SMB4004 Topic 3

Topic 3
Strategic Quality Planning
3- 1
Overview
Quality is strategic
Strategic quality planning has two important dimensions
content
process.
Strategic content answers the question of what is to be
contained in the strategic quality plan.
Strategy process consists of the steps used to develop
the strategy
Chapter 3
Strategy Content Quality as a strategy

The importance of Quality strategy
time in quality process
improvement Deploying quality
Leadership for quality Does quality lead to
Quality and ethics better business results?
Supply chain strategy
3- 3
Strategy Content
Strategic
Quality Planning relates to quality
improvement that involve:
Identifying potential for improvement,

Prioritizing potential areas for improvement
Planning the implementation of projects and
improvements.
4- 4
Strategy Content
The variables of strategy content that include

in Strategic Quality Planning are:
1. Time
2. Leadership
3. Ethics
4. Generic Strategies (Cost, Differentiation, focus)
5. Quality as a core competency
Strategic Quality Planning (Strategy Content)
The importance of 1. time in quality improvement
There are two aspects of time:

Time is a key variable in improving quality.
The time it takes to achieve business goals as a
result of quality and the speed at which companies
improve.
Strategic planning implies planning for long term for
continuous quality improvement.
Study and research have shown the significant
result of quality improvement can be seen after 3 to
25 years.
Setting short term goals for higher quality levels and
managing toward those goals may prove damaging to
the firm. 4- 6
The importance of 1. time in quality improvement
When goals are set in short term with high quality

levels and without providing systems, one of three
things will occur (based on Donald Wheeler)
1. People will achieve the goals and earn positive
results
2. People will distort the data
3. People will distort the system
There is no optimal time for significant result from QI.
It is depend on the amounts of support from company
for employees to achieve the goals.
4- 7
2.Leadership for quality
Leadership is a key strategic variable for QM.

Leadership is the process by which a leader influences a
group to move towards the attainment of superordinate
goals.
Superordinate goals are those goals that pertain to
achieving a higher end that benefits not just the individual
but the group.
For followers to have power, leadership must share power.
As a result leadership is about the sharing of power.
2. Leadership for quality
This power takes many forms:

The power of expertise
Leader with special knowledge.
Reward power
Leader with reward power.
Coercive power
Leader has power to punish the follower for not following rules.
Referent power
Leader is charismatic or charming and is followed
Legitimate power
As a result of the position that different people hold within an
organization.
4- 9
Leadership dimensions can be measured based on

4 different quadrants leader skills.
1. Q1 (Knowledge)-Knowledge helps the leader
accept risk and moderate the stress.
2. Q2(Communication)-leader must be able to
communicate with other leader and subordinate.
3. Q3(Planning)-Leader must able to plan and
make decisions.
4. Q4(Vision)Leader must able to formulate a
future coherent vision.
4- 10
4- 11
3. Quality and Ethics
Quality is also good ethics.

It is unethical to ship defective parts or poor service
knowingly to a customer.
Company focusing their customer often develop a set
of ethics that includes valuing employees.
Environmental friendliness is seen as an ethical
concern.
Integrity and honesty with customer, employees,
colleagues, family members are the basis for business.
4- 12
4.Quality as a Generic Strategy (Cost, Differentiation, Focus)
Based on research, quality as business

strategy is still an effective tools as an
order qualifier for local and international
market.
These generic strategies are:
Cost of quality
Differentiation through quality.
Focus through quality.

Cost of Quality- discuss on how quality can help

decrease the cost.
PAF Paradigm translates quality cost into:
Prevention Costs
costs associated with preventing defects and imperfections
from occurring.
Appraisal Costs
Cost associated with the direct costs of measuring quality.
Failure Costs
Cost associated with the failure internally and externally.
4- 14
Appraisal Cost
Laboratory acceptance testing
Inspection and test
Setup for inspection
Product quality audit
Review the test and inspection data.
Supplier monitoring
ISO 9000:2008
Quality award assessment
The Colorado Manufacturing Company of Boulder, CO has

gathered the following quality-related costs. You are hired
as a consultant to evaluate these costs and to make
recommendations to management.
Failure Costs (F)
Appraisal Costs (A)
Defective Products $ 4,234
Receiving Inspection $ 24,138
Engineered Scrap $ 21,265
Line 1 Inspection $ 7,256
Non-engineered Scrap $ 224,123
Line 2 Inspection $ 8,543
Consumer Adjustments $ 125,654
Spot Checking $ 2,766
Downgrading Products $ 2,125,328
Total $ 42,703
Lost Goodwill Not evaluated
Customer Policy Changes Not evaluated
Total $ 2,500,604
Prevention Costs (P)
Quality Training $ 25,500

Total Process Engineering Corporate $ 132,678
Plant $ 44,124
PAF=$2,756,031 Product Redesign $ 10,422
Total $ 212,724
Ratio of Prevention to Failure Cost = 212,724 / 2,500,604 =

.0851
Ratio of Appraisal to Failure Cost = 42703 / 2,500,604 = .0171
Ratio of Prevention and Appraisal to Failure Cost =
255,427/2,500,604 = .102
Proportion of total quality cost:
Prevention: 212724/2756031=0.0772
Appraisal : 255427/2756031=0.0927
Failure :2500604/2756031=0.9073
Identify strategies for reducing costs:
Failure costs are very high compared with prevention and appraisal
costs.
Increase prevention and appraisal activities (costs) could result in a
significant decrease in failure costs.
The Lundvall-Juran model

C1 Increase,
Conformance ratio
increase.
C2 decrease,
conformance ratio
increase.
Cmin is the tradeoff point
between C1 and C2
Differentiation is achieved if the consumer

perceives the product and service is unique.
Japanese automakers differentiated their
products based on mileage and quality in 1980
and resulted market share increased
significantly.
It is hard to differentiate products based on
quality alone but it is much room to
differentiate based on service to customer in
market
Focus the product- A product that is

particularly regional or is marketed to
particular segment of the population.
Example: based on age categories, social
factors- baby, senior citizens.
4- 22
5. Quality as a core competency
Core competence consist of communication,

involvement and deep commitment to working
across organization boundaries.
With core competency, organization will able
to produce outstanding products and services
because of a good understanding of
processes .
Core competency is build on the foundation of
long term commitment to quality and continual
process improvement.
Strategic Quality Planning (Quality Strategy Process)
Process consists of the steps for developing

strategy within an organization.
There are many different processes for
developing strategy.
Discussion will be based on 2 types:
Firm with no experience developing strategy.
Firm with mature quality processes developing
strategy
Strategic Quality Planning (Quality Strategy Process)
Forced Choice Model

This model suits to the firm that without experience developing
strategy. They are beginner in strategy planning.
This model is simple compared with other strategy planning
model.
4- 25
Quality Strategy Process
Hoshin Kanri or Policy Deployment

Hoshin is Japanese for a policy or plan.
Kanri refer to management control.
Hoshin Kanri generally refer to Policy Deployment.
Implicit in Hoshin Kanri is the use of Seven tools, new tools for
quality and Quality Function deployment (QFD).
The Company develops a 3 - 5 year plan
The Senior Executives develop the current years objectives.
Then process of Catchball occurs.
4- 26
Deploying Quality
Then process of Catchball occurs.

Catchball is
an interactive Hoshin planning process.
Teams report up.
Management delivers feedback.
Hoshin plan results action plans that are designed to
achieve corporate goals.
Functional manager also should develop Hoshin in
conjunction with upper management.
This result in the development of specific plans for action
and post implementation review of Hoshin to evaluate the
success of the process.
4- 27
4- 28
Step 1: Review the current mission and

vision statement, value and strategy.
Make adjustment if it is needed. Key
customer requirements and key business
factors is reviewed.
Step 2:Forecast market demand and
reassessing the position of company in the
industry. Core competency and revenue
projections are made.
Step 3:Assess the future market in each of
product. Analysis of capacity need,
customer need, technology needs profiling
major competitors and development of
new marketing plans.
Step 4: Development of broad goals and plans by product.

Develop separate mission, vision, value, and plans by product on
very broad basis. These plans are reviewed by upper
management to ensure alignment with overall corporate goals.
Step 5: Review and monitor implementation of strategy plan.
Deployment of Hoshin plans.
Does Quality Lead to Better Business Results?
Deming value chain proposed quality will pay off.

Improve Productivity Stay in
Quality Improve Business
Cost Capture Provide

reduction the market more jobs
1 - 31
But in actual, some firms are success and some are fail.
Two primary reasons why firma unsuccessful in gaining bottom
line result.
1. Many variables affect profitability beside quality
Product obsolete
Macroeconomic factors
Others
4- 31
2. Many companies implement quality incorrectly.

Many companies expected quick return on investment
for quality program.
If returns are slow, companies will give up and conclude
quality program were ineffective.
Quality program have been shown to be effective in a
variety of cultures and industries when implement
correctly.
We need to understand the relationship between quality
and other variables.
Quality and Price

Psychologically, Higher price better quality. But it not
happen to all cases. Because quality-price relationship
become increasingly unclear when cultural differences are
considered.
It also happen high quality, low price goods.
The relationship Quality-price is uncertain. No fix
relationship between these two variables.
4- 33
Quality and Cost

Higher quality, lower cost.
Quality and productivity
Higher Quality, Higher Productivity.
Quality and profitability
Higher quality, higher profitability
This may not true all the time because marketing cash
flow and other factor may affect to profit.
Quality and Environment
Quality always effect by environmental issue that tie
with regulatory requirements.

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Topic 3

Strategic Quality Planning

Strategy Content Quality as a strategy

Identifying potential for improvement,

The variables of strategy content that include

There are two aspects of time:

When goals are set in short term with high quality

Leadership is a key strategic variable for QM.

This power takes many forms:

Leadership dimensions can be measured based on

Quality is also good ethics.

Based on research, quality as business

Focus through quality.

Cost of Quality- discuss on how quality can help

The Colorado Manufacturing Company of Boulder, CO has

Quality Training $ 25,500

Ratio of Prevention to Failure Cost = 212,724 / 2,500,604 =

The Lundvall-Juran model

Differentiation is achieved if the consumer

Focus the product- A product that is

Core competence consist of communication,

Process consists of the steps for developing

Forced Choice Model

Hoshin Kanri or Policy Deployment

Then process of Catchball occurs.

Then process of Catchball occurs.

Step 1: Review the current mission and

Step 4: Development of broad goals and plans by product.

Deming value chain proposed quality will pay off.

Cost Capture Provide

2. Many companies implement quality incorrectly.

Quality and Price

Quality and Cost

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