Quality Practices in Automobile Industry Authored by: HITESH MAHESHWARI – 411 SHIVI MITTAL – 414, (Team Leader) ANKIT SHARMA – 418 RAHUL GORE – 422 ABHI SHAH – 425 ARNEESH SHAH – 427 DEVANG PRAKASH MBA-TECH Class Of 2011 NMIMS University
Acknowledgements Any project requires amount of insights & information. All information is critical and important. Not only the information, but also a roadmap to travel with that piece of information is essential. This project helped us to gain better knowledge of all the systems and practices followed to ensure quality management systems in the automobile industry. We express our gratitude towards Prof. Amol Roy for his guidance and for giving us the opportunity to enhance our
knowledge about Quality practices employed by the global automobile sector.
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TABLE OF CONTENTS
Sr.
Particulars
Page No.
1
Executive Summary
5
2
Introduction
6
No
3
•
Quality Management in Automobile Industry
•
Quality Assurance Management
QS-900, Quality Management System •
4
Case Study - Hyundai
Automotive quality standard: The ISO /TS 16949
6 7
10 13
15
16
5
•
Understanding ISO/TS 16949
•
Value Chain Analysis of Maruti Suzuki
Zero defect quality in the Automobile Industry:
21
22
A SIX SIGMA Perspective
•
Three Pillars of SIX SIGMA
22
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6
7
8
European Automakers •
Regulatory Framework
•
Copenhagen Summit 2009
Japanese Automakers •
Toyota
•
Honda
•
issan
•
Quality Policy
•
Quality Management System
Statistical Process Control •
Case Study – Cooper Tire
24 26 32
35 35 43
47
47 47
50 52
9
Conclusions
56
10
Bibliography
57
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EXECUTIVE SUMMAR SUMMARY Y Over the last 30 years, the manufacturing industry has undergone a notable shift in terms of pushing geographic and cultural boundaries. An increased dependence on global trade, offshore labour and a worldwide supply chain are the determining factors for where, what, when and how produced goods reach consumers in an increasingly level global playing field. fi eld. This shift has been particularly prevalent in the automotive sector, as automotive manufacturers obtain parts from hundreds of suppliers, and the standards for quality are becoming more stringent. A complex organizational structure is therefore required to line up the end-to-end logistics of supply chain management, financials, customer relations and human resources. With a centrally developed and coordinated manufacturing strategy, individual facilities must execute the various tactics for quality management. In this environment, opportunities for business success can be fleeting. Even under ideal circumstances, an unforeseen, unforeseen, outlying factor can determine whether a company wins or loses an important contract. It is critical to establish a competitive advantage in order to simply maintain profits, let alone increase revenues. Businesses can simultaneously reduce costs and remain competitive by investing in process improvements that increase quality. For example, identifying and implementing efficiencies in production methods can result in reduced scrap, rework and even labour costs. Automotive manufacturers are rapidly adopting technologies for the automation of not only processes, but quality control functions.
Methodologies such as statistical process control (SPC), six sigma, lean manufacturing, and total quality management (TQM) have arisen out of the steadily emerging culture of continuous improvement. They are key aspects of the operations management strategies that help manufacturers gain the competitive advantage needed to remain profitable. In the automotive industry, focusing on comprehensive process improvements leads to the creation of more precise parts with less variability.
Many companies have adopted a hierarchy system to organize and execute six sigma and continuous improvement efforts according to Kaizen. The hierarchy is built around a Page | 5
champion, whose responsibility is to define and coordinate business objectives and provide the necessary resources to team members. The champion organizes team responsibilities and determines the scope of involvement necessary to execute tasks. The “black belt,” an expert in engineering process improvement, works in conjunction with the champion to identify innovations that contribute to quality initiatives. init iatives.
INTRODUCTION
QUALITY MAAGEMET I AUTOMOBILE IDUSTRY In times of severe competition, it is of crucial importance to create a competitive advantage to differentiate from the competitors and to sustain the business of the company. This shows that a customer-focused quality management is one way to create a sustainable competitive advantage. advantage. Quality controls along the whole value chain -before, during and after productionleads to failure free products, which save costs on the one hand and have thus a positive influence on the company’s revenue. On the other hand failure free products that meet the customers’ expectations lead to satisfied customers who build up a brand loyalty and conduct retention sales, which have a positive influence on the company’s sales, market share as well as the overall image. Furthermore, it is important to listen to ‘the voice of the customers’ and get an insight in the customer’s needs and wants. To fulfil or even exceed their expectations leads to customer satisfaction, which is a key to success in today’s business world. In addition, the customer demands in regard of quality are growing continuously and new technologies are appearing on the markets on a regular basis. Therefore the producers are forced to keep to the latest technology developments and to get hold on the changing customer needs. But even without this external pressure, quality improvement is justified from a cost point of view. The applicability of a customer-oriented quality management is shown in the practical part of this thesis, when the quality of the Saab models is analyzed from the customer’s perspective. Today’s business environment creates a growing need for quality management. Tougher competition leads to the demand for cost savings and higher profitability. These days the consumer can choose from a variety of similar products, which are often exchangeable in the Page | 6
eyes of the customer. If they are not satisfied with a product’s performance, they switch to the competitors brand. Thus the focus on the customer’s needs and wants in line with quality is one way of differentiation from the vast number of competitors. Satisfied customers are likely to build up a brand loyalty and this helps to ensure long term sales. The explosive growth of technology led to a higher product complexity and thus favoured the quality movement. Some technical products bear threats to human safety and to the environment which resulted in an expansion of governmental quality regulations as well as warranty laws in order to protect the consumers. In addition, the product life cycles are shortening along with the technological development and producers have to be prepared for increased quality requirements from the customers´ side as well as to respond to fast changing customer wants. Especially, on such a competitive market as the world market for passenger cars, the contenders are forced to reduce costs and to fulfil their customers’ wants and satisfy their needs to be successful. These developments developments show that striving for quality is and will be of importance for a company that wants to succeed in its business. This thesis is going to highlight the importance of quality management as it is proved that product quality is a major competitive success factor to create a sustainable competitive advantage.
QUALITY ASSURACE MAAGEMET I AUTOMOBILE IDUSTRY The accent on quality was lost in American industry in the post World War II era, when the country's industry could sell almost anything that it can make, at a time when t he quality level of foreign made products was of no great worry. To be sure, there were advocates of quality control in the United States (US), such as Edwards Deming; however, American industry was in no mood to listen to them. Unfortunately for American industry, someone else did listen to Deming the Japanese. The superior quality control procedures of today's Japanese industry were originally developed under the guidance and tutelage of Edwards Deming. Further, the statistical and mathematical element of Deming's procedures, and, in turn, those of Japanese industry were based on the work of another American quality control expert, Walter Shewhart.
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Deming insisted that true quality control began with a real commitment from top management. American companies, particularly automobile manufacturers, however, made quality control a minor function of middle or lower level management. People would agree that fear is the enemy of success. According to Deming, fear is the enemy of innovation and improvement. "No one... can put in his best performance unless he feels secure. Secure means without fear...," stated Deming. Creating a positive stress-free work environment, eliminating fears and anxieties is important for any company. Employees working in a supportive non-threatening work atmosphere display significantly better results. Dr. Deming's philosophy does not target a specific area of business. If implemented, it will be extremely beneficial to any organization, institution, or business that has growth, prosperity, and customer satisfaction as its goal. What Deming sought was a mathematical means of controlling the level of quality by seeking "ever finer manufacturing tolerances". While this system of quality control demanded a commitment from the highest management levels, it depended upon the participation of personnel from all levels of the organization involved in the production process. Participation meant more than input from production workers. It also meant that managers must be a part of the production process. In American industry in the 1950s and 1960s, however, the concept of the professional manager developed though an MBA education and a fast track management development program meant that managers would have little or no contact with the actual production process. Short term financial goals took precedence over all else particularly quality control. Thus, the American automobile manufacturing industry in the 1960s demanded an increasing accommodation accommodation by the production function for the norms established by the organizational finance function. Lee Iacocca, who, at that time, headed Ford, established the Profit Improvement Program (PIP), the purpose of which was to reduce costs by taking them out of an existing budget. This program was financially based, and had a detrimental detri mental impact on product quality at Ford. As an example, a decision was made to equip Mercury automobiles with less expensive Ford automobile upholstery, with an underlying philosophy that the customer would be unaware of the quality deterioration. It was this approach to product quality, with its patronizing attitude toward consumers, which has been cited by b y some analysts as the underlying of the company's Pinto automobile disaster in 1970. Cost control was the imperative with American Page | 8
automobile manufacturers, and quality control and safety were considered to be undesirable initiatives from annoying industry outsiders. At Ford under Iacocca, production line facilities and equipment were worked hard, and maintained lightly. In an effort to push for maximum profit, both physical facilities maintenance and product innovation were sacrificed. In turn, product quality was sacrificed by each of these factors. In the late 1950s, Ford developed a paint application process (E coat), which improved significantly both the external finish and rust proofing on automobiles. Ford would not introduce the process into its North American production, because (1)The top management believed that the competition did not demand it, and (2) It would increase costs. Ford did, however, introduce the process into its European production, because competition did demand it. Ford's, and Iacocca's, arrogance toward quality and the North American consumer were not shared by all automobile manufacturers. The Japanese automobile manufacturers and General Motors paid Ford a royalty to incorporate the E coat process into their production. By the mid 1970s, Ford had introduced the process into only about one half of the company's North American production plants. The process was introduced intr oduced into the last of ford's North American plants only in 1984. A continued emphasis on product quality control may be expected in the American automobile manufacturing industry. It is not just the Japanese now, but also the Koreans who are maintaining quality level pressures on the domestic manufacturers. People involvement through quality circles may be expected to continue. Additionally, new innovations in online precision testing and measurement may be expected.
