Business Management Articles / Quality Management

GLOBAL COMPETITIVENESS THROUGH TOTAL QUALITY

by Rene T. Domingo

There are new forces and drivers in the global environment which create both opportunities and problems for all business enterprises. Perhaps we can reduce these forces into 4C's - the changing customer, increasing competition, the rising costs, and impeding crises. To withstand these forces or 4C's, any company should continuously improve and strengthen itself. The next question is what to do next. Lest we get bewitched, bothered, and bewildered by these changes in the global environment, and be overwhelmed by innumerable strategic options, let us seek guidance from what I consider one of the best but underrated management books of all time: Alice's Adventures in Wonderland.

When Alice got lost in the forest, she met a cat.

Alice: "Would you tell me, please, which way I ought to go from here?"

Cat: "That depends a good deal on where you want to get to."

Alice: "I don't much care where --"

Cat: "Then it doesn't matter which way you go."

A company without a focus, without a vision, will lose its way and self-destruct in the midst of global opportunities and problems. Problems will become crises, and opportunities will be become problems. As somebody once said "No opportunity is lost -- the other fellow just takes it."

TQM AS FOCUS

I believe that the only winning global strategy is one based on Quality or Total Quality Management (TQM). The Japanese have proven this time and again. The survivors who will withstand any global force now and in the future will be companies whose focus or obsession is one and only one: Quality. TQM puts the customer on top of everything. Systems and strategies of TQ companies are based on the unchanging beliefs that "the customer is king and the customer is always right." TQM also guides them on which opportunity to grab and which problems to solve first. TQ companies have this constancy of purpose, regardless of global trends and threats. Constancy of purpose is the first quality commandment of the late great quality guru, the patron saint of Japanese businessmen: Dr. Edwards Deming. . Big global companies that forget the customer and quality are bound to fail from the very beginning, and the experience is going to be expensive if not fatal. And the bigger they are, the harder they fall.

FAILURES IN QUALITY

Sophisticated strategies based on costs, comparative advantage, technology, economies of scale, past experience, novel management concepts and paradigms are bound to fail if the company sells the wrong product or service to the wrong customer. Global competitiveness starts with quality competitiveness and ends with quality competitiveness. We should become quality competitive, before we strive to be price competitive, cost competitive, or technologically competitive. We have to strive for quality, before we even strive for profits. If we concentrate on quality, everything else follows : delighted customers, lower cost, lower inventories, motivated employees, higher sales and profits. Not surprisingly, because of the substantial cost of making mistakes in quality - called quality cost - which on the average is 30% of sales, TQ companies discover that by improving quality, they can cut down cost dramatically. With improved quality, even without any increase in sales, companies have doubled or tripled their profits.

AIRLINE HUB-AND-SPOKE PARADIGM

The airline industry can also teach us a lesson in quality management. Big American airlines like United and Northwest which are losing billions of dollars are now reassessing their hub-and-spoke strategies which based on load factor and economies of scale of the Jumbo jet. Hub-and-spoke means passengers will have more transits and stopovers just to get their destination. It may be ideal for parcels, but not for people. Passengers want convenience and speed, not load factors; they believe that the shortest distance between two points is a straight line, not a spoke. So they are flying the smaller but profitable Southwest Airlines which caters to point-to-point passengers.

A major reason for the low market shares of American cars in Japan is that they are of the wrong size, and the steering wheel is on the wrong side. The American carmakers find it expensive to produce and modify cars for the Japanese market. European car makers are much more pragmatic and successful in penetrating this tough market. Low cost and advanced technology will not translate to competitiveness and profitability if products are of inferior quality and service is slow, because there will be no sales.

GLOBAL CONVERGENCE OF TASTES

As regional blocs remove economic boundaries and tariff barriers, there will be only one type of competition - global competition. Even local companies selling locally will have to compete globally with the onrush of high quality and cheap imported goods from neighboring nations. Dr. George Yip, author of Total Global Strategy, cites increasing travel, global advertising, and convergence of lifestyle as strong drivers which increase the demand for standardized products world wide. The quality challenge is to have consistency and sameness in all products and services sold anywhere in the world; these require rigid processes, systems, and training. It is easy to do something right, but it is difficult to it right all the time in all places. Standardization is relatively easy with Coke which tastes the same anywhere in the world since the syrup comes only from one source. It is tougher to do this with McDonalds hamburger since raw materials and labor will have to be sourced locally. Nevertheless, there are no surprises and we are guaranteed that the Big Mac in Moscow, Manhattan, or Manila should taste the same. The bigger challenge is how to standardize service. Euro-Disney is finding it difficult for French employees to be as smilingly friendly as their American counterparts.

