Title:

A Quality Managers Report of the implementation of a new Quality Program In Philips: A Critical Evaluation of TQM Implementation

Joachin .U. Nnorom: s20101013

MG 622: Quality and Environmental Management

9th January,2011

Dr. Pieris Chourides

Executive Summary
Quality improvement efforts in the 1980s and continuing into 1990s throughout the world have been fueled by a host of good ideas to make quality integral to the business decision making process. On technical front, SPC , JIT, DOE, Taguchi Methods, QFD, and TPM philosophies and methodologies have been attempted. On the system front, ISO 9000 has been interpreted as a must. On the human front, Total Employment Involvement(TEI), Participative Management, and quality circles have attracted the attention of many companies. On the motivational front, many quality improvement awards have be instituted. In spite of widespread interest and massive investment, there are reports of only isolated successes. By and large, quality is not yet integral to all businesses or all activities in any given business. The progress is only in terms of how many people are trained rather than how many inherent quality problems have been recognized and resolved. Within the context of TQM Practices, organizational visions, missions, and Strategic objectives will often determine which method of quality management practice to implement within organization, and also how effective that strategy will be. As illustrated in this report, Philips tends to take a more thorough and detailed approach to quality management as seen in the six process that they employ. The total quality management(TQM) concept has the potential to integrate all the improvement philosophies proposed thus so far. However, TQM can end-up being diffused like all other improvement philosophies if the TQM concept is not well executed. The execution difficulties arise from the fact that the TQM is a soft science and as such as invites philosophical discussion. The element of TQM are rather straight forward, but the execution is quite difficult. After finishing initial conceptual journey, many companies falsely believe that TQM is simply a matter of applying common sense. The purpose of this report is to illustrate the principles behind TQM and how its introduction and successful implementation in Philips Group will achieve the desired improvement in already existing quality management Assurance policy. Although TQM may be simple but their execution is not. TQM implementation options must be aware of the execution options. Some options are very effective whereas others sputter after initial eager blips. Without the awareness and analysis of critical implementation issues, it is not possible to make a better choice. This report will also examine critically the benefits as well as difficulties/ obstacles that may be arise from the implementation of TQM. The report further analyzes the factors to be considered for a successful implementation of TQM.

Introduction
In 1997, When bestowed the Prestigious European Quality Award For Business Excellence, Philips leaders paid tribute to the benefits of TQM in defining the goals and ensuring that strategic objectives were met. Philips employ the five key principles of TQM within the organizational mission. Specifically, Management Commitment, People Empowerment, Continuous Improvement, fact-based decision-making, and Customer focus are employed to ensure standard, consistent, and data-driven, measurable results in the organization.. For Philips, TQM is proved to be an integral component of developing strategies to meet changing industry conditions, satisfy customers needs, and compete effectively( Pistorio,1997). Philips decided to develop a plan that would take into consideration the need, strength and valuable resources that the company had at its disposal. Specifically, the organization felt that by establishing the quality goals; effectively identifying customers; discovering customer needs; developing product features; developing process features, and transfer to operations, the organization could achieve its goals of a continuous process improvement and quality operation. These six component of process improvement are the foundation in which the Philips TQM strategy is based upon. Accordingly, it can be easily ascertained that data, customers, and processes are paramount to the organizational strategy and quality is the focus of the organization as a whole.(Pistrio,1997). Why TQM? TQM is a management philosophy that seeks to integrate all organizational functions (marketing, finance, design, engineering, and production, customer service, etc.) to focus on meeting customer needs and organizational objectives( Hill,1991). TQM views an organization as a collection of processes. It maintains that organizations must strive to continuously improve these processes by incorporating the knowledge and experiences of workers. The simple objective of TQM is "Do the right things, right the first time, every time". TQM is infinitely variable and adaptable. Although originally applied to manufacturing operations, and for a number of years only used in that area, TQM is now becoming recognized as a generic management tool, just as applicable in service and public sector organizations. There are a number of evolutionary strands, with different sectors creating their own versions from the common ancestor. TQM is the foundation for activities, which include: Commitment by senior management and all employees Meeting customer requirements Reducing development cycle times Just In Time/Demand Flow Manufacturing Improvement teams Reducing product and service costs Systems to facilitate improvement Line Management ownership

Employee involvement and empowerment Recognition and celebration Challenging quantified goals and benchmarking Focus on processes / improvement plans Specific incorporation in strategic planning

The Oakland Model of Total Quality Management This shows that TQM must be practiced in all activities, by all personnel, in Manufacturing, Marketing, Engineering, R&D, Sales, Purchasing, HR, etc. Objective of TQM: The classic observation of quality is the position of a product attribute on a good-bad scale. From the TQM standpoint, quality is the whole thing that an organization(Philips) does in the eyes of its customers, which will give confidence to them to look upon that organization(Philips) as one of the pre-eminent in its meticulous field of operation.

The Four Pillars of TQM

Principles of TQM The key principles of TQM are as following: Management Commitment Plan (drive, direct) Do (deploy, support, participate) Check (review) Act (recognize, communicate, revise)

Employee Empowerment Training Suggestion scheme Measurement and recognition Excellence teams

Fact Based Decision Making SPC (statistical process control) DOE, FMEA The 7 statistical tools TOPS (FORD 8D - Team Oriented Problem Solving)

Continuous Improvement Systematic measurement and focus on CONQ Excellence teams Cross-functional process management Attain, maintain, improve standards

Customer Focus Supplier partnership Service relationship with internal customers Never compromise quality Customer driven standards

The Concept of Continuous Improvement by TQM TQM is mainly concerned with continuous improvement in all work, from high level strategic planning and decision-making, to detailed execution of work elements on the shop floor. It stems from the belief that mistakes can be avoided and defects can be prevented. It leads to continuously improving results, in all aspects of work, as a result of continuously improving capabilities, people, processes, technology and machine capabilities. Continuous improvement must deal not only with improving results, but more importantly with improving capabilities to produce better results in the future. The five major areas of focus for capability improvement are demand generation, supply generation, technology, operations and people capability.

DEVELOP SERVICE QUALITY STRATEGY

ANALYZE SERVICE PROCESS AND DEFINE ALL QUALITY MEASURES

ESTABLISH PROCESS CONTROL SYSTEM

INVESTIGATE THE PROCESS TO IDENTIFY IMPROVEMENT OPPORTUNITIES

IMPROVE PROCESS QUALITY AND MONITOR

A Framework for Improving Service Quality A central principle of TQM is that mistakes may be made by people, but most of them are caused, or at least permitted, by faulty systems and processes. This means that the root cause of such mistakes can be identified and eliminated, and repetition can be prevented by changing the process. There are three major mechanisms of prevention: Preventing mistakes (defects) from occurring (Mistake - proofing or Poka-Yoke). Where mistakes can't be absolutely prevented, detecting them early to prevent them being passed down the value added chain (Inspection at source or by the next operation). Where mistakes recur, stopping production until the process can be corrected, to prevent the production of more defects. (Stop in time).

The Quality Manager Martins (2007) identifies the functions that a quality manager should perform for the smooth functioning of the team towards the achievement of the organizational quality goals. For the purpose of this report, one of the Quality Managers roles is to acquire the needed resources for the quality plan. To realize this objective, the Quality manager must possess both hard and soft skills of persuasion, negotiation and communication which are needed to provide direction and leadership to Quality department; including people management as follows: managing performance; addressing disciplinary issues; hiring; assisting people with career development; communicating information to direct reports and passing information up the management chain; ensuring team is aligned with and accomplishing goals/objectives; administrative processing; and, maintaining trust and confidentiality The Quality managers failure to build an appropriate team will water down whatever positive attributes he may possess, because a quality plans success is judged on its outcome. The Quality Manager must also possess a powerful personality to communicate the objectives of the organization, the quality plan and the approaches that should be espoused by the team members which will help develop and promote the customers understanding of the Philips quality philosophy. The Quality Manager must possess the skills and experience to devise and implement quality systems/ procedures that provide continuous improvement methodology supporting manufacturing and operational consistency. Quality Management Approaches at Philips Group The Quality Management Approach most commonly used by Philips Group is the Jablonskis approach to Quality Management. Jablonski's approach is one of many that has been applied to achieve TQM, but contains the key elements commonly associated with other popular total quality systems. Jablonski(1992) offers a five- phase approach as described below with each phase designed to be executed as part of long-term goal of continually increasing quality and productivity.

Assessment

Implementati on

Diversificatio n

Preparation

Planning and design

Figure 1: Quality Management Approaches at Philips Group Preparation This is the stage in which the Quality Manager first communicates the idea which later becomes a plan if accepted. In the case of the plan under study in this report, the idea originated from Quality Manager. A detailed document highlighting the scope ,purpose and relevance of the TQM framework was tabled before the board of Directors for approval, and forwarded to the management board for adoption. Once it was adopted, the quality department under the supervision of the quality Manager was then instructed by the management to plan and design the TQM program. They undergo initial training, identify needs for outside consultants, develop a specific vision and goals, draft a corporate policy, commit the necessary resources, and communicate the goals throughout the organization. Planning and Design In the planning stage, a detailed plan of implementation is drafted (including budget and schedule), the infrastructure that will support the program is established, and the resources necessary to begin the plan are earmarked and secured. Other researchers (Kloppenborg et al., 2011) point out that the quality manager must at this stage adequately estimate the work needed and effectively manage risk during the implementation of the plan. Failure to plan adequately reduces the programs chances of successfully accomplishing its goals. The quality manager must pay attention to the following activities in order to avoid the ultimate failure of the program

 Planning Developing the scope statement Selecting the planning team Identifying deliverables and creating the work breakdown structure Identifying the activities needed to complete those deliverables and networking the activities in their logical sequence Estimating the resource requirements for the activities Estimating time and cost for activities Developing the schedule Developing the budget Risk planning Gaining formal approval to begin work. In the context of this program, this was the most critical stage for the quality manager, especially selecting the planning team. This is where the quality manager needs to show his good communicating attributes by communicating the importance of the right skills in the program.

Assessment This stage emphasizes a thorough self-assessmentwith input from customers/clientsof the qualities and characteristics of individuals in the company, as well as the company as a whole.

How can we get on track again? (Correction)

Negotiate for personnel with right skills.

Where we planned to be (Evaluation)

Where we are (Measurement)

Figure 2: Assessment Cycle Implementation Program Implementation refers to the processes used to complete the work defined in the quality management plan in order to achieve the program's requirements. This involves coordinating people and resources, besides integrating and performing the activities of the program in accordance with the quality management plan. The deliverables are produced as outputs from the processes performed as defined in the program management plan. Jablonski(1992)explains:

The success of the plan or the quality manager will usually be judged according to how well they achieved the organizational goals of continuous improvement and quality operations. Many things need to be in place and many actions taken during the project execution period to help ensure success . At this point, the organization can already begin to determine its return on its investment in TQM. It is during this phase that support personnel are chosen and trained, and managers and the workforce are trained. Training entails raising workers' awareness of exactly what TQM involves and how it can help them and the company. It also explains each worker's role in the program and explains what is expected of all the workers The Quality manager responsible for implementing the program was faced with the mammoth task of coordinating people from diverse backgrounds. But as explained above, the Quality

manager is evaluated on the basis of the teams achievement of the two stakeholder goals. In the case of this particular program, the QM could achieve the goals by successfully implementing the program. Diversification In this stage, Quality manager utilizes TQM experiences and successes to bring groups outside the organization (suppliers, distributors, and other companies that have an impact on the business's overall health) into the quality process. Diversification activities include training, rewarding, supporting, and partnering with groups that are embraced by the organization's TQM initiatives. Difficulties/ obstacles to Successful TQM Implementation Several researchers have focused more directly on the obstacles that hinder the ability of organizations to make a successful transformation to TQM or quality management. In an early paper on the topic, Glover(1993) argues that TQM failures follow one of three patterns; conceptual weakness, design flaws or ineffective implementation. Recognizing that TQM requires a true organizational transformation, Glover explains conceptual weakness as failures occurring because organization make only superficial attempts at change. Design flaws occur when TQM systems are not designed to fit the cultural circumstance of the organization. And the most common reason for failure- ineffective implementation-results when TQM becomes so much extra work instead of a new way of doing things. Glover also argues that without a change in management evaluation and reward policy, TQM cannot be taken seriously. He advocates managers will need to know that their evaluations, and subsequent pay increases and bonuses, are dependent on having high levels of quality, satisfied staff and customers, and successful TQM implementation in their respective areas of responsibility. Subsequent research, based on both case studies and surveys, has led to similar conclusions regarding the role managements plays in the success of TQM. Using a structured approach, Mann and Kehoe(1995) interviewed the managing directors at 21 leading TQM organizations about organization characteristics affecting the success TQM. Of the seven Quality-critical organizational characteristics(QCOCs) considered, they found that management style and shared values were the two QCOCs having the most impact on the successful implementation of TQM; process factors were reported to have least effect. Kanji(1996) identified managements failure to lead as the primary obstacle to successful TQM. Based on several company case studies, he compiled a list of poor management practices that contribute to failed TQM initiatives. These include a management style that inhibits a learning culture, is based on fear or intimidation and creates barriers between departments. Matta et al.,(1996), in a study of Malcolm Baldrige National Quality Award(MBNQA) winners, found that difficulties in implementing TQM are rooted in three causes:(i) the holistic change of corporate culture; (ii) achieving and maintaining employee buy-in and acceptance of TQM; and (iii) Integration with suppliers and customers. However the

only factor that 100% of the MBNQA winners considered critical to the success of TQM was top managements commitment and involvement. Examining middle managers perceptions about the relationship between quality management practices and organizational climate at Taiwans top manufacturing companies, Kuei et al.,(1997) found a stronger emphasis on top management leadership at higher quality organizations. Recent studies continue to find that management plays a critical role in an organizations successful quality transformation. Gunasekaran(1999) examined the enablers of TQM implementation in a British manufacturing company using structured interviews of employees from different functional areas of the organization. Emphasizing people-oriented factors, such as teamwork, and empowerment, he found that the major enabler of TQM implementation was communication between managers, supervisors and staff, and that poor communication between departments was a real barrier to implementing TQM. The success of TQM depends largely on managements ability to lead the organizations quality transformation. In addressing why transformation efforts fail, Kotter(1995) identified eight common management errors: (i) not establishing a sense of urgency; (ii) not creating a powerful enough guiding coalition;(iii) lacking a vision; (iv) not communicating the vision; (v) not empowering others to act on the vision; (vi) not planning for short-terms wins; (vii) not consolidating improvements and producing more change;(viii) not institutionalizing new approaches. In study of companies that won the Australia Quality Award, Abraham, Crawford, and Fisher(1999) found the key factor in achieving a successful change to a quality culture was management support. They state managers must be clearly perceived to support the change through communication, resource allocation and recognition/ award. Recently, Leonard and McAdam(2002) reiterated the importance of upper management participation in the quality transformation through their exploration of strategic quality management. From this review of the literature, it is apparent that many of the obstacles found to hinder TQM efforts ( such as poor communication, lack of employee empowerment, inadequate resources, inadequate performance evaluation and reward systems, and so on) are linked to how effectively the quality transformation is managed. Ultimately, it is managements responsibility to plan for, lead, and effect the organizational change required for TQM success.

Theoretical Backgrounds
Factors and processes to TQM Implementation Factors as a top management commitment and leadership, people management, policy and strategy, partnership and resources management and management of processes, are generally considered as the inputs to the implementation of TQM. According to the European Foundation

for Quality Management( 1999), these factors are called the enablers. In this model of excellence essentially customer satisfaction(results), employee satisfaction(results), and a favourable impact on society(results) are achieved through leadership driving and strategy, people partnership, resources and processes, which lead ultimately to excellence in business results(Key performance results). The enablers deliver the results, which in turn drive innovation and learning (Oakland,2000). This suggests that the quality factors can be classified as soft and hard quality factors. Leadership and employee involvement are intangible and difficult to measure quality factors. However, cost of quality, statistical process control and quality management systems impact the internal efficiency of the organization. Wilkinson(1992) highlights that it is practical to refer to the experience at Black and Decker(UK) and the Co-operative Bank Plc to classify the quality factors along soft and hard criteria. Factors like leadership, employee involvement and quality policy development have long-term nature and some of them are difficult to measure. These factors have an impact on maximizing wide-wide support and involvement in attaining the quality goals of an organization. Such factors are considered as internal marketing issues( Wilkinson,1992). They include; Senior executives commitment and involvement, actively demonstrated Comprehensive policy development and effective deployment of goals Entire workforce commitment to quality goals of the organization Supervisors, unit heads and divisional managers assume active new roles Empowerment Effective Communication Teamwork System for recognition and appreciation of quality efforts Training and education

These soft quality factors are long-term issues, something that cannot be switched on and off. These quality factors must be addressed accordingly in the implementation plan. There is a good chance that the TQM process will end up in failure if there is insufficient attention to soft factors (Wilkinson,1992). The implementation of the Soft quality factors must be supported by tools and systems hard quality factors to achieve the goals. These hard quality factors include; Benchmarking Managing by process Self-assessment Quality Control tools Cost of quality process Documented quality Management system Supplier management Customer management

These soft and hard quality factors reflect the total quality management model proposed by Oakland(2000). The soft quality factors are expected to be rated highly in terms of critically and emphasis in TQM implementation process. The hard quality factors are considered as tactics rather than strategies( Black,1993). This review of the available literature is based on such classification of soft and hard quality factors that are reflected in the sets of criteria of the European Quality Model. The attempt is to provide landmarks for Total Quality Management(TQM).

Hard Quality Factors Suppliers Management: Suppliers quality management is an important aspect of TQM since materials and purchased parts are often a major source of quality problems( Zhang et al.,2000). Poor quality of suppliers products results in extra costs for the purchaser; e.g. for one appliance manufacturer, 75% of all warranty claims were traced to purchased components for the appliances( Juran and Gryna,1993). According to Besterfield(1994) on the average, 40% of production cost is due to purchased materials; therefore suppliers management is extremely important. It follows that a substantial portion of quality problems will be due to the supplier. In order for both parties to succeed and their business to grow, a partnership is required. The supplier should be treated as an extension of the production process. Flood(1993) states that companies should treat their suppliers as long term business partners. Many authors advocate that companies must establish supply chain partnerships to motivate suppliers to provide materials needed to meet customer expectations(Harrison et al.,1996; Kumar(1996); Lambert et al.,1996; Clifton,2001; Jabnoun,2000; Thakur,2002). Wong et al.,(1999) state that partnership with suppliers lead to quality results from the supply chain. According to Kanji and Wong(1999) the creation and enhancement of the customer-supplier partnership is a major quality practice. This is also emphasized by Wong and Fung(1999). The quality gurus believe that supplier should be viewed as an integral part of the organizations business operations( Ishikawa,1985; Deming, 1986; Crosby,1989). Crosby(1986) states that one of the most important parts of the quality improvement process is the relationship between suppliers and buyers. In his letter to the 3rd Shanghai International Symposium on quality, Juran(1998)(in Sun,2000) said that there is universal set of unions that are the essential elements of quality management. These elements include, among others ,partnering with suppliers. Feignebaum(1998)(in Sun,2000) suggested in his speech in the same symposium ten principles of quality management, one of them is that ,quality is implemented in a complete system connecting customers and suppliers. Crosby(1998)(in sun,2000) stated in his speech that management must describe the responsibilies of employees, suppliers, and customers. Genna(1997) states that the idea of adding value to products and services is keenly linked to

customer satisfaction, although not every company realizes it. He suggests that steps such as ontime shipment, and defect-free can improve the suppliers product quality, as well as , help to provide the same quality to the ultimate customers. Quality management is based on prevention rather than detection. This is emphasized by Eshennawy et al.,(1992) when they consider that managing suppliers is a major issue to be addressed to have a complete total quality management organization. Philips Group created a long-term business partnership with its suppliers. They coined the phrase Comarkership simply means working together towards a common goal. It is based on the principle that both parties can gain more through co-operation than by separately pursuing their own interests. Comarkership means establishing a long-term business partnership with each supplier-base operation. It pushes a desire for both parties to continuously improve the product and to clearly understand their responsibilities. The Philips Group found that to develop comarkership considerable changes in behavior and attitudes were required from both customers and suppliers. Customers have to prepare to develop plans and procedures for working with suppliers and allocated time and resources to this. Suppliers for their part must accept full responsibilities for their products and not depends on their customers inspectors(Flood,1993). Rank Xerox, TI Rayleigh and Locas all adopted a comarkership approach with their supplier to improve quality(Flood,1993). At Toyota and Nissan, full-time specialized management consulting groups provide suppliers with assistance to improve their production and to achieve total quality in their products and services. At least one consultant works with four to six suppliers. All of this supplier assistance is free of charge(Dyer et al.,1993). Deming(1986) considers the reduction in the supplier base will minimize total cost. Besterfield(1994) says that single sourcing with a large contract will create better quality at lower cost (also Dyer et al.,1993). Companies worldwide realize that optimizing operations within the four walls of their enterprises is not enough to achieve business excellence. They understand that the involvement of suppliers, which is critical to improve quality and meet customer specifications can enhance their performance( Kanji and Wong,1999).Organizations world-wide are using teams to improve the quality of their products and services and recognize that this teamwork should include suppliers(Wong,2000).At shorts Brothers-UK, they motivate suppliers to initiate total quality by providing training services and joint involvement teams. This is done as the company reduces the suppliers base and builds long-term relationships with a number of preferred suppliers(Oakland et al.,1994). Adopting single sourcing strategy requires supplier selection criteria. Besterfield(1994) suggests that effective selection requires the supplier to be knowledgeable of the purchasers quality philosophy and requirements. The supplier must demonstrate technical capability and capacity to provide quality products, and of particular importance, is the credibility of the supplier. He continues a well-designed check list with weights( for suppliers ability to provide quality products as evidenced by quality system and improvement programme, suppliers and suppliers