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QS 9000 - QUALITY MANAGEMENT SYSTEMS IN AUTOMOBILE SECTORS INTRODUCTION QS-9000 is the industry specific adaptation of the ISO-9000 standards for the North American auto industry. It applies to all first-tier suppliers, i.e. companies selling components to be used or installed directly in the products of the Big Three automakers. It is a QUALITY SYSTEM REQUIREMENT STANDARD developed by three U.S.automobile giants: * CHRYSLER: Supplier quality assurance manual. * FORD: Q-101 quality system s ystem standard. * GENERAL MOTOR: NAO targets for excellence. The first edition was issued in August 1994 and the second edition in February 1995.The Automotive Industry Action Group in U.S.A. are authorized for distribution of the document and training co-ordination. The Truck Manufacturers who have participated in the development of this standard and adopted it as their basic quality system are Freightliner Corporation, Mack Trucks, Navistar, PACCR and Volvo GM Heavy Truck Corporation. GOAL
The goal for Quality System Requirements QS-9000 is the development of fundamental quality system that provides for continuous improvement, improvement, emphasizing defect prevention and the reduction of variation and waste in the supply chain. PURPOSE
QS-9000 defines the fundamental quality system expectation of Chrysler, Ford, General Motors, Truck Manufacturers and other subscribing companies for internal and external suppliers of production and service parts and materials. These companies are committed to working with suppliers to ensure customer satisfaction beginning with conformance to
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quality requirements, and continuing with reduction of variation and waste to benefit the final fi nal customer, the supply base, and themselves. APPROACH
QS-9000 is a harmonization of Chrysler's Supplier Quality Assurance Manual, Ford's Q-101 Quality System Standard and GM's Targets for Excellence, with input from The Truck Manufacturers. ISO-9001:1994 Section 4 has been adopted as the foundation for this standard. Interpretations and supplemental quality system requirements have been added. While other companies may adopt this document, Chrysler, Ford and GM retain full control over the content except for ISO-9001:1994. The mandatory requirements are indicated by use of "shall" and the word "should" indicates a preferred approach. Suppliers using other approaches must be able to show that their approach meets the intent of QS -9000. Paragraphs marked "Note" are for guidance and the words, "Typical" and "examples" are used to indicate that the appropriate alternative for the particular commodity or process should be chosen. APPLICABILITY
QS-9000 applies to all internal and external suppliers of: 1) Production Materials. 2) Production or Service Parts, or 3) Heat Treating, Painting, Plating or other finishing services directly to Chrysler, Ford, GM or other OEM customers subscribing to this document. REQUIREMETS
The requirements in the standard are contained in three sections: SECTION 1: ISO-9000 Based Requirements & Supplements. SECTION 2: Sector-Specific Requirements: This section contains Sector-specific requirements on topics like 1) Production Part Approval Process, 2) Continuous Improvement, and 3) Manufacturing Capabilities. Page | 11
SECTION 3: Customer-Specific Requirements. IMPLEMETATIO
Chrysler, Ford, General Motors, The Truck Manufacturers and other subscribing companies require that suppliers establish document and implement an effective quality s ystem based on QS-9000 in accordance with timing requirements established by their customers. All requirements of QS-9000 are to be incorporated in the supplier's quality system and described in the Quality Manual. COCLUSIO
It has been well recognised that development, implementation and maintenance of Quality System to generic standards like ISO-9001/2 is immensely beneficial to every business. While implementing quality management system with such generic standards, many suppliers have felt the need for more specific elaboration and guidance of customer requirements. There is no doubt that QS-9000 Quality System Requirements which is sector based for the automotive industry can not only meet customer requirements but at the same time add value to suppliers business by its focus on defect prevention and continuous improvement in all areas of their business. The proper understanding of the challenge of QS-9000 by top management of suppliers in qualifying for it will maximize the results obtained. Each step of the qualification process can immediately improve quality and productivity for the suppliers who implement the requirements with proper understanding. It is hoped that automotive suppliers in India would welcome QS-9000 and meet the challenge successfully. It would be appropriate to conclude with a quote of the remarks made by Daniel Brennan, Partner-in-Charge of KPMG Quality Registrar in a recent interview to Quality Focus: "During my 30 years of third-party auditing experience, I have never witnessed such positive impact on organizations as I have watching them implement ISO/QS-9000. Over the last two years, I have seen companies improve efficiency and customer service, reduce scrap, eliminate redundancies and most of all-increase profit. It is only after they have that they can reap the benefits. We believe that as registrar it is our obligation to help companies focus on continuous improvement and not simply registration."
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Case study This case study is an example of how an organisation has been able to successfully adopt the automotive standard QS 9000. The company Hyundai Motors India Limited is 100 per cent subsidiary of the South Korea-based
Hyundai Motor Company. Hyundai India started its operations in the year 1996. In September 1998, Hyundai India stated mass production of its well-known "Santro". It launched its second model "Accent" in October 1999. It achieved the milestone of producing 2 lakh cars within a span of 30 months. In the year 2000, it started establishing its products in the global market. It launched its super luxury sedan "Sonata" in July 2001.
What does quality mean to Hyundai India?
As per Hyundai India's policy quality does not mean meeting the specification. Quality for Hyundai India means meeting the customer requirements and exceeding their expectations. They also concentrate on our indirect customers. They were the first to introduce MPFI (Multi-point fuel injection) in 1998 for the small car segment, even when the Euro II standards were not mandatory. When and why did Hyundai India go in for QS 9000 Certification?
Hyundai India was certified to QS 9000 in January 2002. QS 9000 is a customer-driven automotive standard. It focuses on defect prevention, continuous improvement and reduction of wastage or variation in the supply chain; development of sub-contractors; product quality, cost, delivery and service. It is based on a preventive methodology. It uses disciplined problem solving methods. As they were already following the above, they realised that by adopting QS 9000, the above practice could become more focused. Has this certification helped the functioning at Hyundai India?
Yes. After they got certified to QS 9000, the activities were streamlined; a focused approach on planning was established. A team of professionals started concentrating on solving problems and identifying potential areas of improvement. The attitude of workers improved. Page | 13
They feel motivated to come out with more ideas on mistake proofing, defect prevention, statistical analysis of a particular activity etc. Could you briefly mention a before and after scenario in which certification to QS 9000 standard has helped Hyundai India (any two key instances)?
- By adoption of Failure Mode and Effect Analysis (FMEA), they are able to identify potential failures of the product and take control measures in time. - They are able to measure the customer satisfaction / dissatisfaction levels, whereby they are able to improve their products through process control. Have there been any direct benefits as a result of this certification? Has it affected Hyundai India's bottom line?
By implementing QS 9000 they have been able to improve the direct pass ratio of their vehicles. The field claims on their product has also reduced. Has the quality certification helped you market your products better? Has it helped you service your clients better?
Yes. Customer complaints were analysed analysed by the auditors at length and they looked l ooked in to every corrective and preventive action plan. By adopting QS 9000, they have eliminated all unrelated / waste processes, non-value added solutions, thereby focusing only on the customer requirements. What has been the employee reaction to the adoption of QS 9000?
Employees could relate to QS 9000, as it was close to their work. The employees have now become more proactive. What was the certification body's role in implementing the QS 9000 standard effectively?
