CAPSTONE PROJECT ON Impact of quality management systems on performance of a company (automobile sector)

FACULTY GUIDE: B.V.R MURTY

SUBMITTED BY: ANKIT BHATNAGAR PGDM-MIB (2011-2013) ROLL NO.= 25

Acknowledgements
Any project requires amount of insights & information. All information is critical and important. Not only the information, but also a roadmap to travel with that piece of information is essential. This project helped us to gain better knowledge of all the systems and practices followed to ensure quality management systems in the automobile industry. We express our gratitude towards Prof. B. V.R MURTY for his guidance and for giving us the opportunity to enhance our knowledge about global automobile sector. Quality practices employed by the

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CERTIFICATE

This is to certify that the Project Work titled IMPACT OF QUALITY MANAGEMENT SYSTEMS ON PERFORMANCE OF A COMPANY (AUTOMOBILE SECTOR) is a bonafide work carried out by ANKIT BHATNAGAR a student of PGDM program 2012 2013 of the Institute for Technology & Management, Kharghar, Navi Mumbai under my guidance and direction.

Signature of Guide:

Name, Designation & Address: Date: Place:

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TABLE OF CONTENTS

Sr. No 1
2 3 4 5

Particulars
Abstract Executive Summary Introduction Historical perspective QS-900, Quality Management System

Page No.
5 6 7 8

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6 7

Automotive quality standard: The ISO /TS 16949 Zero defect quality in the Automobile Industry: A SIX SIGMA Perspective

14

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8 9 10

European automakers BMW Japnese automakers Toyota Honda Nissan Statistical process control Maruti udyog limited

21 22 28

30 37 41 44 46

11 12

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Conclusion

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ABSTRACT

Total Quality Management (TQM) is sometimes referred as a management system in incessant change and consisting of values, methodology and tools, the plan of which is to increase external and internal customer satisfaction with a condensed amount of resources. Whether TQM improves the performance of companies has been talked about for several years. One way of working with TQM and its values, methodology and tools is to be relevant for and work with a quality reward. Today, there are global, national, regional, branch-wise and in-company quality awards The Indian automobile industries have emerged as a sunrise sectors in our Indian economy since its liberalization. This is a crucial period for growth of Indian automobile industries as a significant player in global scenario. It is imperative to accelerate and sustain growth of automobile sectors, it is necessary to keep efforts for coordinating, synergizing as well as steering to relevant participant in competitive market. The purpose of this project is to assess whether and how working with quality awards affects the performance of organizations. This project with consists of an extended outline and one appended case study on this subject with different aim and methodologies. Study will wrap the benefits from in-company quality awards for the performance of units and the economic performance of quality award recipients compared with contenders and branch indices. The main conclusion of the project is to verify that working with quality awards affects financial performance positively if companies productively implement Total Quality Management, which is the case for quality award recipients.

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EXECUTIVE SUMMARY
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 d e v e l o p e d a n d coordinated m a n u f a c t u r i n g strategy, i n di vi dual 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. The hierarchy is built around a

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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.

INTRODUCTION

In times of severe competition, it is of crucial importance to create a competitive advantage to differentiate from the competitors and to sustain the business of the company. This shows that a customer-focused quality management is one way to create a sustainable competitive advantage. Quality controls along the whole value chain -before, during and after productionleads to failure free products, which save costs on the one hand and have thus a positive influence on the companys revenue. On the other hand failure free products that meet the customers expectations lead to satisfied customers who build up a brand loyalty and conduct retention sales, which have a positive influence on the companys sales, market share as well as the overall image. Furthermore, it is important to listen to the voice of the customers and get an insight in the customers needs and wants. To fulfill or even exceed their expectations leads to customer satisfaction, which is a key to success in todays business world. In addition, the customer demands in regard of quality are growing continuously and new technologies are appearing on the markets on a regular basis. Therefore the producers are forced to keep to the latest technology developments and to get hold on the changing customer needs. But even without this external pressure, quality improvement is justified from a cost point of view. The applicability of a customer-oriented quality management is shown in the practical part of this thesis, when the quality of the Saab models is analyzed from the customers perspective. Todays business environment creates a growing need for quality management. Tougher competition leads to the demand for cost savings and higher profitability. These days the consumer can choose from a variety of similar products, which are often exchangeable in the

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eyes of the customer. If they are not satisfied with a products performance, they switch to the competitors brand. Thus the focus on the customers needs and wants in line with quality is one way of differentiation from the vast number of competitors. Satisfied customers are likely to build up a brand loyalty and this helps to ensure long term sales. The explosive growth of technology led to a higher product complexity and thus favored the quality movement. Some technical products bear threats to human safety and to the environment which resulted in an expansion of governmental quality regulations as well as warranty laws in order to protect the consumers. In addition, the product life cycles are shortening along with the technological development and producers have to be prepared for increased quality requirements from the customers side as well as to respond to fast changing customer wants. Especially, on such a competitive market as the world market for passenger cars, the contenders are forced to reduce costs and to fulfill their customers wants and satisfy their needs to be successful. These developments show that striving for quality is and will be of importance for a company that wants to succeed in its business. This thesis is going to highlight the importance of quality management as it is proved that product quality is a major competitive success factor to create a sustainable competitive advantage.

HISTORICAL PERSPECTIVE
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. 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 todays Japanese industry were originally developed under the guidance and tutelage of Edwards Deming. 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.

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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. 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. 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. 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". 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. Short term financial goals took precedence over all else particularly quality control. Thus, t he American aut om obi l e manufacturing i n d u s t r y i n the 1960s demanded an increasing accommodation by the production function for the norms established by the organizational finance function. 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. 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. 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

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Automobile manufacturers, and quality control and safety were considered to be undesirable initiatives from annoying industry outsiders. At Ford under Iacocca, production line facilities and equipment were worked hard, and maintained l i g h t l y . In an effort to push for maximum profit, both physical

facilities maintenance and product innovation were sacrificed. 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)The 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. Ford's, and Iacoccas, arrogance toward quality and the North American consumer were 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. 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.

