OM ASSIGNMENT TOTAL QUALITY MANAGEMENT a CASE OF GENERAL ELECTRIC

FOREIGN TRADE UNIVERSITYOM ASSIGNMENT: TOTAL QUALITY MANAGEMENT A CASE OF GENERAL ELECTRIC Lecturer: Dao Minh Anh, MBA, MSc... In addition, we also introduce to you one of the most well-

FOREIGN TRADE UNIVERSITY

OM ASSIGNMENT:

TOTAL QUALITY MANAGEMENT

A CASE OF GENERAL ELECTRIC

Lecturer: Dao Minh Anh, MBA, MSc

Pham Ha Thanh Phuong- ID 1712280044Nguyen The Trung - ID 1712280062Phan Khanh Chi - ID 1712280013Duong Thi Thu Thuy - ID 1712280054

Class: Advanced Program in International Business Administration

Batch 56

Ha Noi, December 2019

Table of Contents

INTRODUCTION 2

MAIN CONTENTS 4

A DISCUSSION OF THE TOTAL QUALITY MANAGEMENT MODEL 4

Definition 4

TQM Approaches 5

Other elements 6

Six Sigma 7

TQM Approach Advantages vs Disadvantages 8

Criticism/Difficulty 11

B INTRODUCTION OF A SUCCESS COMPANY: GENERAL ELECTRIC 11

About General Electric 11

Reasons for implementing 12

Improvement program 13

Model 15

Benefits 16

A look from today 18

CONCLUSION 20

REFERENCE 21

an important aspect of TQM, is being adopted by many famous managers of many known firms This essay will provide you with the general knowledge of TQM in general and Six Sigma in particular In addition, we also introduce to you one of the most

well-successful companies which applied Six Sigma in their operations which is General Electric Company (GE)

The paper contains 2 main parts:

● Discussion of the Total Quality Management model

● Introduction of a successful company: General Electric

MAIN CONTENTS

A DISCUSSION OF THE TOTAL QUALITY MANAGEMENT MODEL Definition

Quality is the ability of a product or service to consistently meet or exceed customer

expectations Quality is important to business organizations and can benefit them in a variety of ways Some examples include: an enhanced reputation for quality, the ability tocommand premium prices, an increased market share, greater customer loyalty, lower liability costs, fewer production or service problems, and higher profits to name a few

Total Quality Management (TQM) is “a philosophy that involves everyone in an

organization in a continual effort to improve quality and achieve customer satisfaction”

(Stevenson, Bateman and Snell, 2012)

The term total quality management (TQM) refers to a quest for quality in an organization There are three key philosophies in this approach One is a never-ending push to improve,

which is referred to as continuous improvement; the second is the involvement of everyone

in the organization; and the third is a goal of customer satisfaction TQM systems are

intended to prevent poor quality from occurring

To specify, TQM is the continual process of detecting and reducing or eliminating errors

in manufacturing, streamlining supply chain management, improving the customer

experience, and ensuring that employees are up to speed with training Total quality management aims to hold all parties involved in the production process accountable for the overall quality of the final product or service

TQM was developed by William Deming, a management consultant whose work had a great impact on Japanese manufacturing While TQM shares much in common with the Six Sigma improvement process, it is not really the same as Six Sigma TQM focuses on ensuring that internal guidelines and process standards reduce errors, while Six Sigma

looks to reduce defects (Barone, 2019)

TQM Approaches

The ordinary, text-book approach consists of 5 steps:

1 Find out what customers want: This involves the use surveys, focused group interviews

or some other techniques that demonstrate customers’ voice in the decision making process

2 Design a product or service that will meet or exceed what customers want: Organization should produce and supply services and products aligned with the needs and desires of consumers

3 Design processes that facilitate doing the job the right the first time: Determine wheremistakes most likely to occur and try to prevent them When mistakes do occur, find out thesolution and try not to let them happen again

4 Keep track of results and use them to guide improvement in the system: Improvement is strongly required, it is a must in the development of an organization

5 Extend this concept throughout the supply chain: Many companies have successfully implemented TQM in multiplying its chains and components

Some other approaches to be mentioned:

1 Just in Time: Cutting inventory in raw material, work-in-progress, finished goods, time, etc

2 Statistical Process Control: Tighter monitoring of operations Moto: Plan, do, check

3 Process architecting: Re-founding the workforce from scratch for enhanced quality

4 Robust Design: Scientific design for long-term performance

5 Middle-Up-Down Management: Giving different levels of leaders responsibility and power, not just ones on the top.

6 Democratic Scientific Management: Every employee can improve cognitive processes

(Money Matters, 2019)

Other elements

There are different ideas of TQM elements, one of which are these:

1 Continuous improvement Japanese companies have done this for years In Japanese, the

term for continuous improvement is Kaizen.

