Assignment On,

TOTAL QUALITY MANAGEMENT (TQM) & CORE PROCESSES REENGINEERING (CPR)

Submitted By: Student ID: Subject: Course No: International Strategic Management. EIB-516

Submission Date: December 13, 2011.

ACKNOWLEDGEMENT

I am heartily thankful to course teacher of International Strategic Management, whose encouragement, guidance and support from the initial stage to the final level enabled me to develop an understanding of the topic and prepare this asignment.

I thank all of those who supported me in any respect during the completion of the assignment.

Date: December 13, 2011.

1. Introduction

Strategic management is a field that deals with the major intended and emergent initiatives taken by general managers on behalf of owners, involving utilization of resources, to enhance the performance of firms in their external environments. It entails specifying the organization's mission, vision and objectives, developing policies and plans, often in terms of projects and programs, which are designed to achieve these objectives, and then allocating resources to implement the policies and plans, projects and programs. Balanced scorecards often used to evaluate the overall performance of the business and its progress towards objectives. Recent studies and leading management theorists have advocated that strategy needs to start with stakeholders expectations and use a modified balanced scorecard which includes all stakeholders. Strategic management is a level of managerial activity under setting goals and over Tactics. Strategic management provides overall direction to the enterprise and is closely related to the field of Organization Studies. In the field of business administration it is useful to talk about "strategic alignment" between the organization and its environment or "strategic consistency." According to Arieu (2007), "there is strategic consistency when the actions of
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an organization are consistent with the expectations of management, and these in turn are with the market and the context." Strategic management includes not only the management team but can also include the Board of Directors and other stakeholders of the organization. It depends on the organizational structure. Strategic management is an ongoing process that evaluates and controls the business and the industries in which the company is involved; assesses its competitors and sets goals and strategies to meet all existing and potential competitors; and then reassesses each strategy annually or quarterly [i.e. regularly] to determine how it has been implemented and whether it has succeeded or needs replacement by a new strategy to meet changed circumstances, new technology, new competitors, a new economic environment., or a new social, financial, or political environment.

One may generally consider that there are three distinct areas inherent in any business: marketing, finance, and operations; all other business disciplines fit somewhere under one or more of these areas. For example, finance could include investing, real estate, insurance or banking. While management is considered an academic discipline unto itself it is actually a part of all three areas: financial management, marketing management, and operations management. Operations management is the area concerned with the efficiency and effectiveness of the operation in support and development of the firm's strategic goals. Other areas of concern to operations management include the design and operations of systems to provide goods and services. To put it succinctly, operations management is the planning, scheduling, and control of the activities that transform inputs (raw materials and labor) into outputs (finished goods and services). A set of recognized and well-developed concepts, tools, and techniques belong within the framework considered operations management. While the term operations management conjures up views of manufacturing environments, many of these concepts have been applied in service settings, with some of them actually developed specifically for service organizations.
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Operations management is also an academic field of study that focuses on the effective planning, scheduling, use, and control of a manufacturing or service firm and their operations. The field is a synthesis of concepts derived from design engineering, industrial engineering, management information systems, quality management, production management, inventory management, accounting, and other functions. The field of operations management has been gaining increased recognition over the last two decades. One major reason for this is public awareness of the success of Japanese manufacturers and the perception that the quality of many Japanese products is superior to that of American manufacturers. As a result, many businesses have come to realize that the operations function is just as important to their firm as finance and marketing. In concert with this, firms now realize that in order to effectively compete in a global market they must have an operations strategy to support the mission of the firm and its overall corporate strategy. Another reason for greater awareness of operations management is the increased application of operations management concepts and techniques to service operations. Finally, operations management concepts are being applied to other functional areas such as marketing and human resources. The term marketing/operations interface is often used.

2. HISTORY OF OPERATIONS MANAGEMENT Until the end of the 18th century, agriculture was the predominant industry in every country. The advent of the steam engine and Eli Whitney's concept of standardized parts paved the way for the Industrial Revolution with its large manufacturing facilities powered by steam or water. A number of countries (the United States included) evolved from an agricultural economy
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to an industrial economy. But for a time, manufacturing was more of an art than a science. This changed with the introduction of Frederick W. Taylor's systematic approach to scientific management at the beginning of the twentieth century. The introduction of Taylor's method of scientific management and Henry Ford's moving assembly line brought the world into an age where management was predominantly centered on the production of goods. In the late 1950s and early 1960s scholars moved from writing about industrial engineering and operations research into writing about production management. Production management had itself become a professional field as well as an academic discipline. As the U.S. economy evolved into a service economy and operations techniques began to be incorporated into services the term production/operations management came into use. Today, services are such a pervasive part of our life that the term operations management is used almost exclusively.