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QS 9000 - QUALITY MANAGEMENT SYSTEMS IN AUTOMOBILE SECTORS

INTRODUCTION
QS-9000 is the industry specific adaptation of the ISO-9000 standards for the North American auto industry. It applies to all first-tier suppliers, i.e. companies selling components to be used or installed directly in the products of the Big Three automakers. It is a QUALITY SYSTEM REQUIREMENT STANDARD developed by three U.S.automobile giants: * CHRYSLER: Supplier quality assurance manual. * FORD: Q-101 quality system standard. * GENERALMOTOR: NAO targets for excellence. The first edition was issued in August 1994 and the second edition in February 1995.The Automotive Industry Action Group in U.S.A. are authorized for distribution of the document and training co-ordination. in The T r u c k M a n u f a c t u r e r s who have participated

the development of this standard and adopted it as their basic quality system are

Freightliner Corporation, Mack Trucks, Navistar, PACCR and Volvo GM Heavy Truck Corporation. GOAL The goal for Quality System Requirements QS-9000 is the development of fundamental quality system that provides for continuous improvement, emphasizing defect prevention and the reduction of variation and waste in the supply chain. PURPOSE QS-9000 defines the fundamental quality system expectation of Chrysler, Ford, General Motors, Truck Manufacturers and other subscribing companies for internal and external suppliers of production and service parts and materials. These companies are committed to working with suppliers to ensure customer satisfaction beginning with conformance to

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Quality requirements and continuing with reduction of variation and waste to benefit the final customer, the supply base, and themselves. APPROACH QS-9000 is a harmonization of Chrysler's Supplier Quality Assurance Manual, Ford's Q-101 Quality System Standard and GM's Targets for Excellence, with input from The Truck Manufacturers. ISO-9001:1994 Section 4 has been adopted as the foundation for this standard. Interpretations and supplemental quality system requirements have been added. While other companies may adopt this document, Chrysler, Ford and GM retain full control over the content except for ISO-9001:1994. The mandatory requirements are indicated by use of shall" and the word "should" indicates a preferred approach. Suppliers using other approaches must be able to show that their approach meets the intent of QS-9000. Paragraphs marked "Note" are for guidance and the words, "Typical" and "examples" are used to indicate that the appropriate alternative for the particular commodity or process should be chosen. APPLICABILITY QS-9000 applies to all internal and external suppliers of: 1) Production Materials. 2) Production or Service Parts, or 3) Heat Treating, Painting, Plating or other finishing services directly to Chrysler, Ford, GM or other OEM customers subscribing to this document. REQUIREMENTS: The requirements in the standard are contained in three sections: SECTION1: ISO-9000 Based Requirements & Supplements. SECTION 2: Sector-Specific Requirements: This section contains Sector-specific

requirements on topics like 1) Production Part Approval Process, 2) Continuous Improvement, and 3) Manufacturing Capabilities.

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SECTION3: Customer-Specific Requirements. IMPLEMENTATION: Chrysler, Ford, General Motors, The Truck Manufacturers and other subscribing companies require that suppliers establish document and implement an effective quality system based on QS-9000 in accordance with timing r e q u i r e m e n t s established by t hei r

customers. All requirements of QS-9000 are to be incorporated in the supplier's quality system and described in the Quality Manual.

CONCLUSION: It has been well recognized that development, implementation and maintenance of Quality System to generic standards like ISO-9001/2 is immensely beneficial to every business. While implementing quality management system with such generic standards, many suppliers have felt the need for more specific elaboration and guidance of customer requirements. There is no doubt that QS-9000 Quality System Requirements which is sector based for the automotive industry can not only meet customer requirements but at the same time add value to suppliers business by its focus on defect prevention and continuous improvement in all areas of their business. The proper understanding of the challenge of QS-9000 by top management of suppliers in qualifying for it will maximize the results obtained. Each step of the qualification process can immediately i m p r o v e q u a l i t y and productivity f o r t h e s u p p l i e r s w h o

i m p l e m e n t t h e requirements with proper understanding. It is hoped that automotive suppliers in India would welcome QS-9000 and meet the challenge successfully. It would be appropriate to conclude with a quote of the remarks made by Daniel Brennan, Partner-in-Charge of KPMG Quality Registrar in a recent interview to Quality Focus: "During my 30 years of third-party auditing experience, I have never witnessed such positive impact on organizations as I have watching them implement ISO/QS-9000. Over the last two years, I have seen companies improve efficiency and customer service, reduce scrap, eliminate redundancies and most of all-increase profit. It is only after they have that they can reap the benefits. We believe that as registrar it is our obligation to help companies focus on continuous improvement and not simply registration."

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Automotive quality standard: The ISO /TS 16949

The ISO/TS16949 standard unites automotive industry quality requirements that exist worldwide, and is therefore recognized by both the American and the European automobile industries. The automotive industry has become increasingly international, and this has led to the need for a commonly accepted management system. The ISO/TS16949 standard has been created by the International Automotive Task Force (IATF) and the International Organization for Standardization (ISO) to satisfy this need. The document unites the quality requirements that exist worldwide, and is therefore recognized by both the American and the European automobile industries. ISO/TS16949 is based on ISO9000, EAQF (French), VDA6.1 (German), AVSQ (Italian) and QS9000 (US) automotive catalogues. ISO/TS16949 is a breakthrough as it combines global quality system requirements in one standard which can be used along the automotive supply chains. Automobile manufacturers such as GM, Ford, Volkswagen, BMW, Nissan, Renault, Peugeot, Citroen and Daimler Chrysler require their suppliers to be ISO/TS16949 certified. Certification in accordance with ISO/TS16949 has several advantages. It creates transparency and comprehensibility for all processes. Thus, it becomes possible to evaluate the profitability of all the divisions of a company. It is also the door opener to the automotive supply chain. Instead of fulfilling several national requirements, companies need only to comply with one international standard, reducing the time and the cost of the certification process. Any company in the automotive supply chain can obtain ISO/TS16949 certification, but the definition of automotive only includes cars, buses, trucks and motorcycles, and not agricultural, industrial or off-highway vehicles. Moreover, the standard is only applicable to plants where the specific automotive components are manufactured. Depending on the situation, companies that manufacture products for the automotive industry but are not permanently within the automotive supply chain can obtain the aforementioned certification.

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UnderstandingtheISO/TS16949:2002Standard
What is ISO/TS16949:2002? ISO/TS 16949:2002 is an ISO Technical Specification, which integrates existing American and European automotive quality management systems standards within the global automotive industry, with the aim of eliminating the need for multiple certifications to satisfy multiple customer requirements. Using ISO 9001:2000 as its foundation, ISO/TS 16949:2002 specifies the quality management system ( QMS) requirements for the design & development; production, installation and servicing of automotive related products. In addition, there are customer specific requirements that are required by individual IATF subscribing vehicle manufacturers. In the past a variety of standards were in use by various automotive companies around the world. ISO/TS 16949 is designed to eventually replace all of these standards as the single worldwide automotive sector QMS standard. Previous standards include the following: QS 9000 (Ford, General Motors, Daimler Chrysler) EAQF 94 (PSA Peugeot, Citron, Renault, FIEV) VDA 6 (Audi, BMW, VW, Daimler Chrysler) AVSQ 94 (Fiat Auto, IVECO) Who authored ISO/TS16949:2002? ISO/TS 16949:2002 were developed by the International Automotive Task Force (IATF), in conjunction with the International Organization for Standardization (ISO). The IATF consists of an international group of vehicle manufacturers - BMW Group, DaimlerChrysler, Fiat, Ford Motor Company, General Motors Corporation, PSA PeugeotCitroen, Renault and Volkswagen - plus national trade associations - AIAG (America), VDA (Germany), SMMT (UK), ANFIA (Italy) and FIEV (France). While the Japanese vehicle manufacturers association, JAMA, were also involved in the development of ISO/TS 16949:2002, they do not formally subscribe to the TS 16949 document as yet or require it of their supply chain.

