must be replaced; they require paperwork and human labor to process it; they might potentially lose

10.5  TIMWOOD: Seven Types of Waste

123

Overprocessing Definition Definition • Process weakness in terms of sequence, content, technologies and resources

Possible reasons reasons Possible • • • •

Insufficient technology Not the most efficient procedure for the process Insufficient analysis and design of processes Due to process problems the product requirements in the specification are higher than required by the customer

Consequences Consequences

Examples

• High production costs

• High tolerances

• Waste of material

• Wrong, faulty and not needed process steps

• Low efficiency

• Not optimal utilisation of resources

• High need for resources (employee, machine, material)

• Duplication of efforts

Fig. 10.12 Overprocessing

Defects Definition Definition • If right first time is not achieved

Possible reasons Possible reasons • Lack of machine and tool maintenance • Insufficiently trained employees • Product not according to customer requirements • Unstable or not standardized processes • No problem solving process established

Consequences • Additional need for material, tools and capacity

Examples • Increase of non-conformities

• Additional space for rework

• Retrofitting and repairing defect parts

• Increase of quality employees and checks

• Increased quantity of scrap

• Increase of lead time

• Supply issues due to bad quality

Fig. 10.13  Defects. (Source: Author’s source)

customers; the resources put into the defective product are wasted because the product is not used. Moreover, a defective product implies waste at other levels that may have led to the defect to begin with; making a more efficient production system reduces defects and increases the resources needed to address them in the first place. Environmental costs of defects are the raw materials consumed, the defective parts

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T

Transport

How many times? Which routes? Empty containers?

I

Inventory

How much material is in front of a line/machine? What is the material range?

W

Motion

Motions of employee within the workstation: Destination? How many times? Routes? Duration? ˛

W

Waiting

Waiting for material, devices or supervisor? All information available? Missing documents?

O

Overproduction

Compliance with quality? Batch size?

O

Overprocessing

Proper tools? Proper settings? Proper instructions? Proper tolerances?

D

Defects

Which mistakes? How often does it happen? Problem solving system?

Fig. 10.14  TIMWOOD checklist

of the product requiring disposal or recycling (which wastes other resources involved in repurposing it), and the extra space required and increased energy use involved in dealing with the defects. The checklist in Fig. 10.14 is the ideal tool to assess operations in terms of the seven wastes. It is a proven method for identifying waste in process and activities (Helmold & Terry, 2021).

10.5  TIMWOOD: Seven Types of Waste

125

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References Bertagnolli, F. (2020). Lean management. Springer. Helmold, M., & Terry, B. (2017). Global sourcing and supply management excellence in China. Procurement guide for supply experts. Springer. Helmold, M., & Terry, B. (2021). Operations and supply management 4.0 (Industry insights, case studies and best practices). Springer. Helmold, M., et al. (2022). Lean Management, Kaizen, Kata and Keiretsu. Best-practice examples and industry insights from Japanese concepts. Springer. Lehmann, M. (2021). Lean Management mit der 5S-Methode: Praktische Anleitung für effiziente Arbeitsplatzgestaltung und reibungslose Prozesse. Schäfer Pöschel. Niemann, J., Reich, B., & Stöhr, C. (2021). Lean Six Sigma. Methoden zur Produktionsoptimierung. Springer. Ohno, T. (1990). Toyota production system. Beyond large scale production. Productivity Press. Pinto, J. L., et al. (2018). Just in time factory. Implementation through lean manufacturing tools. Springer. Sahoo, S. (2019). Lean manufacturing practices and performance: The role of social and technical factors. International Journal of Quality & Reliability Management, 37(5), 732–754.

Lean Production as Part of QM

11

Quality needs to be constantly improved, but it is just as necessary to make sure that quality never deteriorates. (Shigeru Mizuno)

11.1 Lean Production and Toyota Production System (TPS) 11.1.1 Introduction to the Lean Production System The lean or Toyota Production System (TPS), the just-in-time production system or lean production system can be described as the ideal combination of four principles (Imai, 1986). These principles are the (1) zero defect principle, the pull principle, the tact principle, and the flow principle as displayed in Fig.  11.1 (Helmold & Samara, 2019). The TPS is an integrated socio-technical system, developed by Toyota, that comprises its management philosophy and practices. The TPS is a management system that organizes manufacturing and logistics for the automobile manufacturer, including interaction with suppliers and customers. The system is a major precursor of the more generic lean manufacturing (Bertagnolli, 2020). The pull system is one of the lean manufacturing principles and is used to reduce waste in the production process. In this type of system, components used in the manufacturing process are only replaced once they have been consumed so companies only make enough products to meet customer demand (Pascual, 2013). The opposite principle is the push system, in which as many products as possible are generated to be sold via marketing activities. The principles aim to avoid overproduction and stockpiling, thereby saving working capital, by letting demand dictate the rate at which goods or services are delivered. In this way the customer, or the next step in the chain, “pulls” value through the process. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Helmold, Virtual and Innovative Quality Management Across the Value Chain, Management for Professionals, https://doi.org/10.1007/978-3-031-30089-9_11

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Fig. 11.1  Four major principles in a lean production system. (Source: Author’s source)

Zero-Defect

Tact

Principle

Principle

Pull Principle

Flow Lean Production System

Principle

11.1.2 Pull Principle The starting point in Toyota’s success story, zero defects, is all about identifying errors or defects as closely as possible to where they occur. By so doing and by neither accepting nor passing on defects, issues are resolved quickly and efficiently, avoiding subsequent rework and quality issues. The zero-defect principle is a concept of the Toyota Production System and is aimed at the reduction of defects through error prevention. It is directed at motivating people to prevent mistakes by developing a constant, conscious desire to do their job right the first time. In reality, zero defects are not possible; however, the concept ensures that there is no waste existing in a project (Helmold & Terry, 2016). Waste refers to all unproductive processes, tools, employees, and so on. Anything that is unproductive and does not add value to a project should be eliminated, called the process of elimination of waste. Eliminating waste creates a process of improvement and correspondingly lowers costs. Common with the zero defects theory is the concept of “doing it right the first time” to avoid costly and time-consuming fixes later in the project management process (Belekoukias et al., 2014). The concept of zero defects is grounded on four major elements for implementation in real projects: • Quality is a state of assurance to requirements. Therefore, zero defects in a project means fulfilling requirements at that point in time. • Right the first time. Quality should be integrated into the process from the beginning, rather than solving problems at a later stage. • Quality is measured in financial terms. One needs to judge waste, production, and revenue in terms of budgetary impact. • Performance should be judged by the accepted standards, as close to perfection as possible.

11.1.3 Tact Principle Tact refers to the rhythm at which goods or services are produced to meet customer demand. With a consistent, continuous rhythm providing a heartbeat for your production processes, it is far easier to regulate, responding flexibly and effortlessly as

11.1  Lean Production and Toyota Production System (TPS) Fig. 11.2  Tact time and other ratios

Tact time:

Available production time

(Customer tact)

Customer demand

Optimum Manning level:

Sum of cycle times

LBR:

(Line balance ratio)

LER:

129

(Line efficiency ratio)

Customer tact (Takt) Sum of cycle times Longest OP x No. OP

x 100 %

Sum of cycle times

x 100 % Customer tact (Takt) x No. OP

demand rises or falls. Takt time is defined as the average time available (time available minus breaks, maintenance, or setup) divided by the customer-requested quantity as shown in Fig. 11.2. This is the average time between the start of production of one unit and the start of production of the next unit, when these production starts are set to match the rate of customer demand. For example, if a customer wants 15 units with the available time of 9 minutes and the steady flow through the production line, the average time between production starts should be 36 seconds for one part or unit (9 minutes multiplied by 60 seconds = 540 seconds; 540 seconds divided by 15 units requested by the customer = 36 seconds per part). In fact, the tact time simply reflects the rate of production needed to match the demand. In the previous example, whether it takes 4  minutes or 4  years to produce the product, the tact time is based on customer demand. If a process or a production line is unable to produce at tact time, either demand levelling, additional resources, or process reengineering is needed to correct the issue (Helmold & Terry, 2016). • • • • •

Directly tie production efficiencies to fiscal reporting Reduce investigation time for root cause analysis Shorten equipment ROI through increased utilization Decrease costs through waste elimination Increase customer satisfaction through quality improvement

11.1.4 Flow Principle Value should be added in a smooth, uninterrupted flow, from the start to the end of the production process. The ultimate effect of this principle is that all process steps are focused and aligned to adding value, one piece at a time, removing all wasteful

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U-Type flow OP 1

Preassembly

OP 2

Zick-Zack-Type flow

Assembly 1

OP 1

OP 2 OP 4

Finshing

OP 3

OP 3

Preassembly

Assembly 1

Assembly 2

OP 4

Line-Type flow OP 1

Preassembly

OP 2

Assembly 1

OP 3

Assembly 2

OP 4

Finishing

Assembly 2

Fig. 11.3  Types of flows in operations. (Source: Marc Helmold)

and unnecessary activities from the process. The advantage of a continuous flow in operations is that it features stability, continuity, and balance and does not waste time (the nonrenewable resource). No time wasted on waiting between steps means time is being maximized for its capabilities. Operations are not able to introduce a wasteless process without the continuous flow, as it is the truly ideal process state. However, the troubles with continuous flow are that it is very hard to achieve, process steps are not generally balanced, and all processes contain inherent waste activities. When one starts out to achieve continuous flow, many process problems will appear and come to the surface. Most individuals think this is bad—it is actually a good thing. The optimal process features continuous flow, and any problems that stand in your way from achieving continuous flow are problems that are now visible and can be rectified. The ideal flow is the one-piece flow as shown in Fig. 11.3.

11.1.5 Zero-Defect Principle Zero defect is a concept or philosophy that encourages the adoption of measures to correct manufacturing errors to achieve optimal production, in other words, a production with minimal errors, tending to zero and, preferably, the first time.

11.2 Andon Andon (Jap.: アンドン or あんどん or 行灯) is a lean manufacturing tool referring to a system to notify management, maintenance, and other workers of a quality or process problem. The centerpiece is a device incorporating signal lights to indicate which workstation has the problem. The alert can be activated manually by a worker using a pull cord or button, or may be activated automatically by the production equipment itself. The system may include a means to stop production so the issue

11.3 Poka-Yoke

131

Fig. 11.4  Andon. (Source: Author’s source)

can be corrected. Some modern alert systems incorporate audio alarms, text, or other displays. An Andon system is one of the principal elements of the Jidoka method pioneered by Toyota as part of the TPS and therefore now part of the lean concept. It gives the worker the ability, and moreover the empowerment, to stop production when a defect is found and immediately calls for assistance. Common reasons for manual activation of the Andon are part shortage, defect created or found, tool malfunction, or the existence of a safety problem. Work is stopped until a solution has been found. The alerts may be logged to a database so that they can be studied as part of a continuous improvement program. The system typically indicates where the alert was generated and may also provide a description of the trouble. Modern Andon systems can include text, graphics, or audio elements. Audio alerts may be done with coded tones, music with different tunes corresponding to the various alerts, or prerecorded verbal messages. Usage of the word originated within Japanese manufacturing companies and, in English, is a loanword from a Japanese word for a paper lantern (Imai, 1986). Figure 11.4 shows an Andon example at Alstom in China. The red light means the disruption of production in the respective production operation.

11.3 Poka-Yoke Poka-yoke (ポカヨケ) is a Japanese term that means “mistake-proofing.” A poka-­ yoke is any mechanism in a lean concept a process that helps an equipment operator avoid (yokeru) mistakes (poka). Its purpose is to eliminate product defects by

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11  Lean Production as Part of QM

preventing, correcting, or drawing attention to human or other errors as they occur. The concept was formalized, and the term adopted, by Shigeo Shingo as part of the TPS. It was originally described as baka-yoke, but as this means “foolproofing” (or “idiot-proofing”), the name was changed to the milder poka-yoke.

11.4 Gemba and Shop Floor Management Gemba (現場) is also a Japanese term meaning the real or right place. A production environment considers the shop floor as the most important place and the employees in the operation and support functions as the most important human capital for adding value (Pascual, 2013).

11.5 Shadow Boards Shadow (Fig. 11.5) boards are specific boards for parts, tools, equipment in operations, manufacturing, or service areas to reduce waste and waiting time. The aim of the shadow board is to achieve an organized workplace where tools, supplies, and equipment are stored in appropriate locations close to the work area or workstations. It provides the basis for standardization in the workplace. They are a simple and inexpensive tool which provides tangible efficiencies and cost savings as well as intangible benefits. Figure 11.5 shows a shadow board for screws in Mitsubishi

Fig. 11.5  Shadow board. (Source: Helmold. Shadow board. Mitsubishi Shinkanzen Production in Osaka)

11.6  Health, Safety, Environment (HSE)

133

Japan. The appropriate storage, allocation, and preparation of screws avoid waiting time and the possibility of errors. The advantages of using shadow boards include avoiding waste, such as time looking for the appropriate tool or even having to buy a new one, wasted time in looking for supplies, and interchanging tools between tasks. Shadow boards also provide the ability to quickly gauge the location of tools and equipment or if they are missing. Shadow boards are used in the sort and set in order stages of the implementation and operation of a 5S system in a workplace and kaizen initiatives. Shadow boards can be different sizes and located in many different areas of a process or plant. The key is that they are appropriately located and hold all the necessary tools for the area or workstation.

11.6 Health, Safety, Environment (HSE) Health, safety, and environment (HSE) (in Fig. 11.6) is the concept and paradigm that implements and secures practical aspects of environmental protection and safety at work. From a health and safety standpoint, it involves creating organized efforts and procedures for identifying workplace hazards and reducing accidents and exposure to harmful situations and substances. It also includes training of personnel in accident prevention, accident response, emergency preparedness, and use of protective clothing and equipment. From an environmental standpoint, it involves creating a systematic approach to complying with environmental regulations, such as managing waste or air emissions all the way to helping operations’ departments reduce the company’s carbon footprint. Successful HSE programs also include measures to address ergonomics, air quality, and other aspects of workplace safety that could affect the health and well-being of employees and the overall community. Figure 11.6 displays HSE requirements in a Chinese operations environment.

Fig. 11.6  Health, safety, and environment. (Source: Author’s source)

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11  Lean Production as Part of QM

11.7 Overall Equipment Effectiveness (OEE) Manufacturing a product is a complex process. Without metrics and guidelines, it is very easy to lose control and have your business managed by your production. OEE is a tool that combines multiple manufacturing issues and data points to provide information about the process. By analyzing and calculating data, it also functions as a framework for root cause analysis. Through a documented process of combining the underlying data, OEE provides specific process information. All members of the manufacturing team, from assembly technicians to financial personnel, can use the data to understand the current state of the manufacturing process. By having a predetermined framework of the impact of machine availability, performance, and quality, OEE provides a framework to track underlying issues and root causes. OEE also provides a framework for improvements in the manufacturing process. By using key OEE concepts such as the Six Big Losses, waste exposed by tracking OEE can be understood and efficiencies can be improved. The components of this framework are as follows: • Availability • Performance • Quality OEE is a very simple metric to immediately indicate the current status of a manufacturing process and also a complex tool allowing you to understand the effect of the various issues in the manufacturing process and how they affect the entire process (OEE = availability x performance x quality). Availability refers to the machine or cell being available for production when scheduled. At the most basic level, when a process is running, it is creating value for the end user. When a process is stopped, it is creating a cost with no associated value. Whether it is due to mechanical failure, raw materials, or operator issues, the cell or machine is either producing or not producing. By comparing scheduled run time to actual run time, the availability component of OEE allows for a determination of lost production due to downtime. Performance is determined by how much waste is created through running at less than optimal speed. By comparing the actual cycle times against ideal cycle times, OEE allows for a determination of how much production was lost by cycles that did not meet the ideal cycle time. Quality focuses on identifying time that was wasted by producing a product that does not meet quality standards. By comparing the quantity of good to reject parts, the percent of time actually adding value by producing good product is exposed. By itself, OEE only provides data about your manufacturing process. Companies that use OEE as a metric have found success when combining it with general lean manufacturing programs and also as part of TQM systems. When using OEE with these systems, the benefits become significant: Fig. 11.7 shows an example of the OEE. High-performing companies can achieve an OEE higher than 85% (Helmold & Samara, 2019). In the calculation, the OEE

11.9 Supermarkets

135

OEE (Overall Equipment Ef fect iveness) OEE =

73.5% = Availability:

Availability x Performance x Quality 83.3% x 90.0% x 98.0% 800 Minutes Machine Operat ing Time 960 Minutes Plant Operating Time

Performance:

180 Average Speed qpm (quantity per minute) 200 Average Speed qpm (quant ity per minute)

Quality:

24,974 Good Parts 25,484 Total Parts

Fig. 11.7  OEE calculation. (Source: Author’s source)

has the elements availability (83.3%), performance (90.0%), and quality (98%). Based on the actual figures, it is now possible to optimize each at the inefficient categories. The availability ratio is below 90% and needs special actions for improvements.

11.8 Kanban Kanban (看板) is a visual system for managing work as it moves through a process. It is a concept related to lean and just-in-time (JIT) production, where it is used as a scheduling system that tells you what to produce, when to produce it, and how much to produce. Initially, it arose as a scheduling system for lean manufacturing, originating from the Toyota Production System (TPS).

11.9 Supermarkets Supermarkets ordinarily are located near the supplying process to help that process see customer usage and requirements. Each item in a supermarket has a specific location from which a material handler withdraws products in the precise amounts

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11  Lean Production as Part of QM

Fig. 11.8  Shisa kanko

needed by a downstream process. As an item is removed, a signal to make more (such as a kanban card or an empty bin) is taken by the material handler to the supplying process. Toyota installed its first supermarket in 1953 in the machine shop of its main plant in Toyota City. Toyota executive Taiichi Ohno took the idea for the supermarket from photos of American supermarkets showing goods arrayed on shelves by specific location for withdrawal by customers.