2 Competitive bench-marking: This involves identifying some leading organizations andlearning from them to improve one’s own (supposed that these companies are in the sameindustry)

3 Employee empowerment: This means giving workers the responsibilities for

improvements and the authorities to accomplish them

4 Team approach: The use of teams for problem solving and to achieve consensus take advantage of group synergy, gets more people involved and spreads the organization’s spirits

5 Decisions based on facts rather than opinions: Management gathers and analyzes as a basis for decision making

6 Knowledge of tools: Employees and managers are trained in the use of quality tools

7 Supplier quality: Suppliers must be involved in quality assurance

8 Quality at the source: Quality must be well managed from the very beginning of the process etc,

Meanwhile, others believe that there are only 8 key elements divided into different levels, which are:

following Motorola in successfully implementing the Six Sigma program (Yang, 2012)

Six Sigma strategies seek to improve the quality of the output of a process by identifying and removing the causes of defects and minimizing variability in manufacturing and business processes It uses a set of quality management methods, mainly empirical, statistical methods, and creates a special infrastructure of people within the organization who are experts in these methods Each Six Sigma project carried out within an

organization follows a defined sequence of steps and has specific value targets, for

example: reduce process cycle time, reduce pollution, reduce costs, increase customer

satisfaction, and increase profits (Wikipedia, 2019)

The Six-Sigma program has a five-phase cycle, including ‘Define,’ ‘Measure,’ ‘Analyze,’

‘Improve,’ and ‘Control’ (DMAIC) for process improvement, as illustrated in the table

below (Yang, 2012)

TQM Approach Advantages vs Disadvantages

Advantages:

- Lower costs: TQM lowers costs throughout the business infrastructure and

organization Because TQM involves everyone in an organization, it helps different

departments to communicate their needs, problems, and desires with each other, so that workable solutions can be found that will help the organization cut costs throughout the supply chain, distribution chain, shipping and receiving, accounting and management

departments without losing productivity or the ability to operate rapidly in the face of change.Besides, TQM eliminates defects and waste, which reduces production costs in a business The emphasis on

engagement at all levels leads which TQM applies to employee engagement will reduce turnover and save money on training and mistakes due to inexperience.

- Gain customer satisfaction: The focus on using high quality information to improve

processes, leading to reduced expenses that can be passed along to clients in the form of lower prices Companies that successfully implement TQM are able to reduce variability, providing the consistency that customers value This creates customer loyalty and earns their continued business Moreover, these changes which TQM creates allow for more individual empowerment and voice, that is, more satisfaction with work and supervision, more accurate and faster communication, which means better information quality and quantity, and the

potential for warmer, more supportive work situations, which is more satisfaction

with co-workers and a better environment (Blackburn & Rosen, 1993).

in mindset, attitude and methods for performing their jobs while the effects of total quality management will not be seen until employees get used to doing better quality work

- Expensive: Seaver (2003) points out that quality is expensive to implement

Implementation TQM requires additional costs such as consulting fees, training,

9

infrastructure improvement and team development fees In the long-run, the

investment may be costly to an organization

To better see how TQM impacts on the operations of a business, we can compare it

between companies following TQM culture and those adhering to traditional philosophy

expectation

Objectives Emphasis on short term Balance of long/short term

Management Not always open, sometimes Open, encourage employee

inconsistent objectives input, consistent objectives

Manager role Issue orders, enforce Coach, remove barriers, build

trust

Customer Not highest priority, may be Highest priority, important to

Problem Not systematic, individual Systematic, teams

solving

Jobs Narrow, specialized, much Broad, more general, much

Source: Principles of Management and Operations (Management 339, CSUF), p394

TQM brought about huge improvements by going upstream in the process to eliminatedefects at the source and to develop products and processes that are inherently reliable.That significantly reduces the need for inspection and dramatically reduces the level of

scrap and rework Hence, the philosophy of TQM helps maximize all stakeholders’

- Lack of preparation for changing the entire organization cultures: It is difficult for individuals to change their way of doing things because they become habituated to doing a particular process and it becomes the preferred way Besides, it takes a long time for an organization to adapt to a new culture

- Lack of financial support in the short-term especially for SMEs: It will take time for

a company to yield more profit from when it started applying TQM Therefore, TQM can not

be considered as the best choice for all types of enterprises when their short-term focus is profit and cash