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What is the format of ISO/TS16949:2002? TS 16949:2002 is built upon all of the requirements, principles and concepts included in ISO 9001:2000, and goes further in specifying supplemental requirements that are specific to the automotive sector. The TS 16949 specific clauses may: Include new requirements over and above ISO 9001 requirements Supplement or expand on the existing ISO 9001 requirement Call for prescriptive ways to address ISO or TS requirements These automotive sector requirements also refer to automotive core tools (reference documents) such as the Advanced Quality Planning (eg. APQP), Part Approval Process (eg. PPAP), Measurement Systems Analysis (MSA), FMEA and SPC. Customer specific requirements are required by individual IATF subscribing customers and are provided separately on their respective websites and on trade association websites representing them (e.g., IAOB). Who does ISO/TS16949:2002 apply to? TS 16949 is applicable to the following types of automotive supply chain products and facilities: 1. Cars, trucks (light, medium and heavy), buses, motorcycles. 2. Supplier sites providing value-added parts, components, products , sub-assemblies and services up the supply chain to the OEM. TS 16949 requirements may be applied to any site in the supply chain by its customer. 3. Supply chain facilities or sites that manufacture production materials; production and service parts; assemblies; or provide (value-added) finishing services such as heat treating, welding, painting; etc., for the automotive OEMs subscribing to this standard. 4. This means that all Tier 1 suppliers providing such products or services directly to IATF subscribing automotive OEMs must get TS 16949 certification and they in turn may flow TS 16949 conformity or certification requirements down to Tier 2 suppliers and so on. The flow down to tier 2 or 3 has now become more the norm than the exception.

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Who/what is excluded from TS 16949:2002? TS 16949 cannot be applied to the following products or organizations: The supply chain for agricultural, off-highway (mining, forestry, construction, etc.) vehicles. Automotive after-market service parts made to original IATF subscribing OEM Specifications, but not procured and released through them. Manufacturers of tooling; production equipment; jigs; fixtures; moulds; etc used by the auto industry. Remanufactured automobile parts. Distribution centers; warehouses; parts packagers; logistics support; and sequencers. Support functions (non-manufacturing, whether on-site or off), cannot obtain standalone TS 16949 certification. They must be audited and included with the certification of the manufacturing site they support.

What are the benefits of implementing an effective QMS based on the TS 16949:2002 standard? Benefits include: External Improves OEM customer confidence and satisfaction in your organizations QMS capability and consistency in delivering conforming products and services. Improves conformity to quality requirements. Increases competitive edge and automotive supply market share Internal Improves business efficiency and productivity Reduces organizational waste, inefficiencies, and defects Facilitates continual improvement in business processes and customer satisfaction Improves process consistency and stability Provides basis for training programs to improve competence and consistency of personnel performance Improves employee motivation and participation through improved

communication, interaction and involvement

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 Contributes to provision of objective evidence that facilitates the assessment of system controls and effectiveness What are the benefits of ISO/TS 16949 Certification? Improved product and process quality Provide additional confidence for global sourcing Lowers costs through improved customer and supplier communication Open up supplier resources for other quality activities Consistent QMS approach in the supply chain for supplier/subcontractor development Reduction of variation and increased efficiency in the supplier chain Reduction in 2nd party system audits Reduction in multiple 3rd party registrations, only one certificate Common language to improve understanding of quality requirements Customer confidence from non-automotive markets as well as automotive markets. What are TS 16949:2002 requirements? The requirements cover a wide range of topics, including: Your organizations top management commitment to quality, its customer focus, Adequacy of its resources, employee competence, Process management (for production, service delivery and relevant administrative and support processes), quality planning, product design, review of incoming orders, purchasing, monitoring and measurement of its processes and products, calibration of measuring equipment, Processes to resolve customer complaints, corrective/preventive actions and a requirement to drive continual improvement of the QMS. Last, there is a requirement to monitor customer perceptions about the quality of the goods and services it provides. TS 16949:2002 does not specify requirements for your products or services; these are specified by your customer. It specifies requirements for your quality management system. An effective QMS will reap the benefit of providing/improving your ability to consistently meet customer product and other requirements.

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Zero defect quality in the Automobile Industry: A SIX SIGMA Perspective

Six Sigma is a business management strategy originally developed by Motorola. As of 2009, it enjoys widespread application in many sectors of industry, although its application is not without controversy. Six Sigma seeks to improve the quality of process outputs by identifying and removing the causes of defects (errors) and minimizing variability in manufacturing and business processes. It uses a set of quality management methods, including statistical methods, and creates a special infrastructure of people within the organization ("Black Belts", "Green Belts" etc.) who are experts in these methods. Increasing competition has meant that more and more companies are on the look-out for a sustainable concept to optimize company processes in terms of quality, time and cost. Six Sigma is the perfect solution if introduced in its entirety and applied consistently, if the company managers and directors provide their full commitment, and if there is a company culture which encourages transparency of errors, stringent project control and a desire for quantitative results. Automobile manufacturers have recognized this and demand zero defect quality from their suppliers. Companies who develop a high level of Six Sigma expertise at an early stage will achieve significant cost reductions and gain competitive advantages.

THREE PILLARS OF SIX SIGMA

The customer in the Six Sigma concepts: 1. The .voice of the customer. (VOC) is the foundation of any Six Sigma process analysis and improvement measure. 2. The .Critical To Quality Characteristics. (CTQ) define the required process results from the customers point of view and represent the companys factors for success.

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3. The higher quality of (preliminary) products and services through Six Sigma makes industrial users as customers more successful in their respective market and creates the basis for multi-stage .Value Marketing. The process in the Six Sigma concept: 1. In all Six Sigma projects, there is a bi-lateral focus on the process map. On the one hand, an outside-in analysis examines how central customer requirements as critical factors for success (CTQs) are fulfilled in current processes and how they should be better fulfilled in the future. On the other hand, an inside-out analysis studies the decisive value drivers and core competences, which must be developed to respond to these. 2. The quality vision (from the customers point of view) is then not only formulated in the business model, but concretely implemented in all key added value processes. This is achieved in all Six Sigma projects by the completion of SIPOC analyses, i.e. the examination of key process stages in the supplier, input, process, and output and customer chain. The analysis establishes output, process and input measurements necessary to achieve the required outcome. 3. Errors are defined based upon the central customer requirements and subsequently by the business strategy. Both are implemented in internal process and performance standards, to distinguish the company from the relevant competitors. Quality in the Six Sigma concept: 1. The stated aim of Six Sigma is as already mentioned practical zero defect quality. From a statistical point of view, this represents an error rate of 3.4 defects per 1 million opportunities. The basis for calculation is the standard normal distribution. This means that 99.99966 per cent of products lie within a (tolerance) range of 6 at a mean shift of 1,5. 2. The tolerance range for quality is defined by the levels of deviation accepted by the customer in accordance with the customer requirements. The tolerance range is only reduced if internal process/performance standards are structured more harshly in accordance with the business strategy 3. Minimizing process variance within the defined tolerance range and centring the process status, i.e. ensuring that processes adhere rigidly to the CTQs, is at the centre of all Six Sigma Improvement activities.

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RELATIONSHIP BETWEEN SIX SIGMA AND CUSTOMER SATISFACTION

EUROPEAN AUTOMAKERS
The auto sector is often credited as the engine room of Europe. The European Union is the homeland to a competitive and innovative automotive industry that generates activity throughout the economy from materials and parts supply, to R&D and manufacturing, to sales and after-sales services. Manufacturers have trained and developed a highly-skilled workforce, producing quality products for home and international markets. Vehicle manufacturing supports over 2 million European jobs with an additional 10 million citizens employed in associated industries. Exports are valued at over 70 billion annually. The automotive industry has also established itself as a partner in sustainability. Technological advances have brought real solutions, driving down harmful emissions from industry products and production sites. The automobile industry in Germany is one of the largest employers in the country, with a strong labour force of over 866,000 (2005) working in the industry. In addition, Germany has the largest share of passenger car production in Europe with over 29% market share (source: OICA, 2002), followed by France (18%), Spain (13%) and the United Kingdom (9%). In 2009, Angela Merkel pointed out that losing the lead in electric vehicle technology means Germany also will lose markets. Manufacturers have spearheaded significant improvements in vehicle safety and embraced social responsibility goals. Annually, the industry invests 20 billion in R&D, more than any other private sector. Its drive towards sustainable mobility remains an ongoing commitment.
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Currently, six German companies dominate the automotive industry in the country: VW, Audi (owned by the Volkswagen Group), BMW, Daimler AG, Porsche and Opel. Nearly six million vehicles are produced in Germany each year, and approximately 4.8 million are produced overseas by German brands. Alongside the United States, China and Japan, Germany is one of the top 3 automobile manufacturers in the world. The Volkswagen Group is one of the three biggest automotive companies of the world (along with Toyota and General Motors).

A STRONG INDUSTRY INNOVATES

The industry has come a long way on all sustainability criteria, and sustainable mobility remains a key part of manufacturers long-term plans. During the last ten years of relative economic stability, manufacturers delivered fifty new CO2 reduction technologies to market. Improved engine design, the use of lightweight new materials, development of alternativelyfuelled vehicles and in-vehicle driver aids, these examples have helped slash average new car CO2 by almost 20% in just thirteen years. Emissions are a fraction of what they once were too, thanks to industry innovation. Particulates and other pollutants have come down over 95% compare to 1990 levels. Truck and bus makers have set a benchmark in efficiency too. Todays 40-tonne trucks burn around a third less fuel than equivalents thirty years ago, while exhaust technologies are trapping more harmful emissions improving air quality in our towns and cities. Investment in logistics, tracking, driver training and intelligent transport systems ensure modern trucks work smarter

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as well as harder for their operators. On safety, vehicle technology has helped halve the number of deaths on Europes roads in the last thirty years, despite a three-fold increase in traffic volumes

REGULATORYFRAMEWORK
The most regulated sectors in the EU. Over-regulation and complex or even conflicting rules can bring substantial costs. The objective to streamline regulation in the auto sector, with the help of the CARS 21 process, must be continued to reinforce the sectors competitiveness.

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PART OF A JIGSAW
While technology continues to deliver greener, safer vehicles, it represents just one part of the jigsaw. Impact studies clearly show that the greatest benefits to the environment and safety come when all relevant stakeholders play their part in an integrated approach. As well as being heavily regulated, the auto sector is often forced to deal with rules that are unduly complex with high administrative c o s t s for compliance. Simplifying e x i s t i n g legislation is much needed, particularly in areas like type approval. Where possible, the EU should seek harmonisation in an international context. An industry that devotes less time and resources to applying rules can devote more to what it is good at; developing cars, trucks and buses that are even safer and more efficient. Policy makers must always be fully informed about the consequences of new proposals. Timely consultation and thorough impact assessments are therefore key, and must be at the heart of any new proposal. Consultation reveals the practical consequences of new policy proposals; thorough impact assessments highlight wider issues, like cost benefits and the potential for meeting objectives through alternative means.

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HARMONISATION OF RULESAND STANDARDS

Governments across the globe are applying policy instruments to control road transport emissions by regulating tailpipe limits. However, the approach can vary significantly from market to market. In the US, Europe and Japan, this has led to different technical solutions for standards, test criteria and permitted emission

levels. For commercial vehicle manufacturers, this has led to higher operating costs and longer lead-times in bringing the cleanest new models to market. Harmonizing technical regulations on areas like tests, emission limits and onboard diagnostics would reduce development costs and help manufacturers rollout new technologies more quickly. This would deliver a more competitive auto sector,

but also newer vehicles with lower emissions and better safety technologies in markets across the globe.

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FUEL QUALITY
Modern vehicles are fitted with sophisticated engines with components and assemblies designed t o operate at fine tolerances. They are managed by computer to optimize performance, and complemented by exhaust treatment technologies that remove pollutants directly from the tailpipe. Together, these technology solutions help reduce emissions and deliver the performance demanded by commercial customers and private motorists. The industry is concerned that regulators continue to prioritize vehicle technology in the drive to cut emissions. Insufficient impetus has been given to the importance of fuel quality and the need to develop global fuel regulations that complement modern vehicles. Without quality and standardized fuels, vehicles cannot perform to their potential, generating higher emissions, with the risk of premature component failure through contamination and corrosion. Auto makers acknowledge European targets to increase the use of renewable fuels in road transport to 10% by 2020. However, they are concerned by the Commissions Fuel Quality Directive. At a time when the industry has been working to develop global standards for bio fuels through membership of the Worldwide Fuel Charter, this is a retrograde step. It sends out entirely the wrong message and must be reviewed.

SAFETY
Like climate change, road safety is an international issue which should be tackled through a collaborative effort from all stakeholders. Manufacturers have a responsibility to bring safety technologies to market, and innovation has delivered huge advances in occupant protection, Pedestrian-friendly design and active technologies that help avoid a Crash. Road users, planners, governments and enforcement authorities must also accept their role in cutting the unacceptable death toll on roads. Here too, an integrated approach must be applied. Safety regulations that vary from market to market have the same effect as those applied to emissions and fuel standards. They create barriers that can delay the introduction of new technologies. Manufacturers are actively involved in the Global Road Safety Partnership (GRSP), which brings together regulators, industry and civil society in the poorest countries, to deliver an integrated approach on a global level.

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Voluntary measures have also been taken, such as the introduction of seat belts as standard in all vehicles sold anywhere in the world. All European cars are now fitted with ABS as standard, while more recently the industry has become an active participant in the Choose ESC campaign to increase consumer awareness of the benefits of Electronic Stability Control.

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BAVARIAN MOTOR WORKS (BMW)

BMW is a German automobile, motorcycle and engine manufacturing company founded in 1916. It also owns and produces the MINI brand, and is the parent company of Rolls-Royce Motor Cars. BMW is known for its performance and luxury vehicles. The BMW Group and its products are committed to meet and exceed the expectations of its customers regarding innovations, performance and quality. Therefore quality management is a responsibility which can only be realized if it is lived by highly committed and qualified employees.

QUALITY MANAGEMNT
BMW in its Quality policy says that, Quality is our promise to the customer. The products of BMW Group shall meet and exceed the expectations of our customers regarding innovations, performance, and quality. This is based on the development process of vehicles and components, where BMW Group engineers and suppliers share responsibility for achieving challenging goals. Quality management is a task that affects all employees and which can only be executed successfully, if it is fully understood by involved and capable individuals. Bmw program quality management programs are a voluntary program that requires BMW centers to thoroughly examine every operation, every procedure and even job description throughout the dealership. Each one is evaluated for improvement, and changes are made to increase effectiveness and efficiency. Finally, a complete record is written down into an operations manual that helps assure continuity. a continuing independent audit confirms that all systems are rigoursly followed BMW Group has reorganized its method for supplied parts quality management in the product development process to meet the demanding challenges of the future. BMWs Quality Control Procedures

BMW believes that quality control is important through every point in its supply chain. The quality concept of consistency is greatly stressed as a key component of BMW, s quality

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manufacturing and assembly processes. Even after assembly, each automobile is given a

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control philosophy. This consistency is achieved through audits at each step in the sourcing

Comprehensive quality checks to ensure compliance with BMW standards. In keeping with its adoption of Total Quality Management principles, BMW designates every employee as being responsible for the quality of the final product, and empowers employees to take action if product quality is jeopardized.

As part of its quality control procedures, BMW has implemented process automation across much of its manufacturing operations. To support its continuous improvement philosophy BMW connects suppliers closely to its manufacturing operations in an effort to collaborate on quality improvement. The BMW manufacturing process makes extensive use of robotic technology to ensure a consistent end product. Over the past four years, BMW has greatly increased the use of robotics in manufacturing plants with the goals of increasing assembly diversification and improving productivity. Part of BMWs quality improvement philosophy consists of continuous innovation. We outline a few of BMWs success factors for ongoing improvement: Deep-Six the Egos- Rigorously screen new hires for their ability to thrive as part of a team. Promote young talent but hold back perks until they've shown their stuff. Build a Shared Mythology- New hires learn about 1959, when BMW nearly went bankrupt. Its recovery remains the centerpiece of company lore, inspiring a deep commitment to innovation. Worship the Network- Teams from across the company work elbow to elbow in open, airy spaces, helping them to create informal networks where they hatch ideas quickly and resolve disagreements. Work Outside the System- The sleek Z4 coupe exists because a young designer's doodle inspired a team to push his concept even though management had already killed the program. Keep the Door Open- From the factory floor to the executive suite, everyone is encouraged to speak out. Ideas bubble up freely, and even the craziest proposals will get a hearing. Through this innovation, BMW is able to entertain production concepts that would have otherwise never been considered. Taken collectively, the quality principles of BMW stress the concepts of manufacturing excellence, process improvement, and new idea generation. As such the bulk of BMWs quality programs are geared towards improving product design, maintaining material and product integrity, and improving productivity.

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JAPANESE AUTOMAKERS
TOYOTA
TYOTA GLOBAL COMPETITIVE ADVANTAGE

Toyotas global competitive advantage is based on a corporate philosophy known as the Toyota Production System. The system depends in part on a human resources management policy that stimulates employee creativity and loyalty but also on a highly efficient network of suppliers and components manufacturers. The Toyota Production System (TPS) is an integrated socio-technical system, developed by Toyota t hat comprises i t s m anagem ent p hi l osoph y a n d pract i ces . The TPS

organizes manufacturing and logistics for the automobile manufacturer, including interaction with suppliers and customers. The system is a major precursor of the more generic "Lean manufacturing." Taiichi Ohno, Shigeo Shingo and Eiji Toyoda

developed the system between 1948 and 1975. Originally called "Just In Time Production," it builds on the approach created by the founder of Toyota, Sakichi Toyoda, his son Kiichiro Toyoda, and the engineer Taiichi Ohno. The founders of Toyota drew heavily on the work of W. Edwards Deming and the writings of Henry Ford. When these men came to the United States to observe the assembly line and mass production that had made Ford rich, they were unimpressed. While shopping in a supermarket they observed the simple idea of an automatic drink resupplier; when the customer wants a drink, he takes one, and another replaces it. The principles underlying the TPS are embodied in The Toyota Way. GOALS The main objectives of the TPS are to design out overburden (muri) and inconsistency (mura), and to eliminate waste (muda). The most significant effects on process value delivery are achieved by designing a process capable of delivering the required results smoothly; by designing out "mura" (inconsistency). It is also crucial to ensure that the process is as flexible as necessary without stress or "muri" (overburden) since this generates muda" (waste).

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valuable. There are seven kinds of muda that are addressed in the TPS:

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Finally the tactical improvements of waste reduction or the elimination of muda are very

1. 2. 3. 4. 5. 6. 7.

Over-production Motion (of operator or machine) Waiting (of operator or machine) Conveyance Processing itself Inventory (raw material) Correction (reworks and scraps)

The elimination of muda has come to dominate the thinking of many when they look at the effects of the TPS because it is the most familiar of the three to implement. In the TPS many initiatives are triggered by mura or muri reduction which drives out muda without specific focus on its reduction.

PRINCIPLES The 14 Principles The Toyota Way has been called "a system designed to provide the tools for people to continually improve their work". The 14 principles of The Toyota Way are organized in four sections: I) II) III) IV) Long-Term Philosophy The Right Process Will Produce the Right Results Add Value to the Organization by Developing Your People Continuously Solving Root Problems Drives Organizational Learning. The principles are set out and briefly described below: SectionILong-TermPhilosophy Principle1 Base your management decisions on a long-term philosophy, even at the expense of shortterm financial goals. People need purpose to find motivation and establish goals. SectionII the Right Process Will Produce the Right Results Principle2 Create a continuous process flow to bring problems to the surface. Work processes are redesigned to eliminate waste (muda) through the process of continuous improvement kaizen. The seven types of muda are:
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Overproduction Waiting (time on hand)

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Unnecessary transport or conveyance Over processing or incorrect processing Excess inventory Motion Defects

Principle3 Use "pull" systems to avoid overproduction. A method where a process signals its predecessor that more material is needed. The pull system produces only the required material after the subsequent operation signals a need for it. This process is necessary to reduce overproduction. Principle4 Level out the workload (heijunka). (Work like the tortoise, not the hare). This helps achieve the goal of minimizing waste (muda), not overburdening people or the equipment (muri), and not creating uneven production levels (mura). Principle5 Build a culture of stopping to fix problems, to get quality right the first time. Quality takes precedence (Jidoka). Any employee in the Toyota Production System has the authority to stop the process to signal a quality issue. Principle6 Standardized tasks and processes are the foundation for continuous improvement and employee empowerment. Although Toyota has a bureaucratic system, the way that it is implemented allows for continuous improvement (kaizen) from the people affected by that system. It empowers the employee to aid in the growth and improvement of the company. Principle7 Use visual control so no problems are hidden. Included in this principle is the 5S Program - steps that are used to make all work spaces efficient and productive, help people share work stations, reduce time looking for needed tools and improve the work environment.

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Straighten: Have a place for everything

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Sort: Sort out unneeded items

Shine: Keep the area clean Standardize: Create rules and standard operating procedures Sustain: Maintain the system and continue to improve it

Principle8 Use only reliable, thoroughly tested technology that serves your people and processes. Technology is pulled by manufacturing, not pushed to manufacturing. SectionIII Add Value to the Organization by Developing Your People Principle9 Grow leaders who thoroughly understand the work, live the philosophy, and teach it to others. Without constant attention, the principles will fade. The principles have to be ingrained; it must be the way one thinks. Employees must be educated and trained: they have to maintain a learning organization. Principle10 Develop exceptional people and teams who follow your company's philosophy. Teams should consist of 4-5 people and numerous management tiers. Success is based on the team, not the individual. Principle11 Respect your extended network of partners and suppliers by challenging them and helping them improve. Toyota treats suppliers much like they treat their employees, challenging them to do better and helping them to achieve it. Toyota provides cross functional teams to help suppliers discover and fix problems so that they can become a stronger, better supplier. SectionIV: Continuously Solving Root Problems Drives Organizational Learning Principle12 Go and see for yourself to thoroughly understand the situation (Genchi Genbutsu). Toyota managers are expected to "go-and-see" operations. Without experiencing the situation

managers use Tadashi Yamashima's (President, Toyota Technical Centre (TTC)) ten

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firsthand, managers will not have an understanding of how it can be improved. Furthermore,

management principles as a guideline:

1. 2. 3. 4.

Always keep the final target in mind. Clearly assign tasks to yourself and others. Think and speak on verified, proven information and data. Take full advantage of the wisdom and experiences of others to send, gather or discuss information.

5. 6. 7. 8. 9. 10.

Share information with others in a timely fashion. Always report, inform and consult in a timely manner. Analyze and understand shortcomings in your capabilities in a measurable way. Relentlessly strive to conduct kaizen activities. Think "outside the box," or beyond common sense and standard rules. Always be mindful of protecting your safety and health

Principle13 Make decisions slowly by consensus, thoroughly considering all options; implement decisions rapidly (nemawashi). The following are decision parameters: 1. 2. 3. 4. 5. Find what is really going on (go-and-see) to test Determine the underlying cause Consider a broad range of alternatives Build consensus on the resolution Use efficient communication tools

Principle14 Become a learning organization through relentless reflection (hansei) and continuous improvement (kaizen). The process of becoming a learning organization involves criticizing every aspect of what one does. The general problem solving technique to determine the root cause of a problem includes: 1. 2. Initial problem perception Clarify the problem
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3. 4. 5. 6. 7.

Locate area/point of cause Investigate root cause (5 whys) Countermeasure Evaluate Standardize

Long-term philosophy Base your management decisions on a long-term philosophy, even at the expense of shortterm financial goals. The right process will produce the right results 1. 2. 3. 4. 5. Create continuous process flow to bring problems to the surfac Use the "pull" system to avoid overproduction Level out the workload (heijunka). (Work like the tortoise, not the hare.) Build a culture of stopping to fix problems, to get quality right from the first Standardized tasks are the foundation for continuous improvement and employee empowerment 6. 7. Use visual control so no problems are hidden Use only reliable, thoroughly tested technology that serves your people and processes.

Add value to the organization by developing your people and partners 1. Grow leaders who thoroughly understand the work, live the philosophy, and teach it to others. 2. 3. h Develop exceptional people and teams who follow your company's philosophy. Respect your extended network of partners and suppliers by challenging them and helping them improve.

Continuously solving root problems drives organizational learning 1. 2. Go and see for yourself, and thoroughly understand the situation (Genchi Genbutsu) Make decisions slowly by consensus, thoroughly considering all (Nemawashi); implement decisions rapidly. 3. Become a learning organization through relentless reflection (Hansei) and continuous improvement (Kaizen).
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The Toyota production system has been compared to squeezing water from a dry towel. What this means is that it is a system for thorough waste elimination. Here, waste refers to anything which does not advance the process, everything that does not increase added value. Many people settle for eliminating the waste that everyone recognizes as waste. But much remains that simply has not yet been recognized as waste or that people are willing to tolerate. People had resigned themselves to certain problems, had become hostage to routine and abandoned the practice of problem-solving. This going back to basics, exposing the real significance of problems and then making fundamental improvements, can be witnessed throughout the Toyota Production System. RESULTS Toyota was able to greatly reduce lead-time and cost using the TPS, while improving quality. This enabled it to become one of the ten largest companies in the world. It is currently as profitable as all the other car companies combined and became the largest car manufacturer in 2007. It has been proposed that the TPS is the most prominent example of the 'correlation', or middle, stage in a science, with material requirements planning and other data gathering systems representing the 'classification' or first stage. A science in this stage can see correlations between events and can propose some procedures that allow some predictions of the future. Due to the success of the production philosophy's predictions many of these methods have been copied by other manufacturing companies, although mostly unsuccessfully. Also, many companies in different sectors of work (other than manufacturing) have attempted to adapt some or all of the principles of the Toyota Production System to their company. These sectors include construction and health care.

Employees empowerment : average annual results 1. 2. 3. Toyotas employees submitted more than 700,000 improvement suggestions. that is an average of over 10 improvement suggestions per employee per year. Over 99% of suggestions were implemented.

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HONDA
Introduction
Honda Motors, initially a maker of motorbikes, succeeded in becoming an automobile producer after all others, in the mid-1960s, by implementing a strategy of innovation and flexibility and by constructing an industrial model enabling it to avoid or limit the risks peculiar to that strategy. The firm's success owed much to the mechanical and commercial imagination of Soichiro Honda himself. Based on the long-standing philosophy of, "building products in the markets where they are sold," Honda now has more than 100 manufacturing facilities in 33 countries.

Context
Honda was unusual in having already created an industrial model by the time it entered the automobile industry. Twelve years after it was founded in 1948, Honda had become the world's largest motorcycle manufacturer, on the basis of a strategy which focused on product innovation and production flexibility and on the mass production of products which had in effect opened new market segments. Other non-Japanese carmakers ask: why do the Japanese learn better from experience than we do? Is it because they stress companywide continuous improvement? For example, Japanese executives worry less about whether overhead allocation reflects the precise demands that each product makes on corporate resources than about how it affects the cost reduction priorities of middle managers and shop floor workers. American executives often dismiss Japanese management accounting techniques as misguided, or even simplistic. Yet, these same Japanese management styles were the ones that helped Honda become successful in todays fast changing world. As a means to encourage creativity and get flexibility accepted, Honda and Fujisawa developed a company compromise which was not dependent upon group spirit and loyalty as at Toyota but rather on the recognition and gratification of individual talents as well as good work and employment conditions. Inventiveness and expertise were first valued by a

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promotion path and wage scale, named the expert system, which ran in parallel to the traditional lines and scales. This seemed a good idea since reliance on promotion has affirmative incentive properties because workers can anticipate that differential talent and degrees of cooperativeness will be rewarded. By 1967 Honda had become a proper car manufacturer. It opted for an innovative automobile niche and exportation in order to create a place for itself among Japanese producers. Given that Honda cars were seen as practical and fuel efficient, the company was ideally positioned to exploit global (and, above all, US American) markets during the 1970s oil price crises. For its part, Honda continued to seek ways to maintain and indeed increase its capacity to innovate and to make its production apparatus more flexible. In particular, Honda decided always to seek two solutions to the same problem, so as not to become prisoner to a premature decision. Conversion of its production lines to other models was made easier, and the principle of producing homogeneous lots of thirty to sixty vehicles was retained.

EmployeeFocus
Honda claims to have a 'human-centred' approach to work, less rigid in defining standard operations than Toyota. Employees rotate tasks; indeed they must be flexible, changing posts, models, departments, and product types. But the HPS does not rely on unplanned long shifts to make up lost production. When needed, Saturdays are used. Working hours are the lowest in the Japanese automobile industry. Focusing on employees is a good strategy. Employees after all are the backbone of a company, and without them it is impossible for any company to succeed. Employees at Honda Motors were therefore viewed as a 'fixed' asset, consistent with the 'flexi factory' operations strategy. Honda also continued to promote individualism, youth, and a certain equality while Japanese culture emphasized the opposites - groupism, respect for age, status. The constant theme at Honda remained how to overcome the organizational rigidities that Japanese culture was believed to foster - 'big business disease'. Honda the business leader appears to have a contemporary and dynamic appeal. Striking remains the extent to which his and his companys approach to business and management - and indeed to life generally - so contradict many of the stereotypical images of Japanese management styles.

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Rover entered into collaboration with Honda in order to secure new model designs and engineering capabilities without which it could no longer survive. Hondas main interest in the collaboration was more offensive, seeing Rover as providing a bridge into the European market. Moreover an alliance which starts off with primarily defensive intentions can become offensive in nature if it is successful in the market. The key to the Honda new system was 'single status' employment, in which all employees shared the same uniforms, parking lots, restaurants, and private health-care. All offices were open-plan and many had windows so that they could be viewed from production areas. All production workers were placed in one category (with separate categories only for maintenance workers and team leaders) and received the same wage with no allowance for seniority, job done, or individual merit. This un-Japanese system was consistent with Western principles of equality. Consistent with Fujisawaism, it reduced obstacles to managerial authority, individual initiative, transparency of merit, and open communications. Also consistent with Western ideologies, there was a measure of democracy. Workers voted on the organization of the working day (breaks, leaving hours), holidays, and when to make up for any lost output. A panel of production associates reviewed management dismissals of workers and had the power to reinstate; one in five was reinstated. More challenging than getting American workers to accept this system was to ensure that American managers could work in it.

Quality Management in Problem Solving

Many works describe the application of systems theory to production planning. Based on works, authors group organizational problems into four kinds. Its principle is that an organizational problem may result from having erroneously specified either one of or many among the output of the system, the input to the system, the production process itself, or even the entire system. Within a firm, problems can occur singly or in combination as well as within specific organizational tasks, such as quality control. This grouping scheme can help managers and planners characterize most business problems. To improve Hondas decision quality, they became more aware of their assumptions, including assumptions about the way strategic variables are affected by and cause changes in other variables over time. The resulting confrontation between devil's advocates and proponents of a particular system structure that causes a dynamic behaviour pattern becomes a

rational confrontation becomes lively in a team because of an analytical approach.

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learning experience for Honda Motors. Institutional learning opportunities abound when

To encourage and to make learning an integral part of management technology, we must lift our sights from the short term. To design strategy, we must learn to search for and to identify patterns of change over time. To practice strategy design and to act proactively, we should replace our transaction-driven calculus with scenario analysis. Learning is not a luxury; it is how firms create their own future. Creating the organizational capability of and ambiance for learning will lead to a truly sustainable advantage. A product's Market Perceived Quality is a driving force that increases market share. They further it is argued that when superior quality and large market share are both present, profits are virtually guaranteed, changing the "competitive positioning" of the product. To the essentially conservative posture of the responsible leader there is a concern for change and reconstruction. This creative role has two aspects. First, there is what is called the 'institutional embodiment of purpose.' Second, creativity is exercised by strategic and tactical planning, that is, analyzing the environment to determine how best to use the existing internal resources and capabilities of the organization. To explain further, Hondas expertise in engine technology as a core competency satisfies all the above three factors. Honda used their expertise in engines to come up with gasoline engines for different industries such as automobiles, motorcycles, boats, and generators. To top all of that, Hondas reputation satisfies the third factor, which makes hard for competitors to keep imitating. How Honda was able to survive through all the years despite strong rivalry and competition from other Japanese and Western automakers can solely be attributed to their corporate strategy. Honda built effective strategies in support of their competitive strategies. Honda has not only extended its distinctive capability into other markets but has added new distinctive capabilities. Honda has added reputation to its critical distinctive capability. By specializing in engine technology, it has achieved some success in innovation as well. Honda the business leader therefore appears to have a contemporary and dynamic appeal.

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NISSAN
QualityPolicy
Nissan recognizes that to achieve its mission Quality comes first and should be incorporated in its operations. To achieve this, the company focuses on the following: Strive to exceed Customer Requirements by delivering high quality products and services. This is measured by conducting regular Customer Satisfaction Surveys. To develop employee skills through training, motivation and empowerment. The company works towards achieving Improving Employee Satisfaction. SBA is committed to be a Responsible Corporate Citizen by sponsoring social events, contributing to cultural activities, charity organizations and promoting sports activities. SBA is committed to the principles of Total Quality Management and continual improvement. The effectiveness of this is measured by conducting regular Internal Audits, Quality Steering Meetings, Management Review Meetings and Monthly Performance Reviews. Specific Quality Objectives set by the company are regularly monitored and reviewed in the Management Review Meetings.

QualityManagementSystem
Through robust partnerships with suppliers, Nissan is improving its quality component by component. The ability to consistently source precision-built components defines the quality of the car A car is complex product made up of a huge number of componentsas many as ten thousand of them. In Nissan's case, suppliers may provide up to 70 or 80 percent of those parts. Currently, we source components from around five thousand suppliers. To raise the quality of the final product, we need to maintain the quality of each component. Nissan's SQA* activities ensure that we consistently receive high-quality components from suppliers. A supplier is a vendor or a company/manufacturer providing parts to a manufacturer. SQA, or Supply Quality Assurance, refers to the detailed protocol Nissan employs to maintain and improve the quality of components from its suppliers. Aiming for equal, robust partnerships

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To secure a consistent supply of high-quality components, Nissan partners with strong and reputable suppliers. Through our SQA activities, we treat our suppliers as equal business partners to achieve a mutually profitable relationship. The Supplier Quality Assurance Group, which promotes SQA activities, employs an objective and neutral view to evaluate the needs of Nissan design, Nissan production and that of our suppliers. The aim is to rapidly improve the quality of sourced components and strengthen mutual understanding between the three participating entities. Setting a world standard, with management conducted on a global basis. Early in its history, Nissan has been committed to set a global standard for the quality of the components from its suppliers' base. With the Renault Alliance, the establishment of a common global management system has been accelerated with the Alliance's supply base worldwide. As a result, even though we have various suppliers in different parts of the world with varying standards, cultures and customs, the components they provide are guaranteed to meet with Nissan's strict quality standards.

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Implementing an organic system to achieve a virtous cycle of quality improvement The starting point: upgrade the quality of the many components that make up a car. A car has an extremely large number of parts, and these parts involve a correspondingly large number of people and processes. While raising the quality of each component and assembly process is crucial, the quality of the finished vehicle must be equally high. To maintain our elevated quality standards, we follow the Nissan Quality Assurance Way (NQAW), a quality assurance system that takes a holistic view of the entire production process. Auto production requires innovation on a wide variety of components and complex processes. The principle behind the NQAW is simple: ensure that all the people involved in creating a car grasp the full spectrum of the processes involved and supply a quality product to the market. If everyone understands the overall picture, quality will inevitably rise. Similarly, everyone needs to understand that planning and development must flow smoothly toward the production process. Another key is recognizing the importance of finding a specific defect in a particular market, the ability to pinpoint the component causing the problem and fixing it quickly.Feeding data on defects back to those handling planning and development improves quality in the production cycle of the vehicle. NQAW is a proven system for consistently upgrading quality. Quality assurance checks in every department and within every process deliver the type of quality our customers have come to expect. When we combine that quality with innovation, we create the kind of quality that satisfies every customer.

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Statistical Process Control: A Scientific Methodology (With regards to quality control)

More and more manufacturers are implementing automated Statistical Process Control (SPC) systems as part of their continuous improvement efforts. Simply stated, SPC uses statistical equations and graphs to create acceptable limits for process variationcontrol 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: 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 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 such as maintenance schedules and bring short term quality improvements into view. The scope, detail and accessibility of quality data helps manufacturing facilities avoid unscheduled downtime, By analyzing tool wear metrics, quality departments have the opportunity to minimize downtime by creating detailed maintenance schedules that extend out for many years.
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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 dont 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 behaviour, and conversely, whats abnormal. By addressing inconsistencies properly, manufacturers proactively approach process changes that, if ignored, could potentially disrupt future operations.

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MARURI UDYOG LIMITED Maruti Udyog Ltd (Maruti), a joint venture between Suzuki Motors of Japan and the Indian government, is the leader in India''s automobile market. Maruti has the widest product range among Indian car manufacturers, with 15 basic models and more than 150 variants. In 2003, Maruti produced 1133695 vehicles, operating at a capacity utilisation of 103%, against the industry average of 57.8%. Even though Maruti is well ahead of its other rivals, its market share has been declining. As competition intensifies, Maruti has realised the importance of getting closer to its customers.

The company has launched various initiatives to improve customer service. Maruti has improved its operational efficiency by increasing productivity, cutting costs and launching new products. By its quality initiatives, Maruti has reduced its defects per vehicle significantly. Even though Maruti was well ahead of its other rivals, it realized competition could not be underestimated. Hyundai, Tata Motors and Ford were all formidable rivals. In this context, the company's executives wondered what more could be done to improve operational efficiency, cut costs and launch new products.

Improving Operational Efficiency Maruti turned around from losses to a net profit had been facilitated by sharp improvements in quality and productivity, both in-house and at the vendors' end.

Maruti started a program "Challenge 50 initiative" to improve productivity by 50 % and reduce cost by 30 %. Maruti involved various component suppliers in Challenge 50. Productivity improvement programs were undertaken by key vendors in collaboration with experts from Suzuki. Maruti started implementing new manufacturing techniques and various value analysis and value engineering initiatives. Product development in the automobile industry was a very capital-intensive process... Improving Quality Maruti measured the relative quality of dispatched vehicles on a random, daily basis through a quality index audit. To improve quality, Maruti had introduced various measures: Tracking surveys and direct customer contact in order to understand the problems faced by customers.
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 Full-time task forces for improvement in initial quality study problems and departmental cross-functional teams to work on defined problems with challenging targets... Vendor Management Vendor management became an important area as Maruti attempted to improve operational efficiency. Maruti procured components worth about Rs.6,000 crores every year. The company's top 10 vendors accounted for about 43 % of its aggregate purchases of components from vendors in India.

Maruti was working on a 3.5% per annum reduction in vendor prices by 2012-2013. Maruti streamlined the sourcing and stocking of materials and components through its Delivery Instruction system , one of Suzuki's best practices. This system provided details of Maruti's component requirements for every 15 days, across the different variants of the various models, to its vendors. Web initiatives helped Maruti to bring down procurement time and costs... Leveraging Information Technology When Maruti decided to automate its operations in the early 1990s, there was no ERP vendor support available in the country. So, the company decided to do it all by itself. A team of 45 engineers, using a combination of software from Oracle and Computer Associates, built a variety of applications covering inventory management, receipts, excise, consumption, production, sales, invoicing, exports, financial accounting, payroll, and bank reconciliation. The applications were developed and upgraded on a regular basis, while the maintenance and administration were outsourced...

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Conclusion
After a detailed report regarding the quality practices in the automobile sector from a global perspective, we can observe how, despite the different principles, rules, standards etc followed, they all aim for a common result Quality. Automobile industry by nature is consumer centric. It responds immediately and sensitively to emerging technologies and innovations and companies that fail to keep up with the consumer expectations eventually die out. However precautions must be observed while keeping up with the changing times. Hence Quality control and Quality assurance are very important tools in maintaining standards and expectations from the customers. This is where the importance of Quality Management Systems comes into perspective. Automobile Quality Industry Standards like QS 9000 and ISO/TS 16949 help draw a framework and a set of guidelines for automobile companies to follow so as to maintain their quality standards and policies. We also noted the differences in the Quality Management Systems followed by the European and Japanese Automobile Companies. We deduced that the Germans and Europeans are more technology centric, more focussed on improving operations and quality of materials and systems followed. Europeans prefer a more individual approach. They focus on the car as an individual unit and let the quality standards of the car do all the talking. They like to focus on their individual cars as though each one unit is perfect. Their Quality Management Systems are very stringent and often difficult to emulate. The Japanese consider quality management to be a holistic process. They involve the employees and the top management under the umbrella of quality principles that are common to all. This approach has helped Toyota, Honda and Nissan become global leaders in Automobile Industry. Even in the backdrop of the bankruptcy of General Motors (World's Largest car manufacturer), and the troubles faced by the iconic Ford, their German and Japanese counterparts continued to show positive results because of their ability to maintain the highest levels of quality and safety while providing ultimate customer satisfaction.

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THANK YOU

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