1. Global Supply Chain Management

2. Developing High-Quality Logistics Systems
Chapter #13
Developing High-Quality Logistics Systems

3. The Logistics System
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4. Overview We will define quality
We will discuss quality delivered to both internal and external customers
We will relate customer value to quality as a function of culture/region in the global market
We will examine approaches to quality management
We will discuss quality of logistics functions specifically and related costs
We will introduce the international quality standard, ISO9000
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5. Quality
Quality means different things to different customers and must be defined in terms that relate to the customer’s desired “value”
Our concept of quality, that is the firm’s definition, may be totally different from our customers’
Internal
External
Quality is relative
Quality is a moving target that must be constantly tracked
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6. Quality Concepts: Internal View
Recent emphasis on work improvement focuses on internal processes rather than functional effectiveness (TQM)
Deming and the Union Of Japanese Scientists and Engineers (1949) (Juran, Crosby, Hammer, etc.)
Emphasis on a customer focus, internal/external
Focuses on processes
Stressed leadership and team work
Goal was to reduce process variation
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7. Quality Concepts: Internal View
The Deming Circle
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8. Quality Concepts: Internal View
Juran’s Quality Wheel
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9. Quality Concepts: Internal View
Crosby’s 14 quality steps emphasized zero-defects through:
Management commitment
Teamwork
Training
Adequate measurement
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10. Quality Concepts: Internal View
Hammer’s six principles for reengineering emphasized:
Business process
Information technology
Employee empowerment
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11. Quality Concepts: Internal View
Objectives of reengineering are often stated as:
Improvement of critical measures of performance
Costs
Quality
Service
Speed
Etc.
By fundamental rethinking and radical redesign of business processes to achieve “breakthrough” performance for competitive advantage
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12. Quality Concepts: Internal View
TQM and reengineering are one in the same today
Each effort must be enthusiastically lead by management
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13. Quality Concepts: Internal View
Leadership must be characterized by vision and commitment
Senior management plays the central role of defining, motivating and communicating goals
Goals must be realistic and achievable
Management must have the commitment to stay the course
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14. Quality Concepts: Internal View
Cooperation, internal and external collaboration is central to achieving quality goals
Teamwork
Employee involvement and empowerment
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15. Quality Concepts: Internal View
Organizational Learning is reflected in the firm’s commitment (as in budget) to training
Work improvement concepts/skills
Analysis and teamwork training
Management training
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16. Quality Concepts: Internal View
Process management is the set of practices that combine HR management and traditional analysis methodology
Identification, information and analysis of processes supported by
Benchmarking
Data availability
Statistical analysis
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17. Quality Concepts: Internal View
Employee outcomes focus on the results of the work effort on those employed
Stress
Fulfillment
Economic well being
Organizational performance measures the end value of the reengineering/quality improvements
Relate back to KPIs , cost , speed, dependability, customer needs
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18. Quality Concepts: External View
Customers typically define quality as value or fitness for use
Expectations may embrace quality which is not necessarily a function of the production process
After sale service
Waiting time for order/customer support
Cleanliness and politeness of people, etc.
Challenge is to reconcile external and internal views to ensure true customer satisfaction
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19. Quality Concepts: External View
From the point of view of logistics, we should strive to provide “defect-free” service to our customers
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20. Service Quality Model
The service quality model represents the process of customer dissatisfaction growth
Basically represents the marketing process
Customer on top/company on the bottom
Managers must
Learn what the customer expects for service
Put together the service package
Communicate the service value to the customer
Deliver the value
Model includes 5 service gaps that may occur
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21. Service Quality Model Customer Organization Gap 5 Gap 1 Gap 4 Gap 3
Word of Mouth
Communications
Perceived Service
Management
perceptions of
customer service
expectations
Service Delivery
(including pre- and
post-contacts)
Expected Service
Past Experience
Personal Needs
External
Communications to
customers
Translation of
perceptions into
service quality
specifications
Customer
Organization
Gap 3
Gap 1
Gap 5
Gap 2
Gap 4
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22. Service Quality Model Gap 5 service received different then expected
May be better or worse
If better, raise expectations, wasting money or even offending the customer
If worse, may lose the customer
Gap 1 results when management does not understand customer’s needs
Insufficient market data or badly interpreted
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23. Service Quality Model
Gap 2 opens when management does know what the customer wants but won’t/can’t deliver
Customer expectations too high
Company lacks the resources to deliver
Gap 3 opens when management knows what the customer wants, develops an appropriate plan, but fails to deliver
Don’t meet cycle times
Rude employees, etc
Customer dissatisfied with the entire encounter
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24. Service Quality Model
Gap 4 opens when something promised is not delivered
Delivery later than promised
Broken promise with respect to after-sale support
Etc.