They realised that the competence of the certification body in implementing a standard helps a lot as they are our guide to through the process and only if they are competent, can the full objective of the standard be achieved. TÜV deutschland's auditing approach was practical. The auditors were looking for facts and activities focused on continuous improvement. They helped us implement some improvement oriented systems and eliminating some redundant procedures. This helped us a lot in implementing QS 9000 effectively. Page | 14
Automotive quality standard: The ISO /TS 16949 The ISO/TS16949 standard unites automotive industry quality requirements that exist worldwide, and is therefore recognised by both the American and the European automobile industries. The automotive industry has become increasingly international, and this has led to the need for a commonly accepted management management system. The ISO/TS16949 standard has been created by the International Automotive Task Force (IATF) and the International Organisation for Standardisation (ISO) to satisfy this need. The document unites the quality requirements that exist worldwide, and is therefore recognised by both the American and the European automobile industries. ISO/TS16949 is based on ISO9000, EAQF (French), VDA6.1 (German), AVSQ (Italian) and QS9000 (US) automotive catalogues. ISO/TS16949 is a breakthrough as it combines global quality system requirements in one standard which can be used along the automotive supply chains. Automobile manufacturers such as GM, Ford, Volkswagen, BMW, Nissan, Renault, Peugeot, Citroen and Daimler Chrysler require their suppliers to be ISO/TS16949 certified. Certification in accordance with ISO/TS16949 has several advantages. It creates transparency and comprehensibility for all processes. Thus, it becomes possible to evaluate the profitability of all the divisions of a company. It is also the door opener to the automotive supply chain. Instead of fulfilling several national requirements, companies need only to comply with one international standard, reducing the time and the cost of the certification process. Any company in the automotive supply chain can obtain ISO/TS16949 certification, but the definition of automotive only includes cars, buses, trucks and motorcycles, and not agricultural, industrial or off-highway vehicles. Moreover, the standard is only applicable to plants where the specific automotive components are manufactured. Depending on the situation, companies that manufacture products for the automotive industry but are not permanently within the automotive supply chain can obtain the aforementioned certification.
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Understanding the ISO/TS 16949:2002 Standard What is ISO/TS16949:2002? ISO/TS16949:2002?
ISO/TS 16949:2002 is an ISO Technical Specification, which integrates existing American and European automotive quality management systems standards within the global automotive industry, with the aim of eliminating the need for multiple certifications to satisfy multiple customer requirements. Using ISO 9001:2000 as its foundation, ISO/TS 16949:2002 specifies the quality management system (QMS) requirements for the design & development; production, installation and servicing of automotive related products. In addition, there are customer specific requirements that are required by individual IATF subscribing vehicle manufacturers. In the past a variety of standards were in use by various automotive companies around the world. ISO/TS 16949 is designed to eventually replace all of these standards as the single worldwide automotive sector QMS standard. Previous standards include the following: • QS 9000 (Ford, General Motors, Daimler Chrysler) • EAQF 94 (PSA Peugeot, Citroën, Renault, FIEV) • VDA 6 (Audi, BMW, VW, Daimler Chrysler) • AVSQ ‘94 (Fiat Auto, IVECO) Who authored ISO/TS16949:2002? ISO/TS16949:2002?
ISO/TS 16949:2002 was developed by the International Automotive Task Force (IATF), in conjunction with the International Organization for Standardization (ISO). The IATF consists of an international group of vehicle manufacturers - BMW Group, DaimlerChrysler, Fiat, Ford Motor Company, General Motors Corporation, PSA PeugeotCitroen, Renault and Volkswagen - plus national trade associations - AIAG (America), VDA (Germany), SMMT (UK), ANFIA (Italy) and FIEV (France). While the Japanese vehicle manufacturers association, JAMA, were also involved in the development of ISO/TS 16949:2002, they do not formally subscribe to the TS 16949 document as yet or require it of their supply chain. Page | 16
What is the format of ISO/TS16949:2002?
TS 16949:2002 is built upon all of the requirements, principles and concepts included in ISO 9001:2000, and goes further in specifying supplemental requirements that are specific to the automotive sector. The TS 16949 specific clauses may: •
Include new requirements over and above ISO 9001 requirements
•
Supplement or expand on the existing ISO 9001 requirement
•
Call for prescriptive ways to address ISO or TS requirements
These automotive sector requirements also refer to automotive core tools (reference documents) such as the Advanced Quality Planning (eg. APQP), Part Approval Process (eg. PPAP), Measurement Systems Analysis (MSA), FMEA and SPC. Customer specific requirements are required by individual IATF subscribing customers and are provided separately on their respective websites and on trade association websites representing them (e.g., IAOB). Who does ISO/TS16949:2002 apply to?
TS 16949 is applicable to the following types of automotive supply chain products and facilities: 1. Cars, trucks (light, medium and heavy), buses, motorcycles. 2. Supplier ‘sites’ providing value-added parts, components, products , sub-assemblies and services up the supply chain to the OEM. TS 16949 requirements may be applied to any site in the supply chain by its customer. 3. Supply chain facilities or ‘sites’ that manufacture production materials; production and service parts; assemblies; or provide (value-added) finishing services such as heat treating, welding, painting; etc., for the t he automotive OEM’s subscribing to this standard. 4. This means that all Tier 1 suppliers providing such products or services directly to IATF subscribing automotive OEM’s must get TS 16949 certification and they in turn may flow fl ow TS 16949 conformity or certification requirements down to Tier 2 suppliers and so on. The flow down to tier 2 or 3 has now become more the norm than the exception.
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Who/what is excluded from TS 16949:2002?
TS 16949 cannot be applied to the following products or organizations: •
The supply chain for agricultural, off-highway (mining, forestry, construction, etc.) vehicles.
•
Automotive after-market service parts made to original IATF subscribing OEM specifications, but not procured and released through them.
•
Manufacturers of tooling; production equipment; jigs; fixtures; moulds; etc used by the auto industry.
•
Remanufactured Remanufactured automobile parts.
•
Distribution centers; warehouses; parts packagers; logistics support; and sequencers.
•
Support functions (non-manufacturing, whether on-site or off), cannot obtain standalone TS 16949 certification. They must be audited and included with the certification of the manufacturing site they t hey support.
Who is authorized to carry out certification of organizations to TS 1949:2002?
The IATF has developed its own unique and proprietary processes and requirements for registering organizations to TS 16949, as well as for Certification Bodies (CB) and CB auditors. Subscribing IATF automotive OEM companies will only recognize and accept a TS 16949 certification which has been conducted using the prescribed registration process (ask your CB for these rules), and conducted by CB’s that have been qualified and contracted by the IATF or its regional offices such as the IAOB in Detroit. Certification to TS 16949 by an IATF qualified registrar is required before such a certificate can show the IATF mark and indicate IATF recognition. The IATF require all qualified CB’s to assure that TS16949:2002 (TS-2) registrants meet the t he following applicability requirements: 1. The organization seeking TS 16949 certification must meet the TS 16949 definition of supplier applicability. See applicability above. 2. Any tier may be certified if it has a direct customer (or potential customer) that requires either compliance or 3rd party registration to TS16949 and
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3. Evidence of being a potential supplier to a customer requiring TS16949 could include an RFQ issued to it, or the supplier being on the bid list of the TS16949 IATF subscribing customer. What should you do if do not qualify for TS 16949 certification?
Those organizations that do not qualify for IATF recognized registration to ISO/TS16949 , or which supply parts and services to a TS16949 registered organization, are encouraged to maintain ISO9001:2000 or ISO 17025 certification as the case may apply. How do I obtain TS 16949 publications and find an IATF qualified certification Body?
A complete and updated list of qualified Certification Bodies may be found on the IAOB Web site at www.iaob.org . You will also be able to purchase all the required publications for TS 16949 at this site. Please read our article on “Tips on choosing a Certification Body”, before you make your selection. What are the benefits of implementing an effective QMS based on the TS 16949:2002 standard?
Benefits include: External •
Improves OEM customer confidence and satisfaction in your organizations QMS capability and consistency in delivering conforming products and services.
•
Improves conformity to quality requirements.
•
Increases competitive edge and automotive supply market share Internal •
Improves business efficiency and productivity
•
Reduces organizational waste, inefficiencies, and defects
•
Facilitates continual improvement in business processes and customer satisfaction
•
Improves process consistency and stability
•
Provides basis for training programs to improve competence and consistency of personnel performance
•
Improves employee motivation and participation through improved communication, interaction and involvement
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•
Contributes to provision of objective evidence that facilitates the assessment of system controls and effectiveness
What are the benefits of ISO/TS 16949 Certification? •
Improved product and process quality
•
Provide additional confidence for global sourcing
•
Lowers costs through improved customer and supplier communication
•
Open up supplier resources for other quality qualit y activities
•
Consistent QMS approach in the supply chain for supplier/subcontractor development
•
Reduction of variation and increased efficiency in the supplier chain
•
Reduction in 2nd party system audits
•
Reduction in multiple 3rd party registrations, only one certificate
•
Common language to improve understanding of quality requirements
•
Customer confidence from non-automotive markets as well as automotive markets.
What are TS 16949:2002 requirements?
The requirements cover a wide range of topics, including: •
Your organization’s top management commitment to quality, its customer focus,
•
Adequacy of its resources, employee competence, competence,
•
Process management (for production, service delivery and relevant administrative and support processes), quality planning, product design, review of incoming orders, purchasing, monitoring and measurement of its processes and products, calibration of measuring equipment,
•
Processes to resolve customer complaints, corrective/preventive actions and a requirement to drive continual improvement of the QMS.
•
Last, there is a requirement to monitor customer perceptions about the quality of the goods and services it provides.
•
TS 16949:2002 does not specify requirements for your products or services; these are specified by your customer. It specifies requirements for your quality management system. An effective QMS will reap the benefit of providing/improving your ability to consistently meet customer product and other requirements.