Standardization and convergence of tastes do not mean we are back in Henry Ford's days when he said "The customer can have a car with any color he wants, as long as it is black." It is foolhardy to standardize tastes, and design products and services based on the average consumer. Competition and increase in purchasing power can make consumers expect more variety , more models from more and more competing suppliers. Convergence of tastes means consumers all over the world will want to choose from the same set of products; but they expect the set to consist of many types and models from which they can choose their own combination. This is what I call variety within uniformity. The quality challenge here is how to continuously innovate products and come up with many models with small lots, short lead time, and deliver them anywhere in the world without excessive cost to the customer. Flexible manufacturing systems and just-in-time systems were designed to meet this challenge.

TO STANDARDIZE OR TO CUSTOMIZE?

By using only one rule - what the customer wants - TQ companies easily decide whether to standardize or customize products in one country. For traditional companies, which have many priorities and criteria, it may be a complicated guessing game, or at most a calculated risk, subject to fine tuning or expensive correction later on. There are no hard and fast rules. But there is only one rule: the rule the customer makes and follows. Whether a standardized or customized product/service will sell depends on the customer, not the company making it. The only strategy that will work is one that can satisfy customer's needs and quality expectations better than the competitor. While there is such a thing as global market, there is no such thing as a global customer which wants a global product with a global quality. For a particular product, each customer in each country is a unique situation. Success of a standard product in the home market is not always a guarantee of success in the global market.

ADAPTIVE OR PROACTIVE

Some say the ability to adapt is a strength. But to be adaptive or reactive in the global market can be a very risky and expensive exercise - because of the size of investment, distance, and long lead times. Adaptation means you have to modify products and processes after learning painfully what customers really want. Before P&G's Pampers became the best selling disposable diaper in Japan, it learned an expensive lesson and was almost driven out of the Japanese market when it sold the unmodified American diaper which was thick and bulky. P&G realized much later that the Japanese housewives change their baby's diaper twice as often as the American housewives, and want a slimmer and more compact diaper because of limited space in the tiny Japanese houses.

TQ companies have learned to be proactive and sensitive to customer needs, especially in the ruthless and far-flung international markets. They thoroughly study and anticipate consumer needs before launching or exporting their product - to satisfy their customer right the first time. They design products by thinking like the customer and with the customer. Sony developed the highly successful Walkman for the Japanese consumers by focusing on the limited space in typical Japanese homes which cannot accommodate large appliances. The Walkman was also a hit in the U.S. Though Americans have much bigger homes, the Walkman appealed highly to their need for individual privacy.

WORLD CLASS MANUFACTURING

After quality is attained and assured, the TQ company operating globally, dramatically cuts its cycle times like product development time, customer order processing time, manufacturing lead time, set-up time. Cycle time reduction greatly enhances product innovation, and product delivery, and manufacturing flexibility -- thus increasing competitiveness. With the rapid and unforeseeable changes in global demand and tastes, short cycle times are a great advantage, since you can adapt to changes rapidly with minimum loss, minimum inventory, and minimum obsolescence of products. You do not have to depend on accurate forecasts and a 20-20 vision of the future.

Traditional mass production systems are designed to produce big batches of the same model, because of economies of scale and long set-up times. In a dynamic global environment, this system is uncompetitive and can be fatal because you may suddenly get stuck with very high inventory of models and products customers don't want anymore. Global competitiveness can only be achieved by world class manufacturing systems like flexible manufacturing systems and Just-in-time systems which can produce high variety of products with small lot sizes and short changeover times.

In the Toyota factory in Japan, you can see cars of different models and colors alternate and flow in the same production line. The just-in-time system has made Toyota the benchmark of all other car companies in the world. In Japan, the growing trend in some industries, like metalworking, is to offer customers a "minimum order of one piece" at no extra charge. The assured formula for failure in the export market is to have long lead times, large minimum orders, with little or no product variety. With short lead times and set-up times, a lean and mean manufacturer can satisfy even "unreasonable" customers who frequently change their minds and their orders with short notice. TQ companies look at unreasonable customers as a gold mine, since competitors do not want to serve them.