Chapter 3 Global Supply Chain Quality and International Quality Standards

Global Supply Chain Quality and International Quality Standards Chapter 3 Managing Quality for the Multinational Firm Quality Improvement: The American Way Quality Improvement: The Japanese Way Quality Improvement: The European Way ISO 9000:2000 Quality Improvement: The Chinese Way Are Quality Approaches Influenced by Culture?

Global Supply Chain Quality and International Quality Standards 1- Managing Quality for the Multinational Firm Because of globalization, companies are facing more challenges. Firms seek to be global to gain new markets. U.S. Trade 1960–2010 Source: U.S. Department of Commerce 3 - 3 3

Global Supply Chain Quality and International Quality Standards 1- Managing Quality for the Multinational Firm There are variety of mechanisms that firms use in globalizing: Licensing: a US corporation can allow foreign firms to sell in restricted markets while using the design of the original designer. It involves the sale of some product with another trademark in different countries. Partnering: this agreement is often reached when 2 firms have technology, products or access to markets that each other wants. Globalization: an approach to capture international markets. It consists of changing the nature of a firm business by establishing production and marketing facilities in foreign markets. These firms encounter changes in: Physical Environment: firms locate themselves near or far away from natural resources. U.S. Trade 1960–2010 Source: U.S. Department of Commerce

Global Supply Chain Quality and International Quality Standards Managing Quality for the Multinational Firm Task Environment: firms find themselves having to deal with complex regulatory structures when establishing operations in foreign countries. Firms should understand international law. Ex: regulations concerning tobacco vary a great deal from one country to another. Social Environment: it refers to cultural factors such as language, business customs, customer preference… Exporter: Firms produce their products and ship them internationally. Exportation has a high shipping costs, but helps avoid problems. U.S. Trade 1960–2010 Source: U.S. Department of Commerce 3 - 5 5

Global Supply Chain Quality and International Quality Standards 1- Managing Quality for the Multinational Firm Global Factors that Affect Quality-related Decisions

Global Supply Chain Quality and International Quality Standards 1- Managing Quality for the Multinational Firm Example of Changing the Physical Environment: Wages and Costs in Mexico (Average Hourly Compensation for Manufacturing Workers in U.S. Dollars)

Global Supply Chain Quality and International Quality Standards Managing Quality for the Multinational Firm Export Quality Model

Global Supply Chain Quality and International Quality Standards 2- Quality Improvement: The American Way The Baldrige Performance Excellence Program: the success of this model influenced international practice. It applies on small and large firms in the manufacturing, health care, education not-for-profit, and service sector. Focuses on business results: firms should show outstanding results concerning performance, customer satisfaction… No prescriptive and adaptable: the criteria of the results do not specify which tools or techniques a company should use to improve. The Baldrige Award

Global Supply Chain Quality and International Quality Standards 2- Quality Improvement: The American Way Supports company-wide alignment of goals and processes: alignment between strategic goals and operational plans helps foster a learning-based system. Permits goal-based diagnosis: By assessing approach, deployment, and results in several areas, firms are able to assess their current strenghts and areas for improvement. Once areas for improvement are identified, these can prioritized and tackled one by one. The Baldrige Award 3 - 10 10

Global Supply Chain Quality and International Quality Standards Quality Improvement: The American Way The Baldrige model consists of seven interrelated categories: Category 1: Leadership: evaluate to what extent management is involved in reinforcing goals, values, customer involvement… Category 2: Strategic planning: focuses on how the company establishes strategic directions and tactical action plans.

Global Supply Chain Quality and International Quality Standards Quality Improvement: The American Way Category 1: Leadership: Category 2: Strategic planning: Category 3: Customer Focus: the company should be successful in serving the customer. Category 4: Measurement, Analysis and Knowledge Management: relates to the firm’s selection, management and use of information to support and improve company performance. Category 5: Workforce Focus: the goal of the company is to use the full potentiel of its workforce. Category 6: Operations Focus: it includes customer focus, work system, design for services and products… Category 7: Results: consists of graphs and tables that demonstrate the results of the firm. 3 - 12 12

Global Supply Chain Quality and International Quality Standards Quality Improvement: The American Way The Baldrige Process

Global Supply Chain Quality and International Quality Standards Quality Improvement: The American Way The Baldrige Process: 1st stage: 1st step is eligibility determination: for Baldrige only firms chartered in US are eligible for National Institute of Standards and Technology. Once eligibility is established , the applicant send the application to NIST. 2nd step is Review: the applicant is subject to the 1st round review of Baldrige examiners. 3rd step is Consensus: during this phase, between 5 and 8 examiners participate in a conference to determine a consens 3 - 14 14

Global Supply Chain Quality and International Quality Standards Quality Improvement: The American Way The Baldrige Process: 2nd Stage 4th step is Consensus review: once consensus reached, the judges receive consensus report. 5th step is Judge site visit: applicants with a high scoring granted a site visit. 3rd Stage 6th step is site visit review: 4 to 6 examiners of judges visit the firm for one week: 2 to 3 days in the form and 2 to 3 days in the hotel to write the report. The report consist of: strengths, area for improvement… 7th step is review and recommand winners: the feedback report include the scoring summary, the individual scoring range, the scoring distribution, the examiner comments. 3 - 15 15

Global Supply Chain Quality and International Quality Standards Quality Improvement: The American Way Even if a company is not selected for the award, the intensive investigation will supply invaluable information. Being a Baldrige examiner is a very prestigious and time-consuming distinction. The job is intensive and requires a dedication to the end-product. It is also performed gratis – for no pay. Baldrige examiners must be willing to give up approximately 10% of their time during an entire year to fulfill their responsibilities 3 - 16 16

Global Supply Chain Quality and International Quality Standards Quality Improvement-The Japanese Way Deming Prize Policy Deployment New Product Development Maintenance and Improvement Management System Information Analysis Human Resources Development

Global Supply Chain Quality and International Quality Standards Quality Improvement-The Japanese Way Lean Production Anything that does not add value for the customer should be eliminated Group of techniques or systems focused on optimizing quality processes A productive system whose focus is on optimizing processes through the philosophy of continual improvement

Global Supply Chain Quality and International Quality Standards Quality Improvement-The Japanese Way Shingo’s seven wastes Waste of overproduction Waste of waiting Waste of transportation Waste of processing itself Waste of stocks Waste of motion Waste of making defective products

Global Supply Chain Quality and International Quality Standards Quality Improvement-The Japanese Way Japanese Total Quality Control (TQC) Visibility In-process Inspection N = 2 Technique Total Involvement of the workforce The five S’s Preventive Maintenance

Global Supply Chain Quality and International Quality Standards Quality Improvement-The European Way European Quality Award Leadership Strategy People Partnerships and Resources Processes, Products, and Services Customer Results People Results Society Results Key Results

Global Supply Chain Quality and International Quality Standards Quality Improvement-The European Way European Quality Award 3 - 22 22

Comparision

Global Supply Chain Quality and International Quality Standards ISO 9000:2008 Focus is for companies to document their quality systems in a series of manuals to facilitate trade through supplier conformance Registration states a quality system is in place and being adhered to Standards are very broad and nonspecific, so they can be adapted to many different industries and cultures Recognized international quality standard that businesses can follow

Global Supply Chain Quality and International Quality Standards ISO 9000:2008 Three Standards: ISO 9000:2008—Quality management systems: Fundamentals and vocabulary ISO 9001:2008—Quality management systems: Requirements ISO 9004:2008—Quality management: Guidelines for Performance Improvement

Global Supply Chain Quality and International Quality Standards ISO 9000:2008 ISO 9000:2008 Five Clauses: Quality Management System Management System Resource Management Product Realization Measurement Analysis and Improvement

Global Supply Chain Quality and International Quality Standards ISO 9000:2008 ISO 9000:2008 Five Clauses: Quality Management System General Requirements- establish, document, implement, and maintain a quality management system and continually improve its effectiveness in accordance with the requirements of the international standard Documentation Requirements- include a quality policy and quality objectives; a quality manual; documented procedures; documents to ensure effective planning, operation, and control of processes; and records required by the international standard.