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Value Chain Analysis of Maruti Suzuki Su zuki Value Chain: A value chain is a chain of activities. Products pass through all activities of the chain in order and at each activity the product gains some value. The goal of these activities is to offer the customer a level of value that exceeds the cost of the activities so that the company can charge a premium price for the product hereby resulting in a profit margin. The primary value chain activities which are used in MUL are: Inbound Logistics
The receiving and warehousing of raw materials, and their distribution to manufacturing. MUL’s inputs primarily comprise raw materials and purchased components. In order to improve quality and generate economies of scale, MUL has reduced the number of vendors of components in India from 370 as of March 31, 2000 to about 100 as in 2005. By lowering the time and cost involved in dealing with more vendors, they have increased their supply chain efficiencies In case of repair and replacements, costs of defective components supplied are borne by the vendor So Quality aspect
Periodic vendor quality system audits are conduct in order to ensure that quality standards are sustained. Vendor Quality Control Quality management system such as ISO 9000/ QS 9000 forms the basis for producing a quality product. To assist small and medium vendors in achieving ISO 9000 certification, in 1995 MUL adopted a cluster approach wherein vendors are grouped together, are trained in quality management and are assisted in obtaining ISO 9000 certification. This cluster approach was extended to helping vendors attain QS 9000 certification.
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Zero defect quality in the Automobile Industry: A SIX SIGMA S IGMA Perspective Six Sigma is a business management strategy originally developed by Motorola. As of 2009,
it enjoys widespread application in many sectors of industry, although its application is not without controversy. Six Sigma seeks to improve the t he quality of process outputs by identifying and removing the causes of defects (errors) and minimizing variability in manufacturing and business processes. It uses a set of quality management methods, including statistical methods, and creates a special infrastructure of people within the t he organization ("Black Belts", "Green Belts" etc.) who are experts in these methods. Increasing competition has meant that more and more companies are on the look-out for a sustainable concept to optimise company processes in terms of quality, time and cost. Six Sigma is the perfect solution if introduced in its entirety and applied consistently, if the company managers and directors provide their full commitment, and if there is a company culture which encourages transparency of errors, stringent project control and a desire for quantitative results. Automobile manufacturers have recognised this and demand zero defect quality from their suppliers. Companies who develop a high level of Six Sigma expertise at an early stage will achieve significant cost reductions and gain competitive advantages.
THE THREE PILLARS OF SIX SIGMA The customer in the Six Sigma concept:
1. The .voice of the customer. (VOC) is the foundation of any Six Sigma process analysis and improvement measure. 2. The .Critical To Quality Characteristics. (CTQ) define the required process results from the customer’s point of view and represent the company’s factors for success.
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3. The higher quality of (preliminary) products and services through Six Sigma makes industrial users as customers more successful in their respective market and creates the basis for multi-stage .Value Marketing. The process in the Six Sigma concept:
1. In all Six Sigma projects, there is a bi-lateral focus on the process map. On the one hand, an outside-in analysis examines how central customer requirements as critical factors for success (CTQs) are fulfilled in current processes and how they should be better fulfilled in the future. On the other hand, an inside-out analysis studies the decisive value drivers and core competences, which must be developed to respond to these. t hese. 2. The quality vision (from the customer’s point of view) is then not only formulated in the business model, but concretely implemented in all key added value processes. This is achieved in all Six Sigma projects by the completion of SIPOC analyses, i.e. the examination of key process stages in the supplier, input, process, and output and customer chain. The analysis establishes output, process and input measurements necessary to achieve the required outcome. 3. Errors are defined based upon the central customer requirements and subsequently by the business strategy. Both are implemented in internal process and performance standards, to distinguish the company from the relevant competitors. Quality in the Six Sigma concept:
1. The stated aim of Six Sigma is as already mentioned practical zero defect quality. From a statistical point of view, this represents an error rate of 3.4 defects per 1 million opportunities. The basis for calculation is the standard normal distribution. This means that 99.99966 per cent of products lie within a (tolerance) range of ±6σ at a mean shift of ±1,5σ. 2. The tolerance range for quality is defined by the levels of deviation accepted by the customer in accordance with the customer requirements. The tolerance range is only reduced if internal process/performance standards are structured more harshly in accordance with the business strategy 3. Minimising process variance within the defined tolerance range and centring the process status, i.e. ensuring that processes adhere rigidly to the CTQs, is at the centre of all Six Sigma improvement activities. Page | 23
RELATIONSHIP BETWEEN SIX SIGMA AND CUSTOMER SATISFACTION
EUROPEAN AUTOMAKERS The auto sector is often credited as the engine room of Europe. The European Union is the homeland to a competitive and innovative automotive industry that generates activity throughout the economy – from materials and parts supply, to R&D and manufacturing, to sales and after-sales services. Manufacturers have trained and developed a highly-skilled workforce, producing quality products for home and international markets. Vehicle manufacturing supports over 2 million European jobs with an additional 10 million citizens employed in associated industries. Exports are valued at over €70 billion annually. The automotive industry has also established itself as a partner in sustainability. Technological advances have brought real solutions, driving down harmful emissions from industry products and production sites. The automobile industry in Germany is one of the largest employers in the country, with a strong labour force of over 866,000 (2005) working in the industry. In addition, Germany has the largest share of passenger car production in Europe with over 29% market share (source: OICA, 2002), followed by France (18%), Spain (13%) and the United Kingdom (9%). In 2009, Angela Merkel pointed out that losing the lead in electric vehicle technology means Germany also will lose markets. Manufacturers have spearheaded significant improvements in vehicle safety and embraced social responsibility goals. Annually, the industry invests €20 billion in R&D, more than any other private sector. Its drive d rive towards sustainable mobility remains an ongoing commitment. Page | 24
Currently, six German companies dominate the automotive industry in the country: VW, Audi (owned by the Volkswagen Group), BMW, Daimler AG, Porsche and Opel. Nearly six million vehicles are produced in Germany each year, and approximately 4.8 million are produced overseas by German brands. Alongside the United States, China and Japan, Germany is one of the top 3 automobile manufacturers in the world. The Volkswagen Group is one of the three biggest automotive companies of the world (along with Toyota and General
Motors).
A STRONG INDUSTRY INNOVATES The industry has come a long way on all sustainability criteria, and sustainable mobility remains a key part of manufacturers’ long-term plans. During the last ten years of relative economic stability, manufacturers delivered fifty new CO 2 reduction technologies to market. Improved engine design, the use of lightweight new materials, development of alternativelyfuelled vehicles and in-vehicle driver aids, these examples have helped slash average new car CO2 by almost 20% in just thirteen years. Emissions are a fraction of what they once were too, thanks to industry innovation. Particulates and other pollutants have come down over 95% compare to 1990 levels. Truck and bus makers have set a benchmark in efficiency too. Today’s 40-tonne trucks burn around a third less fuel than equivalents thirty years ago, while exhaust technologies are trapping more harmful emissions improving air quality in our towns and cities. Investment in logistics, tracking, driver training and intelligent transport systems ensure modern trucks work smarter Page | 25
as well as harder for their o perators. On safety, vehicle technology has helped halve the number of deaths on Europe’ s roads in the last thirty years, despite a th ee-fold increase in traffic volumes.
REGULATORY REGULATO RY FRAMEWORK automotive industry is one of The most regulated sectors in the EU. Over-regulation and complex or ev en conflicting rules can bring substantial costs. T e objective to streamline regulation in the a to sector, with the help of the CARS 21 process, must be continued to reinforce the sector’s c ompetitiveness.
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PART OF A JIGSAW While technology continues t deliver greener, safer vehicles, it represents just one part of the jigsaw. Impact studies clearl show that the greatest benefits to the envi onment and safety come when all relevant stake olders play their part in an integrated i ntegrated approach. As well as being heavily reg lated, the auto sector is often forced to deal with rules that are unduly complex with high administrative costs for compliance. Si plifying existing legislation is much needed, p articularly in areas like type approval. Whe e possible, the EU Page | 27
should seek harmonisation in an international context. An industry that devotes less time and resources to applying rules can devote more to what it is good at; developing cars, trucks and buses that are even safer and more efficient. Policy makers must always be fully informed about the consequences of new proposals. Timely consultation and thorough impact assessments are therefore key, and must be at the heart of any new proposal. Consultation reveals the practical consequences of new policy proposals; thorough impact assessments highlight wider issues, like cost benefits and the potential for meeting objectives through alternative means.
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HARMONISATION OF RULES AND STANDARDS Governments across the globe are applying policy instruments to control road transport emissions by regulating tailpipe limits. However, the approach can vary significantly from market to market. In the US, Europe and Japan, this has led to different technical solutions for standards, test criteria and permitted emission levels. For commercial vehicle manufacturers, this has led to higher operating costs and longer lead-times in bringing the cleanest new models to market. Harmonising technical regulations on areas like tests, emission limits and on-board diagnostics would reduce development costs and help manufacturers roll-out new technologies more quickly. quickly. This would deliver a more competitive auto sector, but also newer
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vehicles with lower emissio s and better safety technologies in market across the globe.