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25. Service Quality Model
Service marketing model is different then the product marketing mix introduced earlier
Satisfactory service results from the interaction of organization controllable and uncontrollable factors
External factors may also impact level of service the organization can deliver
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26. Service Quality Model
Management’s challenge is to minimize the size and occurrence of service quality gaps
Understanding the customer’s needs
Providing the right service mix
Taking corrective action when required
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27. TQM in Logistics TQM goals with respect to logistics are
Cost reduction
Service enhancement
Increased customer satisfaction/perceived value
QC, QA and TQM
QC (quality control) is internally focused
QA (quality assurance) is externally focused
TQM focuses on quality as a competitive advantage
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28. TQM in Logistics
At the focal point of any quality enhancement effort must be customer service (value) including the customer’s perception of quality
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29. TQM in Logistics
Elements common to many formal quality processes include:
Emphasis on customer requirements/expectations
Measurable results from the process
Continuous improvement
Elimination of waste and rework
Measurement and concern for process variability
A total organizational commitment…beyond words
Dedication to a formal quality process
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30. Developing a Quality Process
A formal quality process improves the long-term likelihood of sustainable improvement
Step 1. Make an organizational commitment
Top management must walk the talk
Should have meaningful, well-developed statements of mission, goals, measures, etc.
Step 2. Understand the customer’s needs and requirements
Seems obvious, but….
Must specifically and scientifically understand them
Should include our supply chain partners, not just the final customer!
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31. Developing a Quality Process
Step 3. Measure current levels of performance
Must acquire such information specifically and scientifically
Without something to measure, how do you know if you have made progress?
Must find performance indicators that can be measured and monitored
Step 4. Develop a quality strategy
Specific initiatives planned and time-lined
Focus on understanding customer needs
Appropriate initiatives like training, measuring performance, monitoring variability, etc.
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32. Developing a Quality Process
Step 5. Implement the quality process
Must take action to change
Implementation should be smooth
Timeline, resource requirements, budget, etc.
Step 6. Continually improve the process
Process should recognize both CPI and breakthrough improvement
Like strategic planning, good quality programs have no end (Deming cycle)
Must constantly monitor customer expectations for changes and be prepared to react
Be proactive, not reactive!
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33. The Quality Process Organizational Commitment Quality Strategy
Operations
Strategies
Marketing
Continuous
Quality/Process
Improvement
Implementation
Current level of
performance
Customer needs
and requirements
Step 1
Step 6
Step 3
Step 5
Step 2
Step 4
System
Design/redesign
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34. Success Factors For success we must recognize and ensure that:
Senior logistics managers must believe
Every employee must accept responsibility for performing quality work
Management must earn employee’s commitment
Errors must be captured and corrected immediately
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35. Success Factors
For success we must recognize and ensure that (continued):
Employees must be empowered and really know that they are
Each activity must be addressed as a process with measurable inputs and outputs…use statistics
Everyone must understand that a quality program takes time and resources to establish and see returns from
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36. ISO 9000 The ISO 9000 standards are based on sound business practice
Defined and made available in 1987
Framework that requires each organization to define much of the structure…not prescriptive
Recognizes that even within the same industry, each organization is different
Adopted by 100+ countries
Becoming a necessary “stamp” for companies operating in the global market
Ensures that an organization has taken an inward look to improve the way they address customers.
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37. ISO 9000 Benefits of ISO 9000 compliance include:
Improved discipline, awareness of activities and contributions
Continuous process improvement institutionalized
Process analysis and reengineering emphasized
Identification and elimination or redundancy
Structured training for employees
Focus on improving customer value delivered
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38. ISO 9000 Compliance should not be viewed simply as a necessary evil
Time consuming and costly to achieve…but the payback can be tremendous
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39. Cost of Quality Quality pays…but generally costs something to achieve
Initial efforts may bring improvement without great cost
When the system is stable, improvements generally will require significant investment
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40. Cost of Quality
Three types of cost associated with any quality program:
Cost of failure
Cost of prevention
Cost of appraisal
All must be considered to get a true Benefit/Cost
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