2.1 Importance of organizations internal operation to its overall performance and strategic success Efficient internal operations are the foundation of long-term corporate success. But individuals or teams can only approach their full performance potential when they commit to achieving strategic objectives. A corporations leadership strategy must be supported by a foundation of internal operations that are focused, understood, and accepted if the corporation is ultimately to succeed. The challenge for corporate leadership must go for beyond establishing a strategic plan and /or articulating overall performance objectives. It must also create an environment or culture in which the individual contributor, alone or participating on a team, can identify with end result in a personal way. This linking between people and their essential elements separates those companies that simply exist from those who truly achieve.
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3. WHAT DO OPERATIONS MANAGERS DO? At the strategic level (long term), operations managers are responsible for or associated with making decisions about product development (what shall we make?), process and layout decisions (how shall we make it?), site location (where will we make it?), and capacity (how much do we need?). At the tactical level (intermediate term), operations management addresses the issues relevant to efficiently scheduling material and labor within the constraints of the firm's strategy and making aggregate planning decisions. Operations managers have a hand in deciding employee levels (how many workers do we need and when do we need them?), inventory levels (when should we have materials delivered and should we use a chase strategy or a level strategy?), and capacity (how many shifts do we need? Do we need to work overtime or subcontract some work?). At the operational level, operations management is concerned with lowerlevel (daily/weekly/monthly) planning and control. Operations managers and their subordinates must make decisions regarding scheduling (what should we process and when should we process it?), sequencing (in what order should we process the orders?), loading (what order to we put on what machine?), and work assignments (to whom do we assign individual machines or processes?). Today's operations manager must have knowledge of advanced operations technology and technical knowledge relevant to his/her industry, as well as interpersonal skills and knowledge of other functional areas within the firm. Operations managers must also have the ability to communicate effectively, to motivate other people, manage projects, and work on multidisciplinary teams. Sunil Chopra, William Lovejoy, and Candace Yano describe the scope of operations management as encompassing these multi-disciplinary areas:

Supply Chainsmanagement of all aspects of providing goods to a consumer from extraction of raw materials to end-of-life disposal.
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Operations Management/Marketing Interfacedetermining what customers' value prior to product development. Operations Management/Finance InterfaceCapital equipment and inventories comprise a sizable portion of many firms' assets. Service OperationsCoping with inherent service characteristics such as simultaneous delivery/consumption, performance measurements, etc.

Operations StrategyConsistent and aligned with firm's other functional strategies. Process Design and ImprovementsManaging the innovation process.

3.1 The Strategic Role of Operations One of the two main sources to the capacity and the abilities is a firms operations to produce the elements of differentiation, low cost and quick response that customers value. A firms ability to produce the elements of competitive advantage is dependent on its capabilities or the internal resources it has to draw from, and this perspective is sometimes referred to as the source-based view of the firm. Processes are systems of the interconnected activities involved in accomplishing an organizations work. For instance key process: For a bank: key processes might include credit management and transactions. For an airline: key process might be flight operations, route and management and ticketing. The generic model of core processes and systems given below :

Fig 1: Generic Model of Core Processes and Systems Complementary approaches to improving a firms process capabilities. One is commonly known as total quality management (TQM), the other as core process reengineering (CPR). Total Quality Management (TQM) is an approach that seeks to improve quality and performance which will meet or exceed customer expectations. This can be achieved by integrating all quality-related functions and processes throughout the company. TQM looks at the overall quality
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measures used by a company including managing quality design and development, quality control and maintenance, quality improvement, and quality assurance. TQM takes into account all quality measures taken at all levels and involving all company employees. There are several reasons why TQM and CPR have become so popular for improving process execution capabilities
1. The encourage a strategic approach to management at the

operations level: Process improvement virtually always cuts across functions or involves multiple departments. When individual departments or functions are manages in isolation, managers tend to, in the language of management science. Reach local maximum while avoiding global optimums. In other words 2. They get the results managers want
3. They work equally well for blue-collar and white collar

process: regardless of whether the output is a service or a manufactured good, process usually share certain elements. Managing operations as processes has provided a common framework that managers can apply throughout their organization, and this encourages its widespread use.

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Fig 2: Widespread Use of Various TQM and CPR Related Practices

4. They allow organizations to take advantage of several

enabling developments: over the last 10/15 years, several developments have taken place that facilitate, or enable managing operations as cross-functional processes. When work teams were organized around functions, cross functional work was virtually impossible, but as workforces are organized into cross-functional teams, organizational entities that can take a process perspective develop.
5. They fit with an orientation toward interorganizational

collaboration: as organization process management, they grow more adept at looking at the cross-functional issues cutting horizontally across intraorganizational boundaries can be extended to interorganizaional collaboration with suppliers and customer.

4. Origins of TQM Total quality management has evolved from the quality assurance methods that were first developed around the time of the First World War. The war effort led to large scale manufacturing efforts that often produced poor quality. To help correct this, quality inspectors were introduced on the production line to ensure that the level of failures due to quality was minimized. After the First World War, quality inspection became more commonplace in manufacturing environments and this led to the introduction of Statistical Quality Control (SQC), a theory developed by Dr. W. Edwards Deming. This quality method provided a statistical method of quality based on sampling. Where it was not possible to inspect every item, a sample was tested for
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quality. The theory of SQC was based on the notion that a variation in the production process leads to variation in the end product. If the variation in the process could be removed this would lead to a higher level of quality in the end product. After World War Two, the industrial manufacturers in Japan produced poor quality items. In a response to this, the Japanese Union of Scientists and Engineers invited Dr. Deming to train engineers in quality processes. By the 1950s quality control was an integral part of Japanese manufacturing and was adopted by all levels of workers within an organization. By the 1970s the notion of total quality was being discussed. This was seen as company-wide quality control that involves all employees from top management to the workers, in quality control. In the next decade more nonJapanese companies were introducing quality management procedures that based on the results seen in Japan. The new wave of quality control became known as Total Quality Management, which was used to describe the many quality-focused strategies and techniques that became the center of focus for the quality movement.

4.1 Principles of TQM TQM can be defined as the management of initiatives and procedures that are aimed at achieving the delivery of quality products and services. A number of key principles can be identified in defining TQM, including: Executive Management Top management should act as the main driver for TQM and create an environment that ensures its success.

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Training Employees should receive regular training on the methods and concepts of quality. Customer Focus Improvements in quality should improve customer satisfaction. Decision Making Quality decisions should be made based on measurements. Methodology and Tools Use of appropriate methodology and tools ensures that non-conformances are identified, measured and responded to consistently.

Continuous Improvement Companies should continuously work towards improving manufacturing and quality procedures. Company Culture The culture of the company should aim at developing employees ability to work together to improve quality. Employee Involvement Employees should be encouraged to be proactive in identifying and addressing quality related problems.

4.2 The Cost of TQM Many companies believe that the costs of the introduction of TQM are far greater than the benefits it will produce. However research across a number of industries has costs involved in doing nothing, i.e. the direct and indirect costs of quality problems, are far greater than the costs of implementing TQM. The American quality expert, Phil Crosby, wrote that many companies chose to pay for the poor quality in what he referred to as the Price of Nonconformance. The costs are identified in the Prevention, Appraisal, and Failure (PAF) Model. Prevention costs are associated with the design, implementation and maintenance of the TQM system. They are planned and incurred before actual operation, and can include:

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Product Requirements The setting specifications for incoming materials, processes, finished products/services. Quality Planning Creation of plans for quality, reliability, operational, production and inspections. Quality Assurance The creation and maintenance of the quality system. Training The development, preparation and maintenance of processes.

Appraisal costs are associated with the vendors and customers evaluation of purchased materials and services to ensure they are within specification. They can include: Verification Inspection of incoming material against agreed upon specifications. Quality Audits Check that the quality system is functioning correctly. Vendor Evaluation Assessment and approval of vendors.

Failure costs can be split into those resulting from internal and external failure. Internal failure costs occur when results fail to reach quality standards and are detected before they are shipped to the customer. These can include: Waste Unnecessary work or holding stocks as a result of errors, poor organization or communication. Scrap Defective product or material that cannot be repaired, used or sold. Rework Correction of defective material or errors. Failure Analysis This is required to establish the causes of internal product failure.

External failure costs occur when the products or services fail to reach quality standards, but are not detected until after the customer receives the item. These can include: Repairs Servicing of returned products or at the customer site. Warranty Claims Items are replaced or services re-performed under warranty. Complaints All work and costs associated with dealing with customers complaints. Returns Transportation, investigation and handling of returned items.
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4.3 Principles of CPM When discussing how to improve the way we work within any organization, core process re-engineering is a commonly used tool. Why? The reason is that optimization of business processes to eliminate duplicating or redundant steps can contribute significantly to improving organizational efficiency. What is a process? If you have ever waited in line at the grocery store, you can appreciate the need for process improvement. In this case, the "process" is called the check-out process, and the purpose of the process is to pay for and bag your groceries. The process begins with you stepping into line, and ends with you receiving your receipt and leaving the store. You are the customer (you have the money and you have come to buy food), and the store is the supplier. The process steps are the activities that you and the store personnel do to complete the transaction. In this simple example, we have described a business process. Imagine other business processes: requesting a new telephone service from your telephone company, developing new products, administering the social security process, building a new home, etc. Davenport & Short (1990) define business process as "a set of logically related tasks performed to achieve a defined business outcome". A process is "a structured, measured set of activities designed to produce a specified output for a particular customer or market. It implies a strong emphasis on how work is done within an organization" (Davenport 1993). In their view, processes have two important characteristics: (i) They have customers (internal or external), (ii) They cross organizational boundaries, i.e. they occur across or between organizational subunits. Processes are generally identified in terms of beginning and end points, interfaces, and organization units involved, particularly the customer unit. High impact processes should have process owners. Examples of processes common among UN offices include: developing a programme strategy, procurement process for program supplies and office supplies, processing of payments, etc. 4.4 What is process reengineering?
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Improving business processes is paramount for organizations and businesses to stay competitive in the marketplace (be it developmental or otherwise) and provide better products and services. Business Process Improvement (BPI) efforts attempt to understand, map and measure the current process, and make performance improvements accordingly. This method is effective to obtain gradual and incremental improvement. Nowadays, organizations across the board want breakthrough performance changes and not just incremental changes. One approach for rapid change and dramatic improvement that has emerged is Business Process Reengineering (BPR). Michael Hammer & James Champy define reengineering as the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed. What CPR isnt Overlaying new software on top of the same business processes Evolutionary Incremental improvements Downsizing Merely reorganizing and restructuring Single dimension solution Continuing to maintain status quo

What CPR is Starting from scratch and fundamentally changing the way we do business Innovative Leveraging best practices and enablers Multi-dimensional, integrated solution
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Cross-functional, inter-departmental change A migration to from activity management process

TQM focuses on encouraging a continuous flow of incremental improvements from the bottom of the organizations hierarchy. CPR, on the other hand generally more of a top down approach, aimed at more radical changes in how processes are designed. TQM and CPR are both usually manage as broad-based, multifaceted improvement efforts that entail a variety of initiatives and activities. There are several reasons why TQM and CPR have become so popular for improving process execution capabilities:

They encourage a strategic approach to management at the operations level. They get the results managers want. They work equally for blue collar and white-collar processes. They allow organizations to take advantage of several enabling developments. They fit with an orientation toward inter organizational collaboration. Approaches to managing at the operation level

TQM and CPR as the most common approaches to process improvement. They have similarities and differences. 4.5 Similarities: Since their fundamental objective is to improve process execution capabilities, it is not surprising that TQM and CPR have significant similarities in how they are manages: Both are meant to improve the capabilities of processes to provide customer value.
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Both look for opportunities to simultaneously improve multiple dimensions of competitive advantage. Both are based on a systems view of the organization. Both typically cross intraorganaizaional boundaries. Both benefit from benchmarking. Both are aimed at achieving, if possible, redefining best-in-class performance.

4.6 Differences: As similar as TQM and CPR are, there are also important differences between them. These are summarized and discussed below: Differences in general orientation Scope and scoring Within versus on Direction and staffing Involvement and numbers Boundaries Degree of continuity

4.7 How TQM and CPR Complement Each other Despite their differences, there is no reason for the top-down approach of CPR to conflict with the bottom-up approach of TQM. Guideline for Managing TQM and CPR Because there are similarities in and differences between TQM and CPR, it should come as no surprise that the two have correspondingly shared and distinct managerial guidelines for their applications. First, common things are discussed:

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Shared Guidelines for Managing Process improvement, both should be driven by a Broader Strategy: Assuming that the business has a strategy that is focused on creating and sustaining a competitive advantage based on offering customers superior value, this strategy should be the starting point for managing either TQM and CPR.TQM and CPR are about improving operations, and only the overall strategy can determine which operations matter most. Without solid grounding in the broader strategic issues, both TQ!M and CPR generally slip into addressing less important issues or devolve into efforts to improve internally focused operations through market-blind cost cutting. To ensure that its process improvement efforts are grounded in a strategic view of providing customers with superior value. Firm widely recognized for its successful use of TQM and CPR principles, uses three questions to guide its improvement/reengineering teams Q1. Who is your customer? This question forces teams to link their efforts back to customers, encouraging an external focus. Q2. What value are you providing for your customer? This forces explicit consideration of the specific forms of customer value. Q3. What business strategy are you contributing to? Here the process improvement efforts is placed in the context of a broader strategic initiative so that the various efforts throughout the organization are cumulative rather than disconnected.

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4.8 Managerial Guidelines Unique to TQM or CPR There is obviously an overlap between the managerial approaches appropriate for TQM and CPR, there are also differences. The differences are subtle, but they are important and organizations that overlook them will likely suffer setbacks as a result.

4.8.1 Guideline unique to TQM The steps involved in TQM Initiatives: TQM is managed as a series of projects. In order to facilitate the work of the various project teams, the organization will usually adopt a particular model or approach for its teams to use and this approach is meant to be used companywide with adaptations made where require by special circumstances. Usually this approach is broken down into a series of steps the team is to take, and often these steps are presented as a flowchart in keeping the process orientation. Typically, these frameworks are kept as basic and as simple as possible in order to facilitate their widespread applicability and use.

TQMs Greatest Managerial Challenge: the greatest managerial challenge involved in TQM is making it a way of life rather than an isolated program or project. The power of TQM is the power of the masses, hundreds of teams each making an individual effort to achieve a greater , shared goal. 4.8.2 Guidelines Unique to CPR The steps involved in CPR: In this model a team identifies a strategically important process and then studies it as it currently exists. The team then rethinks the current process, with possible ideas for change being stimulated
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by benchmarking other organizations to identify best practices and/or by considering generic process improvement principles.

4.9 CPRs Greatest Managerial Challenge The greatest challenge to CPR is making the transition from the as-is process to the newly designed should-be process. There are two specific problems associated with this transition period. One problem lies in the fact that the organization cannot usually just shut down while it moves one process to another, and this can be seen on the time axis of our exhibit. Usually the organization must continue operating its old process while it brings the new process on line, and considerable confusion results from the overlap in operating the two processes.

5. Conclusion The fundamental concepts of CPR - defining core processes, radical redesign, customer focus, empowerment, cross-functional collaboration, hierarchy flattening and team work - has been explained in detail. Five critical factors were suggested to increase the effectiveness of the reengineering effort - in particular, the factors that address how to ease resistance and how to build a successful team. Successful companies will be those who not only reengineer their processes and technology, but that reengineer their approaches to people.

By getting people actively involved in the reengineering process, the company not only benefits, but they also make their employees beneficiaries
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rather than victims of change. TQM is a proven technique to guarantee survival in world class economy. As we have seen the purpose of TQM is to provide a quality product or service to customers which in turn will increase productivity and lower the costs. An organization is more likely to know both the costs and the benefits of the process it has been using than the one it is considering adopting. Furthermore in considering new process, managers typically know more about the new processes are not only unknown but unknowable-simply impossible to foresee or predict. When analysis of a proposed change is based on known costs and unknowable benefits, it is usually difficult to gain widespread support for it.

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