FUEL QUALITY Modern vehicles are fitted with sophisticated engines with compone ts and assemblies designed to operate at fin
tolerances. They are managed by co puter to optimise
performance, and compleme ted by exhaust treatment technologies that remove pollutants directly from the tailpipe. T gether, these technology solutions help re uce emissions and deliver the performance dema nded by commercial customers and private
otorists.
The industry is concerned tha regulators continue to prioritise vehicle tec nology in the drive to cut emissions. Insufficient mpetus has been given to the importance of fuel quality and the need to develop global fuel egulations that complement modern vehicl s. Without quality and standardised fuels, ve icles cannot perform to their potential, generating higher emissions, with the risk o f premature component failure through
ontamination and
corrosion. Auto makers acknowledge E ropean targets to increase the use of rene able fuels in road transport to 10% by 2020. H wever, they are concerned by the Commis ion’s Fuel Quality Directive. At a time when the industry has been working to develop glob l standards for bio fuels through membership of the Worldwide Fuel Charter, this is a retro rade step. It sends out entirely the wrong messag e and must be reviewed.
SAFETY Like climate change, road sa ety is an international issue which should b tackled through a collaborative effort from all s akeholders. Manufacturers have a responsib ility to bring safety technologies to market, and i novation has delivered huge advances in o ccupant protection, Page | 30
pedestrian-friendly design a d active technologies that help avoid a
rash. Road users,
planners, governments and e forcement authorities must also accept thei role in cutting the unacceptable unacceptable death toll on roa ds. Here too, an integrated appro ch must be applied. Safety regulations that ary from market to market have the same effect as those applied to emissions and fuel sta dards. They create barriers that can delay the intr oduction of new technologies. Manufacturers are actively i volved in the Global Road Safety Partners ip (GRSP), which brings together regulators, industry and civil society in the poorest cou tries, to deliver an integrated approach on a glob al level. Voluntary measures have also been taken, such as the introduction of seat belts as standard in all vehicles sold anywhere i n the world. All European cars are now itted with ABS as standard, while more recentl the industry has become an active particip ant in the “Choose ESC” campaign to increase consumer awareness of the benefits of lectronic Stability Control.
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Copenhagen Summit 2009: European Automakers reaffirm their commitment to sustainable mobility As world focus turns to the Copenhagen Climate Change Conference in December, European automakers re-affirm their commitment to sustainable mobility at the heart of their business strategies. The industry will continue to drive forward in a spirit of collaboration and openness, carrying the message that a vibrant automotive sector will help drive innovation in support of the low-carbon economy of tomorrow. t omorrow. PROGRESS TODAY:
In the last twenty years, CO2 emissions from cars and commercial vehicles have come down dramatically. Data from car sales reveal a drop of almost 20% since 1995; similar improvements in efficiency have been reported in the heaviest trucks. The Commission has acknowledged this progress and the fact that investment in vehicle technology has been its primary driver. More policy makers now appreciate that, to achieve further significant cuts from road transport, society must look beyond vehicle technology alone. PROGRESS TOMORROW:
In-vehicle technology will continue to play a role, particularly in the development of interconnected transport networks. But governments must now also involve more cost-effective means of driving down CO2, such as eco-driving, joined-up fiscal incentives and the development of alternative fuels and renewable energies as well as their infrastructure. Investments in road infrastructure and measures to facilitate traffic flow present further practical means to minimise CO2 emissions. Auto makers are now working towards tough 2012 targets on CO2 for new cars and further goals set for 2020. WHAT ARE THE CHALLEGES? •
It means improving road safety by building on investment in vehicle technology, focusing on better road design, improved driver education and strong enforcement by the authorities.
•
Sustainable mobility is about ensuring consumers have real choices, but also encouraging them to buy the most suitable vehicle for their needs and educating them in eco-driving techniques to cut unnecessary pollution and save money.
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•
Crucially, during these times of economic recession, sustainable mobility means designing a regulatory framework that allows Europe’s vibrant auto industry to go on innovating and delivering the technologies and low-emission vehicles for a sustainable future.
BAYERISCHE MOTEREN WERKE AG (BMW) BMW is a German automobile, motorcycle and engine manufacturing company founded in
1916. It also owns and produces the MINI brand, and is the parent company of Rolls-Royce Motor Cars. BMW is known for its performance and luxury vehicles. The BMW Group and its products are committed to meet and exceed the expectations of its customers regarding innovations, performance and quality. Therefore quality management is a responsibility which can only be realized if it is lived by highly committed and qualified employees. MISSIO STATEMET
"To become most successful premium manufacturer in the car industry" VISIO STATEMET
Uniqueness through diversity, Leadership taking Risk courteous. QUALITY MAAGEMET
BMW in its Quality policy says that, Quality is our promise to the customer. The products of BMW Group shall meet and exceed the expectations of our customers regarding innovations, performance, and quality. This is based on the t he development process of vehicles and components, where BMW Group engineers and suppliers share responsibility for achieving challenging goals. Quality management is a task that affects all employees and which can only be executed successfully, if it is fully understood by involved and capable individuals. BMW Group has reorganised its method for supplied parts quality management in the product development process to meet the demanding challenges of the future. Page | 33
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JAPANES JAP ANESE E AUTOMAKERS AUTOM AKERS TOYOTA Toyota’s Global Competitive Advantage
Toyota’s global competitive advantage is based on a corporate philosophy known as the Toyota Production System. The system depends in part on a human resources management policy that stimulates employee creativity and loyalty but also on a highly efficient network of suppliers and components manufacturers. The Toyota Production System (TPS) is an integrated socio-technical system, developed by Toyota that comprises its management philosophy and practices. The TPS 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." Taiichi Ohno, Shigeo Shingo and Eiji Toyoda developed the system between 1948 and 1975. Originally called "Just In Time Production," it builds on the approach created by the founder of Toyota, Sakichi Toyoda, his son Kiichiro Toyoda, and the engineer Taiichi Ohno. The founders of Toyota drew heavily on the work of W. Edwards Deming and the writings of Henry Ford. When these men came to the United States to observe the assembly line and mass production that had made Ford rich, they were unimpressed. While shopping in a supermarket they observed the simple idea of an automatic drink resupplier; when the customer wants a drink, he takes one, and another replaces it. The principles underlying the TPS are embodied in The Toyota Way. GOALS
The main objectives of the TPS are to design out overburden (muri) and inconsistency (mura), and to eliminate waste (muda). The most significant effects on process value delivery are achieved by designing a process capable of delivering the required results smoothly; by designing out "mura" (inconsistency). It is also crucial to ensure that the pr ocess is as flexible as necessary without stress or "muri" (overburden) since this generates "muda" (waste). Finally the tactical improvements of waste reduction or the elimination of muda are very valuable. There are seven kinds of muda that are addressed in the TPS: Page | 35
1.
Over-production
2.
Motion (of operator or machine)
3.
Waiting (of operator or machine)
4.
Conveyance
5.
Processing itself
6.
Inventory (raw material)
7.
Correction (reworks and scraps)
The elimination of muda has come to dominate the thinking of many when they look at the effects of the TPS because it is the most familiar of the three to implement. In the TPS many initiatives are triggered by mura or muri reduction which drives out muda without specific focus on its reduction. PRICIPLES
The 14 Principles The Toyota Way has been called "a system designed to provide the tools for people to continually improve their work". The 14 principles of The Toyota Way are organized in four sections: I)
Long-Term Philosophy
II)
The Right Process Will Produce the Right Results
III)
Add Value to the Organization by Developing Your People
IV)
Continuously Solving Root Problems Drives Organizational Learning. The principles are set out and briefly described below:
Section I — Long-Term Philosophy Principle 1
Base your management decisions on a long-term philosophy, even at the expense of shortterm financial goals. People need purpose to find motivation and establish goals. Section II — — the Right Process Will Produce the Right Results
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Principle 2 •
Create a continuous process flow to bring problems to the surface.
Work processes are redesigned to eliminate waste (muda) through the process of continuous improvement — kaizen. The seven types of muda are: •
Overproduction
•
Waiting (time on hand)
•
Unnecessary Unnecessary transport or conveyance conveyance
•
Over processing or incorrect processing
•
Excess inventory
•
Motion
•
Defects
Principle 3 •
Use "pull" systems to avoid overproduction. overproduction.
A method where a process signals its predecessor that more material is needed. The pull system produces only the required material after the subsequent operation signals a need for it. This process is necessary to reduce overproduction. Principle 4 •
Level out the workload (heijunka). (Work like the tortoise, not the hare).
This helps achieve the goal of minimizing waste (muda), not overburdening people or the equipment (muri), and not creating uneven production levels (mura). Principle 5 •
Build a culture of stopping to fix problems, to get quality right the first time.
Quality takes precedence (Jidoka). Any employee in the Toyota Production System has the authority to stop the process to signal a quality issue.
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Principle 6 •
Standardized tasks and processes are the foundation for continuous improvement and employee empowerment.
Although Toyota has a bureaucratic system, the way that it is implemented allows for continuous improvement (kaizen) from the people affected by that system. It empowers the employee to aid in the growth and improvement of the company. Principle 7 •
Use visual control so no problems are hidden.
Included in this principle is the 5S Program - steps that are used to make all work spaces efficient and productive, help people share work stations, reduce time looking for needed tools and improve the work environment. •
Sort: Sort out unneeded items
•
Straighten: Have a place for everything
•
Shine: Keep the area clean
•
Standardize: Create rules and standard operating procedures
•
Sustain: Maintain the system and continue to improve it
Principle 8
Use only reliable, thoroughly tested technology that serves your people and processes. processes. Technology is pulled by manufacturing, not pushed to manufacturing. Section III — Add Value to the Organization by Developing Your People Principle 9 •
Grow leaders who thoroughly understand the work, live the philosophy, and teach it to others.
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Without constant attention, the principles will fade. The principles have to be ingrained; it must be the way one thinks. Employees must be educated and trained: they have to maintain a learning organization. Principle 10 •
Develop exceptional people and teams who follow your company's philosophy.
Teams should consist of 4-5 people and numerous management tiers. Success is based on the team, not the individual. Principle 11 •
Respect your extended network of partners and suppliers by challenging them and helping them improve.
Toyota treats suppliers much like they treat their employees, challenging them to do better and helping them to achieve it. Toyota provides cross functional teams to help suppliers discover and fix problems so that they can become a stronger, better supplier. Section IV : Continuously Solving Root Problems Drives Organizational Learning Principle 12 •
Go and see for yourself to thoroughly understand the situation (Genchi Genbutsu).
Toyota managers are expected to "go-and-see" operations. Without experiencing the situation firsthand, managers will not have an understanding of how it can be improved. Furthermore, managers use Tadashi Yamashima's (President, Toyota Technical Centre (TTC)) ten management management principles as a guideline: 1.
Always keep the final target in mind.
2.
Clearly assign tasks to yourself and others.
3.
Think and speak on verified, proven information and data.
4.
Take full advantage of the wisdom and experiences experiences of others to send, gather or discuss information.
5.
Share information with others in a timely fashion. Page | 39
6.
Always report, inform and consult in a timely manner.
7.
Analyze and understand shortcomings in your capabilities in a measurable way.
8.
Relentlessly strive to conduct kaizen activities.
9.
Think "outside the box," or beyond common sense and standard rules.
10.
Always be mindful of protecting your safety and health.
Principle 13 •
Make decisions slowly by consensus, thoroughly considering all options; implement decisions rapidly (nemawashi).
The following are decision parameters: 1.
Find what is really going on (go-and-see) to test
2.
Determine the underlying cause
3.
Consider a broad range of alternatives
4.
Build consensus on the resolution
5.
Use efficient communication tools
Principle 14 •
Become a learning organization through relentless reflection (hansei) and continuous improvement (kaizen).
The process of becoming a learning organization involves criticizing every aspect of what one does. The general problem solving technique to determine the root cause of a problem includes: 1.
Initial problem perception
2.
Clarify the problem
3.
Locate area/point of cause Page | 40
4.
Investigate root cause (5 whys)
5.
Countermeasure
6.
Evaluate
7.
Standardize
Long-term philosophy
Base your management decisions on a long-term philosophy, even at the expense of shortterm financial goals. The right process will produce the right results 1.
Create continuous process flow to bring problems to the surface
2.
Use the "pull" system to avoid overproduction
3.
Level out the workload (heijunka). (Work like the tortoise, not the hare.)
4.
Build a culture of stopping to fix problems, to get quality right from the first
5.
Standardized tasks are the foundation for continuous improvement and employee empowerment
6.
Use visual control so no problems are hidden
7.
Use only reliable, thoroughly tested technology that serves your people and processes.
Add value to the organization by developing your people and partners
1.
Grow leaders who thoroughly understand the work, live the philosophy, and teach it to others.
2.
Develop exceptional people and teams who follow your company's philosophy.
3.
Respect your extended network of partners and suppliers by challenging them and helping them improve.
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Continuously solving root problems drives organizational learning
1.
Go and see for yourself, and thoroughly understand the situation (Genchi Genbutsu)
2.
Make decisions slowly by consensus, thoroughly considering all options (Nemawashi); implement decisions rapidly.
3.
Become a learning organization through relentless reflection (Hansei) and continuous improvement (Kaizen).
The Toyota production system has been compared to squeezing water from a dry towel. What this means is that it is a system for thorough waste elimination. Here, waste refers to anything which does not advance the process, everything that does not increase added value. Many people settle for eliminating the waste that everyone recognizes as waste. But much remains that simply has not yet been recognized as waste or that people are willing to t olerate. People had resigned themselves to certain problems, had become hostage to routine and abandoned the practice of problem-solving. This going back to basics, exposing the real significance of problems and then making fundamental improvements, can be witnessed throughout the Toyota Production System. S ystem. RESULTS
Toyota was able to greatly reduce lead-time and cost using the TPS, while improving quality. This enabled it to become one of the ten largest companies in the world. It is currently as profitable as all the other car companies combined and became the largest car manufacturer in 2007. It has been proposed that the TPS is the most prominent example of the 'correlation', or middle, stage in a science, with material requirements planning and other data gathering systems representing the 'classification' or first stage. A science in this stage can see correlations between events and can propose some procedures that allow some predictions of the future. Due to the success of the production philosophy's predictions many of these methods have been copied by other manufacturing companies, although mostly unsuccessfully. Also, many companies in different sectors of work (other than manufacturing) have attempted to adapt some or all of the principles of the Toyota Production System to their company. These sectors include construction and health care.
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Employee Empowerment: Average Annual Results
1.
Toyota’s employees submitted more than 700,000 improvement suggestions.
2.
that is an average of over 10 improvement suggestions per employee per year.
3.
Over 99% of suggestions were implemented.
HONDA Introduction Honda Motors, initially a maker of motorbikes, succeeded in becoming an automobile producer after all others, in the mid-1960s, by implementing a strategy of innovation and flexibility and by constructing an industrial model enabling it to avoid or limit the risks peculiar to that strategy. The firm's success owed much to the mechanical and commercial imagination of Soichiro Honda himself. Based on the long-standing philosophy of, "building products in the markets where they are sold," Honda now has more than 100 manufacturing facilities in 33 countries.
Context Honda was unusual in having already created an industrial model by the time it entered the automobile industry. Twelve years after it was founded in 1948, Honda had become the world's largest motorcycle manufacturer, on the basis of a strategy which focused on product innovation and production flexibility and on the mass production of products which had in effect opened new market segments. Other non-Japanese carmakers ask: why do the Japanese learn better from experience than we do? Is it because they stress companywide continuous improvement? For example, Japanese executives worry less about whether overhead allocation reflects the precise demands that each product makes on corporate resources than about how it affects the cost reduction priorities of middle managers and shop floor workers. American executives often dismiss Japanese management accounting techniques as misguided, or even simplistic. Yet, these same Japanese management styles were the ones that helped Honda become successful in today’s fast changing world. Page | 43
As a means to encourage creativity and get flexibility accepted, Honda and Fujisawa developed a company compromise which was not dependent upon group spirit and loyalty as at Toyota but rather on the recognition and gratification of individual talents as well as good work and employment conditions. Inventiveness and expertise were first valued by a promotion path and wage scale, named the expert system, which ran in parallel to the traditional lines and scales. This seemed a good idea since reliance on promotion has affirmative incentive properties because workers can anticipate that differential talent and degrees of cooperativeness will be rewarded. By 1967 Honda had become a proper car manufacturer. It opted for an innovative i nnovative automobile niche and exportation in order to create a place for itself among Japanese producers. Given that Honda cars were seen as practical and fuel efficient, the company was ideally positioned to exploit global (and, above all, US American) markets during the 1970s oil price crises. For its part, Honda continued to seek ways to maintain and indeed increase its capacity to innovate and to make its production apparatus more flexible. In particular, Honda decided always to seek two solutions to the same problem, so as not to become prisoner to a premature decision. Conversion of its production lines to other models was made easier, and the principle of producing homogeneous lots of thirty t hirty to sixty sixt y vehicles was retained.
Employee Focus Honda claims to have a 'human-centred' approach to work, less rigid in defining standard operations than Toyota. Employees rotate tasks; indeed they must be flexible, changing posts, models, departments, and product types. But the HPS does not rely on unplanned long shifts to make up lost production. When needed, Saturdays are used. Working hours are the lowest in the Japanese automobile industry. Focusing on employees is a good strategy. Employees after all are the backbone of a company, and without them it is impossible for any company to succeed. Employees at Honda Motors were therefore viewed as a 'fixed' asset, consistent with the 'flexi factory' operations strategy. Honda also continued to promote individualism, youth, and a certain equality while Japanese culture emphasized the opposites - groupism, respect for age, status. The constant theme at Honda remained how to overcome the organizational rigidities that Japanese culture was believed to foster - 'big business disease'. Honda the business leader appears to have a contemporary and dynamic appeal. Striking remains the extent to which his and his Page | 44
company’s approach to business and management - and indeed to life generally - so contradict many of the stereotypical images of Japanese management management styles. Rover entered into collaboration with Honda in order to secure new model designs and engineering capabilities without which it could no longer survive. Honda’s main interest in the collaboration was more offensive, seeing Rover as providing a bridge into the European market. Moreover an alliance which starts off with primarily defensive intentions can become offensive in nature if it is successful in the market. The key to the Honda new system was 'single status' employment, in which all employees shared the same uniforms, parking lots, restaurants, and private health-care. All offices were open-plan and many had windows so that they could be viewed from production areas. All production workers were placed in one category (with separate categories only for maintenance workers and team leaders) and received the same wage with no allowance for seniority, job done, or individual merit. This un-Japanese system was consistent with Western principles of equality. Consistent with Fujisawaism, it reduced obstacles to managerial authority, individual initiative, transparency of merit, and open communications. Also consistent with Western ideologies, there was a measure of democracy. Workers voted on the organization of the working day (breaks, leaving hours), holidays, and when to make up for any lost output. A panel of production associates reviewed management management dismissals of workers and had the power to reinstate; one in five was reinstated. More challenging than getting American workers to accept this system was to ensure that American managers could work in it.
Quality Management in Problem Solving Many works describe the application of systems theory to production planning. Based on works, authors group organizational problems into four kinds. Its principle is that an organizational problem may result from having erroneously specified either one of or many among the output of the system, the input to the th e system, the production process itself, or even the entire system. Within a firm, problems can occur singly or in combination as well as within specific organizational tasks, such as quality control. This grouping scheme can help managers and planners characterize most business problems.
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To improve Honda’s decision quality, they became more aware of their assumptions, including assumptions about the way strategic variables are affected by and cause changes in other variables over time. The resulting confrontation between devil's advocates and proponents of a particular system structure that causes a dynamic behaviour pattern becomes a learning experience for Honda Motors. Institutional learning opportunities abound when rational confrontation becomes lively in a team t eam because of an analytical approach. To encourage and to make learning an integral part of management technology, we must lift our sights from the short term. To design strategy, we must learn to search for and to identify patterns of change over time. To practice strategy design and to act proactively, we should replace our transaction-driven calculus with scenario analysis. Learning is not a luxury; it is how firms create their own future. Creating the organizational capability of and ambiance for learning will lead to a truly sustainable advantage. A product's Market Perceived Quality is a driving force that increases market share. They further it is argued that when superior quality and large market share are both present, profits are virtually guaranteed, changing the "competitive positioning" of the product. To the essentially conservative posture of the responsible leader there is a concern for change and reconstruction. This creative role has two aspects. First, there is what is called the 'institutional embodiment of purpose.' Second, creativity is exercised by strategic and tactical planning, that is, analyzing the environment to determine how best to use the existing existi ng internal resources and capabilities of the organization. To explain further, Honda’s expertise in engine technology as a core competency satisfies all the above three factors. Honda used their expertise in engines to come up with gasoline engines for different industries such as automobiles, motorcycles, boats, and generators. To top all of that, Honda’s reputation satisfies the third factor, which makes hard for competitors to keep imitating. How Honda was able to survive through all the years despite strong rivalry and competition from other Japanese and Western automakers can solely be attributed to their corporate strategy. Honda built effective strategies in support of their competitive strategies. Honda has not only extended its distinctive capability into other markets but has added new distinctive capabilities. Honda has added reputation to its critical distinctive capability. By specializing
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in engine technology, it has achieved some success in innovation as well. Honda the business leader therefore appears to have a contemporary and dynamic appeal.
NISSAN Quality Policy Nissan recognizes that to achieve its mission Quality comes first and should be incorporated in its operations. To achieve this, the company focuses on the following: •
Strive to exceed Customer Requirements by delivering high quality products and services. This is measured by conducting regular Customer Satisfaction Surveys.
•
To develop employee skills through training, motivation and empowerment. The company works towards achieving Improving Employee Satisfaction.
•
SBA is committed to be a Responsible Corporate Citizen by sponsoring social events, contributing to cultural activities, charity organizations and promoting sports activities.
•
SBA is committed to the principles of Total Quality Management and continual improvement. The effectiveness of this is measured by conducting regular Internal Audits, Quality Steering Meetings, Management Review Meetings and Monthly Performance Reviews. Specific Quality Objectives set by the company are regularly monitored and reviewed in the Management Management Review Meetings.
Quality Management System •
Through robust partnerships with suppliers, Nissan is improving its quality component by component.
•
The ability to consistently source precision-built components defines the quality of the car
A car is complex product made up of a huge number of components—as many as ten thousand of them. In Nissan's case, suppliers may provide up to 70 or 80 percent of those parts. Currently, we source components from around five thousand suppliers. To raise the quality of the final product, we need to maintain the quality of each component. Nissan's SQA* activities ensure that we consistently receive high-quality components from suppliers. Page | 47
•
A supplier is a vendor or a company/manufacturer company/manufacturer providing parts o a manufacturer.
•
SQA, or Supply Quali ty Assurance, refers to the detailed protocol Nissan employs to maintain and improve the quality of components from its suppliers.
•
Aiming for equal, rob st partnerships
To secure a consistent suppl of high-quality components, Nissan partn rs with strong and reputable suppliers. Through our SQA activities, we treat our suppliers as equal business partners to achieve a mutuall profitable relationship. The Supplier Qualit Assurance Group, which promotes SQA activiti s, employs an objective and neutral view to evaluate the needs of Nissan design, Nissan pro uction and that of our suppliers. The aim is to rapidly improve the quality of sourced comp nents and strengthen mutual understanding between the three participating entities. •
Setting a world standa d, with management conducted on a global asis.
Early in its history, Nissan h s been committed to set a global standard f r the quality of the components from its suppli rs' base. With the Renault Alliance, the establishment of a common global management system has been accelerated with the Alli ance's supply base worldwide. As a result, even hough we have various suppliers in differen t parts of the world with varying standards, cultu es and customs, the components they provid e are guaranteed to meet with Nissan's strict quali ty standards.
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Implementing an organic sys t em em to achieve a virtuous cycle of quality i provement
The starting point: upgrade th e quality of the many components that make u p a car. A car has an extremely large umber of parts, and these parts involve a co respondingly large number of people and proces es. While raising the quality of each comp nent and assembly process is crucial, the quality of the finished vehicle must be equally hig h. To maintain our elevated quality standards, w follow the Nissan Quality Assurance Way NQAW), a quality assurance system that takes a olistic view of the entire production process . Auto production requires i novation on a wide variety of compon ents and complex processes. The principle behi d the NQAW is simple: ensure that all the people involved in creating a car grasp the full s ectrum of the processes involved and suppl y a quality product to the market. If everyone un erstands the overall picture, quality will inev itably rise. Similarly, everyone needs to understand that planning and development
ust flow smoothly
toward the production proce ss. Another key is recognizing the impor ance of finding a specific defect in a particul r market, the ability to pinpoint the com onent causing the problem and fixing it quickly. Feeding data on defects back to those handling planning and developme t improves quality in the production cycle of the vehicle. NQAW is a proven system or consistently upgrading quality. Quality a ssurance checks in every department and within every process deliver the type of quality ur customers have Page | 49
come to expect. When we co bine that quality with innovation, we create the kind of quality that satisfies every customer.
Statistical Process Control: A Sc entific Methodolog (With regards to q uality control) More and more manufacturer are implementing automated Statistical Pro cess Control (SPC) systems as part of their conti uous improvement efforts. Simply stated, PC uses statistical equations and graphs to cre ate acceptable limits for process variation —“control limits”. Control limits fall well withi product specification limits so that unstabl e processes can be identified before problemati product characteristics are produced. W th real-time SPC, operators monitor processes o n the production floor. Typically, there is an alarming system in place to alert operators of pro esses that have exceeded the defined control limits, so that they can take an immediate correct ive action. The core objectives of SP
are to provide productivity and quality information about
production processes in real-ti me. The principles of SPC take into account the following: Page | 50
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All processes have unique characteristics or hidden personalities that are inherent within them
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Data analysis provides in depth understanding of process variations and identifies improvement opportunities
Success in real-time SPC requires that measurement data be accurate, and collected in a timely manner. Various gauging devices are used to ensure that a specific measurement is taken and recorded. SPC software programs collect and store this data, analyzing it and creating graphs instantaneously. As a factory floor application that can be extended up to corporate offices and throughout the enterprise SPC software delivers vital quality data upstream to Manufacturing Execution Systems (MES). By integrating live production data into enterprise-wise systems, SPC plays a vital role in the business’ continuous improvement strategy. SPC solutions are designed to allow companies to plan and structure long-term strategies such as maintenance schedules and bring short term quality improvements into view. The scope, detail and accessibility of quality data helps manufacturing facilities avoid unscheduled downtime, By analyzing tool wear metrics, quality departments have the opportunity to minimize downtime by creating detailed maintenance schedules that extend out for many years. To execute process improvements, workers participate in the PDCA cycle – as in Plan Do Check Act, also known as the Shewhart cycle. PDCA involves planning a process adjustment, executing the adjustment, reading the results of the process adjustment to validate results, and taking corrective action if the results don’t align with the original goals. This pattern is repeated until there is a minimal statistical margin of error.2 The PDCA cycle illustrates one of the most valuable concepts of SPC: out-of-control processes present opportunities for improvement. When applied correctly, control charts and limits identify an inconsistency i nconsistency that manufacturers need to know about. Control limits limit s denote what is normal behaviour, and conversely, what’s abnormal. By addressing inconsistencies properly, manufacturers proactively approach process changes that, if ignored, could potentially disrupt future operations.