Global Supply Chain Quality and International Quality Standards ISO 9000:2008 ISO 9000:2008 Five Clauses: 2. Management System Top management shall ensure that customer requirements are determined and are met with the aim of enhancing customer satisfaction Management shall establish a quality policy Management shall ensure that quality objectives shall be established Management shall ensure that responsibilities and authorities are defined and communicated. Management shall review the quality management system at regular intervals

Global Supply Chain Quality and International Quality Standards ISO 9000:2008 ISO 9000:2008 Five Clauses: 3. Resource Management Determine and provide needed resources Workers will be provided necessary education, training, skills, and experience Determine, provide, and maintain the infrastructure needed to achieve conformity to product requirements Determine and manage the work environment needed to achieve conformity to product requirements

Global Supply Chain Quality and International Quality Standards ISO 9000:2008 ISO 9000:2008 Five Clauses: 4. Product Realization Develop processes needed for product realization Determine requirements as specified by customers Plan and control the design and development for its products Ensure that purchased product conforms to specified purchase requirements Plan and carry out production and service under controlled conditions Determine the monitoring and measurements to be undertaken and the monitoring and measuring devices needed to provide evidence of conformity of product to determined requirements

Global Supply Chain Quality and International Quality Standards ISO 9000:2008 ISO 9000:2008 Five Clauses: 5. Measurement Analysis and Improvement Plan and implement the monitoring, measurement, analysis, and improvement process as needed Monitor information relating to customer perceptions Ensure that product that does not conform to requirements is identified and controlled to prevent its unintended use or delivery Determine, collect, and analyze data to demonstrate the suitability and effectiveness of the quality management system Continually improve the effectiveness of the quality management system

Global Supply Chain Quality and International Quality Standards IS0 9000:2008 ISO 9000:2008 Eight Principles: Customer focus Leadership Involvement of people The Process approach A systems approach to management Continual Improvement Factual Approach to Decision Making Mutually beneficial supplier relationship

Global Supply Chain Quality and International Quality Standards IS0 9000:2008 An Example of the ISO Registration Process

Global Supply Chain Quality and International Quality Standards IS0 9000:2008 ISO 14000: International standard for environmental compliance Adoption in many countries is slow Firms with little environmental exposure will adopt ISO 14000 first

Global Supply Chain Quality and International Quality Standards IS0 9000:2008 ISO 14000 Eight Elements General Requirements Environmental Policy Planning Environmental Aspects Legal and other Requirements Objectives and Targets Environmental Management Programs Implementation and Operation Structure and Responsibility Training, Awareness, and Competence Environmental Management System Audit Communication Environmental Management System Documentation Document Control Operational Control Emergency Preparedness and Response Checking and Corrective Action Monitoring and Measurement Nonconformance and Corrective and Preventative Action Records Management Review

Total Volume of Trade between the United Global Supply Chain Quality and International Quality Standards Quality Improvement-The Chinese Way Socialist market economy Low quality goods due to: Low Education of Workers Lack of Experience Unfamiliar with Goods Short-term Workers GUANXI or Influence Personal Relationships Bribery Total Volume of Trade between the United States and China

Global Supply Chain Quality and International Quality Standards Are Quality Approaches Influenced by Culture? United States Command-and-Control Oriented Results Oriented Japanese Based on Ethic of Consistency Emphasis on Reduction of Waste Europeans adopted broad standards that can be adapted to the diverse nation-states in the European Union Satisfy Employees Care for the Environment

Global Supply Chain Quality and International Quality Standards Chapter Summary Managing Quality for the Multinational Firm Quality Improvement: The American Way Quality Improvement: The Japanese Way Quality Improvement: The European Way ISO 9000:2000 Quality Improvement: The Chinese Way Are Quality Approaches Influenced by Culture?

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