B INTRODUCTION OF A SUCCESS COMPANY: GENERAL ELECTRIC

About General Electric

General Electric (GE) is a worldwide-famous multinational company, currently hiring 283,000 employees and establishing customer relationships in more than 180 countries Facing the dynamic, integrating world market, the company decided to incorporate,

changing from being an industrial company to a global digital-industrial, focused business to catch on with the global transformation GE's products and services range from aircraft engines, power generation, oil and gas production equipment to

technology-medical imaging, financing services and research investment (Ge.com, About us)

The company has experienced impressive developments throughout 130 years of history

In 1889, GE started out as only one among many small plants founded by Thomas Edison

in New York The company has gone through several acquisitions and partnerships, investments and divestments, expandition and cut down, etc

In 1998, GE had more than $100 billion in revenue, an increase of 11 percent over 1997 Earnings increased 13 percent to $9.3 billion, and the operating margin was at a record

16.7 percent In 1998, Fortune magazine called GE "The Most Admired Company in America," and the Financial Times dubbed GE "The World's Most Respected Company." The 1998 marked the beginning of GE's golden times and impressive growth (Godfrey, 1999) Until now, GE has been included 65 times in the Fortune 500 list (with 4th being the highest rank ever) (Fortune, 2019) General Electric was one of the original 12

companies listed on the newly formed Dow Jones Industrial Average, where it remained a

part of the index for 122 years (Wikipedia, 2019) It has also been highlighted for its

innovation, corporate branding, trustworthiness and leadership in worldwide credible charts

So, what is the secret behind GE's success? It all lies in one principle: “Six Sigma”

Reasons for implementing

Following the grand groundwork of Motorola in Six Sigma, General Electric soon enteredthe arena in the mid 1990s The model applied, implemented and enhanced by the

corporation attained such success that it set an example for many to go after

The CEO of GE, Jack Welch, was convinced by the systematic and statistical method of Six Sigma which had proved successful at Allied Signal With his energetic support, senior management became fully committed to the Six Sigma programme ‘GE

QUALITY 2000’ became the GE mantra for the 1990s and beyond Jack Welch declared that “Six Sigma, GE Quality 2000 will be the biggest, the most personally rewarding and

in the end the most profitable undertaking in our history!”

GE identified four specific reasons for implementing it:

1 Cost reduction

It was pointed out that the gap between Three sigma and Six sigma was costing GE between $7 and $10 billion annually in scrap, rework, transactional errors and lost

productivity (Basu and Wright, 2003)

2 Customer satisfaction improvement

GE claimed customers to be the center of its universe: they define quality They expect performance, reliability, competitive prices, on-time delivery, service, clear and correct transaction processing and more Therefore, Six Sigma is a necessity for GE to delight its customers

3 Wall Street recognition

Financial analysts aligned a serious Six Sigma commitment from a top management team with increased management execution capability and the profitability of hundreds of millions of dollars Consequently, they tend to evaluate such a company more highly and are more inclined to recommend the stock to investors Six Sigma clearly became a factor for GE to make it to Wall Street’s “strong buy recommendation” (Bertsch and Williams, 2001)

4 Corporate synergies

Synergy is the concept that the value and performance of two companies combined will

be greater than the sum of the separate individual parts (Barone, 2019)

For a multi-functional corporation like GE, it is important to enhance synergies In thiscase, Six Sigma, or Lean Six Sigma in particular, provided a useful synchronization forthe management of thousands of employees

Improvement program

Welch applied Six Sigma in four key ways that ultimately translated to a formula forsuccess:

1 Training: GE required almost all employees to take a two week, 100-hour Six Sigma

Training Program Afterward, employees were asked to complete a project implementing those methodologies

2 Mentoring: Mentoring was key to GE’s success Full-time, Master Black Belt Six

Sigma professionals were required to train and mentor employees whose jobs were integral tokey processes After those employees were trained and mentored to become Black Belts as well, GE Black Belt teams carried out different Six Sigma projects within the company

Green Belts were also able to join projects teams to a certain capacity

3 Leadership: Welch also asked for a commitment to their Six Sigma goals from both

executives and the GE workforce, linking promotions and bonuses to improvement in quality.Even the CEO and President attended training sessions

4 Focused Implementation: GE used three key implementation approaches.

● “Show Me the Money” meant GE focused on the bottom line, cutting costs to

compete in price-sensitive markets

● “Everybody Plays” meant that even outsourced suppliers were expected to

participate in the Six Sigma initiative to make sure that the quality was assured from start to finish for each product

● “Specific Techniques” meant GE used process maps and other Six Sigma tools to

rank and associate projects with overarching business goals

The structure of a typical GE Six Sigma team: