A

PROJECT REPORT ON

A Detailed study on TQM In various automobile

Industries.

SUBMITTED BY

SAURABH SINGH

SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR

POST GRADUATE DEPLOMA IN MANAGEMENT

SPECIALIZATION- OPERATIONS

UNDER THE GUIDANCE OF

Prof. SUBHASH BHANGAONKAR

SINHGAD BUSINESS SCHOOL, PUNE CITY

MARCH 2011
 CERTIFICATE

This is to certify that this management thesis entitled – ‘A Detailed study on TQM In various
automobile Industries” embodies the sincere work done by Saurabh Sing under my guidance
and supervision in the academic year 2009 -2011 in partial requirement for the award in
Program in Post Graduate Diploma In Management.
 ACKNOWLEGDEMENT

It gives me immense pleasure to thank the following members for their kind co-operation and
guidance towards me during the completion of my project work.

I would like to thank Mr. Nikhil Gowda and Mr.Mohammed Abbaz from Industries for their
continuous support.

I express my sense of deep gratitude to our faculty guide, Mr. Subhash Bhangaonkar for his
kind co-operation and support extended and for sparing valuable time in guiding and helping
me in successful completion of this project.

A special thanks to my Parents whose consistent encouragement, blessings and undivided

support have paid rich dividends to form a successful project. Finally, I would like to thank
my friends and well wishers for their enthusiastic support which has directly or indirectly
helped me in making this project a successful one.

Place:Pune
Date : Suarabh Singh
INTRODUCTION

Total Quality Management

The fourth chapter of this Master Thesis is about “Total Quality Management”. First, we started
with the roots and then found a definition of TQM. In the definition we explained the benefits
and reasons for failures of TQM. In the end, we regarded the TQM to the automotive industry.
Figure 10 illustrates our proceeding of the TQM chapter with its core aspects customer focus,
continuous improvements and total participation (Boaden, 1997; Rao et al., 1996). This chapter
also discusses theoretical benefits of TQM, which are mainly seen in a reduction of COPQ
through quality improvements. In the end, we presented reasons why many companies fail
implementing TQM. Outsourcing TQM Impact on Quality Costs Benefits of TQM Failures of
TQM Customer Focus Continuous Improvement Total Participation Reduction of COPQ TQM
in the Automotive Industry .
The Roots of TQM Total Quality Management was not investigated by a single person but a
small group of individuals; the roots of TQM were explored, found and written by five different
thinkers in the 1950s (Huggins, 1998). Deming, Juran and Crosby are the most well-known
gurus for TQM but Feigenbaum as well as Ishikawa have been as important as Master Thesis
Total Quality Management the others regarding to define the scope of TQM (Rao et al., 1996).
These authors did not really use the term of TQM on purpose; but retrospective, they wrote about
it (Boaden, 1997). It is hard to say where the origin of TQM is, but it is assumed that TQM has
its origin in Armand V. Feigenbaum’s book “Total Quality Control” from 1951. He was the first
one who came up with this big theme. And the other authors who wrote about TQM
acknowledged afterwards that his work were the first approaches for TQM. In 1979, Philip B.
Crosby continued in “Quality is free” about the affecting of quality and quality management on
business costs. He belongs also to one of the gurus of TQM. Kaoru Ishikawa amplified with his
book “What is total quality control?” the concepts of quality management of Feigenbaum for
almost all kinds of business management. Shortly after Ishikawa, W. Edwards Deming (1986)
and Joseph M. Juran (1988) began to write about TQM. They are the latest specialists in TQM,
and they concentrated on the statistic of quality control. (Huggins, 1998) Deming was the first
American who introduced the quality principles to the Japanese on a large scale (Rao et al.,
1996).
Definition of TQM

Total Quality Management is a widespread and ample theme. Hence, there are found several
definitions of TQM in the literature because of different aspects from the authors. Jack Hradesky
(1995) gave a good and summarized overview about TQM in his “Total Quality Management
Handbook”: “Total Quality Management (TQM) is a philosophy, a set of tools, and a process
whose output yields customer satisfaction and continuous improvement. […] TQM combines
cultural-changing tactics and structured technical techniques whose focus is on satisfying the
needs of internal and external customers. TQM requires that the executives are involved and
committed, not just interested, and that the focus is on implementation. Results of TQM include
error-free processes which deliver products and services fit for use, on time, with competitive
pricing and good value.
When properly carried out, TQM becomes integrated into all aspects of the corporate identity.
TQM‟s scope covers all functions within a company from sales and marketing through design,
production, and service. The formula for success is one part „effective training‟, two parts
„effective implementation‟, and three parts „executive involvement‟. Master Thesis Total
Quality Management
The training is analogous to a football team‟s practice; the implementation is the real „game
action‟. Broadening the concept of quality is the aim of TQM, so that quality moves from a
product appraisal function to a corporate imperative for excellence and the refusal to be satisfied
with the status quo.” The objective of TQM practices is to improve the performance of an
organization. Over the years Deming summarized in 14 points his knowledge that a company
needs for working with a successful quality management at all organizational levels. (Rao et al.,
1996) Juran’s concept comprised the managerial dimensions of planning, organizing and
controlling, and focused on trying to reach quality improvement. He established ten steps for
quality improvement. The third guru Feigenbaum created four points which were indispensable
for a good quality management. Today, it is known that these authors wrote about quality control
in general, and not only specified on TQM. (Ross, 1993) For this reason we would like to present
Boaden’s list with his eleven points. In his article he investigated and specified on TQM. Hence,
we decided to use his eleven statements for a successful TQM in a company. TQM Customer
Focus Management Commitment Training & Education Involvement of Everyone Process Focus
Teams & Teamwork Use of appropriate Tools & Techniques Goal-Setting, Measurement &
Feedback Continuous Improvement Change in the Culture: Attitude & Behavior Inclusion of
Quality Principles
Figure 11: Eleven Aspects which TQM involves (Boaden, 1997) So, this prior list of Boaden but
also Deming’s 14 tools, Juran’s ten steps and Crosby’s four points can be assigned to three
dominant broad categories. They want each employee to accept a way of life which comprises
(Boaden, 1997; Rao et al., 1996):
Customer focus (customer = any person affected by what you do)

Prior importance of providing products and services that fulfill customer needs: demands
organization-wide focus on customers
Continuous improvement (lots of statistical tools)

Consistent customer satisfaction can be achieved only through persistent improvement of

processes that create products and services
Total participation (which requires respecting others)

Customer focus and continuous improvement are best attained by collaboration throughout
an organization as well as with customers and suppliers
Summing up it is safe to say that all authors agree that TQM seeks to improve productivity by
focusing on satisfying the customer and involving the employees in the Master Thesis Total
Quality Management.
QM Customer Focus Management Commitment Training & Education Involvement of Everyone
Process Focus Teams & Teamwork Use of appropriate Tools & Techniques Goal-Setting,
Measurement & Feedback Continuous Improvement Change in the Culture: Attitude & Behavior
Inclusion of Quality Principles
Figure 11: Eleven Aspects which TQM involves (Boaden, 1997) So, this prior list of Boaden but
also Deming’s 14 tools, Juran’s ten steps and Crosby’s four points can be assigned to three
dominant broad categories. They want each employee to accept a way of life which comprises
(Boaden, 1997; Rao et al., 1996):
Customer focus (customer = any person affected by what you do)

Prior importance of providing products and services that fulfill customer needs: demands
organization-wide focus on customers
Continuous improvement (lots of statistical tools)

Consistent customer satisfaction can be achieved only through persistent improvement of

processes that create products and services
Total participation (which requires respecting others)

Customer focus and continuous improvement are best attained by collaboration throughout
an organization as well as with customers and suppliers
Summing up it is safe to say that all authors agree that TQM seeks to improve productivity by
focusing on satisfying the customer and involving the employees in the Master Thesis Total
Quality Management.

Benefits of TQM

Many scientists state that TQM results in a competitive edge for companies (Shin et al., 1998;
Powell, 1995; Seetharaman et al., 2006; Tari, 2005). The implementation of TQM takes much
time, effort, and is connected with costs in the beginning. Nevertheless, if the philosophy is
implemented properly TQM has many benefits. (Ahire et al., 1996) This chapter provides an
overview of benefits arising from TQM. The main result of TQM should be a profitable
company. Hence, TQM wants to lead to a more efficient company. This is gained through
satisfied customers which is the basis for profitability. TQM strongly focuses on customers to
meet customer needs and expectations, and to achieve satisfied customers. Therefore, the
company concentrates on quality as TQM suggests. This means the company wants to create
value for customers, and all processes, which are not valuable, are unnecessary. (Powell, 1995;
Seetharaman et al., 2006; Tari, 2005) The way to an efficient and profitable company starts with
the implementing of TQM characteristics. If the implementation is successful the company gains
several benefits which lead to a better performance. Some main results of a successful TQM are
improved quality through reduction of COPQ, easier problem solving, and improvement of
products, processes and efficiency of employees. (Powell, 1995; Seetharaman et al., 2006; Tari,
2005) TQM focuses on quality improvements and tries to cut valueless processes for customers.
A main activity to quality improvements is the reduction of COPQ. Due to the fact that the whole
company, this includes every worker, tries to reduce COPQ the productivity can be increased.
COPQ contains internal and external failure costs as well as appraisal and prevention costs, and
this is explained in detail in chapter 3.2.1.2 (De Feo & Barnard, 2004; Juran, 2000).
(Seetharaman et al., 2006)
TQM strongly involves employees in its philosophy. Employees take part at the development.
They need to understand what they are doing and should be able to react independently on
occurring situations. TQM improves teamwork, creativity, innovation, Master Thesis Total
Quality Management.
training, communication, trust and decision making (Karia & Asaari, 2006). Furthermore,
employees become more motivated and encouraged to control, manage, and improve processes
as well as solve problems within their responsibility. Moreover, TQM provides an atmosphere in
which continuous improvements are very welcome. All these results of TQM lead to a
competitive edge for an efficient and profitable company. (Powell, 1995; Seetharaman et al.,
2006; Tari, 2005)

Reasons for Failures of TQM

If TQM is implemented properly the philosophy leads to quality improvements and excellence in
business performance (Shin et al., 1998). However, the implementation is not as easy as some
manager think. Many variables must be considered and if TQM were not implemented in a
proper form the approach would lead to no progress. Furthermore, TQM is always connected to
costs in the beginning, and if the system does not result in expected outcomes the
implementation would be inefficient (Ahire et al., 1996). Many companies fail implementing a
successful TQM. The failure quote presented in the literature is between 60% and 67% like Shin
et al. (1998) state. This chapter states reasons for failure of TQM. (Seetharaman et al., 2006;
Shin et al., 1998; Ahire et al., 1996) Seetharaman et al. (2006) identified six major reasons for
TQM failure:
Lack of management commitment and management understanding on quality.

Lack of awareness on the benefits of TQM implementation in the organization.

Inadequate knowledge of TQM and improper understanding of the measurement techniques that
are used to measure the effectiveness of TQM implementation.

Lack of clarity in the guideline, implementation plan and implementation methods.

Lack of understanding about positive results of continuous improvements.

Ignoring the importance of customers.

TQM often fails due to the fact that there is a lack of knowledge about the proper
implementation. The six major reasons for TQM failure are explained in detail in the next
paragraphs. The first problem arises because of the lack of management commitment and
understanding of quality. This means that TQM implementation is not successful if the top
management does not play a special role in improving companies’ Master Thesis Total Quality
Management.
 The management needs to show commitment to TQM activities. This also results in increased
employee awareness. Otherwise, if even the top management does not concentrate on TQM
activities how should employees “live” TQM? For a successful TQM implementation the
management must mainly support four areas, which are allocation of budgets and resources,
control through visibility, monitoring progress and organizational change. (Seetharaman et al.,
2006) If the company is not aware of possible TQM benefits the implementation will fail.
Employees must work towards improvements and must therefore know what the advantages and
benefits of TQM are. Only then employees accept changes and concentrate on the philosophy.
The benefits of TQM are explained in detail in chapter 4.2.1 (Seetharaman et al., 2006) The third
reason for TQM failure is the misunderstanding of TQM philosophy and its measurements. It is
one problem not understanding TQM philosophy. If management and employees do not know
what TQM is about they cannot implement and live the philosophy in a proper form. Another
problem is if measurements are not done or done in a wrong way. Only if the changed activities
and quality concentration is measured the company is able to assess whether the implementation
is valuable or not. If statistical analyses and benchmarking are not done correctly the TQM
implementation cannot be assessed and improved. (Seetharaman et al., 2006; Khanna et al.,
2003; Shin et al., 1998; Ahire et al., 1996) Lack of clarity in the guideline, implementation plan
and implementation methods are also reasons for the failure of TQM. If the procedure of TQM
implementation is not done accurately the systems fails. A proper strategy, capability, and
control are necessary for TQM. Thereby, the implementation needs some time, and quality is a
never ending process. Furthermore, the implementing employees should be skilled in TQM in
order that the implementation does not fail. (Seetharaman et al., 2006) Moreover, TQM fails if
the importance of continuous improvement is misunderstood. If TQM is not understood as a
system which improves all the time it could not work. Nowadays, the world and business live
changes very quickly, and so must the TQM model. Furthermore, continuous improvements
provide a very smooth changeover from one technology to another. (Seetharaman et al., 2006)
Master Thesis Total Quality Management ~ 39 ~ The customers are the center for every TQM
philosophy. If the company does not focus on its customers it is not able to implement a
successful TQM. The management and employees have to accept the importance of customers.
(Seetharaman et al., 2006; Shin et al., 1998; Ahire et al., 1996) Today’s customers are more
knowledgeable then ever before. They expect low prices and high quality at the same time.
(Fawcett et al., 2000; Seetharaman et al., 2006) Hence, the customer focus is essential for
companies to achieve customer satisfaction, and only satisfied customers are profitable for
companies. Thus, organizations want to provide value to their customers, and this is only
possible if the TQM focuses on its customers. (Seetharaman et al., 2006) The following figure
visualized the six discussed critical factors for a valuable TQM implementation. Effective TQM
Implementation Understanding customers as the main contributors for organizational success
Understanding of TQM guidelines, methods and implementation plan Understanding the
importance of continuous improvement Understanding of TQM philosophy and its measurement
3 TQM in the Automotive Industry
Product quality in an automobile supply chain can be attained through TQM. Many OEMs use
this philosophy to achieve customer satisfaction. However, the current market situation is
characterized by an outstanding tough competition which means for the automobile OEM that it
has to provide top-quality at low price. Nowadays, this is the main challenge for automobile
manufacturers and TQM helps to handle low costs and high quality to meet the challenge.
Hence, TQM is in connection with TS-2 the main approach of the automotive industry to treat
the cost and quality pressure. (Fawcett et al., 2000; Bandyopadhyay, & Sprague, 2003)
Significance of TQM in price sensitive automotive industry

AUTOMOTIVE sector has been dynamic in inventing new manufacturing

strategies owning to prevailing high level of competition. With this scenario the
challenges faced by Original Equipment Manufacturers (OEM) have also
multiplied over the years.

Customers are demanding individualized final products. This is especially true

of the OEM. While the organizations will have some standard base products,
the total number of options that they have to offer to the consumers should be
plenty. ERP will allow management of these configurations.

Through the supply chain there is need for innovation and new product development with much
reduced life cycle for development. Hence, the NPI (New Product Introduction) will greatly help
in promoting concurrent engineering.

Automotive industry is characterized by the presence of dedicated customer-supplier

relationships and the competition in the market is between supply chains and not individual
organizations. Hence, supply chain efficiency is thus very important. The principles of Just-in-
Time (JIT), Lean Manufacturing and others become very important here. ERP will help in
promoting these concepts.

Another challenge faced by automotive industry is the pressure to reduce delivery time and cost.
A comprehensive supply chain solution that crosses the organization boundaries (B2B) is
required. Different elements of the supply chain interact very closely.

Quality Management module with support for advanced features like TQM will help to promote
quality at source. This receives significance owing to the continuous pressure exerted to cut cost
and improve quality.

As the automotive market is extremely price sensitive, the features of comprehensive costing and
kaizen costing will be of special relevance here. Understanding the accurate cost of
manufacturing and identifying all potential areas for reduction of costs is one of the keys to
success.

I. Continuous Improvement in the Automotive Industry

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
labor 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. 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, 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 labor 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.1 The hierarchy is built around a 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.
II. Statistical Process Control: A Scientific Methodology
More and more manufacturers are implementing automated Statistical Process Control (SPC)
systems
1 Kaizen is Japanese for improvement. In business, the term applies to the culture of applying
continuous quality improvement functions as part of their continuous improvement efforts.
Simply stated, SPC uses statistical equations and graphs to create acceptable limits for process
variation—“control limits”. Control limits fall well within product specification limits so that
unstable processes can be identified before problematic product characteristics are produced.
With real-time SPC, operators monitor processes on the production floor. Typically, there is an
alarming system in place to alert operators of processes that have exceeded the defined control
limits, so that they can take an immediate corrective action.
The core objectives of SPC are to provide productivity and quality information about production
processes in real-time. The principles of SPC take into account the following:
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 and
bring short term quality improvements into view. The scope, detail and accessibility of quality
data helps manufacturing facilities avoid unscheduled downtime. Analyzing tool wear metrics
gives quality departments 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 that manufacturers need to know about. Control limits denote what is normal
behavior, and conversely, what’s abnormal. By addressing inconsistencies properly,
manufacturers proactively approach process changes that, if ignored, could potentially disrupt
future operations.3
All processes have unique characteristics or hidden personalities that are inherent within them
Data analysis provides in depth understanding of process variations and identifies improvement
opportunities 2 Statistical Method from the Viewpoint of Quality Control. Shewhart, Andrew.
New York: Dover, 1939. 3 Taming the Control Freak. Fair, Douglas C. Quality Digest - Quality
Insider, October, 2007.

QUALITY ASSURANCE MANAGEMENT IN AUTOMOBILE INDUSTRY

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 the quality level of
foreign made products was of no great worry (Halberstam, 1986, p. 313). 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 (p. 314). 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 (p. 314).

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 (Halberstam, 1986, pp. 312-313).
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 (Schmoker, 1993, p. 13). 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.
Most importantly, people "become more open and honest about discussing barriers to performing
their jobs... workers cooperate to ensure the long-term survival of the company " (Gitlow, 1987,
p. 133). 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" (Halberstam, 1986, p. 312). 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 (Halberstam, 1986, p. 313). 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 by the production function for the norms established by the
organizational finance function (Halberstam, 1986, p. 461). 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 (p. 461). This
program was financially based, and had a detrimental 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 (p. 461). It was this approach to product quality, with
its patronizing attitude toward consumers, which has been cited by some analysts as the
underlying of the company's Pinto automobile disaster in 1970. Cost control was the
imperative with American automobile manufacturers, and quality control and safety were
considered to be undesirable initiatives from annoying industry outsiders (p. 461).
 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 (Halberstam, 1986, p. 498). 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) 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 (p. 499). Ford's, and
Iacocca's, arrogance toward quality and the North American consumer was 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 (pp. 500-501). The process was introduced 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 (Ealey, 1987,
p. 21).Automotive Industry Five Forces of Competition Model  Threat of New Entrants 
The threat of new entrants is very low in the automobile industry. The industry is very
mature and it has successfully reached economies of scale. In order to compete in this
industry a manufacture must be able to achieve economies of scale. For this to occur,
manufacturers must mass-produce the automobiles so that they are affordable to the
consumer. Another barrier to entry is that it takes an incredible amount of capital to
manufacture the automobiles. It takes an extreme amount of capital not only to be able to
manufacture the products but also to keep up with the research and development that is
necessary for the innovation requirements. Access to distribution channels is another high
barrier to entry. A company must find a dealership to sell their automobiles or have their
own dealership. Space in the dealerships lots is very limited making it difficult to have a
wider variety of supplier.
 The bargaining power of suppliers is very low in the automobile industry. There are so
many parts that are used to produce an automobile, that it takes many suppliers to
accomplish this. When there are many suppliers in an industry, they do not have much
power. There are so many suppliers to this industry; manufactures can easily switch to
another supplier if it is necessary. 
The strengths, weaknesses, opportunities, and threats, are quite dynamic for General Motors and
each can be integrated into another. For example, what might be a threat in one category for
General Motors, can turn into an opportunity or become a new strategy for General Motors in the
future. One of the major strengths that General Motors possess is the global awareness and
presence it holds in today's market. General Motors today has manufacturing operations in 32
countries and its vehicles are sold in 192 countries (www.gm.com). To gain a better idea of
General Motors position in today's market, refer to table 1. By having such a strong presence
globally, General Motors can integrate its operations so each manufacturer can concentrate on its
core competencies. For example, automakers are trying to drive down costs by sharing costs
through their own global alliances, or in joint ventures or partnerships with other companies
(Harbour, 2001). This has become one of Europe's strategies for the problem where small vehicle
continue to dominate the market and provide only small profit margins for General Motors.
Through global alliances, General Motors can stay in business in Europe and continue to satisfy
its' customers. 

Another strength for General Motors is having the largest amount of annual sales at $185,524.00
million, reaching about 15 percent of the global market (Company Press Release). Leading the
industry in sales enables General Motors to spend time and money in its' R&D department. One
of General Motors' current projects is releasing two Hybrid cars in China and hopefully more in
the United States in the year 2007 (Stein, 2004). Troy Clarke, president of Asian-Pacific, claims
that developing Hybrid cars is the new strategy for General Motors (Stein, 2004). One reason
that General Motors is sitting at the top of the industry could be due to the fact that it also lead
the industry in ad spending. Last year, General Motors spent close to $2.12 billion on advertising
in the United States alone. This large amount of spending has reached customers through the first
internet coupons worth $500 towards a Buick Regal (Halliday, 1999), and is another method of
how General Motors' innovation strategies enables them to remain at the top of the industry. 

The opportunities for General Motors globally are almost endless and the ways in which General
Motors turns threats into opportunities proves why they are number one in the industry. With
sales growing at 60 percent in the Middle East last year, General Motors would like to institute a
dealership network in Iraq (Ridder, 2004), which would help Iraq's economy recover from the
war. Another threat of losing "safety professionals" due to retirement at General Motors has been
turned into an opportunity of developing the recruiting and training program at General Motors
(Minter, 2002). 

In terms of taking a threat, such as losing any global market share, General Motors has made
advances in the E-Business strategy and technology for the Asian automotive industry, and
turned this threat into an opportunity. It is crucial for every company to try and turn threats into
opportunities for improvement and development. 
However, not all threats can be turned into a positive. General Motors CEO never thought that
the price war he launched three years ago would still be going on. This has caused General
Motor's market share to fall in the past year (Welch, 2004). The main problem with General
Motor's plants in the United States is that they have too much capacity, which in turns causes
them to make bad long-term business decisions. Other major threats have to deal with worker
dissatisfaction. The dissatisfaction of the workers is not only in America, but is occurring
globally. A strike in Germany has squeezed some of European production due to lack of two
essential parts that are usually provided by the German plants (Three, 2004). As one can see, a
strike at one plant or factory can have a domino affect on other plants or factories. In this
particular case, the strikes of one plant in Germany, causes other plants in Europe to lay-off close
to 12,000 jobs across the continent. This demonstrates the importance of keeping each plant
happy. Nationally, General Motors has plans to make 10,000 temporary layoffs (G.M., 2004).
What General Motors needs to do is make sure that the people who are laid off are treated with
respect. This entails helping them find other jobs, or promising them the opportunity to come
back work when it is available, and keeping this promise. This is crucial to keep employee
morale high for those workers who still have a job. 

The main weakness that General Motors has been battling for the last century is employee
satisfaction which leads to constant strikes throughout the corporation. Managers have been
battling with employees and unions on keeping wages, hours, and retirement plans fair. General
Motors is currently spending a large proportion of their earnings on health care for their retirees
as compared with newer automakers. In the past, General Motors has offered generous plans to
attract workers to its plants (Hakim, 2004), but no one thought about what would happen when
these workers got to the age of retirement. Well, that time has arrived and General Motors is
facing a difficult future as these costs of retirement continue to rise. 

Critics have been criticizing General Motors for waiting so long to develop what is now the new
wave of vehicles, the Hybrid cars. However, General Motors is first in line when it comes to the
HydroGen3 fuel cell prototype. Recently, General Motors has sped up the pace of innovation
with the successful completion of a trans-Europe endurance run for its HydroGen3 fuel cell
prototype (Kisiel, 2004). Although General Motors is just now releasing a Hybrid car in China, it
hopes to be the leader in the future with hydrogen fuel. 

As dynamic as General Motors is, it must have multiple strategies being implemented at the
same time to keep up with the fast, changing pace of the industry. One of the major strategies
which General Motors is changing is the switch from producing seventy percent light trucks to
producing seventy percent cars. General Motors does not plan on letting the production of light
trucks slip away however. Gary Cowger, president of GM North America, still believes there is a
strong market for trucks, but America is switching to a more economic commercial car
(Guilford, 2003). General Motors also plans on implementing a line of compact pickups which
include more car-like creature comforts and style. This change has come about to match what the
customers want with one of General Motors' slogans: 'A car for every purse and purpose'
(Greensberg, 2003). General Motors has realized that it can make the add-ons, such as CD and
DVD players, affordable for those who desire them. Another add-on which has become the most
popular add-on and almost a standard for General Motors vehicles is the OnStar feature. OnStar
has expanded its premium services to let the customer check his or her E-mail as well as trade
stock via different voice commands (Galvin, 2001). General Motors has started licensing the
technology of OnStar to other companies which might erode its brand name. 

With everything that General Motors is doing right and with what little it is doing wrong, there is
still room for improvement. Recommendations can be given in the fields of employee
satisfaction, innovation, and new markets. Being one of General Motors' main weaknesses, it is
imperative that the managers and executives review the policies and procedures which the lower
employees must abide by and determine if these rules are fair or not. With every strike that
General Motors goes through, the competition gains a little bit of ground on the leading
corporation. Open communication and open minds between the managers and the unions' needs
to become a must in the General Motors Corporation. If the money to pay for the rising health
care costs cannot be found by cutting costs, then management needs to find other ways to give
benefits and incentives to the employee staff that will keep everyone happy. Implementing the
process of improving customer satisfaction is a timely and excruciating process. The major
advantages of improving employee satisfaction are higher worker morale, higher productivity,
and an overall sense of corporate loyalty both internally and externally. Employee satisfaction
has a domino effect on the corporation. As the morale of the worker increases, workers tend to
be more efficient and profit margins rise, which increases stakeholders' satisfaction and
everyone, becomes more loyal to General Motors. The disadvantages of trying to improve
employee satisfaction are that it cost a lot of money to have external consultants work with the
corporation to figure out what exactly is wrong, and it takes a lot of time. However, in the long
run scheme of things, increasing worker satisfaction will have an overall positive effect on the
corporation. 
Innovation is the backbone for any corporation these days, and it is crucial that General Motors
stays a leader in innovation as well as sales. Although General Motors might be the leader in
hydrogen fuel in the future, currently the competition is way behind the rest if its competitors in
Hybrid automobiles. It has been recommended by critics across the globe that General Motors
should pick up the pace and not let the competition gain an edge in the next few years with the
Hybrid cars. General Motors needs to be extremely careful on how far in the future it is looking
ahead. It would only seem wise to be at the same level, if not ahead of the competition with what
is going to be the new fad in the years to come. If General Motors does not see the customers
adapting to Hybrid cars then it might be making a good decision on jumping ahead to the next
level of fuel efficiency. It would be extremely difficult for General Motors to catch up with
Honda, Toyota, and Accura, and their manufacturing of Hybrid cars. The advantage of doing so
however is that in case Hybrid cars are the future of the automobile industry and not hydrogen
fuel, General Motors will still be able to contend with the rest of the industry. Hopefully, the
technology on how to produce Hybrid cars with economy of scale will be shared throughout the
industry, enabling General Motors to compete at the same level as its competitors. The
disadvantage of waiting for the improvement of technology and for it to be shared is of course
the waste of time not improving the corporation. And as has been discussed before, time is
money, and no one can compete with out money. 

General Motors has recently entered into the retail industry with its first ever General Motors
Collection store in Detroit's McNamara Terminal. General Motors Collection store was the third
highest in net sales at the McNamara Terminal in August, 2002 (Geist, 2002). The retail stores
sells merchandise from miniature models of General Motors manufactured cars and racing cars,
to hats and t-shirts with its most popular automobiles on them. With sales on average of $2,000 a
day, this retail store is a perfect template for General Motors to use in other cities where General
Motors manufacturing is a large part of the community. By targeting cities that have large
manufacturing plants, General Motors will continue to sell to its employees who take pride in
where they work. Also, large cities with high tourist rates will have more flow in the shops and
will in turn have higher sales. It would also be interesting to see if such retail stores could do as
well in foreign markets who might not as ego-savvy as Americans and their possessions. Before
General Motors starts putting these collection stores all over the world, it is essential that much
research be put into the location selection. If a store enters into a market place and fails
miserably, the consumers in the market may in turn form a negative view about General Motors.
This would come about through the association of the store failing to survive and the lack of
quality decision General Motors produces. The opposite effects however is what General Motors
would like to see. General Motors already leads the industry in advertising and by offering the
public the choice of supporting their favorite sports car or any General Motors product, General
Motors gains free advertising. Not only will free advertising be gained, but customer's brand
loyalty will be increased and more cash flow will be available for General Motors. 

Toyota motor corporations SWOT analysis

 The Toyota Motor Corporation was incorporated in 1937 and has many strengths being one of
the industry leaders in the automotive industry. Toyota has three major brands underneath the
company umbrella; Toyota, Lexus, and Scion. By having these three distinct brands, it lets the
company reach many sectors of the globe in a choice of vehicle for customers. They produce
their vehicles and target specific global regions, such as the Carina E for the European segment
(Amherst). Toyota has traditionally also been the leader in Total Quality Management or TQM.
The belief that no process could ever be declared perfect, and that therefore there was always
room for improvement was introduced by Toyota Sakichi (Financial Times). This brought about
the Japanese word, Kaizen meaning continuous improvement (Financial Times). By using the
Kaizen theory of continuous improvement, Japan caught up the U.S. auto makers during the
1980's (Financial Times). Toyota has also introduced it's newest hybrid power car, Toyota Pirus,
at the 2003 New York Auto Show and hit the dealerships in the fall of 2004 (Toyota). In
September of 2003, orders for the new and improved Pirus totaled 17,500 which is five times
more then the company target of 3000 (MSNBC). With the price of gasoline and oil ever rising,
this is a great market for Toyota to exploit. 

Toyota does have some company traits that are portrayed as a weakness in the industry. The
brand Toyota is not perceived as many to be prestigious (Amherst). Another perceived weakness
is that it is in the top five of sales but not in the top five in dividend payouts or stock
performance (Yahoo Finance). This may put up a red flag to investors around the globe that
Toyota is not paying dividends as frequent or as efficiently as they should to their shareholder of
the company. In Europe, the Lexus brand sold 18,206 vehicles last year compared with 509,720
BMW's. The reason for this is the Lexus brand lacks the diesel V-8 engine (Bloomberg). In
certain European countries such as Belgium and Greece, diesels make up 90 percent of BMW
sales in part to the tax subsidies the consumer receives (Bloomberg). 

The opportunities for the Toyota Motor Company seem to be endless. Today, Toyota has passed
the Ford Motor Company to become the world's second largest automaker in the world trailing
only GM (Forbes). Toyota has also rounded out it's product line to suit the U.S. market with the
redesigned passenger trucks and SUV, but they have also hit the market hard with eco-crazed
society with the introduction of the second generation hybrid car, the Prius (Business week). The
company is also being pushed in the right direction for opportunity with the strengthening of the
Japanese Yen (Bloomberg). With the yen gaining strength and shifts in other world currency, the
operating profits dropped during the April-June quarter by fifteen percent or seventy billion yen
(Bloomberg). Because of the saving the company acquired in currency shifts, Toyota has extra
money on hand to use possibly in R&D to improve on their vehicles or in several other areas
causing great opportunities for the company. Toyota has doubled its market share in Europe in
the past four years to 5.1 percent due to import restrictions being dropped in the 1990's
(Bloomberg). The opening up of imports in the European market is a great opportunity for
Toyota because that enables them to put their luxury line of automobiles Lexus, up against the
European BMW and Mercedes Benz. Toyota is considering the idea of introducing a beefy three-
quarter-ton pickup truck into the U.S. Market (Big News). This model would combat the Ford F-
250 and the heavy-duty Chevy Silverado and these two pickups typically sell for more than
$30,000 (Big News). If Toyota will decide to enter the heavy-duty truck market now it could be
very profitable with construction, where the use of heavy-duty trucks are needed, booming all
over the United States. 

Threats to the Toyota Motor Company are an everyday occurrence. A major threat to Toyota is
the Hyundai motor company. On average, Hyundai usually has thirty more horsepower in their
vehicles, and costs around 3000 dollars less than a comparably segmented Toyota vehicle
(Amherst). In the luxury line of Lexus, they are still losing ground to BMW in sedan sales and in
SUV sales (Business week). Technology increases in cars today is a major driving force in the
automobile industry, and if Toyota can't keep up with its other competitors, they could quickly
lose market share in sectors they are involved in. The latest trend in the U.S. market is the eco-
friendly vehicle that uses less gas and even more use of electronic power (MSNBC). Toyota has
introduced the Prius hybrid vehicle, but Honda also is selling a hybrid car right now and Ford,
GM and DaimlerChrlsyer have all announced plans for a soon release of their hybrid vehicles
(MSNBC). If the Toyota Company can gain market share before the other big three release their
hybrid, this won't become much of a threat, but if the Pirus does not fit consumer's needs in the
hybrid sector, they will quickly switch and try the other products on the market. 

The Toyota Motor Company has a slogan that is plastered across one of its assembly plant; Yoi
kangae, yoi shina (Business week). That slogan translates to "Good thinking means good
products", and that sums up what Toyota is all about as a company (Business week). There
combination of speed and flexibility is world class with the 30 plants they have worldwide with
some of them able to produce up to eight models of on the same line (Business week). Toyota
also lives by the word Kaizen which translate into continuous improvement (Financial Times).
Toyota introduced TQM and Kaizen to the world with the help of Edwards Demming to take the
world by surprise and focus on quality and improvement constantly instead of just the bottom
line and this focus has helped the Japanese company to become one of the leaders in the auto
manufacturing industry (Financial Times). 

Toyota, to be as profitable in the future as they are right now needs to keep their focus on the
hybrid sector when selling in the U.S. market. Toyota has also launched a joint program with it's
suppliers to drastically cut the number of steps it needs to make cars and car parts. Over the past
year, the company chopped out 2.6 billion dollars out of its 113 billion dollar manufacturing
costs without any plant closure of layoffs (Business week). They are also putting the finishing
touches on a plan to create a more flexible manufacturing system. In this new plan, plants
Indonesia to Argentina will be designed to make more customized cars that fit the demand in the
local markets and Toyota believes that by doing this at their plants the can save 1 billion dollars
normally needed to build a new factory (Business week). These are the recommendations that the
Toyota Motor Company needs to take into consideration to keep their company moving in the
right direction globally. 

The advantage that Toyota would have by being the leader in the hybrid car sector is unknown
right now. Nobody knows for a certain fact if the "green trend" will be a large factor in the
future. In the U.S. market, it appears that having a marketable hybrid car in their line up of
automobiles will be a good plan for Toyota in the future. The advantage of producing
automobiles customized to a certain market is a good plan to keep a competitive advantage over
the competitors in the same geographic region. 

The hybrid car market could be a failure in the U.S. market and others in better technology
increases before Toyota's Pirus begins to turn profits for the company. If this happens, Toyota
could have a huge failure with all of the R&D and advertisement they have put into their new
hybrid vehicle. Toyota also has an advantage over their customers today using the TQM model
of operations. If the rest of the industry begins to implement this also, and Toyota fails to keep
improving, this could prove to become a disadvantage for the company. 

Ford Motor Company SWOT Analysis 

"Ford Motor Company is a global company with two core businesses: Automotive and Financial
Services. The Automotive business consists of the design, development, manufacture, sale and
service of cars, trucks and service parts. In 2003, the Company organized its Automotive
business as two primary segments, Americas and International. The Americas segment includes
primarily the sale of Ford, Lincoln and Mercury brand vehicles and related service parts in North
America and Ford-brand vehicles and related service parts in South America. The International
segment includes the sale of Ford-brand vehicles and related service parts outside of North and
South America and the sale of Premier Automotive Group brand vehicles and related service
parts throughout the world" (Yahoo Finance). 

Ford's chairman and CEO, Bill Ford has a simple strategy, "Our vision for the future is simple:
We want to build great products, a strong business, and a better world." Ford's vision is, "To
become the world's leading consumer company for automotive products and services"
(Ford.com). 

Ford has been focusing on cutting costs to increase margins more than its competitors. In 1997,
Ford cut $1 billion in costs as a result of work suggestions and using standardized parts for
different Ford models. As a result of using standardized parts, Ford was able to decrease the
number of inventory parts, which decreased the chance of inventory parts not in stock. This
meant the assembly plant would be shut down less for out of stock parts, saving Ford money
Ford has used reverse engineering in the development of their products. The Taurus is one
example of this tactic. Ford examined the close competitors of the Taurus to see which parts on
each car were the best of the group. Ford then designed the same parts as well or even better than
the competitions. Since the Taurus had the best parts when compared with its competitors, the
Taurus was viewed as the best-in-class car. This tactic allowed Ford to "leapfrog" ahead of the
competition in the family sedan category (Stevenson 130). 

Ford has been an innovator in the auto industry when it comes to technology. "Ford Motor
Company has aggressively adopted videoconferencing and computer-assisted design and
manufacturing technologies." These innovations have led Ford to staying successful and efficient
in the auto industry. Another technology innovation is the "use an online computer network to
share ideas, create the actual designs, integrate the designs for the various parts and components,
and build and test prototypes via computer simulations" (Thompson and Strickland 157). Ford
has recently added Voice over IP phones to help control costs. Ford paid SBC $100 million to
install and manage a network of 50,000 VoIP phones. "The immediate benefit is going to be
efficiencies in cost and operations related to moves, adds and changes" (Pappalardo 14). Ford is
hoping that VoIP phones will become a long term cost saver and help the company save their
profit margins. "Ford Motor Co's state-of-the-art F-150 truck-assembly facility, expected to be
operational by summer and running at full capacity by year's end, is a body shop and final
staging area where trucks are assembled and prepped before being shipped to dealers. It's also
Ford's first completely wireless assembly factory." The factory utilizes a flexible body shop,
automated-materials-replenishment system, "self-adjusting platforms at each bay station, and
software-driven systems that monitor maintenance for tooling, conveyers, robots, and other
machines. The wireless infrastructure Ford is deploying for parts replenishment and vehicle
tracking comes from WhereNet Corp Inventory replenishment is driven by Ford's Auto Call, part
of its synchronous material-replenishment trigger system, with assistance from about 58 antennas
around the compound" (InformationWeek 26). This wireless technology will allow Ford to be
more effective and efficient in all operations of manufacturing vehicles at this facility. 

Bill Ford said, "We've made solid progress in the last two and a half years and we're building
momentum. We're not going to let up on our efforts to raise our quality, lower our costs, or
improve on the fundamentals of our business, and we'll continue the biggest product roll-out in
our company's history" (Company News). Ford has been introducing new products to the market
which include the all-new Ford Mustang, Ford GT, Ford Five Hundred, Ford Freestyle, and the
redesigned F-Series Super Duty; the all-new Mercury Montego and Mercury Mariner; the all-
new Ford Escape Hybrid - the world's only hybrid SUV; the redesigned Ford Focus in Europe
and Asia; the Land Rover LR3; the Volvo S40 and V50; and the long wheelbase Jaguar XJ"
(Company News). 

The first quarter of 2004 was a great quarter for Ford Motor Company. Ford reported earning of
$1.9 billion. This was "twice as much as the company had told Wall Street to expect and far
more than historical rival General Motors, which made only $ 1.3 billion." Ford's management
says that "Rather than relying on windfall profits from a couple of hot-selling models that might
cool off later, the company showed a mastery of the myriad small but important details that
bolster the bottom line. It reduced overheads, cut product expenditures and slashed warranty
costs. At the same time, it boosted revenues by targeting incentives and increasing the mix of
high-profit vehicles, such as sports utility vehicles (SUVs) with four-wheel-drive packages"
"Behind the earnings hoopla, something even more interesting is beginning to emerge: Bill
Ford's strategy for the company. It is uncharacteristically audacious and sweet in its apparent
simplicity. Ford wants to make more money selling fewer cars. In Detroit that makes him a
virtual heretic and threatens to turn accepted industry practice on its head. This is a business
where the fixed costs are so enormous that bosses like DaimlerChrysler's Juergen Schrempp have
staked their company's future on selling more cars, whatever the immediate impact on profits.
Pushing fewer cars out of the factory also means accepting lower market share, blasphemous to
some ears, particularly since Ford has been losing share since 1995. And prioritizing profits
might also threaten brand loyalty, a fragile commodity. Customers who shop elsewhere because
Ford's prices are a few dollars higher could be lost forever" (Taylor 10). 
Bill Ford is taking a very new outlook on the automobile industry. While economies of scale
always determined if an automobile was successful or not, Bill Ford wants to make money by
selling fewer cars. This viewpoint is an unbelievable stance from the CEO of an automobile
manufacturer. 

Ford has been struggling to maintain consistent sales numbers. Its first quarter numbers were
twice what was expected, but the rest of the quarters have been lagging. Ford hopes that the
release of the many different new vehicles will revitalize Ford. The financial numbers will turn
out decent for the year due to the money made on the financing side. Some critics say that the
financing side of Ford is what makes the money. Ford counters with saying that they must sell
vehicles before the financing side can make the money. 

Some recommendations are needed for Ford to maximize profits. Ford needs to capitalize on all
the new vehicles coming on to the market. Aggressive advertising campaigns might entice
consumers to go to a Ford dealer and look at the new products. The only way Ford can make
money from theses new vehicles is to sell a lot of them. Costs need to be reasonable for the
appropriate class of vehicles. 

Along with selling all the new vehicles, Ford must make sure that the new vehicles are what the
consumer wants. The consumer won't buy the car if he or she doesn't like its appearance,
performance, and price. If Ford can meet these three needs better than its competitors can, Ford
will gain market share. Extensive testing is needed before a new vehicle is launched onto the
market. If Ford has not done enough testing and surveys of potential customers, sales might lag
causing Ford not to get much return on its investment. 

Ford needs to stop using reverse engineering on the development of their automobiles. If reverse
engineering is used, then Ford is behind its competitors. Ford must stay on the cutting edge for
developing new ideas. Stealing its competitor's ideas does not make Ford first to the market with
a new concept. Ford appears that it wants to be seen as an innovator. This is seen with the first
wireless truck manufacturer facility and using VoIP phones. Ford needs to find ways to cut costs
while maintaining or improving efficiency. To be viewed as an innovator, Ford must continue to
be the pacesetter for anything new related to the auto manufacturer sector. 

An advantage for releasing new products by Ford would be the potential profit making
opportunity. Humans have a natural tendency to be competitive. This competitive nature carries
over to automobiles. One person will usually want a better car or truck than his or her neighbor.
If a new car or truck is released on the market, the neighbor with the new car or truck that very
few others have will have bragging rights. This explains why brand new vehicle sales are very
large immediately after the release date. People want what others don't have. Ford is playing this
game. Releasing several new cars and trucks will hopefully entice the masses to purchase a new
automobile. The down side of this is the cost to create the new vehicle. Millions and even
billions of dollars are put into designing, developing, testing, and producing a new vehicle. In
order to make a profit on the specific car or truck, thousands of that type of vehicle must be sold
in order to cover the development costs. If that number of sales is not met, the car or truck was
not a success. Ford would not make a profit on it and would end up losing money on the project. 

There are many advantages for Ford to be an innovator in its industry. Costs can usually be saved
in the long run. The publicity of the new innovation will help sales. Newer efficient ways of
running the company can be found. The major disadvantage of innovation is the initial cost of
the innovation. Savings in the long run might be large, but the costs to switch from the old way
of doing something to a new way are usually a sizeable amount. If the innovation doesn't work,
the company will lose lots of money. They would lose the initial investment to switch and create
new costs to switch back to the old way of doing something. 

TQM

Total Quality Management (TQM) emphasized using multi-functional teams (professional staff
and workers from all departments involved) to solve problems. The teams were trained to use
basic statistical tools to collect and analyze data.

 Check sheets
 Pareto diagrams
 Histograms
 Run charts
 Flow charts
 Cause and effect diagrams
 Force field analysis
 Scatter diagrams

Flow charts or process maps were used to

visualize the flow of product or documents
through a series of process steps. The
predominant goal of Process Improvement Teams
was to eliminate the non-value adding steps and
to resolve quality problems in order to reduce the
(cycle) time needed to complete the process.

ISO / QS9000

ISO9000 was developed as a standard for business quality systems. To be certified, businesses
needed to document their quality system and insure adherence to it with reviews and audits. A
key element was the identification of non-conformances and a Corrective Action System to
prevent reoccurences. Specific quality improvement methodologies were not prescribed.

The automotive industry adopted the QS9000 standard for their suppliers to require the use of
specific practices in quality planning and in production operations.

 Advanced Product Quality Plans

 Design / Process Failure Mode and Effects Analysis (FMEA)
 Production Part Approval Process
 Control Plans (for production)
 Measurement Systems Analysis

The Juran methodology was central to maintaining control of special product and process
characteristics (CTQs).

Design of Experiments (DOE)

Six Sigma process improvement emphasizes getting quantitative data on the effect of key
variables in production, service, or administrative processes. Many process improvement efforts
go astray because people assume they know all of the key variables -- key variables and
especially interactions between variables are not always obvious. Simple statistical data
gathering or testing can be used to verify or determine these key variables.

In DOE, a series of experiments (tests) are

conducted to determine the relative
importance of the key variables and to
assist in selecting optimum operating
values. The number of variables is usually
limited so that the time, effort, and cost of
testing is not excessive. After the array of
tests (experiments) are complete, graphical
techniques -- such as at the right -- can be
used to illustrate the results.

DOE is especially useful in simplifying

the improvement process for complex
technical and administrative processes. 
Brecker Process Improvement

Brecker Associates integrated the

 Team-based Process Improvement of TQM

 Data gathering and brainstorming of VA
 Quality methodologies of QS9000
 Statistical process control of Juran
 Process capability analysis and DOE techniques of Six Sigma

into a more powerful Process Improvement methodology that gets better results, faster, and with
less effort. Identifying the most promising and rewarding process improvement opportunities and
re-designing the products and processes involved are the focus of workshops in Phases 2 and 3 of
the Brecker Six Sigma Improvement Methodology.

Phase 2: Process improvement solutions are identified and quantified.

Value Analysis techniques are used to collect business, product, and process data on
productivity, quality, and costs. Workshop participants include marketing, design, operations,
quality, purchasing, service personnel as well as suppliers, workers, and customers as
appropriate. Customer requirements are determined and quantified using QFD techniques.
Process mapping (from TQM) is used to develop an understanding of the product / service and
the processes used to produce and deliver it. Quality issues are raised and root causes are sought.
VA brainstorming is used to identify potential improvements. Ideas are refined and the benefits
of the most promising improvements are quantified. Specific product and process re-design
projects are selected for Six Sigma Leaders and / or teams to undertake in Phase 3.

Phase 3: Multi-functional teams improve key products and processes.

Design and operations teams (with other members as appropriate) are charged with re-designing
specific components and / or processes. They examine the product and process information in
detail. Critical-To-Quality parameters are determined for products and for processes. DOEs may
be run to identify CTQ parameters and assign target values. Process capability data is obtained.
Additional productivity and quality tools, such as

 Design for Manufacturability

 Lean thinking
 Design for Assembly
 Set-up reduction

are used as appropriate to identify specific improvement opportunities. VA brainstorming may

be used to identify and refine specific design changes. Specific re-design recommendations are
quantified. When approved, implementation plans are made and executed. The PDCA cycle is
used until the desired improvements are obtained. 

Basic Principles of Total Quality Management (TQM)

The basic principles for the Total Quality Management (TQM) philosophy of doing business are
to satisfy the customer, satisfy the supplier, and continuously improve the business processes.

Questions you may have include:

 How do you satisfy the customer?

 Why should you satisfy the supplier?
 What is continuous improvement?

This lesson will answer those questions. There is a mini-quiz near the end of the lesson.

Satisfy the customer

The first and major TQM principle is to satisfy the customer--the person who pays for the
product or service. Customers want to get their money's worth from a product or service they
purchase.

Users

If the user of the product is different than the purchaser, then both the user and customer must be
satisfied, although the person who pays gets priority.
Company philosophy

A company that seeks to satisfy the customer by providing them value for what they buy and the
quality they expect will get more repeat business, referral business, and reduced complaints and
service expenses.

Some top companies not only provide quality products, but they also give extra service to make
their customers feel important and valued.

Internal customers

Within a company, a worker provides a product or service to his or her supervisors. If the person
has any influence on the wages the worker receives, that person can be thought of as an internal
customer. A worker should have the mind-set of satisfying internal customers in order to keep
his or her job and to get a raise or promotion.

Chain of customers

Often in a company, there is a chain of customers, -each improving a product and passing it
along until it is finally sold to the external customer. Each worker must not only seek to satisfy
the immediate internal customer, but he or she must look up the chain to try to satisfy the
ultimate customer.

Satisfy the supplier

A second TQM principle is to satisfy the supplier, which is the person or organization from
whom you are purchasing goods or services.

External suppliers

A company must look to satisfy their external suppliers by providing them with clear instructions
and requirements and then paying them fairly and on time.

It is only in the company's best interest that its suppliers provide it with quality goods or
services, if the company hopes to provide quality goods or services to its external customers.

Internal suppliers

A supervisor must try to keep his or her workers happy and productive by providing good task
instructions, the tools they need to do their job and good working conditions. The supervisor
must also reward the workers with praise and good pay.
Get better work

The reason to do this is to get more productivity out of the workers, as well as to keep the good
workers. An effective supervisor with a good team of workers will  certainly satisfy his or her
internal customers.

Empower workers

One area of satisfying the internal suppler is by empowering the workers. This means to allow
them to make decisions on things that they can control. This not only takes the burden off the
supervisor, but it also motivates these internal suppliers to do better work.

Continuous improvement

The third principle of TQM is continuous improvement. You can never be satisfied with the
method used, because there always can be improvements. Certainly, the competition is
improving, so it is very necessary to strive to keep ahead of the game.

Working smarter, not harder

Some companies have tried to improve by making employees work harder. This may be counter-
productive, especially if the process itself is flawed. For example, trying to increase worker
output on a defective machine may result in more defective parts.

Examining the source of problems and delays and then improving them is what is needed. Often
the process has bottlenecks that are the real cause of the problem. These must be removed.

Worker suggestions

Workers are often a source of continuous improvements. They can provide suggestions on how
to improve a process and eliminate waste or unnecessary work.

Quality methods

There are also many quality methods, such as just-in-time production, variability reduction, and
poka-yoke that can improve processes and reduce waste.
Conclusion

The principles of Total Quality Management are to seek to satisfy the external customer with
quality goods and services, as well as your company internal customers; to satisfy your external
and internal suppliers; and to continuously improve processes by working smarter and using
special quality methods.