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A Case Study in SPC for Continuous Improvement: Improv ement: Cooper Tire Background
Cooper Tire & Rubber Company is a global organization that specializes in the design, manufacture, marketing and sales of passenger car, light truck, medium truck tires and subsidiaries that specialize in motorcycle and racing tires. With headquarters in Findlay, Ohio, Cooper Tire has 67 manufacturing, sales, distribution, technical and design facilities within its family of companies located around the world. In 2007, Cooper reported record sales of $2.9 billion with an operating profit of $134 million, a marked improvement since restructuring and other cost saving initiatives were undertaken in 2006. Cooper delivered $100 million in cost savings and profit improvement initiatives while successfully launching the CS4 line and ramping up production of Cooper Kenda Tire. The Cooper brand is one of the most well established names in the automotive industry. The company always ensures that it is on the leading edge of industry innovations for quality improvement and production efficiencies in high-volume environments that produce thousands of tires each day.. Although the functional purpose of a tire has remained the same for over a century, improvements to materials and design are allowing Cooper to bring a more effective, longer lasting tire to the market. To maintain its competitive advantage, Cooper is working to establish long term strategies for continuous improvement, operational effectiveness and product differentiation. Cooper differentiates its products with a winning portfolio of high performance tires marketed under the brand name Zeon. This portfolio also includes the Cooper CS4, Discoverer and Roadmaster lines as well as associate brands Avon, Mastercraft, Dean and Kenda. The Cooper brand is distributed and well positioned in passenger, light truck, sport utility vehicle, commercial and high performance markets.
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Challenge
Along with creating cost effective operations, Cooper has sought to streamline its supply chain with low-cost, high quality raw materials that include natural rubber, synthetic rubbers, carbon black, reinforcing fabrics and steel. Cooper’s continuous improvement activities are leading the company to continue to develop innovative quality improvements. To achieve their objectives for establishing highly efficient production processes, they first had to understand and benchmark their baseline capabilities. One goal was to make better use of production data and, from an operations standpoint, use the data to help guide the decision making process. They needed a quality solution that could satisfy their scalability needs while offering insight into potential quality improvements. i mprovements. “We were trying to gain a perspective about what the data is telling us. What does it point to about opportunities we have? We wanted to do less troubleshooting and work on improving processes rather than resolving production issues,” said Donald S. Bruce, Director of Reliability Engineering. Logistically, Cooper needed an enterprise-wide standard for reports in a system that would initially be implemented in North American, with the ability to go worldwide. As a global entity, Cooper’s implementation would take place in phases, so they needed a solution that was flexible with training, consulting and support. One of Cooper’s objectives was to employ a quality expert at each location to oversee the implementation and ensure the stability of corporate standards. Solution To achieve their process improvement goals, Cooper standardized with InfinityQS Statistical Process Control (SPC) software. “Because quality is synonymous with the Cooper brand, we looked to InfinityQS to ensure that every process met the Cooper standard,” said Bruce. “We investigated a few different options and decided that InfinityQS provided the best SPC solution to handle the complexities of our manufacturing operations.” InfinityQS integrates with MES and ERP systems to provide real-time detailed quality analysis capabilities at the process level that MES and ERP products were never designed to provide. The unique capabilities of InfinityQS solutions contribute to more fluid processes and allow the quality personnel to take a proactive approach to improving the capabilities of the various processes throughout the operations. Page | 53
As opposed to the other real-time SPC solutions that Cooper was initially considering, InfinityQS uses a relational database structure, a simple, flexible format that was able to give Cooper the versatility they needed for a thorough analysis of parts across various production processes. InfinityQS’ unique relational databases allows users to quickly and easily manage thousands of parts in a single set-up (project) as opposed to the hundreds of thousands of data files other SPC systems force users to configure. This structure allows Cooper to conduct comparative analysis of any part running across any process with just a few clicks of a mouse. InfinityQS International is currently helping Cooper instil a culture of innovation throughout all the manufacturing sites. Rather than t han a reactive approach that dedicates resources to putting out fires, Cooper is bringing about change with a data-driven culture. InfinityQS’ data analysis functions give Cooper a full grasp of their process capabilities. InfinityQS control charts illustrate process control limits, and create automated alerts when a process exceeds these limits. Instituting process control across production lines helps ensure that each Cooper tire is produced to the highest quality standards. This robust data analysis allows Cooper to shift resources away from processes within specification and control limits toward areas that can enhance the overall operations. The first phase of Cooper’s corporate-wide InfinityQS implementation took place in four North American facilities. Work has also begun to install trial one of the software packages in China. Results
Cooper was able to drive and sustain continual improvement using the InfinityQS SPC system. The software gave them additional tools to help them as they head down the path to become ISO 9001 certified in 2008. With InfinityQS, Cooper effectively monitors processes to ensure effectiveness, keeps adequate records, checks output for issues and applies CAPA where necessary – all requirements of ISO 9001. Cooper Tire & Rubber Company was able to use InfinityQS software to drive operational process improvements with significant cost savings and increased productivity. In one plant, Cooper realized $400,000 in annual savings on the belt line by analyzing the dimensional data of components. These cost savings represent just one line in one plant. Similar savings were recognized on other production lines and throughout other facilities using InfinityQS Page | 54
software. Cooper also attained measurable process performance index improvements in the inner line, extrusion, and cutting processes. Cooper’s road to success is driven by a combination of lower production costs and increased productivity. The significant annual savings on the belt line alone demonstrates how Cooper is able to significantly reduce its costs of production. In addition to cost savings, Cooper also made substantial improvements in process performance index. With the InfinityQS solution, Cooper Tire is systematically driving process improvements that ensure the optimal quality levels that consumers have come to expect from the Cooper brand. Cooper’s road to success is driven by a combination of lower production costs and increased productivity. The significant annual savings on the belt line alone demonstrates how Cooper is able to significantly reduce its costs of production. In addition to cost savings, Cooper also made substantial improvements in process performance index. With the InfinityQS solution, Cooper Tire is systematically driving process improvements that ensure the optimal quality levels that consumers have come to expect from the Cooper brand.
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Conclusion After a detailed report regarding the quality practices in the automobile sector from a global perspective, we can observe how, despite the different principles, rules, standards etc followed, they all aim for a common result – Quality. Automobile industry by nature is consumer centric. It responds immediately and sensitively to emerging technologies and innovations and companies that fail to keep up with the consumer expectations eventually die out. However precautions must be observed while keeping up with the changing times. Hence Quality control and Quality assurance are very important tools in maintaining standards and expectations from the customers. This is where the importance of Quality Management Systems comes into perspective. Automobile Quality Industry Standards like QS 9000 and ISO/TS 16949 help draw a framework and a set of guidelines for automobile companies to follow so as to maintain t heir quality standards and policies. The Cooper Tire case study and the Hyundai case study that were presented in the report are examples of the positive impact Quality Qualit y Management Systems can have on the prospects, operations and overall efficiency and results of the company. We also noted the differences in the Quality Management Systems followed by the European and Japanese Automobile Companies. We deduced that the Germans and Europeans are more technology centric, more focussed on improving operations and quality of materials and systems followed. Europeans prefer a more individual approach. They focus on the car as an individual unit and let the quality standards of the car do all the t he talking. They like to focus on their individual cars as though each one unit is perfect. Their Quality Management Systems are very stringent and often difficult to emulate. The Japanese consider quality management to be a holistic process. They involve the employees and the top management under the umbrella of quality principles that are common to all. This approach has helped Toyota, Honda and Nissan become global leaders in Automobile Industry. Even in the backdrop of the bankruptcy of General Motors (World's Largest car manufacturer), and the troubles faced by the iconic Ford, their German and Japanese counterparts counterparts continued to show positive results because of their ability abilit y to maintain the highest levels of quality qualit y and safety while providing ultimate customer satisfaction. The report also helps shed some light on the role of the Automobile Sector at the ongoing Copenhagen Copenhagen Summit 2009.
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Bibliography
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