11.10 Shisa Kanko Pointing and calling is a method in occupational safety for avoiding mistakes by pointing at important indicators and verbally calling out their status. It is particularly common on Japanese railways or transportation, where it is referred to as shisa kanko (指差喚呼), shisa kakunin kanko (指差確認喚呼) or yubisashi koshō (指差 呼称). Gesturing at and verbalizing these indicators helps with focus on work safety and concentration. The method was first used by train drivers and is now commonly used in the Japanese industry as part of the lean management philosophy. Figure 11.8 depicts a train driver who is pointing at the direction going before starting the train.

References Belekoukias, I., Garza-Reyes, J. A., & Kumar, V. (2014). The impact of lean methods and tools on the operational performance of manufacturing organisations. International Journal of Production Research, 52(18), 5346–5366. Bertagnolli, F. (2020). Lean Management: Einführung und Vertiefung in die japanische Management-Philosophie. Springer.

References

137

Helmold, M., & Samara, W. (2019). Progress in performance management (Industry insights and case studies on principles, application tools, and practice). Springer. Helmold, M., & Terry, B. (2016). Global sourcing and supply management excellence in China. Procurement guide for supply experts. Springer. Imai, M. (1986). Kaizen. Der Schlüssel zum Erfolg der Japaner im Wettbewerb. Ullstein. Pascual, M. D. (2013). Toyota: Understanding the key to success: Principles and strengths of a business model. Pluma Publishing.

Quality Management on the Supply Side

12

12.1 Supply Side The term supply management as key value-adding function replaces old definitions of procurement or purchasing. This definition is in line with Porter’s description of value chains. A value chain is a set of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market. The concept comes from business management and was first described and popularized by Michael E.  Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance in the upstream supply management or the supply side. Figure 12.1 displays the operations, the upstream supply side (supply management) and the downstream supply side (customer or demand side side). In Porter’s value chain framework (see Fig.  12.2), inbound logistics, operations, outbound logistics, marketing and sales, and service are categorized as primary activities. Secondary activities include procurement, human resource management, technological development, and infrastructure. As many companies have external value chains (purchase of goods, services) of more than 80%, supply management has here the most significant role in any enterprise. In many enterprises, functions are still working independently from each other, leading to a large amount of waste and inefficiencies. Many industries are currently faced by fierce competition. This is forcing manufacturing companies to concentrate on core competencies and to transfer the production of components, goods, and services to external suppliers. The number of value-adding activities has decreased constantly and now lies between 10% and 30% in this industry (Dyer, 1996). The company Apple has no production and decided to outsource the manufacturing of iPads or iPhones to the company FoxConn. Such a development has had a great influence on the structure of supply chains and supplier relationships. Supply chains (the terms “supply chains” and “supply networks” are used synonymously in the literature) have become more complex and international, as pointed out by several

What gets measured gets improved. (Peter Drucker) © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Helmold, Virtual and Innovative Quality Management Across the Value Chain, Management for Professionals, https://doi.org/10.1007/978-3-031-30089-9_12

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Tier 3

Tier 2

Tier 1

Tier 1

Tier 2

Supplier Supplier Supplier Supplier Supplier Supplier

Supplier Supplier Supplier

Supplier Customer

Customer

Supplier

Customer

Operations

Supplier

Customer

Customer

Supplier Supplier

Customer

Customer

Supplier

Downstream Supply Chain Management Demand or Customer Side

Upstream Supply Chain Management Supply Side (Supply Networks)

Fig. 12.1  Resilience in the upstream supply chain. (Source: Author’s source, adapted from Helmold et al. (2019))

Secondary Functions

Research and Development Finance and Controlling Human Resources

Margin

Primary Functions

Primary Function: Supply Management

Operations Management Inbound Logistics

Assembly

Marketing & Sales

Outbound Logistics

After Sales

Enterprise Functions

Fig. 12.2  Porter’s value chain. (Source: Author’s source, adapted from Helmold et al. (2020))

authors Christopher and Peck see the level of complexity increasing in the upstream supply chain management of manufacturing companies in many industries, a trend which is characterized by the growing transfer of activities to suppliers and supplier networks, high numbers of supply chain layers (tiers), and the ongoing globalization of supply chains (Christopher & Peck, 2004). As a consequence, vulnerability and risk exposure have risen significantly. The rapid increase in supplier activities therefore directly affects supply management, as emphasized by

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Emmett and Crocker (2009). In recent years, many companies have reduced their value-adding activities and implemented efficiency-oriented cost reductions, e.g., outsourcing, single sourcing, low-­cost country sourcing, platform concepts, lean management, design-to-cost approaches (Gürtler & Spinler, 2010). Supply management has become more important in core and peripheral business areas and is aimed at building resilient supply chains. Resilience is based on being able to anticipate, manage, and prevent supply chain disruptions at an early stage (Christopher & Peck, 2004). On the other hand, supply risks have risen due to increased dependency on supplier networks. Figure 12.1 depicts the supply chain including the supply management phases. Resilience means the optimum levels of quality, cost, delivery, and alpha objectives. In their research “An Empirical Analysis of the Effect of Supply Chain Disruptions on Long-Run Stock Price,” Hendricks and Singhal (2005) found that enterprises without operational slack and redundancies in their supply chains experience negative stock effects. The authors revealed the tremendous impact of supply chain disruptions on stock price performance and shareholder value. Supply disruptions can easily lead to high recovery cost, waste, and sharp decreases in sales. External customers become dissatisfied and internal core functions (e.g., assembly) are disturbed. In most cases, supply disruptions have negative impacts on brand image, sales figures, and the company’s own financial situation as stressed by many authors writing about supply disruptions and resilient supply chains (Trkman & McCormack, 2009). Recent incidents in the media about disruptions caused by upstream supply management inefficiencies from China show that the supply management excellence approach needs to tackle these issues in a proactive and sustainable way. Supply management risks have mainly been investigated at the direct level of tierone relationships, but consideration has not been fully extended to sub-suppliers, i.e., tiers one, two, three, and beyond. The new concept of supply management therefore seeks to address these concerns by investigating how disruptions can be anticipated, prevented, and managed over the entire value chain including all tiers on the supply and demand side as shown in the figure by Slack et al. (1995). Recent supply disruptions show that current supply management organizations, supply management tools, and concepts are not smart and resilient enough to avoid these supply chain discrepancies. Recent articles, for example, in the magazine “Automotive News,” show that all car producers are facing severe problems due to suppliers’ problems. Not only the automotive industry but also many other industries face these issues. The lean supply management concept was developed by Taichi Ohno (1990), who worked for Toyota Motors. It derived from a bundle of instruments which come from sophisticated production methods or supporting functions such as logistics. The ideal interplay and optimal combination of all instruments are essential for success. The vision of lean production is based on the just-in-time (JIT) philosophy and the Toyota Production System (TPS: Japanese = ト ヨタ生産システム) and focuses on the elimination of waste and the minimization of stock.

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12.2 QM Objectives in Supply Supply side objectives are important. The seven rights (7R), which are the major objectives according to the lean supply management philosophy, can be defined as follows: 1. 2. 3. 4. 5. 6. 7.

Right products. Right quality. Right time. Right quantity. Right location. Right people. Right cost.

The right product refers to the right specification and requirements by the demanding customer. The products must have the required dimensions, layout, material, color, etc. The right quality means the clarification of all requirements in terms of quality and improvement measures to have the optimum quality levels. Quality is normally measured by hard factors such as nonconformities, field rejects, or defects at receipt (0-km defects). The right quantity is the placing of a specific order quantity triggered by internal and customer demands. Supply management has to transfer the customer and company demands to the supply networks. The right time means that products ordered have to be at the buyer’s place in time, neither too early nor too late. Supply management has to recognize suppliers’ lead times. The lead time for any product starts from the order until the physical receipt of goods at the ordering party. The right location can be defined as the place where the products are required. Shipment of products from China to Europe take more than 8 weeks, so that the right location is closely linked to the lead time of products. The meaning of right people extends the current definition of the five rights (Emmett & Crocker, 2009) in line with the modern and lean philosophy of the new paradigm of supply management. Suppliers in global markets need to have the right sales people, project managers, and operators to meet the requested criteria. Project managers must have sufficient language skills and as well operators must be trained to produce good-quality parts. People are becoming in a changing and global trade situation more and more important. Any product needs to have the right cost level; otherwise, it will not be demanded and bought.

12.3 Managing the Supply Side 12.3.1 Supply Management Process Industries or companies which have outsourced a large scope of their products to global supply networks would especially benefit from such research in supply management, supplier relationship management, and supply networks. In conclusion, it

12.3  Managing the Supply Side

143 Supply Management Phases

Definition of Strategies Digitization Strategic Suppliers Make or Buy

Performance Management

Supplier Strategy

Supplier Selection

Secondary Functions

Supply

Operations

Supplier Development Quality Performance

Integration of all Functions Primary Functions

Supplier Evaluation

Marketing & Sales

Supplier Inegration

Supplier Controlling

Concentration on Value-added Processes

Cost and Finance Performance

Delivery Performance

Other Performance Objectives

Fig. 12.3  Supply management process. (Source: Author’s source)

is evident that proactive supply management requires a subset of principles (see Fig. 12.3). The principles can be described as follows: 1. Supply management is a function which is managing the entire value chain; therefore, supply management must be incorporated into the mission, values, and strategies of every organization. 2. Supply management best practices are focused on a multilayer approach, involving not only tier one, but also tier two and three levels; proactive supply management can only be introduced and executed if the corporate objectives are communicated and cascaded throughout the organization; the setup must be centralized as a single point of contact to suppliers. 3. Advanced and innovative supply management has standardized tools and processes. 4. Supply management best practice companies have sophisticated B2B platforms/supplier portals in terms of quality, cost, and delivery and other suitable KPI. 5. Supply management and mitigation action activities have to be preventive, proactive, and sustainable; activities have to be oriented in the long term. 6. Supply management requires a collaborative approach, including strategic alliances with suppliers. Such activities should be organized centrally. 7. Proactive supply management can be performed with a key account manager in terms of being a single point of contact for the supplier (customer). 8. Performance indicators have to be mutually agreed upon and may comprise both hard and soft factors. The assessment process should consist of quality, cost, delivery, and technological criteria. 9. The learning organization should, among other things, be characterized by the capability and competencies of coaching suppliers.

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10. All the abovementioned principles should be combined with a philosophy of continuous improvement (Japanese: kaizen) and reflection (Japanese: hansei) to achieve a best practice model in supply management. Companies that want to distance themselves from their competitors through best-in-class supply management must implement the ten principles and adopt a collaborative approach in dealing with their supply base. Appropriate management of one’s supply base can lead to competitive advantage. The strategic objective of supply management is the establishment, design, and management of supplier networks and the successful collaboration within these networks as the figure shows. The network consists of internal and external suppliers. The collaboration between supply partners and the management of the interactions are a key responsibility of the supply management function. A sophisticated information system is a prerequisite for proper interactions.

12.3.2 Supply Management Strategy Strategic supplier and commodity strategies are a suitable tool in supply management to secure the supply of standard, leverage, shortage, and strategic materials (Hofbauer et al., 2012). • • • •

Strategic suppliers/materials. Leverage suppliers/materials. Shortage suppliers/materials. Standard suppliers/materials.

Strategic Materials/Components Strategic materials can be defined as special materials which are important and key to the own production of an enterprise. Siemens and Alstom (formerly Bombardier) Transportation produce car bodies by themselves; however, aluminum and stainless steel or steel profiles and extrusions are strategic for the production and quality of the end product. Leverage Materials/Components Leverage materials can be defined where the supply side is characterized by many companies which offer the materials. The automotive industry is characterized by more than 10–20 different suppliers, which deliver entertainment products (polipolistic market). Shortage Materials/Components Shortage materials can be defined as materials that are scarce on the market. Scarcity represents a problem to any supply management organization and needs the right establishment of strategies.

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Standard or Catalogue Materials/Components Standard materials are materials that can be bought on the market. Often standard goods are catalogue products like screws, C-parts, etc.

12.3.3 Supply Management Selection and Evaluation Supplier evaluation is the systematic assessment of existing or new suppliers on the basis of certain categories (Fig. 12.4). A supplier evaluation must be: • • • • • •

A preventive and proactive system. A KPI-based methodology. An anticipating (sensoric) model. A holistic and cross-functional assessment. A standardized process. An integrated supply base approach.

These categories can be performance of the delivery, price evolution, production capacity, quality of management, technical capabilities, and service. Once there is a mechanism in place to periodically collect performance data from suppliers, the next step is to review the performance data. Ideally, the format that the data is in should lend itself to comparison and analysis. The data should also be in a format that can be quantified and scored. Many companies use a supplier evaluation or scorecard for this. Moreover, data from different types of assessments such as internal surveys, external surveys, and site visits should be incorporated into the analysis. Since most large organizations have many strategic suppliers and lots of data, it

Supply Management Mission, Vision and Values Information available outside / inside the company

Information available outside / inside the company Quality

e.g. Defects

Supplier Evaluation Preventive

Reactive

Delivery

Cost

e.g. Workshops

Alpha-Criteria

e.g. On-Time-Delivery

e,.g. Qualification, CSR Financial Strength Supplier Risk Management

Other Criteria Insolvency Risk

Fig. 12.4  Supplier evaluation. (Source: Author)

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is almost impossible to obtain, organize, and review data from assessments effectively on a large scale without automation or software. When evaluating supplier performance data, the two things to look for (besides the obvious) are large changes in the performance metrics and overall trends. By identifying trends, a company can make projections about where the performance data will be in the future and can take action accordingly. Downward trends and deterioration in performance can signal a problem. Moreover, an abrupt change in performance metrics might signal an imminent problem. However, there could be another explanation. In this case it makes sense to obtain more data from the supplier and to dig deeper to find the source of the problem. It may be a one-time anomaly or it could be something more. Monitoring supplier performance proactively can ensure that exceptions to policies are tracked and personnel and resources are assigned to address the problem quickly. Alerts and notifications can provide up to the minute information to company personnel letting them know of changes in supplier performance. Having a system that can take the assessment/scorecard data and can output it in a report or other format is helpful because members of the team can all access and review the information quickly and easily. The performance evaluation of Daimler shown in Fig. 12.4 is an example of a supplier evaluation. For part C the performance is very bad, so that immediate actions have to be taken. Once there is sudden drop in supplier performance or a downward trend, it is important to take action quickly. Quick action can reduce the risk of disaster significant loss and gives the company the ability to take steps to prevent bad outcomes. Some actions that can be instigated include communicating with the supplier, conducting further evaluations, developing an improvement plan, or finding an alternative supplier. The actions taken may depend on many factors. These include the supplier’s past performance, level of current performance, strategic importance, possible damages, and overall risk. One of the first things to do is to contact the supplier and find out what went wrong and why. The results of the performance assessment should be provided to the supplier and can create a basis for discussions. The poor performance could have been the result of something outside of the supplier’s control. It could have been a problem with process, personnel, a supplier, or something else. By communicating with the supplier, personnel can determine the cause of the problem and try to work with the supplier to make changes to bring the supplier performance back into compliance with the contract or with company policies. If the vendor does not have a good explanation or understanding of why the problem occurred, this may be a sign of trouble. Once the causes of a problem or set of problems have been identified, the next step is to devise a supplier improvement plan. The plan should be specific to the problem, should involve both company personnel and supplier personnel, and should involve a timeline for addressing the problem or bringing the performance into compliance. This process should also be a collaborative process and should be aimed at improving the overall supply chain. Even if a supplier’s performance is acceptable, the company may wish to invest time and resources in developing suppliers and improving supplier performance. If the problem is too severe, cannot be fixed in a timely manner, or poses too great of a risk, the company may wish to stop doing business altogether with the supplier. This

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means that the company should carefully find an alternative source of supply and, if possible, reduce its reliance on the supplier in question. Emmett and Crocker (2009) and Dust et  al. (2010) also propose using such criteria for evaluating the performance of suppliers. Interestingly, the interviews revealed that many companies have created subcriteria of Q-C-D-SF according to their own needs. Regarding the question of how often manufacturing companies in the European transportation industry measure supplier performance, what they do internally with the data, and how they communicate the results to suppliers, several different answers were given. In the best case, data was updated on a weekly basis and made available to suppliers through a web-based tool. Concerning the evaluation of supplier performance, all interviewees outlined three to four categories, like traffic lights: • Category one (green): acceptable with minor deviations and without conditions. • Category two (yellow): acceptable with conditions. • Category three (red): not acceptable. In category one (green), the evaluation is approved and accepted with minor deviations. In category two (yellow), the evaluation is accepted with conditions. Conditional acceptance means that any subsequent action plan has to be approved by the supply management department. If a supplier shows severe deficiencies and is categorized three (red), the evaluation is not accepted. This can mean that a new supplier is not allowed to supply parts. In cases where category three is measured during serial production, specific supply management actions (e.g., management escalation, supplier audits, dual-sourcing) might be the consequence. Some of the challenges associated with supplier evaluation may be mitigated by the use of appropriate tools. For simple projects, a spreadsheet can be used. But as evaluations become more complex or more frequent, data management and data integrity issues become significant. Web electronic RFP/tendering systems are often used for initial selection projects. Some products provide functionality for combining both initial selection and ongoing evaluation and benchmarking. Without few exceptions, there is no evaluation model which considers the maturity and level of relationship with suppliers. The doctoral thesis “Establishing a best practice model of supplier relationship management (SRM) for multinational manufacturing companies in the European transportation industry” makes suggestions for this aspect. There is also an MBA thesis available, which includes the assessment of the Guanxi for supply management in China. Wider, within established supply management evaluation methodologies, the Carter 10Cs model is an internationally recognized approach (Emmett & Crocker, 2009). This model looks at aspects which should be evaluated before contracting and as part of the ongoing supplier performance appraisal. The ten categories can be summarized as the following: • Capacity (does the organization have the capacity and capability to deliver the order). • Competency (is the organization, its people, or its process competent). • Consistency (does the organization produce a consistent output).

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• Control of process (can the organization control its process and offer flexibility). • Commitment to quality (does the organization effectively monitor and manage quality). • Cash (has the organization got a strong enough financial base). • Cost (is the product or service offered at a competitive price). • Culture (are the supplier and buyer cultures compatible). • Clean (is the organization ethical, funded legitimately, does not engage in child labor). • Communication efficiency (does the organization have support technology of information integration) to support collaboration and coordination in the supply chain.

12.3.4 Control Via Supplier Dashboard or Cockpit A supply or supplier dashboard (or cockpit) provides management with an at-a-­ glance awareness of the status of certain performance indicators such as inventory and supply operations (see Fig. 12.5). Thus, it is possible to respond to challenges before any incident is happening. The supplier dashboard is showing key operational indicators and trends like NCG, OTD, outgoing quality, and sub-supplier performance. Indicators can vary from case to case.

Fig. 12.5  Supplier dashboard. (Source: Helmold and Terry (2016))

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A supplier dashboard or supplier cockpit is a one-page summary of the supplier’s critical performance indicators as shown in the example above. The dashboard is supposed to give managers a quick overview of deteriorations and status on quality, delivery, or other critical issues. It enables the supply manager to take immediate actions based on a graph or a color.

12.3.5 Supply Risks Supply disruptions are defined as “unplanned and unanticipated events that disrupt the normal flow of goods and materials within the supply chain.” They distinguish between coordination risks and disruption risks. Supply chain complexity is described by Adenso-Diaz et al. (2012) as “the sum of the total number of nodes and the total number of forward, backward and within-tier material flows” in the upstream supply chain network. Such complexity has a huge impact on supply chain reliability and supply chain stability. The overall recommendation made in several papers is to reduce the number of suppliers, since supply chain complexity increases the risk of disruption. Adenso-Diaz et al. (2012) highlighted the definitions of various authors, using a variety of criteria: (1) function, (2) type of risk, (3) drivers of risks, and (4) likelihood of occurrence. While the literature on supply management and risk management is growing, there is no organized structure regarding the sources of causal factors for supply chain risks and supply disruptions. Several papers show that supply disruptions can lead to high monetary recovery cost, waste, and sharp decreases in sales as pointed out in one of the previous sections by Jing, (2011). As well as findings in literature other sources such as field research, internal reports, and interviews display that supply disruptions have severe impacts on companies in the analyzed European transportation industry. Supply disruptions and their associated risks have been classified in the literature using a variety of criteria, e.g., function (Christopher & Peck, 2004), type of risk, and drivers of risk. Hendricks and Singhal (2005) pointed out that enterprises without operational slack and redundancies in their supply chains experience negative stock effects. They also revealed the tremendous impacts of supply chain disruptions on stock price performance and shareholder value. Causal factors for supply disruptions are automatically associated with risks in the supply network, as stated by Zsidisin (2003). Several authors outline incidents in which supply disruptions caused production standstill or temporary stops in manufacturing companies in the European industry. Other authors refer to capacity management in terms of supply disruptions as being a crucial risk factor for supply chain discrepancies. Due to such risks, specific measures are necessary in terms of overcoming potential supply disruptions caused by supplier capacity shortages (Hittle & Leonard, 2011). Mitigations and preventive measures can take the form of diverse capacity management, backup equipment, or alternative manufacturing locations, as recommended by Hittle and Leonard (2011). It is useful to compare the supply chain strategies of companies and their resulting ability to cope with some of the abovementioned disruptions. Zsidisin (2003) created models which can be used by managers to measure and assess the

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vulnerability of their company and supply chain in relation to the associated risks. Typology may also provide avenues for future research and thus guide practitioners in the management of their supply chain risk portfolio. Such a classification is a useful tool for supply chain managers in differentiating between independent and dependent variables and the mutual relationships which would help them to focus on those key variables that are most important for effective risk minimization in a supply chain. Zsidisin typologized causal factors for supply disruptions into different categories—high, medium, and low risk—based on managerial perception (Zsidisin, 2003). Other authors besides Zsidian have built on this typology and outlined causal factors for supply disruptions as follows, which comprise the following: • • • • • • • • • • •

Capacity shortages. New product launches. Disaster issues (e.g., earthquake, flood). Lack of supply chain transparency. Labor-related issues (e.g., strike). Constraints on market capacity. Pricing instabilities. Quality discrepancies. Transport issues. Product transfers to sites or plants. Inflexible production capacities.

12.3.6 Method of Evaluation Once a company has decided what it is going to evaluate, the next step is to establish how it will evaluate the performance of the supplier. There are many ways to do this and some are more costly, time-consuming, and resource intensive than others. By quantifying the level of risk and the projected benefit of a method of evaluation, company personnel can determine the most appropriate method or combination of methods that should be used. Some methods that companies commonly use to evaluate and measure supplier performance include (Figs. 12.6 and 12.7): • • • • • • • • • • • •

Site visits by cross-functional teams. Supplier audits (process, special process, or product audits). Paper supplier questionnaires. Web-based supplier questionnaires. Organizing existing data. Internal questionnaires. Requiring external certifications. Developing own certifications. Third party reviews. Phone call with a supplier. Independent ratings. Contacts with other supplier customers.

12.3  Managing the Supply Side

High

151

Strategic Relevance of Commodity

Outsourcing Buy

Own Operations Make

(Partnerships)

(Conzentration)

Make oder Buy

Outsourcing Buy

Low

(Using Market Potential)

Low

Own operations Make (Partial Outsourcing)

Own Capabilities and Abilities

Fig. 12.6  Make or buy strategy. (Source: Author’s source)

Fig. 12.7  Advantages and disadvantages of make and buy strategies

High

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• More than 75 percent external value creation • Suppliers are supplying components and system • Subassemblies are produced in four different countries • Subassemblies are delivered from different national sites to the final assembly lines • OEMs and Suppliers are using one ERP-System Platform • Integrated Systems enable Lean Processes over the Value Chain

References

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From individual supply chain portals ... Fragmentation Portal

Portal

Portal

Suppliers

Portal

Suppliers

Portal

Suppliers

Portal

Suppliers

… to a unique aerospace and defense supply chain platform Process Integration + AirSupply

Suppliers

Lean Integration

References Adenso-Diaz, B., Mena, C. H., Garcia, S., & Liechty, M. (2012). Supply chain management: The impact of supply network characteristics on reliability. An International Journal, 17(3), 1–36. Christopher, M., & Peck, H. (2004). Building the resilient chain. International Journal of Logistics Management, 15(2), 1–5. Dyer, J. H. (1996). Specialized supplier networks as a source of competitive advantage: Evidence from the auto industry. Strategic Management Journal, 17(4), 271–291. Dust, R., Gleiser, M. & Gürtler, B. (2010). Total supplier risk monitoring. Lieferfähigkeit präventiv absichern. MQ, Magazine for Quality and Management, 1–2, 27–29. Emmett, St. & Crocker, B. (2009). Excellence in Supplier Management. How to better manage contracts with suppliers and add value. Best practices in Supplier Relationship and Supplier Development. Cambridge: Cambridge Academic. Gürtler, B., & Spinler, S. (2010). A network-oriented investigation of supply risk and implications to supply risk monitoring. International Journal of Production, 12, 1–27. Helmold, M., Dathe, T., & Hummel, F. (2019). Erfolgreiche Verhandlungen  – Best-in-Class Empfehlungen für den Verhandlungsdurchbruch. Springer. Helmold, M., Dathe, T., Hummel, F., Terry, B., & Pieper, J. (2020). Successful international negotiations. A practical guide for managing transactions and deals (Management for professionals). Springer. Hendricks, K. B., & Singhal, V. R. (2005). An empirical analysis of the effect of supply chain disruptions on long-run stock price performance and equity risk of the firm. Production Operations Management, 21(5), 501–522. Hittle, B., & Leonard, K.  M. (2011). Decision making in advance of a supply chain crisis. Management Decision, 49(7), 1182–1193. Hofbauer, G., et  al. (2012). Lieferantenmanagement. Die wertorientierte Gestaltung der Lieferbeziehung (2nd ed.). Oldenbourg Verlag. Ohno, T. (1990). The Toyota production system. Beyond Large Scale Production. CNC Press. New York. Slack, N. et al. (1995). Operations management. London: Pitman Publishing. Trkman, P., & McCormack, K. (2009). Supply chain risks in turbulent environments – A conceptual model for supply chain network risk. International Journal of Production Economics, 119(2), 247–258. Zsidisin, G.  A. (2003). Managerial perceptions of supply risk. Journal of Supply Chain Management, 39(1), 14–25.

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13.1 QM on the Demand Side 13.1.1 Introduction to Quality Management on the Demand Side Quality means providing value to the customer, that is, offering conditions of product use or service that meet or exceed customer’s expectations, yet are still affordable. Quality also takes into account the reduction of waste that a product may cause to the environment or human society, yet still allowing the manufacturing company to maintain customer satisfaction. Another interesting element within the concept of quality is the “wow” effect. Quality delivers to the customer not only what he wants, but also what he never imagined he wanted—and that once he has it, he realizes that this product was exactly what he always had wanted. However, this is still a very subjective judgment. In today’s world, companies are still struggling to be consistent in meeting basic customer needs. Quality is the degree to which an object or entity (e.g., process, product, or service) satisfies a specified set of attributes or requirements. The quality of something can be determined by comparing a set of inherent characteristics with a set of requirements. If those inherent characteristics meet all requirements, high or excellent quality is achieved. If those characteristics do not meet all requirements, a low or poor level of quality is achieved. Quality is the degree to which a set of inherent characteristics fulfils requirements, a subjective term for which each person or sector has its own definition. In technical usage, quality can have two meanings: In the end, quality is an outcome, a characteristic of a good or service provided to a customer, and the hallmark of an organization which has satisfied all of its stakeholders. Customer requirements are the core ideal behind all quality definitions. Other factors related to quality are exact and desired amount Progress is impossible without the ability to admit mistakes. Kaizen means ongoing improvement involving everybody, without spending much money. You can't do kaizen just once or twice and expect immediate results. You have to be in it for the long haul. (Masaaki Imai) © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Helmold, Virtual and Innovative Quality Management Across the Value Chain, Management for Professionals, https://doi.org/10.1007/978-3-031-30089-9_13

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13  Quality Management on the Demand Side Demand Side Customers Providing Value to Demand Side and Customers

Quality Input

Transformaon

Cost

Output

Delivery + alpha

Fig. 13.1  Customers expect value to be delivered. (Source: Author’s source)

of the product to be manufactured and offered, pace of product distribution, speed of customer service, appropriate pricing in line with supply and demand pressures, degree of accuracy with which a product is manufactured concerning its design, ease of use and safety, reliability, impact the product has on the society and the environment, etc. Figure 13.1 depicts that quality is related to value, which customers expect to be delivered from a company as part of the input-transformation-­output model. Quality elements are demanded and expected in line with the optimal cost and on-time delivery. Additionally, customers have additional expectations (alpha) in terms of friendliness, competencies of personnel, or sustainability.

13.1.2 Quality by Using Efficient Consumer Response (ECR) ECR (efficient consumer response) is a strategy to increase the level of quality and service to consumers through close cooperation among retailers, wholesalers, and manufacturers. By aiming to improve the efficiency of a supply chain as a whole beyond the wall of retailers, wholesalers, and manufacturers, they can consequently gain larger profits than each of them pursuing their own business goals. Companies who compose the supply chain can reduce the opportunity loss, inventory level, and entire cost, as well as increase monetary profitability by sharing the purpose of “customer satisfaction.” “ECR” is a strategic concept compiled by a consulting firm “Kurt Simon Associates” at the request of organizations concerning the US processed food distribution industry, aiming to recover the competitive strength for surviving the turbulent time of the industry when discounters emerged in the United States. For “ECR,” reengineering such as eliminating or adding business operations is performed by checking all business operations of a supply chain of companies by a criterion of whether they contribute to providing higher values to consumers. This aims to provide better convenience, better products, better quality, and better selection of goods and build a “win-win” relationship among companies concerned (i.e., every company of a supply chain wins and gains profits). The first target of ECR is

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to reengineer business processes. To realize the reengineering, information technology such as EDI (electronic data interchange) that is used for accurate and timely exchange of information between companies is necessary. Characteristics of ECR are that reengineering is performed considering final results given to consumers from unified business processes and that can be realized by information technology.

13.1.3 Vendor-Managed Inventory (VMI) Vendor-managed inventory (VMI) is a concept and business model in which the customer of a product range discloses information in terms of production planning, forecasts, and demands to the suppliers (vendor) of those products in order to enable the supplier to take full responsibility for maintaining an agreed inventory quantity of the material, usually at the buyer’s warehouse. In many industries, the VMI is managed for a number of suppliers. VMI will thus help suppliers to optimize material and production in line with customer tact and to deliver material in sequence to the assembly line on request.

13.1.4 Enterprise Resource Planning Integration (ERP) Enterprise resource planning (ERP) is defined as the ability to deliver an integrated suite of business applications. ERP tools share a common process and data model, covering broad and deep operational end-to-end processes, such as those found in finance, HR, distribution, manufacturing, service, and the supply chain.

13.1.5 Quick Response (QR) Quick response manufacturing (QRM) is an approach to manufacturing which emphasizes the beneficial effect of reducing internal and external lead times. Quick response manufacturing (QRM) idea aims at permanent restructuring of manufacturing processes and continuous adjustment of actions to interior and exterior changes. The quick response manufacturing concept is, in a way, a modification of previous systems. Moreover, QRM is apparently directed to compress time in all the action spheres and delivery chains of a company. Its implementation ensures not only effective time management inside a company but also strengthens cooperation between suppliers and recipients. Besides, it also ensures a flexible reaction to market signals and improves competitiveness of a company in the long term. During the last few years, many of the US companies have implemented the QRM strategy, which has given astounding results (Suri & Krishnamurthy, 2003). The typical results were shortening the lead time (80–95% both in the stages of production and planning/administration), lowering product costs (15–50%), quality improvement of delivery realization (40–98%), and better exploitation of materials and a decreased number of corrections (80%). QRM has achieved these results owing to detailed

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management rules, production methods, analysis techniques, and tools. Additionally, QRM takes an extra effort to shorten the time of launching the product into the market.

13.2 Incoterms 2020 The International Chamber of Commerce (ICC) in Paris has been issuing “International Rules for the Interpretation of Commercial Contract Formulas” known as Incoterms (International Commercial Terms) since 1923. The Incoterms rules have become an essential part of the daily language of international trade. They have been incorporated in contracts for the sale of goods worldwide and provide rules and guidance to importers, exporters, lawyers, transporters, insurers, and students of international trade. After the ICC’s creation in 1919, one of its first initiatives was to facilitate international trade activities. In the early 1920s, the world business organization set out to understand the commercial trade terms used by merchants. This was done through a study that was limited to six commonly used terms in just 13 countries. The findings were published in 1923, highlighting disparities in interpretation. To examine the discrepancies identified in the initial survey, a second study was carried out. This time, the scope was expanded to the interpretation of trade terms used in more than 30 countries in 1928. Based on the findings of the studies, the first version of the Incoterms rules was published as a global standard. The terms included FAS, FOB, C&F, CIF, ex ship, and ex quay. Due to World War II, supplementary revisions of the Incoterms rules were suspended and did not resume again until the 1950s. The first revision of the Incoterms rules was then issued in 1953. It debuted three new trade terms for non-maritime transport. The new rules comprised DCP (delivered costs paid), FOR (free on rail), and FOT (free on truck). The ICC launched the third revision of the Incoterms rules, which dealt with misinterpretations of the previous version. Two trade terms were added to address delivery at frontier (DAF) and delivery at destination (DDP). The increased use of air transportation gave cause for another version of the popular trade terms. This edition included the new term FOB airport (free on board airport). This rule aimed to allay confusion around the term FOB (free on board) by signifying the exact “vessel” used. With the expansion of carriage of goods in containers and new documentation processes came the need for another revision. This edition introduced the trade term FRC (free carrier named at point), which provided for goods not actually received by the ship’s side but at a reception point on shore, such as a container yard. The fifth revision simplified the free carrier term by deleting rules for specific modes of transport (i.e., FOR, free on rail; FOT, free on truck; and FOB airport, free on board airport). It was considered sufficient to use the general term FCA (free carrier at named point) instead. Other provisions accounted for increased use of electronic messages. The “License, Authorizations and Formalities” section of FAS and DEQ Incoterms rules were modified to comply with the way most customs authorities address the issues of exporter and importer of record. The Incoterms 2020 is the most current edition of the rules to date. This version

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Reference Table 13.1  Incoterms 2020

Incoterm 2020 EXW FCA FAS FOB CFR CIF CPT CIP DAP DAT DDP

Description English/German Ex works/Ab Werk Free carrier/Frei Frachtführer Free alongside ship/Frei Längsseite Schiff Free on board/Frei an Bord Cost and freight/Kosten und Fracht Cost, insurance, and freight/Kosten, Versicherung und Fracht Carriage paid to/Frachtfrei Carriage, insurance paid to/Frachtfrei versichert Delivered at place/Geliefert benannter Ort Delivered at terminal/Geliefert Terminal Delivered duty paid/Geliefert verzollt

Source: Author’s own table, adapted from Helmold and Terry (2016)

consolidated the D-family of rules, removing DAF (delivered at frontier), DES (delivered ex ship), DEQ (delivered ex quay), and DDU (delivered duty unpaid) and adding DAT (delivered at terminal) and DAP (delivered at place). Other modifications included an increased obligation for buyer and seller to cooperate on information sharing and changes to accommodate “string sales.” To keep pace with the ever-­evolving global trade landscape, the latest update to the trade terms is currently in progress and is set to be unveiled in 2020. The Incoterms 2020 Drafting Group includes lawyers, traders, and company representatives from around the world. The overall process will take 2 years as practical input on what works and what could possibly be improved will be collected from a range of Incoterms rules users worldwide and studied (Table 13.1).

Reference Suri R., & Krishnamurthy A. (2003). How to plan and implement POLCA: A material control system for high-variety or custom-engineered products. Technical report. Center for the Quick Response Manufacturing.

Leadership in Quality Management

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The Toyota style is not to create results by working hard. It is a system that says there is no limit to people’s creativity. People don’t go to Toyota to “work” they go there to “think.” (Taiichi Ohno (1912–1990))

14.1 Leadership in QM Leadership is defined as the way of motivating and directing a group of people to jointly work toward achieving common goals and objectives (Helmold & Samara, 2019; Fatma, 2015). The leader is the person in the group that possesses the combination of personality and leadership skills that makes others want to follow his or her direction. Leadership implies formal and informal power distribution. The Tannenbaum-Schmidt leadership continuum is a model showing the relationship between the level of authority you use as a leader and the freedom this allows your team (Tannenbaum & Schmidt, 2009). At one end of the continuum are managers who simply tell their employees what to do. At the other end of the continuum are managers who are completely hands off. As you move from one end of the continuum to the other, the level of freedom you give your team will increase and your use of authority will decrease. Most managers and leaders will lie somewhere in the middle between these two extremes (Fig.  14.1). The leadership continuum was developed by Robert Tannenbaum and Warren Schmidt in their 1958 Harvard Business Revie (HBR) article: “How to Choose a Leadership Pattern.” Tannenbaum was an organizational psychologist and professor at the UCLA Anderson School of Management. Schmidt was also a psychologist who taught at the UCLA Anderson School of Management. Most leadership models ring-fence a leadership style and analyze it in isolation from other leadership styles. However, in practice, a single © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Helmold, Virtual and Innovative Quality Management Across the Value Chain, Management for Professionals, https://doi.org/10.1007/978-3-031-30089-9_14

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Being passionate

Can NOT be demanded Employee Motivation and Commitment

Using Creativity Taking Self-Initiative Applying Intellect Working hard and dilligently Listening and being obedient

Can be demanded

Can be demanded

Can be demanded

Fig. 14.1  Leadership in lean management focuses on employee motivation and commitment. (Source: Author’s source)

leadership style is not appropriate for all situations. Sometimes you might want to borrow elements of another leadership style to use with an individual within your team. Other times you might completely change your style if the situation requires it. Tannenbaum and Schmidt argued that there are certain questions to be considered when selecting a leadership style (Fig. 14.2): • • • • • • •

What is your preferred style? What are your values? What is your relationship with your team? Are they ready and enthusiastic to take responsibility? How important is the work being undertaken? How important or tight are deadlines? What is the organizational culture?

Modern QM is targeting to have passionate and creative employees as part of the quality management system (Helmold & Terry, 2021). This must be triggered by a leadership styles, which motivates employees to take self-initiative. Empowerment is a key element in QM.

14.1.1 Tells The leader that tells is an authoritarian leader. They tell their team what to do and expect them to do the work and job. This style is useful when you urgently need to turn around a department or business and also in situations where deadlines are

14.1  Leadership in QM

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Continuum of Leadership Styles Leader centred

Tells decision

Sells desicion

Group centred

Decides decision

Leader group Leader presents defines collects problem, problem, Consults ideas and group group decides decides decides decides

QM Leadership Principles

Fig. 14.2 Leadership styles. (Source: Author’s source (adapted from Tannenbaum & Schmidt, 2009))

critical. However, this extreme style can be frustrating for experienced subordinates as it takes no account of team members welfare. Because of this, make sure you only use this style when the situation calls for it.

14.1.2 Sells The leader that sells makes their decision and then explains the logic behind the decision to their team. The leader is not looking for team input, but they are looking to ensure the team understands the rationale behind the decision. A key aspect of this approach is for the leader to explain how the decision will benefit the team. In this way, the team will see the manager as recognizing their importance. Selling as leader is not very motivational.

14.1.3 Suggests The leader that suggests makes their decision, explains the logic behind the decision, and then asks team members if they have any questions. Through asking questions, the team can more fully understand the rationale behind the decision than the

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previous approaches. The leader is not going to change their decision but they do want the team to fully understand the rationale behind it.

14.1.4 Consults The leader that consults presents their provisional decision to their team and invites comments, suggestions, and opinions. This is the first point on the continuum where the team’s opinion can influence or even change the decision. The leader is still in control and the ultimate decision-maker, but open to any good ideas the team may have. With this style, the team feels they can influence the decision-making process. Once the leader has finished consulting with their team, their decision is finalized.

14.1.5 Joins The leader who joins presents the problem to their team and then works with the team in a collaborative manner to make the decision as to how the problem is going to be solved. This point on the continuum differs from the previous four, as it is the first point the leader is not presenting their decision. Instead, they are simply presenting the problem to be solved. This obviously will require plenty of input from the team, making this approach suitable when the team is very experienced or has specialist knowledge. Because this style involves greater input and influence from the team, it can lead to enhanced feelings of motivation and freedom. This is a step toward empowerment and will lead to a higher motivation compared to the other styles.

14.1.6 Delegates The leader that delegates asks their team to make the decision, within limits that the leader sets. Although the team makes the decision, it is still the leader that is accountable for the outcome of the decision. It might seem very risky to let your team make a decision even though you will be held accountable for the outcome. However, you can limit the risk by specifying constraints. You should use this style only with very experienced teams. This leadership targets the empowerment of team members and will lead to a higher motivation.

14.1.7 Abdicates The leader who abdicates lets the team decide what problems to solve and how to solve them.

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165

Abdication is the total opposite of telling the team what to do using an autocratic style. In this leadership style employees are empowered. The team leader acts as a coach. Here the team must shape and identify the problem, as well as analyze all the options available, before making a decision as to how to proceed. They will then implement the course of action without necessarily even running it by the leader. This style can be the most motivating but can be disastrous if it goes wrong. Because of this, you should only use this approach with very experienced and senior people. This style is often the way the executive boards of companies will run. Under the CEO, each of the division heads will have complete autonomy as to how they choose to execute the company’s strategy.

14.2 Empowerment and Jidoka in Modern QM Modern QM is characterized by an open leadership style and empowerment of the team members. A team is defined as a group of people with common goals. A work or project team is a group of persons who are grouped according to process and/or geographical location who support each other. In the lean concept it is important to empower teams as shown in Fig. 14.3. Whereas the conventional approach focuses on top-down decisions, the empowerment-focused approach utilizes the creativity and inputs from the team. Ideas are generated and collected from the team members, which independently decide which options to implement. The basis of this concept is that empowerment will promote ideas, creativity, and innovations from all team

Conventional approach Develop internally

A partnership based approach of implementing an improvement is the suitable long-term solution

Decide internally

Announce

Defend

Empowerment focused approach Collect

Development based on teamwork

Decide

Implement

Fig. 14.3  Empowerment-focused versus conventional approach. (Source: Author’s source)

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or project members. Employee empowerment creates organizational and cultural changes starting with a top management who is willing to trust employees with decisions regarding their work. When it comes to production, many modern companies still operate as they did in the early twentieth century, where the production employees are merely the workers. Modern leadership concepts of empowerment and stopping production to fix a problem found in production are called “jidoka,” which means “getting it right the first time” rather than passing it on to the customer (next workstation). Jidoka is a prime example of the lean philosophy of “quality at the source” which emphasizes that every production worker (and supplier) is responsible and empowered for providing quality material to their customer.

14.3 Autonomous Work Groups Similar to an individual with autonomy at work, an autonomous work group is a team of employees granted autonomy or independence over the work they do within an organization.

14.4 Job Rotation Job rotation is a management approach where employees are shifted between two or more assignments or jobs at regular intervals of time in order to expose them to all verticals of an organization. The process serves the purpose of both the management and the employees. Advantages and disadvantages of job rotation are as follows: Advantages of job rotation • Reduces the monotony of work • Broadens one’s knowledge and skills • Helps the management to explore the hidden talent of an individual • Helps an individual to realize his or her own interest • Helps in creating the right employee job fit • Developing a wider range of experience Disadvantages of job rotation • Reduces uniformity of work • Fear of performing another task effectively • Frequent interruptions in the work • Misunderstanding between the team members or union • Difficulty in coping with other team members • Fear of getting more tedious or a hectic work

References More tasks which give increased responsibility, autonomy and decision-making; qualitative increase

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Job Enrichment

Original Tasks

Job Enlargement More tasks of same type; quantitative increase

Fig. 14.4  Job enlargement and job enrichment. (Source: Author’s source)

The job rotation is beneficial for both the employer and the employee. The employer can identify the vertical where the employee is giving his or her best and can also place him or her in the position of a person who has left because of the retirement, transfer, termination, or any other reason.

14.5 Job Enlargement and Job Enrichment Job enlargement (Fig. 14.4) is an increase in job tasks and responsibilities to make a position more challenging. It is a horizontal expansion, which means that the tasks added are at the same level as those in the current position. The job enrichment is the job design technique used to increase the satisfaction among the employees by delegating higher authority and responsibility to them and thereby enabling them to use their abilities to the fullest. Job enrichment will affect more the motivation, as the quality of work will be enriched to the employee.

References Fatma, P. (2015). The effect of organizational culture on implementing and sustaining lean processes. Journal of Manufacturing Technology Management, 26(5), 725–743. Helmold, M., & Samara, W. (2019). Progress in performance management. Industry insights and case studies on principles, application tools, and practice (Management for professionals). Springer. Helmold, M., & Terry, B. (2021). Operations and supply management 4.0. Industry insights, case studies and best practices. Springer. Tannenbaum, R., & Schmidt, W. H. (2009). How to choose a leadership pattern (Harvard business review classics). Harvard Business Press.

Transformation and Change Management in QM

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The measure of intelligence is the ability to change. (Albert Einstein)

15.1 Transformation and Change Management The permanent change and transformation of organizations is an important element in order to adapt to the environment. Change management can be defined as the sum of tasks, measures, and activities that are intended to bring about a comprehensive, cross-departmental, and far-reaching change in an enterprise or organization. Change management includes the implementation of new a mission, vision, strategies, structures, systems, processes, and behaviors in an organization. The ultimate goal of change is to obtain a long-term favorable position in the market and to gain a sustainable competitive advantage (Helmold, 2021). Synonyms for change management found in literature are business process reengineering, turnaround management, transformation management, lean management, innovation management, or total quality management (Vahs, 2019). Change is increasingly determining the everyday businesses and activities of companies. In order to manage change in the most optimal way, special change management techniques are required, which can be summarized under the term change management (Lauer, 2019, 2020). The human factor is at the forefront of all considerations, because the implementation of change depends on the active support of employees. Since everyone has their own needs, ideas, and experiences, some of which do not conform to the official company organization, there can be no simple recipe for how to successfully manage change. Rather, it is a complex process that has to start at three points: the organization and

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Strategy Mission, Vision, Corporate and Divisional Objectives

Culture Values, Behaviour, Communication, Collaboration

Change Management Triggers in QM Organisation Leadership, Structures, Processes

Technology Systems, Methods, Routines, Instruments

Fig. 15.1  Elements of change management. (Source: Author’s source)

individuals concerned, the corporate structures, and the corporate culture (Lauer, 2019). Another important element in the context is the technological factor including systems, routines, methods, and instruments (Helmold, 2021). Figure 15.1 summarizes the elements of change management (Helmold & Terry, 2021).

15.2 Internal and External Reasons for Change Management The need for corporate change can be caused both externally and internally. Externally, companies face an increasingly dynamic environment that requires constant adjustment of their own structures if they want to be successful in sales and also in the preceding procurement markets. The external change is caused by the market environment, politics, technology, ecology, the overall economy or institutions, and the markets themselves, for example, by increasing competition. To explain internal change, the metaphor of human development is used, which—like corporate development—is characterized by a succession of growth, crisis, and higher maturity. There are so-called life cycle models for entrepreneurial change that exemplify the typical development phases. Change is often necessary, however, because companies are successful in exaggerating the offensive spirit of their efforts. Here too, the connection to the human psyche is established and this phenomenon is analogously referred to as “burnout.” Figure  15.2 outlines triggers for change from outside (exogenous triggers) and inside of the organization (endogenous triggers). Exogenous triggers can be described as governmental requirements, new laws, regulations, economic impacts, competitive reasons, market developments, innovations, or the advice from consultants. Endogenous triggers are caused by internal stakeholders, such as managers, employees, shareholders, banks, investors, or customers.

15.3  Kotter’s Change Management Model Fig. 15.2  Triggers for change. (Source: Author’s source)

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Exogeneous Triggers for Change in QM • • • • • • • •

Governmental Reasons Laws and Regulations Economic Impacts Competition Market Developments Innovations Trends Consultants

Endogeneous Triggers for Change in QM • • • • • • •

Management Employees Banks and Investors Suppliers Customers Other Stakeholders Production and Service Requirements

15.3 Kotter’s Change Management Model Kotter analyzed that 70% of all change projects fail, most of them in the initial phase. This is the research result of John P. Kotter, an expert in the field of change management. Two factors are responsible for the low success rate: Not the technology, but the human being is the greatest obstacle to change. Based on this knowledge, Kotter developed the 8-step model in 1996. The theory shows eight phases of change management and gives managers tips on how to successfully drive change. The focus of the model is communication from person to person (Helmold & Samara, 2019). The 8-step model by John P. Kotter is a further development of the popular 3-phase model by Kurt Lewin. According to the theory, changes in companies can only be successful if they go through all eight stages of change and are intensively accompanied by managers (Kotter, 2012). The eight steps are outlined in Fig. 15.3. 1. Show Urgency Raise awareness of the urgency of change among both managers and employees. For example, develop scenarios that could occur if there is no change. Discuss with your managers and employees and make strong arguments. 2. Build Leadership Coalition Build a good leadership team by getting trendsetting people for your idea and bringing them together under the flag of change. Make sure you have a good mix of people from different departments and with different skills. 3. Develop Mission, Vision, and Strategy Wrap up a strong vision and concrete strategies with which you want to achieve the goal. Communicate this in a well-prepared and strong speech. An overarching goal for the company helps to implement change.

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1. Feeling and Situation of Urgency 2. Transformational Leadership Coalition 22. Mission, Vision and Strategic Objectives 4. Communication of Mission, Vision and Goals 5. Clearing of Obstacles and Roadblocks 6. Establishment of short-term Objectives and Success 7. Consolidation of short- & long-term Objectives 8. Integration of Change into Corporate Culture

Fig. 15.3  Change management model by Kotter. (Author’s source)

4. Communicate the Mission, Vision, and Strategies Constant drip hollows the stone: Do not be afraid to communicate the vision to the managers and employees again and again. This creates trust and increases motivation. 5. Clear Obstacles Are there structures in your company that slow down change? Take a close look at the status quo and get rid of unfavorable organizational structures, work processes, and routines. 6. Make Short-Term Successes Visible Do not set goals that are too time-consuming and costly to begin with, but also define intermediate goals that can be reached quickly. Employees who achieve these goals should be rewarded. 7. Continue Driving Change After each goal is achieved, analyze what went well and what could have gone better. Always develop new ideas and goals and bring new employees to your management team.

15.4  ADKAR Change Management

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8. Anchoring Changes in the Corporate Culture Anchor the achieved goals firmly in your corporate culture. Only after this has been achieved can Kotter speak of a successful change management process (Helmold & Terry, 2016). Since Kotter’s 8-phase model gives specific instructions for successful change management, it can serve you well in practice. Critics complain that Kotter’s model does not explain how to act in the event of setbacks and that initiatives by employees or so-called “bottom-up” perspectives are ignored. However, like no other change management model, it shows the importance of good communication for sustainable change (Kotter, 2012).

15.4 ADKAR Change Management The ADKAR change management model was created by Jeffery Hiatt in 1996. The change management concept is a bottom-up method which focuses on the individuals behind the change. It is less of a sequential method and more of a set of goals to reach, with each goal making up a letter of the acronym. By focusing on achieving the following five goals, the ADKAR model can be used to effectively plan out change on both an individual and organizational level: • • • • •

Awareness (of the need to change) Desire (to participate and support the change) Knowledge (on how to change) Ability (to implement required skills and behaviors) Reinforcement (to sustain the change)

Hiatt sees the change of the individual as the basis for sustainable corporate success. The transformation of an entire company can only succeed through individual changes. Thus, the transformation can be understood as the sum of many small changes. A change is only successful when employees adopt new tools, techniques, and processes, fully implement them, and maintain them in the long term. Then the ROI, the “return on investment,” can also be clearly displayed. When enterprises and its managers drive individual changes, the organization will also master organizational changes. There is no need for complex, time-consuming methods, which are actually a science in themselves! As a change manager and change agent, companies need an easy-to-understand, simple, and comprehensive tool or method with which they can quickly identify gaps and barriers in the change process of the respective employee. Only then management will be able to lead and guide the employees through the change in a targeted manner.

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Strategy

Skills

Structure

Subordinate Goals Shared Values Style

Systems

Staff

References Helmold, M. (2021). Kaizen, Lean Management und Digitalisierung. Mit den japanischen Konzepten Wettbewerbsvorteile für das Unternehmen erzielen. Springer. Helmold, M., & Samara, W. (2019). Progress in performance management. In Industry insights and case studies on principles, application tools, and practice. Springer. Helmold, M., & Terry, B. (2016). Global sourcing and supply management excellence in China (Procurement guide for supply experts). Springer. Helmold, M., & Terry, B. (2021). Operations and supply management 4.0. Industry insights, case studies and best practices. Springer. Kotter, J.P. (2012). Leading change. Harvard Business Review: Harvard. Lauer, T. (2019). Change management: Grundlagen und erfolgsfaktoren. Springer Wiesbaden. Lauer, T. (2020). Change management: Fundamentals and success factors (English Edition). Springer Cham. Vahs, D. (2019). Organisation: Ein Lehr- und Managementbuch. Schaeffer Poeschel München.

Environmental, Social, and (Corporate) Governance (ESG) as Part of Quality Management

16

I believe social responsibility begins with a strong, competitive company. Only a healthy enterprise can improve and enrich the lives of people and their communities. (Jack Welch)

16.1 Definition of ESG With this understanding for climate change and carbon-free industry needs, green thinking, ESG is becoming a mainstream corporate initiative to save and maintain our resources. ESG is the abbreviation of environmental social governance and is seen as part of a further wording and familiar description of corporate social responsibility to evaluate one’s company’s social responsibility (Euramco, 2021). It is seen as voluntary efforts of corporate companies and not driven by country’s law or global regulations. Further, it is a part of the CSR setup for sustainability and ecological behaviors in connection with corporate values, etiquettes, and investment decisions (Euramco, 2021). An important baseline of the overall ESG discussion is the kind of products, what the respected company is offering to their customers, and how those products are manufactured in regard to climate and environmental protection; especially the carbon footprint is more and more a critical element in corporate evaluations. Many corporate companies and nonprofit organizations are targeting CO2-neutral operations in the next decade or even until 2030 with the reduction of plastic components; green efficient electricity like wind, water, or solar energy supply; and sol heating. Also, e-mobility like electric cars, using shared public transportation and avoiding petrol-based cars and kerosine-based planes, are part

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of this development of demonstrating ESG. Further items are to be considered are as follows: • • • • • • • •

Environment management with renewable energy Environment regulation for manufacturing and services Criteria for human capital Product regulation and responsibility Equal payment and tariff payment Antidiscrimination efforts Diversity and inclusion Managing fluctuation of employees (Euramco, 2021)

Those aspects shall provide an understanding of the quality of corporate social responsibility of the companies and how those companies are executing and living its voluntary standards (Euramco, 2021). To underline this, the United Nations Principles for Responsible Investing standard was established, to be signed by companies to enforce their commitment of working against corruption, bribery, and money laundering (Euramco, 2021).

16.2 UN Initiative: Who Cares Wins The storyline of environmental social governance (ESG) was initiated by former UN Secretary Kofi Annan who started the reform of the United Nation in 2003 and wrote a letter at the beginning of the year 2004 to more than 50 executives to join forces to enhance the ESG topic and raise an understanding for protecting our planet by incorporating corporate financials. As a first result of Kofi Annan’s initiative, a paper entitled “Who Cares Wins” by Ivo Knoepfel was published. The report “Who Cares Wins” is connecting markets especially financial markets to a changing world, environment behaviors, and committed recommendation by the corporate financial industry like banks, investment trusts, and insurance companies. The overall frame is the recommendation for the specific integration of environmental, social, and governance aspects in asset management strategies and brokerage investments. Therefore, ESG is also today mainly driven by investment companies like Blackrock, MSCI, and Standard and Poor’s and less by regulators and single states, governments, or political organizations. Moreover, CEOs and board of directors see ESG standards and ratings as a crucial item to satisfy investor and maintain the stock price of its company. Therefore, more and more companies are driving to reshape their business to environmentally friendlier outcomes to satisfy customers and stakeholders also driven by social media pressure and finally its shareholder. However, the main goal is to be a preferred investment by ETF and indices like Dow Jones, MSCI, DAX 50 ESG, etc. with ESG are becoming more and more prominent as a soft standard in the future in comparison to looking only on market share and market capitalization.

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177

The commitment for “Who Cares Wins” was given by the following companies: • • • • • • • • • • • • • • • • • • • • • • •

ABN Amro Aviva AXA Group Banco do Brasil Bank Sarasin BNP Paribas Calvert Group CNP Assurances Credit Suisse Group Deutsche Bank Goldman Sachs Henderson Global Investors HSBC IFC Innovest ISIS Asset Management KLP Insurance Mitsui Sumitomo Insurance Morgan Stanley RCM (a member of Allianz Dresdner Asset Management) UBS Westpac World Bank Group

The list of committed companies indicates a rich diversity of different regions who intend to drive ESG forward as a new standard. The initiative is supported by 20 monetary companies from nine different countries with total assets of US$ 6 trillion under their responsibility. A look closer, Swiss banks like UBS and Credit Swiss are part as well as the US-based Morgan Stanley and Goldman Sachs. A special aspect is that Lehman Brothers and Merrill Lynch as well as Bear Stearns, all known as the investment banks who were massively struggling in the financial crisis in 2008, have not signed and worked on those initiative to invent ESG as such. As we all know Lehmann Brother filed for bankruptcy, Merrill Lynch was acquired by the Bank of America, and Bear Sterns was bailed out by the US Federal Reserve FED and sold to JPMorgan Chase. Therefore, it is interesting that those three financial long-term and up to the 2008 financial crisis well-financed institutions were not considered be part of Kofi Annan’s initiative of environmental social governance (ESG) and failed in the end to manage their company’s overall quality approach to be successful in line with the risk management of their investments. It is unclear and not investigated, if the three companies would have joined the ESG discussion at the beginning to allow them to think about new and enhancing ESG and risk standards and not betting against the American

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Housing market, American homeowners, and finally the American economy as described in the book and movie “The Big Short”. In retrospect, today ESG is popular for new and old investment companies like Blackrock and Vanguard which are dominating the exchange-traded fund investments but also did not sign the UN initiative from 2004. Nowadays, they are offering a range of ESG financial investments in this area as well as MSCI and Standard & Poor’s and using ESG as a positive channel to support worldwide green initiatives in combination with their share-selecting strategy. Blackrock uses its new ESG strategy more and more actively and did not discharge around 53 supervisory boards and supervisory board members in 2020 of many international companies, e.g.: • • • • • •

Daimler Lufthansa Uniper Heidelberger Zement Exxon Volvo

This is part of Blackrock CEO Larry Fink’s strategy announcement in January 2020 to consider environment, social, and good governance aspects more frequently and understand it as a risk mitigation tool since the understanding is that climate risk is also an investment risk in the form of less divided payments or less share price increasing with no or limited ESG consideration by the public-traded companies. This was also the intention of the 20 companies who initiated the ESG together with the UN to reduce investment risks and enhance shareholder value in focusing on risk mitigation, e.g., brand reputation, supporting regulations, and driving market access in new areas and technologies within their overall ESG investment strategies. The understanding of big money in brand reputation is one of the key success factors along the value chain in a globalized and Internet-connected world, especially today with fast on-demand social media updates via Twitter, Facebook, and YouTube where negative publicity like shitstorm is more frequent, faster, and intensive in brand damaging and destroying customer loyalty (see Fig. 16.1). In the end, the 2004 ESG proposal consists of nine elements for more superior investment decision and sustainability in terms of society questions: • Analysts Employees are requested to think more often about environmental social governance chances, influence, and trends and to incorporate the learnings in their daily operational work. Next, there should be passion to gain knowledge and develop working models for ESG to further strengthen the algorithm of investment decisions. For the assets’ class of emerging markets, for which it is more difficult to develop ESG, figures shall be part of the research to support investment decision on the entire global supply chain. Subsequently, usually manufacturing is part of the journey of developing countries coming from a developed country which is seen in the history of the industrialization in Europe and in new

16.2  UN Initiative: Who Cares Wins

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Environment

Social

Companies´s ESG Policy

Customer Satisfaction and Brand Awareness

Governance

Fig. 16.1  ESG and brand reputation connection

developing countries today as well: Environmental focus and social aspects like labor security and green energy are to be considered and developed right from the beginning. To develop the ESG benchmark, also academic linkage is to be enhanced as well as the connection between industrial and academic research. For investment analysts, the portfolio theory for investment classes is an essential part of their daily operational work in compilation of a risk-based approach to ensure the right decision-making at the right time. Those fields are now being supported by ESG. • Companies In corporate organizations, ESG shall be driven by information. To build, to research, to understand, to process, and to distribute information about environmental social corporate governance are the key responsibilities of companies. Especially in quarterly reports, annual reports, and shareholder or stakeholder communication, progress but also areas of improvement need to be communicated to establish the critical thinking and critical mass for ESG. Those communication needs to be simple and standardized to have an opportunity to see differences in the ESG implementation and progress in the different firms for investors. • Consultants and independent financial adviser To be focused on answering question related to ESG and providing industry feedback from an outside view related supporting the global ESG initiative. Further, to act as a change agent to navigate and more often moderate the change in corporate organization to help executive to receive the overall company ESG goals. The big four consulting companies might be a starting point nowadays, e.g., PwC, Deloitte, Ernst & Young, and KPMG, whereby those companies are more known as the Big 4 accounting firms but also offering support for consulting, as financial advisers particular for M&A are seen in banks like Goldman and JP Morgan, which have signed Kofi Annan’s ESG ideas. • Financial institutions Institutions are committed to invest in structures and talents to support environmental social corporate governance pioneering in investment and research

180

•

•

•

•

•

16  Environmental, Social, and (Corporate) Governance (ESG) as Part of Quality…

aspects. Further, building up the capacity of the people and department is a crucial step into a change management process today and in the future. As an essential factor, it is seen that executives, senior management, and board of directors are committing to the ESG launch and driving it with their leadership skills forward. Finally, learning as an organization is one of the elements of this cultural and social change. Investors To invest in ESG key performance indicators (KPIs) and key quality indicators (KQIs) to measure success, failure, and trends of the respected ESG strategy by the invested companies is the task of brokers and asset managers to support the overall environmental and social change in the investment branch. It is important to recognize well-positioned companies which are role models for ESG.  The ESG KPI as a working model based on academic and industry research is to be customized to provide service to investors and help them to execute and defend their investment decision. Nonprofit organization (NGO) As all other market participants, also NGOs are invited to accelerate and promote the ESG model, which is from today’s experiences well-­managed and visible in the ecosystem of most of the stock-listed companies. They are focusing on CSR or ESG aspects and monitoring progress within its own company, by analyzing competitors and within its branch. Pension funds and pension trusts Being a trustee means to ensure and establish decision-making models and risk-­ based approaches regarding its own common tasks and to the commitment to its clients and customers to invest their money safely. In this asset class, the ESG criteria need to be established to support environmental and social investment standards in the role as fiduciary. Regulators Global governments and related institutions, e.g., Central Banks like the US Federal Reserve or the European Central Bank or the Bank of England, regulate the financial system and are requested to support the voluntary ESG approach which are driven by banks, corporate financial institution, analysts, and brokers. As a voluntary approach, regulators look initially into the approach and come up with a draft guideline or regulation later. With ESG, it is intended to be voluntary, but a minimum environment and social insight are also welcomed by the regulators for this UN proposal. Stock exchanges Stock exchanges are places to trade stocks, e.g., New  York Stock Exchange (NYSE), Nasdaq, and Euronext. Further, those institutions create more well-­ known indices, for example, Wall Street icon Dow Jones and S&P 500or German DAX or Shanghai composite and others. In the ESG aspect, the companies are invited to issue ESG indices like DAX 50 ESG. The start was of course by actively communicating ESG behaviors of their listed company and work with rating agencies like Standard & Poor’s, Moddy’s, and Fitch which are also well known as the Big Three in the rating world to include not just financial figures

16.2  UN Initiative: Who Cares Wins Fig. 16.2  Nine proposed elements of collaboration making ESG successful

181

ESG Consultants & Analysts

Companies

Financial Advisers

Financial Institutions

Investors

NGOs

Pension Funds and trust

Regulators

Stock Exchange

but more often also ESG aspects into their rating KPIs. MSCI is also playing an important role with its MSCI indices, e.g., MSCI World or ESG derivates nowadays. The nine elements are the key aspects of the “Who Cares Wins” report (Fig. 16.2). To sum up, the voluntary initiative is well recognized in the world and more and more companies use ESG as a standard to convince investors on an investment in their own company. However, the drive comes after the 2008 financial crisis since social aspects are coming more imported at least on the short term and long term due to more and more influence of ETF index funds. Those ESG aspects were from a traditional point of view not part of the investment decision-making process. Nowadays, the focus is on the following: • • • • • • • • •

Climate change management Company culture policy Diversity and inclusion Labor work condition Health management Innovation performance Safety and security management Supply chain management Water management

In 2008, the ESG investment is estimated with US$ 20 trillion in the world and is further increasing since pressure by banks and investment firms is enhancing. In retrospect, share price evolution was higher with strong ESG focus instead of low ESG engagement by the stock exchange-listed companies. Companies on the shortlist with negative ESG terms are as follows: • Alcohol • Firearms • Tobacco firms

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In addition, coal-mining companies, nuclear energy firms, long-haul and point-­ to-­point airline carriers, and traditional car makers might be considered with a negative ESG rating for investments. Well, the point is that in developed countries, ESG standards can be easily adapted. However, the old pollution-based industry is further part of our global supply chain and a certain level of manufacturing processes is always needed. The alternative to outsource everything or using only recycled materials cannot be the only way of our solution for the moment. The question is how fast can the worldwide production process be adapted to a clean manufacturing process and which technologies are needed? Moreover, developing countries need to have access to ESG as well like low-cost manufacturing countries; otherwise, it is just greenwashing of the developed countries’ stock-listed companies and not a change of our blue planet. With the new ESG rating standards, additional new jobs are arriving and generated like ESG analysts or ESG training specialists. Such ESG talents are highly requested as well as ESG certificates or masterclasses.

16.3 Standards and Regulations in ESG In Europe and the United States, the regulation is increasing on the topic of CSR and ESG.  The EU has intensified its ESG Non-Financial Reporting Directive (Directive 2014/95/EU), and the US Securities and Exchange Commission (SEC) is thinking of enhancing its ESG aspects on financial reporting soon (Gupta, Understanding and Adopting ESG  – An Overview [Part II: ESG Reporting as a Genesis of Fiduciary & Other Legal Obligations], 2021). The International Organization for Standardization (ISO) based in Geneva issued several ISO standards regarding ESG (ISO, 2021; Connexis, 2018): • ISO 14001:2015 Environmental management systems: Requirements with guidance for use • ISO 50001:2018 Energy management systems: Requirements with guidance for use • ISO 45001:2018 Occupational health and safety management systems: Requirements with guidance for use • ISO 26000:2010 Guidance on social responsibility • ISO 22000:2018 Food safety management systems: Requirements for any organization in the food chain • ISO 37001:2016 Anti-bribery management systems: Requirements with guidance for use • ISO 9001:2015 Quality management systems: Requirements • ISO 19600:2014 Compliance management systems: Guidelines • ISO/IEC 27001:2013 Information technology–Security techniques–Information security management systems: Requirements • ISO 56002:2019 Innovation management–Innovation management system: Guidance

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183

• ISO/TC 322 Sustainable finance • ISO 14007:2019 Environmental management: Guidelines for determining environmental costs and benefits • ISO 14008:2019 Monetary valuation of environmental impacts and related environmental aspects • ISO 14030-1 Environmental performance evaluation: Green debt instruments— Part 1, Process for green bonds • ISO 14030-2 Environmental performance evaluation: Green debt instruments— Part 2, Process for green loans • ISO 14030-4 Environmental performance evaluation: Green debt instruments— Part 4, Verification program requirements • ISO 14097:2021 Greenhouse gas management and related activities: Framework including principles and requirements for assessing and reporting investments and financing activities related to climate change • ISO 37000 Governance of organizations: Guidance • ISO 45000 Family Occupational Health and Safety (ISO, 2021, Connexis, 2018) With the increasing number of ISO standards for ESG activities, the numbers of different non-ISO certificates might be increasing as well. Therefore, to establish an overall ISO certification for ESG in the future like ISO 9001:2015 for quality management systems or ISO 13485:2016 for quality management systems regarding medical devices, where a certification by a notified body is being issued, would be beneficial for the entire industry to follow the same approach as the other ISO certificates examples have proven. A notified body, e.g., BSI or TÜV Süd or TÜV Rhineland, is needed for such a certification as a partner of choice for the manufacturing and service industry as well as for EU regulators. On the other side for the US regulators, such concept is supported but is not part of their quality management system. Thus, a common US solution, a dual approach, or a global-like solution like Basel III is a way that global banking regulations were endorsed by G20 countries and is proven as a useful approach. With many different ISO standards listed, there is a better granularity for each single ESG aspect possible to underline the different environmental, social, and governance functions (see Proposed linkage to ESG ISO standards for each single item: Social, Environmental and Governance, *in grouped as social item (ISO, 2021; Connexis, 2018) (Fig. 16.3). The grouping of the different ISO standards was conducted after an initial assessment and needs to be understood as a proposal and contribution to the ongoing discussion in corporate and scientific communities about ESG standardization and potential certifications (Dathe et al., 2022; Helmold et al. 2020). ISO as a global organization started to discuss a new standard ISO/TC 322 on sustainable finance to connect environmental and social aspects together for the corporate financial market in 2020 (ISO, 2021). The aim is to understand the local national regulations and develop one standard for the whole market. Further, the overall UN ESG initiative is supported and is a reaction of the 2019 World Economic

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Fig. 16.3  Norms and regulations in ESG. Proposed linkage to ESG ISO standards for each single item: social, environmental, and governance (ISO, 2021)

Forum Sustainable Development Impact Summit in New  York to foster a higher implementation pace of a more sustainable finance world (ISO, 2021). The elements are as follows (ISO, 2021): • Develop global sustainable ESG terminologies, principles, and standards for the financial markets including banks, investors, and insurance companies. • Reduce confusion and unnecessary efforts of market participants on ESG aspects as well as preventing greenwashing or sustainability washing. • Facilitate role for developing innovation regarding ESG sustainable products within the financial market. • Support standards for third-party evaluation for sustainable financial products and global supply chain. • Define standard KPIs for ESG performance to be measurable by market participants on financial products (ISO, 2021). The overall approach of ISO/TC 322 is supporting the initial idea of the United Nations to roll out the ESG benchmarking from the stock exchanges to the listed companies’ included investors and bank and finally convince all companies to be part of the ESG journey to supporting sustainable product and services for us and planet earth.

References

185

The need of guidelines from independent organizations was seen in the DWS case—the investment arm of the Deutsche Bank—with its former employee Desiree Fixler and discussed in the Wallstreet Journal (Frühhauf, 2021; Finanzen.net, 2021; Die Zeit, 2021). The case was a discussion about ESG approaches and ESG investment figures in DWS financial documentation ((Frühhauf, 2021; Finanzen.net, 2021; Die Zeit, 2021). The discussion also proved the ongoing uncertainty and the need of reliable KPI figures for ESG investments. Especially the reputation of such investment companies can be damaged like the 14% drop of DWS shares price at the end of August 2021 (Frühhauf, 2021; Finanzen.net, 2021; Die Zeit, 2021). Therefore, ESG is being understood as a risk management tool to support the value of a company and its performance, but currently, ESG is still a risk itself since the standards from regulations are not clear enough. However, on a long-term goal and strategy, ESG-focused companies will be more successful (Cini & Ricci, 2018).

References Cini, A. C., & Ricci, C. (2018). CSR as a driver where ESG performance will ultimately matter, Symphonya. Emerging Issues in Management (symphonya.unimib.it), pp. 1, 68–75. Connexis. (2018). ISO: ESG standards & development. Swiss. Retrieved from http://www.connexis.ch/files/product_sheet_iso_esg_standards.pdf Dathe, T., et al. (2022). Corporate social responsibility (CSR), sustainability and environmental social governance (ESG) (Approaches to ethical management). Springer. Die Zeit. (2021). US-Börsenaufsicht ermittelt wegen Greenwashings gegen DWS. Retrieved from https://www.zeit.de/wirtschaft/unternehmen/2021-­08/deutsche-­bank-­tocher-­dws-­url-­dws-­ fondsanbieter-­deutsche-­bank-­tochter-­us-­boersenaufsicht-­ermittlungen-­nachhaltigkeitsa Euramco. (2021). Euramco asset management glossar / wissensdatenbank. Retrieved from https:// www.euramco-­asset.de/glossar/environmental-­social-­governance-­esg/ Finanzen.net. (2021). DWS-Aktie mit Kursrutsch: US-Börsenaufsicht untersucht wohl Nachhaltigkeitsangaben der Deutsche Bank-Tochter. Retrieved from https://www.finanzen. net/nachricht/aktien/beschoenigte-­angaben-­dws-­aktie-­mit-­kursrutsch-­us-­boersenaufsicht-­ untersucht-­wohl Frühhauf, M. (2021). DWS weist Vorwürfe entschieden zurück. Frankfurter Allgemeine Zeitung. Retrieved from https://www.faz.net/aktuell/finanzen/dws-­weist-­vorwuerfe-­entschieden-­ zurueck-­17505019.html Helmold, M., Dathe, R., Dathe, T., Groß, D.-P., & Hummel, F. (2020). Corporate Social Responsibility im internationalen Kontext: Wettbewerbsvorteile durch nachhaltige Wertschöpfung. Springer Gabler. ISO. (2021). International Organization for Standardization. International Standards. Retrieved from https://www.iso.org/home.html

Negotiations in QM

17

Simplicity is the ultimate Sophistication. (Leonardo da Vinci)

17.1 Negotiations in QM 17.1.1 Negotiation Competencies and Skills in QM QM activities involve negotiations with several stakeholders across the value chain. QM responsible employees face negotiations with internal colleagues, customers, suppliers, or stakeholders in the value chain  (Helmold & Terry, 2020). Therefore, it is necessary that employees receive negotiation training as part of the required competency profile. Negotiations in QM consist of negotiations and agreements of quality plans, quality criteria, control plans, deadlines, and many other aspects. There are many negotiation concepts on the market, whereby the sequence of negotiations is identical. Successful negotiations must start with a profound and detailed preparation and will always terminate with the agreement and contractual terms (Helmold et al., 2020).

17.1.2 The A-6 Negotiation Concept for Successful Negotiations A suitable and ideal negotiation concept is the A-6 negotiation concept. This concept is novel, intercultural, innovative, and logical and has already been successfully implemented in various projects (Helmold & Samara, 2019). The practical and easy-to-use concept comprises six phases from A-1 to A-6, which must be taken into account in each transaction in order to achieve optimal success (Helmold et al., 2019). The A-6 concept is a structural concept and contains of six steps. Figure 17.1 © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Helmold, Virtual and Innovative Quality Management Across the Value Chain, Management for Professionals, https://doi.org/10.1007/978-3-031-30089-9_17

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188

Negotiations in QM QM Control Plans

QM Agreements

QM Deadlines

A-6 Negotiation Concept A-1: Analysis of Negotiation Scope and Negotiation Partners A-2: Alignment of Negotiation Strategies and Tactics A-3: Aggregation and Affirmation of Arguments A-4: Accomplishment and Amplification of Negotiations A-5: Ascertation of Resistance and attacking Counterarguments A-6: Administration of Contracts and Agreements Fig. 17.1  A-6 negotiation concept in QM. (Source: Author’s source) Table 17.1  A-6 concept: German and English Steps in the A-6 negotiation concept by Dr. Helmold Steps English German A-1 Analysis of negotiation scope and Analyse der Verhandlungspartner und negotiation partners Determinierung der Ausgangsposition A-2 Alignment of negotiation strategies Auswahl geeigneter Strategien und Taktiken für and tactics die Verhandlungen A-3 Aggregation and affirmation of Aufbau und argumentation der Verhandlungen arguments A-4 Accomplishment and amplification Ausführung der Verhandlungen of negotiations (Verhandlungsführung) A-5 Ascertation of resistance and Abwehr von Gegenargumenten und Bekämpfen attacking counterarguments von Widerständen A-6 Administration of contracts and Ausgestaltung der Verhandlungsergebnisse und agreements Achtung der Vereinbarungen Source: Author’s source

shows the sequence, which begins with a proper analysis of negotiation partners, scopes, motives, and objectives. In the following phases (A-2, A-3), it is important to define strategies, tactics, and the argumentation. The fourth phase is negotiation execution (A-4), and in the fifth phase (A-5), it is important to break resistance by sophisticated negotiation tools. In the last phase (A-6), it is important to define agreements and to keep them (Table 17.1).

189

17.2  Negotiation Manuscript in QM as Key Success Factor

In addition to practical relevance, intercultural issues are also described in international transactions in countries such as the United States, China, France, India, or others. Although the model is aimed at business negotiations, other negotiations, e.g., political negotiations, negotiations among private individuals, negotiations on alimony, etc., should be carried out. Lastly, the A-6 concept is a self-contained construct built sequentially in six steps (Helmold, 2020). This means that after the first step is done, you can go to the second and third up to the sixth and last step (A-6).

17.2 Negotiation Manuscript in QM as Key Success Factor The key success factor and foundation of the A-6 negotiation concept is the script or manuscript (Fig. 17.2), which is described in the context of this chapter. The strategies and tactics determine the reasoning and the structure of the negotiations. The preparation of negotiations with the definition of objectives, analysis of the negotiation opponents, and selection of suitable strategies and tactics is a central point in numerous negotiation concepts (Helmold, 2020, 2022). However, the preparations

1. Negotiation Theme: __________________________________________ 2. Scope

Quality:

Cost:

Delivery:

Technology:

Alpha (others):

3. Analysis of negotiation opponents: Roles & responsibilities (alpha, beta, gamma, omega, delta and kappa): ___________________________________________ ______________________________________ 4. Strategies and Tactics: Potential strategies and tactics: ___________________________________________ ___ ___________________________________________ We: They: ___ 5. Objectives 6. Motives

We:

They:

Argumentaon:

Negoaon opponent:

My reacon:

4. Minimum- und Maximumziele: ___________________________________________ 7. ___ Intercultural aspects

Scope (Q-C-D + alpha)

Personalities

Strategies & Tactics

Objectives Motives

Intercultural aspects

Fig. 17.2  A-6 negotiation manuscript in QM. (Source: Author’s source)

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differ from concept to concept. The majority of negotiation experts use a structured template designed to facilitate professional negotiations (Obrien, 2016). Concepts also often represent the boundaries and the framework that should not be crossed in negotiations (Schranner, 2009). The art of successful negotiation often consists of implementing your own negotiation goals and wishes in conversation with the negotiating opponent as far as possible using suitable strategies, tactics, and tools (Knapp, 2019). Companies are therefore usually looking for assertive managers and negotiators (Schmitz et al., 2006). The negotiation manuscript by Dr. Helmold was developed from the background in 2015 that practical templates for business negotiations were missing. In addition, the A-6 negotiation manuscript has been supplemented with central points in international negotiations such as cultural characteristics. As a systematic and logical concept, the W-questions (what, why, who, how, etc.) help to ideally structure and implement negotiation processes. The A-6 negotiation manuscript is continuously improved to enable negotiators to conduct negotiations professionally (Helmold & Samara, 2019).

17.3 Personalities and Roles in Negotiations Negotiations are carried out by humans and contain certain personalities and roles as shown in Fig.  17.3. The analysis of personalities and roles of the negotiation participants is a crucial activity in phase A-1 and consists of the identification of decision-maker (alpha), influencers (beta), co-workers (gamma), guardians (delta), and potential critics (omega). This step can also serve to identify useful and helpful people that provide suitable information and support (kappa). Negotiations must always concentrate on the decision-maker (alpha) and his/her influencers (beta).

Personalities and Roles in Negotiations

Role in Negotiation

Greek Letter

Alpha

Decision Maker

Beta

Influencer

Gamma

Low Influencer

Kappa

V-Mann

Delta

Guardian

䃓

Convince with facts and benefits.

Omega

Critic

䃈

Observe, try to get Mr. O on our side?

α 䃑 䃒 Κ

How to approach…

Respect as decicision maker! Influence her on quality and price! Involve in discussion and figure out if influencer or not? Try to get information – must be winner.

Fig. 17.3  Personalities and roles in negotiations. (Source: Author’s source)

17.4  Summarizing the Success Factors for Negotiations in QM

191

17.4 Summarizing the Success Factors for Negotiations in QM Dr. Marc Helmold and the co-authors of this book have been working in various management roles in the automotive and railway industries since the late 1990s. In these positions, Dr. Helmold negotiated with national and international customers and suppliers about complex projects in many countries in Europe, the Americas and Asia-Pacific, Japan, and China. Projects worth billions of euros were won as manufacturers of trams, commuter trains, regional trains, and express trains. These projects also always involved difficult and intercultural negotiations. Since 2016, Dr. Helmold is professor of Business Administration, Strategic Management, and Supply Chain Management (SCM) in Berlin. In this position he teaches negotiations in the international context on master levels. In parallel he is conducting research in this area of intercultural conflict management. In addition to teaching and research, he advises companies on international and intercultural business and complex negotiations. Within this function and due to the deficits and weaknesses of existing negotiation concepts in an intercultural context, he developed the A-6 negotiation concept (Helmold et al., 2019). The success criteria for negotiations and application of the A-6 negotiation concept are outlined in Table 17.2.

Table 17.2 Recommenda­ tions for the A-6 concept

Recommendations for the A-6 negotiation concept by Dr. Helmold Recommendation Regular training and acquisition of key competencies through workshops and training Systematic and structured analysis of core elements and critical success factors Assessment of scope, personalities, strategies, motives, objectives, and intercultural elements Consideration of intercultural aspects as key aspects for negotiations Quantification and prioritization of objectives Determination of scope with minimum and maximum objectives (Q-C-D-T plus alpha) Usage of nonverbal analytical tools and tactics (e.g., mirroring) Definition of suitable strategies and tactics (e.g., setting time deadline) Argumentation and sequential proceeding in line with the A-6 structure Source: Author’s source

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References Helmold, M. (2020). Lean management and kaizen. Fundamentals from cases and examples in operations and supply chain management. Springer. Helmold, M. (2022). Leadership. Agile, virtuelle und globale Führungskonzepte in Zeiten von neuen Megatrends. Springer Wiesbaden. Helmold, M., & Samara, W. (2019). Progress in performance management. Industry insights and case studies on principles, application tools, and practice. Springer. Helmold, M., & Terry, T. (2020). Operations and supply management 4.0. Industry insights, case studies and best practices. Springer. Helmold, M., Dathe, T., & Hummel, F. (2019). Erfolgreiche Verhandlungen. Best-in-Class Empfehlungen für den Verhandlungsdurchbruch. Springer. Helmold, M., Dathe, T., & Hummel, F. (2020). Successful international negotiations. A practical guide for managing transactions and deals. Springer. Knapp, P. (2019). Verhandlungs-Tools: Effiziente Verhandlungstechniken im Business-Alltag. ManagerSeminare Verlags GmbH Bonn. Obrien, J. (2016). Negotiations for procurement professionals. 2nd Edition. Kogan Page Croyden. Schmitz, R. et al. (2006). Strategische Verhandlungsvorbereitung: Ein Leitfaden mit Arbeitshilfen Wie Sie Ihre Ziele in 5 Schritten sicher erreichen. Springer Wiesbaden. Schranner, M. (2009). Verhandeln im Grenzbereich. Strategien und Taktiken für schwierige Fälle. 8. Auflage. Econ München.

Problem-Solving, Process, and Idea Creation Tools

18

18.1 Problem-Solving Tools Problem-solving consists of using generic or ad hoc methods in an orderly manner to find solutions to problems. Some of the problem-solving techniques developed and used in philosophy, artificial intelligence, computer science, engineering, mathematics, medicine, and societies in general are related to mental problem-solving techniques studied in psychology and cognitive sciences (Helmold, 2021). The term problem-solving has a slightly different meaning depending on the discipline. For instance, it is a mental process in psychology and a computerized process in computer science. There are two different types of problems—ill-defined and welldefined—and different approaches are used for each. Well-defined problems have specific end goals and clearly expected solutions, while ill-defined problems do not. Well-defined problems allow for more initial planning than ill-defined problems. Solving problems sometimes involves dealing with pragmatics, the way that context contributes to meaning, and semantics, the interpretation of the problem. The ability to understand what the end goal of the problem is and what rules could be applied represents the key to solving the problem. Sometimes the problem requires abstract thinking or coming up with a creative solution.

18.2 A3 Method The A3 process allows groups of people to actively collaborate on the purpose, goals, and strategy of a project. It encourages in-depth problem-solving throughout the process and adjusting as needed to ensure that the project most accurately meets its intended goal (see Fig. 18.1). The A3 process is a problem-solving tool Toyota The quality, not the longevity, of one’s life is what is important. (Martin Luther King) © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Helmold, Virtual and Innovative Quality Management Across the Value Chain, Management for Professionals, https://doi.org/10.1007/978-3-031-30089-9_18

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Title:

Owner:

Date:

1. Problem Analysis and Problem

5. Proposed Counter Measures

2. Current Condition

6. Plan

3. Goals and Target Condition

7. Follow Up and review

4. Root Cause Analysis

Fig. 18.1  A3 method. (Source: Author’s source)

developed to foster learning, collaboration, and personal growth in employees. The term “A3” is derived from the particular size of paper used to outline ideas, plans, and goals throughout the A3 process (A3 paper is also known as 11″ × 17″ or B-sized paper). Toyota uses A3 reports for several common types of work: • Solving problems • Reporting project status • Proposing policy changes (policy meaning rules agreed upon and enforced by the group) In most organizations, on most teams, we are not collaborating as strategically as we could be. We leave meetings with ideas half-baked. We often move hastily to begin working on implementing a solution, without aligning around important details. Projects move slowly due to rework and duplicate effort, two symptoms of a lack of alignment. The A3 process allows groups of people to actively collaborate on the purpose, goals, and strategy of a project. It encourages in-depth problem-solving throughout the process and adjusting as needed to ensure that the project most accurately meets its intended goal. The A3 process prescribes to the famed quote by Abraham Lincoln: “Give me six hours to chop down a tree and I will spend the first four sharpening the axe.” The A3 process helps an organization sharpen its proverbial axes by fostering effective collaboration, bringing out the best problem-solving in teams. Collaboration between talented people is critical for innovation and speed. Using the A3 process to foster collaboration can help organizations and teams invest their time, money, and momentum most effectively.

18.2  A3 Method

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Steps of the A3 Process There are nine (well, ten) steps in the A3 process. 0. Identify the problem Since the purpose of the A3 process is to solve problems or address needs, the first, somewhat unwritten, step is that you need to identify a problem or need. 1. Capture the current state of the situation Once you align around the problem or need you would like to address, then it is time to capture and analyze the current state of the situation. Toyota suggests that problem-solvers: Observe the work processes firsthand and document your observations. Gather around a whiteboard and walk through each step in your process. You can use fancy process charting tools to do this, but stick figures and arrows will do the job just as well. If possible, quantify the size of the problem (e.g., percent of tickets with long cycle times, number of customer deliveries that are late, number of errors reported per quarter). Graph your data if possible; visualizations are really helpful. 2. Conduct a root cause analysis Now that you see your process, try to figure out the root cause of the efficiencies. You can ask questions like: Where do we suffer from communication breakdowns? Where do we see long delays without activity? What information are we needing to collaborate more effectively/smoothly? Document these pain points, and then dig deeper. The 5 whys is a helpful tool for conducting a thorough root cause analysis. The basic idea is that you begin with a problem statement, and then you ask “Why?” until you discover the real reason for the problem. You may or may not have to ask why exactly five times— this is simply an estimate. 3. Devise countermeasures to address root causes Countermeasures are your ideas for tackling the situation; the changes to be made to your processes that will move the organization closer to ideal by addressing root causes. Countermeasures should aim to: Specify the intended outcome and the plan for achieving it Create clear, direct connections between people responsible for steps in the process Reduce or eliminate loops, workarounds, and delays. 4. Define your target state Once you have selected your countermeasures, you are able to clearly define your target state. In the A3 process, you communicate our target state through a process map. Be sure to note where the changes in the process are occurring so they can be observed.

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5. Develop a plan for implementation Now that you have defined your target state, you can develop a plan for how to achieve it. Implementation plans should include: A task list to get the countermeasures in place Who is responsible for what Due dates for any time-sensitive work items Most teams choose to document their implementation plan in their A3. 6. Develop a follow-up plan with predicted outcomes A follow-up plan allows lean teams to check their work; it allows them to verify whether they actually understood the current condition well enough to improve it. A follow-up plan is a critical step in process improvement because it can help teams make sure the: Implementation plan was executed Target condition was realized Expected results were achieved These first six steps are captured in the A3 report. Most teams use a template for their A3. 7. Get everyone on board The goal for any systemic improvement is that it improves every part of the system. This is why it is vital to include everyone who might be affected by the implementation or the target state in the conversation before changes are made. Building consensus throughout the process is usually the most effective approach, which is why many teams choose to include this at each critical turning point in the A3 process. Depending on the scope of the work, it might also be important to inform executives and other stakeholders who might be impacted by the work. 8. Implement! Now it is time for implementation. Follow the implementation as discussed, observing opportunities for improvement along the way. 9. Evaluate results In far too many situations, the A3 process ends with implementation. It is critical to measure the actual results and compare them to your predictions in order to learn. If your actual results vary greatly from what was expected, do research to figure out why. Alter the process as necessary, and repeat implementation and follow-up until the goal is met.

18.3 8D Method Eight disciplines of problem-solving (8Ds) is a method developed at Ford Motor Company used to approach and to resolve problems, typically employed by engineers or other professionals. Focused on product and process improvement, its purpose is to identify, correct, and eliminate recurring problems. It establishes a

18.4 Kepner–Tregoe

197

permanent corrective action based on the statistical analysis of the problem and on the origin of the problem by determining the root causes. Although it originally comprised eight stages, or disciplines, it was later augmented by an initial planning stage. 8D follows the logic of the PDCA cycle. The disciplines are as follows: • D0: Preparation and emergency response actions. Plan for solving the problem and determine the prerequisites. Provide emergency response actions. • D1: Use a team. Establish a team of people with product/process knowledge. Teammates provide new perspectives and different ideas when it comes to problem-solving. • D2: Describe the problem. Specify the problem by identifying in quantifiable terms the who, what, where, when, why, how, and how many (5W2H) for the problem. • D3: Develop interim containment plan. Define and implement containment actions to isolate the problem from any customer. • D4: Determine and verify root causes and escape points. Identify all applicable causes that could explain why the problem has occurred. Also identify why the problem was not noticed at the time it occurred. All causes shall be verified or proved. One can use five whys or Ishikawa diagrams to map causes against the effect or problem identified. • D5: Verify permanent corrections (PCs) for the problem that will resolve the problem for the customer. Using preproduction programs, quantitatively confirm that the selected correction will resolve the problem. (Verify that the correction will actually solve the problem.) • D6: Define and implement corrective actions. Define and implement the best corrective actions. Also, validate corrective actions with empirical evidence of improvement. • D7: Prevent recurrence/system problems. Modify the management systems, operation systems, practices, and procedures to prevent recurrence of this and similar problems. • D8: Congratulate the main contributors to your team. Recognize the collective efforts of the team. The team needs to be formally thanked by the organization. 8Ds have become a standard in the automotive, assembly, and other industries that require a thorough structured problem-solving process using a team approach (Fig. 18.2).

18.4 Kepner–Tregoe Kepner–Tregoe (also sometimes called KT analysis) is a company that specializes in problem-solving (also sometimes known as problem-solving method). Kepner– Tregoe was founded in 1958 by Charles Kepner and Benjamin Tregoe. The two company founders are considered pioneers of rational working methods and have researched and visualized the basic solution thought patterns of people

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D1

D2

Team Formation and Set Up Problem Discription Immediate Containment Actions

D3 Root Cause Analysis D4 Selection of corrective Actions D5 Implementation and Validation D6

Preventive Actions D7 Closure of the Issue (Final Meeting) D8

Fig. 18.2  8D process. (Source: Author’s source)

(Kepner-­Tregoe, 2020). In the area of these thought processes, problem analysis, decision analysis, rational project management, analysis of potential problems, situation analysis, strategy formulation and implementation. And as fundamental methods to permanently establish thought processes. Under the term “Kepner–Tregoe,” there are several methods to solve different “tasks.” Basically, the term “problem” is differentiated from “decision.” Different tasks that people face require fundamentally different approaches. The processing of these tasks sometimes requires different processes. Exactly this difference becomes clear through the situation analysis. Furthermore, the classified tasks can be solved through various processes. Problem analysis is now regarded as “best practice” in the field of operational and service excellence. It enables the identification of unknown causes in order to subsequently eliminate them. Decision analysis provides the rational claim for the best available solution that is to be implemented. Situation analysis determines all necessary tasks; clarifies and prioritizes them; presents them in a special to-do list, the so-called action item list (AIL); and prepares the solution with the right tools. The analysis of potential problems is a process to avoid future problems and to be prepared for the damage reduction in an emergency.

18.5 TRIZ

199

18.5 TRIZ TRIZ is the Russian acronym for Teoria reschenija isobretatjelskich sadatsch (Russian: теория решения изобретательских задач), which translates as the theory of inventive problem-solving. RIZ was founded on the assumption that by sifting through a large number of patents, then selecting, and valuing those describing technical breakthroughs, one would discover generally applicable innovative principles and even laws of invention. Figure 18.1 shows the concept of TRIZ, in which specific problems can be resolved with generic problem solutions. The method was initiated by Genrich Saulowitsch Altschuller and Rafael Borissowitsch Shapiro under the influence of Dmitri Dmitrijevitsch Kabanov around 1954–1956. G. Altschuller and R. Shapiro, who did further research and improvements, recognized three essential principles as early as 1956: • A large number of inventions are based on a comparatively small number of general solution principles. • Only overcoming contradictions makes innovative developments possible. • The evolution of technical systems follows certain patterns and laws. With the help of this method, inventors try to systematize their activities in order to find new solutions to problems faster and more efficiently. The TRIZ method has meanwhile spread around the world and is “rapidly developing” (Zobel). In the Anglo-Saxon language area, the term TIPS (theory of inventive problem-solving) is also common. The TRIZ contains a number of methodical tools that make it easier to define and analyze a specific technical problem based on a target description in order to break it down to its abstract components and to find a solution in the abstract space. The abstract solution is then creatively translated into possible specific solutions. A solution is selected from this amount. This prevents the problem from being prematurely deduced to a solution. Instead, TRIZ uses a stock of already existing solution processes. The methods of classic TRIZ are as follows: • • • •

Innovation principles and contradiction table Separation principles for solving physical contradictions Algorithm or step method for solving invention problems (ARIZ) System of 76 standard solutions and substance–field analysis (SFA, formerly also called WEPOL analysis) • S-curves and laws of the development of systems (evolution laws of technical development, laws of technical evolution) • Principle (law) of ideality • Modeling of technical systems with the help of “little men” (dwarf models) Further methods that are assigned to TRIZ, but which are not included in the classic teaching, but were developed by Altschuller’s students, are: • Innovation checklist (Innovation Situation Questionnaire)

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• Functional structure according to TRIZ (a kind of cause-and-effect diagram, which however does not correspond to Ishikawa Kaoru’s cause-and-effect diagram, is also called problem formulation) • SAO functional model (subject–action–object, an extended functional model based on Miles’ basic work on “value analysis”) • Process analysis • GZK operator (size–time–cost) • Anticipatory error detection • Resource checklists In most cases, TRIZ does not mean the abovementioned collection of methods and tools, but only refers to the contradiction table and the 40 innovative principles as “the TRIZ.” However, these are controversial in the professional world in terms of handling and mode of operation. The TRIZ contains 40 principles or “40 rules of innovation” (sometimes also 40 innovative principles, 40 IGP—40 innovative basic principles called). One of these rules is the “principle of the nesting doll (matryoshka)” (also called “integration”): You transfer an object into the inside of another. These abstract rules are in detail: 1. Dismantling 2. Separation 3. Local quality 4. Asymmetry 5. Coupling 6. Universality 7. Integration (plug-in doll, matryoshka) 8. Counterweight 9. Previous counteraction (early counteraction) 10. Previous effect (earlier effect) 11. Principle of the “previously placed pillow” (prevention) 12. Equipotentiality 13. Function reversal (inversion) 14. Similarity to spheres (spheroidality) 15. Dynamization 16. Partial or excessive effect 17. Transition to other dimensions (transition to higher dimension) 18. Use of mechanical vibrations 19. Periodic effect 20. Continuity of useful effect (continuity of active processes) 21. Principle of rushing through (skipping) 22. Conversion of harmful into useful 23. Feedback 24. Principle of the “mediator” 25. Self-service 26. Copy 27. Cheap short life instead of expensive long life

18.6 PDCA

201

28. Replacement of the mechanical system (replacement of mechanical operating principles) 29. Use of pneumo- and hydrosystems 30. Use of flexible sleeves and thin foils 31. Use of porous materials 32. Color change 33. Similarity (homogeneity) 34. Elimination and regeneration of the parts 35. Change in physical and chemical properties (change in physical state) 36. Application of phase transitions 37. Application of thermal expansion 38. Use of strong oxidizing agents 39. Use of an inert medium (use of an inert medium) 40. Use of composite materials (use of composite materials) These rules are mostly used in connection with a so-called contradiction matrix or contradiction table. This matrix has different technical parameters in the first row and in the first column (in an identical order). In the individual fields of the matrix, the individual parameters are thus opposed to each other (similar to a season game table in soccer). The diagonal of the matrix remains empty, because here one and the same parameter is facing each other (which could be solved with the physical contradictions). As far as the other fields are concerned, it is assumed that the assigned parameter in the column is supposed to improve, while the parameter in the corresponding row deteriorates as a result. Herein lies the contradiction. The field in which row and column cross each other uses individual numbers to name the innovative basic rules of TRIZ that can help to overcome this contradiction. A developer who works with the contradiction matrix must therefore first be clear about which parameters of the system he is developing should be improved. He then has to determine which other parameters would usually worsen as a result of these improvements. Finally, the developer abstracts these parameters so that he can assign them to parameters of the first row and column of the contradiction matrix. Ultimately, this brings him to the abstract rules of TRIZ, which are suitable to help overcome the contradictions that arise in the course of development. On the basis of examples and the concretization of the rules for the development object, thoughts are stimulated how the existing development contradictions can be overcome (Fig. 18.3).

18.6 PDCA Deming defined the PDCA sequence for optimizing concepts, processes, and procedures in terms of an incessantly repeating cycle as follows: • • • •

Planning (plan) Application (do) Verification of the results (check) Optimization with standardization (act)

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TRIZ General Solution

TRIZ General Problem

TRIZ

Problem Analysis

Specific Problem

Specific Solution

Evaluation and Selection

Fig. 18.3  TRIZ model. (Source: Marc Helmold)

• Implement • Implement new Standrad

• Analysis • Develop Concept

Act

Plan

Check

Do

• Test • Define new Standard

• Optimize • Check new Standard

Fig. 18.4  PDCA cycle. (Source: Author’s source)

The PDCA cycle is (see Fig. 18.4.) used as a problem-solving strategy. First, the problem is precisely defined and specified so that it can be analyzed more clearly and effectively. Then the real cause of the problem is eliminated and the effectiveness of the improvement is checked. If one comes to the result that the improvement was successful, standardization prevents falling back in times before the improvement.

18.7  Six Sigma

203

18.7 Six Sigma Six Sigma (6σ) is a management system for process improvement and statistical quality target and at the same time a method of quality management. Its core element is the description, measurement, analysis, improvement, and monitoring of business processes with statistical means. It is a method with a comprehensive set of tools for the systematic improvement or redesign of processes. The work breakdown structure for process improvement projects follows the procedure define–measure–analyze– improve–control (DMAIC). DMAIC (define–measure–analyze–improve–control, in spoken language: di-meɪk, to German define–measure–analyze–improve–control) stands for the phases of a process management process. DMAIC is the core process of the Six Sigma quality management approach and is used to design processes in such a way that they stably maintain a specified Six Sigma performance level. DMAIC is used to improve existing products. Within the individual phases of a DMAIC or DMADV project, Six Sigma utilizes many established quality management tools that are also used outside Six Sigma. The following table shows an overview of the main methods used. • • • • • • • • • • • • • • • • • • • • • • • • •

Whys Statistical and fitting tools Analysis of variance General linear model ANOVA gauge R&R Regression analysis Correlation Scatter diagram Chi-squared test Axiomatic design Business process mapping/check sheet Cause-and-effect diagram (also known as fishbone or Ishikawa diagram) Control chart/control plan (also known as a swimlane map)/run charts Cost–benefit analysis CTQ tree Design of experiments/stratification Histograms/Pareto analysis/Pareto chart Pick chart/process capability/rolled throughput yield Quality function deployment (QFD) Quantitative marketing research through use of enterprise feedback management (EFM) systems Root cause analysis SIPOC analysis (suppliers, inputs, process, outputs, customers) COPIS analysis (customer-centric version/perspective of SIPOC) Taguchi methods/Taguchi loss function Value stream mapping

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18.8 Value Stream Mapping The value stream analysis is a business management method for improving process management in production and services. It is also referred to as the value stream recording of an actual state, value stream mapping (VSM). This first process step of the so-called value stream management provides a model of the material and information flows of the individual value streams. The non-value-adding processes are identified in the analysis. In the following design approach, an improved value stream is designed in the context of a value stream design, in which the non-value-­ adding activities and unnecessary idle times are eliminated. The transition from the actual to the target value stream is planned using the value stream planning. The comparable approach in service management does not minimize idle times, but the individual waiting times between activities.

18.9 RPR Method RPR deals with failures, incorrect output, and performance issues, and its particular strengths are in the diagnosis of ongoing and recurring gray problems. The method comprises: • Core process • Supporting techniques The core process defines a step-by-step approach to problem diagnosis and has three phases: • • • • • • • • • • •

Discover Gather and review existing information Reach an agreed understanding Investigate Create and execute a diagnostic data capture plan Analyze the results and iterate if necessary Identify root cause Fix Translate diagnostic data Determine and implement fix Confirm root cause addressed

The supporting techniques detail how the objectives of the core process steps are achieved, and cite examples using tools and techniques that are available in every business.

Creativity Tools in QM

19

19.1 Brainstorming Brainstorming is an idea generation method developed by Alex F. Osborn in 1939 and modified by Charles Hutchison Clark, the purpose of which is to encourage the generation of new, unusual ideas in a group of people. He named it after the idea behind this method, namely, using the brain to storm a problem (literally: using the brain to storm a problem). In brainstorming, ideas and suggestions on a topic are freely expressed and collected. It does not matter how mature and high quality an idea is, but first of all that as many ideas as possible are collected. It is important that all participants collect and publish ideas.

19.2 Mind Mapping A mind map is a diagram used to visually organize information into a hierarchy, showing relationships among pieces of the whole. It is often created around a single concept, drawn as an image in the center of a blank page, to which associated representations of ideas such as images, words, and parts of words are added. Mind mapping is a powerful note-taking method. Mind maps not only highlight important facts, but also show the overall structure of a subject and the relative importance of individual parts of it. They are great when you need to think creatively and can help you to make new connections between ideas.

19.3 Design Thinking 19.3.1 The Concept of Design Thinking Design thinking (in Fig. 19.1) is a customer-centered and iterative method for solving complex problems and developing new ideas. With the design thinking method, you succeed in developing a solution that is superior from the customer’s point of Quality is never an accident. It is always the result of intelligent effort. (John Ruskin) © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Helmold, Virtual and Innovative Quality Management Across the Value Chain, Management for Professionals, https://doi.org/10.1007/978-3-031-30089-9_19

205

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Empathise

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Define

Idea

Prototype

Text

Implement

Fig. 19.1  Design thinking process. Source: Author’s source

view, taking into consideration economic efficiency, feasibility, and desirability. Design thinking is based on the assumption that problems can be solved better if people from different disciplines work together in an environment that promotes creativity, develop a question together, take into account the needs and motivations of people, and then develop concepts that are repeatedly checked. The process is based on the work of designers, which is understood as a combination of understanding, observation, definition of standpoints, brainstorming, prototype development, and testing. At the same time, the word thinking stands for the fact that, as in a research project, the feasibility and profitability of the innovations are systematically examined. According to another understanding, design thinking means “any process that applies the methods of industrial designers to problems beyond how a product should look” (“any process that applies the methods of industrial designers to problems that go beyond the appearance of a product”). Design thinking thus combines three fundamental core aspects: benefit, feasibility, and marketability. Accordingly, the benefits for people, the technological feasibility, and the economic marketability are brought into harmony in order to create a perfect innovation and to solve the problem flawlessly. All points should be weighted equally. The six named and basic steps of design thinking can be described as follows: 1. Understanding and empathizing 2. Defining 3. Finding idea 4. Prototyping 5. Testing 6. Implementing

19.3.2 Understanding and Empathizing The problem at the beginning is at best defined with a team of several people. It is important to create a general understanding and to bring everyone involved on the same page. Specific questions can be, for example: What should be newly developed? For whom should the development be relevant? Which essential (current or future) framework conditions have to be taken into account? Which final state should the solution achieve? Observing in this stage is about being able to empathize with the customer. An analysis of the customer’s will is possible, for example, through an interview or role-play. It is important to let the customer do the talking. Good listening is the most important part of the job; otherwise, misunderstandings can arise. The wishes of the customer are always in the foreground.

19.3  Design Thinking

207

19.3.3 Defining a Point of View The results of the first two steps are combined. Techniques such as personas or point of view are used to define the point of view both visually and in writing.

19.3.4 Finding Ideas At the beginning of the brainstorming process, there is a general brainstorming session in which all ideas, no matter how crazy or utopian, are brought together. The results are structured and sorted according to priorities. Questions about the efficiency, the feasibility, or the economic viability of the individual ideas are important. A look at the competition is also not uncommon.

19.3.5 Prototyping A prototype is created for illustrative purposes. Perfection and completion are insignificant. More important is: the simpler, the better. Creativity is given free rein. Techniques that are used in prototyping include wireframes, Post-its, role-playing games, storyboards, or models. The prototype is tailored to the needs of the customer. It is important that the customer can imagine the solution to his problem based on the prototype.

19.3.6 Testing Finally, what has been developed must be tested. Feedback plays an important role in this. Flexibility is also required. If an idea does not work, it can also be discarded. Customers are closely observed during tests with the prototypes. Based on their reaction, further ideas and improvements develop. Design thinkers are also open to new suggestions at this step. If a defect is found during a test, it is eliminated and the steps are repeated with the improved or new prototype. It is quite common for new products to have multiple test phases until the customer is satisfied and the product can be approved.

19.3.7 Implementing After successfully testing the prototype, the idea can be implemented.

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19.4 Scribble Scribble is a simple creative technique and suitable for spontaneous brainstorming and problem-solving. Scribble comes from the English “to scribble = to scribble” and does not mean hasty writing, but spontaneous visualization. The aim is not to create a beautiful drawing, but a doodle that comes spontaneously from the wrist. Without claiming to be perfect, it should be very short and direct, and ideas should flow into the scribble completely unfiltered. A prominent representative of scribbles is Leonardo da Vinci, who left thousands of scribbles. He was very good at drawing; many of his sketches are “remembrance drawings” (Brunner, 2008). The method is very effective because you start the feedback process. First, the idea is there, and then the picture is created. One notices that it is not yet perfect and makes a new drawing. The dynamic lies in thinking-drawing-looking-thinking-drawing-looking. This process is repeated several times.

19.5 Pecha Kucha Pecha Kucha (Japanese: ぺちゃくちゃ) is a presentation technique in which images (slides) suitable for an oral presentation are projected onto a wall. The format is strictly specified: 20 images (slides), each of which is displayed for 20 s. The total time of 6:40 min is therefore also the maximum speaking time and ends there. Pecha Kucha is a registered word mark in Japan, Germany, and other countries. Pecha Kucha was used for the first time in February 2003 by the two architects Astrid Klein and Mark Dytham as part of a design event in Tokyo and is now widely used in business and at universities. The format is now also used for communication in museums, for example, in the Stadtmuseum Berlin since 2012. The topics are mainly in the areas of design, art, fashion, culture, and architecture. However, this style of presentation has also been transferred to other areas. The main goal of Pecha Kucha is to avoid wasting the audience’s time. The advantages of this technology lie in the short, concise presentation with rigid time specifications, which make long presentations and the associated listener fatigue (“death by PowerPoint” syndrome) impossible from the outset.

19.6 Action Learning Action learning (also action-oriented learning) is a method of experiential learning (“learning by doing”) of individuals, small or larger groups in companies, or other organizations, which goes back to Reginald Revans (Hauser, 2008). In action learning, a team works on a project that is specific and relevant to an organization while reflecting on the learning process. Action learning is based on the belief that people in an organization learn best from a real challenge. The application of action learning creates a double benefit: On the one hand, a need of the organization is satisfied, and on the other hand, individuals and groups are further developed. The sinking of

References

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the Titanic was a key experience for Revans. Revans’ father was part of the commission charged with finding out why a ship built by a large number of the best engineers in England and thought to be completely unsinkable had foundered on her maiden voyage. The result of the commission was astonishing: Many of the engineers stated that they occasionally had serious doubts about the design (Revans, 2011). But since the responsible authorities saw things differently, they changed their perception and finally believed in the unsinkability of the ship. But now, after the catastrophe, they remembered their original doubts, which had cruelly come true. The phenomenon that individuals adapt to the group opinion and the group makes such fatal decisions is called groupthink. Action learning wants to counteract this by having people from different areas work together in a team and ask critical questions from their different perspectives (Pedler, 2011).

References Brunner, A. (2008). Kreativer denken, Methoden von A bis Z. Oldenbourg Verlag. Hauser, B. (2008). Action learning in management development. In Eine vergleichende Analyse von Action-Learning-Programmen zur Entwicklung von Führungskräften in drei verschiedenen Unternehmen. 2. aktualisierte Auflage. Hampp. Pedler, M. (2011). Action learning in practice (4th ed.). Gower Publishing, Ltd. Revans, R. (2011). ABC of action learning. Neuauflage. Gower Farnham.

IT-Based QM

20

Now the playbook is we build AI tools to go find these fake accounts, find coordinated networks of inauthentic activity, and take them down; we make it much harder for anyone to advertise in ways that they shouldn’t be. (Marc Zuckerberg)

20.1 Industry 4.0 in QM Production systems are not like they used to be. The twenty-first century will confront enterprises and manufacturing companies with completely novel generations of technologies, services, and products based on computer technologies. In order to meet competition on global markets and to ensure long-term success, the companies need to adapt to shorter delivery times, increasing product variability and high market volatility, by which enterprises are able to sensitively and timely react to continuous and unexpected changes. One of the major cornerstones to meet these challenges is the implementation of digital information and communication technologies into production systems, processes, and technologies, which allow novel developments by combining the physical world and fast data access and data processing via the Internet (Industry 4.0) (see Fig. 20.1). Industry 4.0 is a name given to the current trend of automation and data exchange in manufacturing technologies. It includes cyber-physical systems, the Internet of Things, cloud computing, and cognitive computing. Industry 4.0 is commonly referred to as the fourth industrial revolution. Industry 4.0 fosters what has been called a “smart factory.” Within modular structured smart factories, cyber-physical systems monitor physical processes, create a virtual copy of the physical world, and make decentralized decisions. Over the Internet of Things, cyber-physical systems communicate and cooperate with each other and with humans in real time both internally and across organizational services offered and used by participants of the value chain. There

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Helmold, Virtual and Innovative Quality Management Across the Value Chain, Management for Professionals, https://doi.org/10.1007/978-3-031-30089-9_20

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Fig. 20.1  Industry 4.0 evolution. (Source: Author’s source)

are four design principles in Industry 4.0. These principles support companies in identifying and implementing Industry 4.0 scenarios (Helmold & Terry, 2021): • Interconnection: The ability of machines, devices, sensors, and people to connect and communicate with each other via the Internet of Things (IoT) or the Internet of People (IoP). • Information transparency: The transparency afforded by Industry 4.0 technology provides operators with vast amounts of useful information needed to make appropriate decisions. Interconnectivity allows operators to collect immense amounts of data and information from all points in the manufacturing process, thus aiding functionality and identifying key areas that can benefit from innovation and improvement. • Technical assistance: First, the ability of assistance systems to support humans by aggregating and visualizing information comprehensively for making informed decisions and solving urgent problems on short notice. Second, the ability of cyber-physical systems to physically support humans by conducting a range of tasks that are unpleasant, too exhausting, or unsafe for their human co-workers. • Decentralized decisions: The ability of cyber-physical systems to make decisions on their own and to perform their tasks as autonomously as possible. Only in the case of exceptions, interferences, or conflicting goals, are tasks delegated to a higher level.

20.2  Artificial Intelligence (AI) in QM

213

20.2 Artificial Intelligence (AI) in QM 20.2.1 AI Tools in QM In the field of computer science, artificial intelligence (AI), sometimes called machine intelligence, is intelligence demonstrated by machines, in contrast to the natural intelligence displayed by humans and other animals (Helmold, 2021). Figure 20.2 depicts nine lean elements of artificial intelligence which can lead to a competitive advantage across the value chain (Helmold & Samara, 2019).

20.2.2 Autonomous Robots An autonomous robot is a robot that performs behaviors or tasks with a high degree of autonomy (without external influence). Autonomous robotics is usually considered to be a subfield of artificial intelligence, robotics, and information engineering.

Autonomous Robots Virtual Production and Supply Chains

Big Data

Virtual, Mixed and Augumented Reality

Artifical Intelligence Tools in QM

Additive Manufacturing

Simulations

Systems Integration

Cloud Computing

Internet of Things Cybersecurity

Fig. 20.2  Artificial intelligence tools. (Source: Author’s source)

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20.2.3 Virtual Production and Supply Chains Virtual production tends to be used to help visualize complex scenes or scenes that simply cannot be filmed for real. In general, though, virtual production can really refer to any techniques that allow filmmakers to plan, imagine, or complete some kind of filmic element, typically with the aid of digital tools.

20.2.4 Lean Simulations Lean simulations include a set of hands-on experiments to teach employees about systems and process improvement in all areas of the value chain. Lean simulations can focus on design, manufacturing, capacity planning, or supply chain design. The purpose of simulations is to understand the implications of input variables and alternations of the value chain elements.

20.2.5 System Integration Lean integration is a continuous improvement methodology for bringing disparate data and software systems together. The goal is to maximize customer value. Lean integration is a management system that emphasizes eliminating waste as a sustainable data integration and system integration practice.

20.2.6 Internet of Things The Internet of Things (IoT) is a system of interrelated computing devices, mechanical and digital machines, objects, animals, or people that are provided with unique identifiers (UIDs) and the ability to transfer data over a network without requiring human-to-human or human-to-computer interaction.

20.2.7 Cybersecurity Cybersecurity is the protection of Internet-connected systems, including hardware, software, and data, from cyberattacks. In a computing context, security comprises cybersecurity and physical security—both are used by enterprises to protect against unauthorized access to data centers and other computerized systems.

20.2.8 Cloud Computing Cloud computing is a type of computing that relies on shared computing resources rather than having local servers or personal devices to handle applications. In its

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most simple description, cloud computing is taking services (“cloud services”) and moving them outside an organization’s IT system and environment.

20.2.9 Additive Manufacturing Additive manufacturing (AM) is the industrial production name for 3D printing, a computer-controlled process that creates three-dimensional objects by depositing materials, usually in layers. The official industry standard term is the ASTM F2792 for all applications of the 3D technology. It is defined as the process of joining materials to make objects from 3D model data, usually layer upon layer, as opposed to subtractive manufacturing methodologies.

20.2.10 Extended, Mixed, and Augmented Reality Extended (XR), mixed (MR), and augmented reality (AR) will be used in future quality control and application methods. AR is an interactive experience of a real-­ world environment where the objects that reside in the real world are enhanced by computer-generated perceptual information, sometimes across multiple sensory modalities, including visual, auditory, haptic, somatosensory, and olfactory.

20.2.11 Big Data Big Data is a phrase used to mean a massive volume of both structured and unstructured data that is so large it is difficult to process using traditional database and software techniques. In most enterprise scenarios, the volume of data is too big or it moves too fast or it exceeds current processing capacity.

References Helmold, M. (2021). Kaizen, Lean Management und Digitalisierung. Mit den japanischen Konzepten Wettbewerbsvorteile für das Unternehmen erzielen. Springer. Helmold, M. and Samara, W. (2019). Progress in performance management. Industry insights and case studies on principles, application tools, and practice. Springer . Helmold, M., & Terry, B. (2021). Operations and supply management 4.0. Industry insights, case studies and best practices. Springer.

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The Quality of Thinking will determine the Quality of our Future. (Edward de Bono).

21.1 Agility and Adaptability in QM In the future, the QM function will become more agile and adaptable in the VUCA world. VUCA is an acronym that stands for volatility, uncertainty, complexity, and ambiguity—qualities that make a situation or condition difficult to analyze, respond to, or plan for. Understanding how to mitigate these qualities can greatly improve the strategic abilities of a leader and lead to better outcomes (Helmold et al., 2023). Global trends, the ongoing globalization, and the COVID-19 pandemic have taught us that businesses need to be prepared for the unexpected (Veeva, 2021). When a crisis could be around the corner, the most effective strategy is adaptability based on thorough risk analysis. Businesses stand a better chance of maintaining their quality management obligations through a crisis when they have contingencies in place (Pfeifer 2001).

21.2 Focus on Efficiency in QM The economic downturn caused by the pandemic has highlighted the need for cost-­ effective quality assurance processes. Dealing with nonconformance is a headache that most businesses can ill afford right now. A watertight quality management system will save your business time and money by avoiding nonconformance in the first place. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Helmold, Virtual and Innovative Quality Management Across the Value Chain, Management for Professionals, https://doi.org/10.1007/978-3-031-30089-9_21

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21.3 Centralized Data Management in QM Having a quality management system with centralized, cloud-based software will give your business access to real-time data anywhere in the world. This data will prove crucial for effective quality management, compliance, and audits. Without centralized and accessible data, noncompliance is more likely due to knowledge gaps and miscommunication.

21.4 QM Backed by Lean Management and Six Sigma Although Six Sigma is a newer quality management concept than QM, it was never meant to replace it. Rather, the two strategies are complementary. Whereas QM focuses on internal departments and customer satisfaction, the key goal of Six Sigma is to reduce the number of defects. Forward-thinking businesses are starting to implement both concepts into their quality management approaches. Specifically, Six Sigma strategies can be used to help businesses meet the “continuous improvement” goal of QM (Helmold & Terry, 2016, 2021).

21.5 Focus on Sustainability, ESG, and CSR in QM As environmental health continues to become a global concern, ISO has developed new standards designed to help organizations manage their environmental responsibilities. For instance, ISO 14001 specifies the requirements for an environmental management system that an organization can use to enhance its environmental performance. The intended outcomes of this environmental management system include: • Enhancement of environmental performance. • Fulfilment of compliance obligations. • Achievement of environmental objectives. Future revisions of ISO standards are expected to further emphasize the importance of environmental sustainability within the scope of QM. Other examples are the ISO standards 26,000 or ISO 27001 for sustainability or IT aspects, which will have a significant contribution to companies and organizations (Helmold et al., 2023).

21.6 Use of Sophisticated QM Software, AR, VR, and XR Intuitive and accessible quality management software is a crucial aspect of a thorough and effective quality management system. Implementing a QMS will help any business meet its quality assurance obligations smoothly and with optimal

21.8  Accountability of QM as Driver of Customer Satisfaction in the Value Chain

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interdepartmental cooperation (Deloitte, 2021). QMM software solutions offer modular, cloud-based quality management software that is accessible via subscription, so you only pay for what you need. Each module can stand alone or be integrated with other operations and quality modules. Digital quality management is one, straightforward way for small to medium manufacturing businesses to start realizing value from Industry 4.0. Quality management software modules and platforms include: • • • • • • •

Document management software. Audit management software. Complaints management software. Risk management software. Corrective action software. Nonconformance management software. Training software.

In this context, QM and other functions will make use of extended, virtual, or augmented reality (XR, VR, AR) applications to simplify quality activities.

21.7 Expanding Boundaries of QM In the early years, QM was only applied to manufacturing operations. Today, it is implemented in a wide variety of nonmanufacturing organizations, and this number is only expected to grow in the coming years and decades. From finance to healthcare to education, processes founded upon quality management concepts are starting to become the rule rather than the exception (Capgemini, 2021). Why? There is a rapidly growing customer demand for top-quality services, products, and interactions across all industries. As for those organizations who do not implement QM principles into their processes and systems, it is likely that over time, they will lose their competitive edge to those who do (Helmold & Samara, 2019).

21.8 Accountability of QM as Driver of Customer Satisfaction in the Value Chain QM will have to take responsibilities across the value chain in the future. QM was in the past often seen as control function and quality gate driver. This will change to a coordinating and moderating function as a central point in the enterprise and value chain activities (Helmold et al., 2023). One of the vital components of QM is the idea that every employee must be actively engaged in the effort to improve quality. As new tools and technologies for tracking employee performance become available, accountability will become an increasingly important part of QM.  Every employee must have a clear idea of their requirements and expectations, in addition to the standards that will be used to access their performance. This shift will, of

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course, expand to management as well. Organizational leaders will need to demonstrate what they are doing to help their bottom line reach their quality improvement goals, as well as the effectiveness of their strategies. Tired approaches like occasional seminars led by upper management will need to be replaced by updated strategies that lead to a genuine improvement in performance. Assessment and performance benchmarks will help to create this sense of accountability across all levels of the organization.

21.9 Virtual Quality Management (VQM) Virtual quality planning and execution will be an upcoming trend in the future of QM. Virtual quality management (VQM) is defined as “coordinated approaches to the efficient modelling, adaptation, utilization and analysis of simulation studies for generating resilient knowledge and dimensioning quality techniques for products and processes during the planning stage.” The concept of VQM (virtual quality management), in addition to this, takes into account also the environmental issues and any other factors that can influence the final product (i.e., quality knowledge and process knowledge), and with the help of “design of virtual experiments” and “quality-oriented process models,” through modelling and simulation, the so-called quality parameters and process parameters are obtained. The latter ones can be further processed in the sense that they can be optimized, this way obtaining the best possible solution, which can be implemented and used in real-life scenarios (Bookjans & Weckenmann, 2010). The purpose of the VQM concept is to generate resilient knowledge either for product or processes by deploying tools and instruments used in the virtual environment. The end scope is to develop the necessary information for those products/processes that will enable implementation into production with an increased performance and with a higher degree of predictability. The concept of VQM was slightly adapted for the product development process, thus obtaining a new framework that relies on customer requirements throughout the entire process and it offers optimized data for the component characteristics of the products’ constitutive elements. By deploying instruments that are simple to use (e.g., VOCT, AHP, and cascaded QFD) and more advanced ones (e.g., genetic algorithms) in the structure described within the framework, product optimization can be achieved without compromising or neglecting the initial customer requirements (Helmold, 2021).

References Bookjans, M., & Weckenmann, A. (2010). Virtual quality management – A new approach for the simulation-based optimization of quality control loops. In: Abrudan, I. (Hrsg.) Review of management and economic engineering. Cluj-Napoca. Capgemini. (2021). World Quality Report 2021: Agile macht Qualitätssicherung zum integralen Bestandteil der Softwareentwicklung . https://www.capgemini.com/de-­de/news/ world-­quality-­report-­2021/

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Deloitte. (2021). Perspectives 4 Quality Engineering Trends Report. Market dynamics shaping the future of quality engineering . https://www2.deloitte.com/us/en/pages/consulting/articles/ quality-­engineering-­and-­testing-­trends.html Helmold, M. (2021). Kaizen, lean management und Digitalisierung. Mit den japanischen Konzepten Wettbewerbsvorteile für das Unternehmen erzielen. Springer. Helmold, M., & Samara, W. (2019). Progress in performance management. Industry insights and case studies on principles, application tools, and practice. Springer. Helmold, M., & Terry, B. (2016). Global sourcing and supply management excellence in China. Procurement guide for supply experts. Springer. Helmold, M., & Terry, B. (2021). Operations and supply management 4.0. Industry insights, case studies and best practices. Springer. Helmold, M., et al. (2023). Qualität neu denken. Innovative, virtuelle und agile Ansätze entlang der Wertschöpfungskette. Springer. Pfeifer, T. (2001). Qualitätsmanagement – Strategien, Methoden, Techniken. Carl Hanser Verlag. Veeva. (2021). Industries. Trends in Quality management 2021. https://www.industries.veeva.com/ quality-­management-­trends-­report-­2021