accessibility) will aid in evaluation and selection. Quality-oriented companies no longer have cost as the primary criterion for selecting suppliers and are being more proactive in developing long-term relationship with their suppliers by extending technical support and training to suppliers to improve the process, quality and productivity of their suppliers( Rao et al.,1999; Clifton,2001;Thakur,2002). Easton(1993,1998) states that many Baldrige Award applicant started quality programmes with their suppliers( concerned with supplier rating and qualification systems, supplier quality system audits, joint design teams, join quality improvement teams , training, and supplier recognition schemes) to spread gradually the quality movement throughout their entire suppliers chain. The report of the U.S General Accounting Office identified the establishment of close supplier relationships by high scoring Baldrige Award applicants as a key feature, which contributed to improved organizational performance(G.A.O,1991). A study conducted by Wong(2000) reveals that working together with suppliers can be very useful for improving customer satisfaction. The findings indicate that supplier satisfaction will help increase the level of customer satisfaction. Other recent studies support these findings( Dayton,2001; Lau and Idris,2001, Martinez-Lorente et al.,1998; Thiagarajan et al.,2001). During the early 1980s the production of Jaguar cars reached its lowest point as confidence and identity slowly ebbed from this most prestigious of car marques. A critical in depth review of the business was carried out by the purchasing manager of Jaguar cars. Findings pointed to the necessity for Jaguar to address its internal controls, its dealer network and to enlist the support of its suppliers to improve overall quality of the vehicles. The initial task was to identify the problem components from the warranty figures. Following this a supplier conference was held with managing directors and chairpersons of the companies concerned to discuss the issues. Multifunctional task forces were set up involving the suppliers. Each had a specific role, which clearly identified the suppliers responsibilities to quality. Poor suppliers were dropped. Components were resourced in the relentless quest for quality. A single source supplier strategy was implemented and care was taken to involve the suppliers at the concept stage(Flood,1993). Jaguar claim that a single-source strategy was progressive and during the reduction of the suppliers base, quality improved creating better value for money whilst trust and stability were built into the relationships. With the mutual benefits of larger contracts, both Jaguar and its suppliers committed themselves to quality, acknowledging this as a merit of long-term commitment. Another feature of Jaguars new approach was the introduction of a supplier of the year award(Flood,1993).

Ways to Quality Improvement in Philips Group

For a leading brand like Philips one of the three largest manufacturers of consumer electronics in the world quality control is vital. The costs of the production process are heavily dependent on the quality of the components supplied. And consumers must be assured that when they buy Philips they are buying a fine product. In today's complex and global environment, WebFOCUS provides the necessary insight into supplier quality.

The Trend Toward Outsourcing The trend toward production outsourcing has gone beyond the computer industry and now is taking hold in Philips. Philips is blazing the trail in this new arena: Philips focuses more on product development, assembly, marketing and branding, while the production of non-vital components and parts is outsourced as much as possible. Specialty suppliers can do that better, and often more economically. A lot of production is being moved to countries where the rate of growth is high or wages are low, such as China. Philips has dozens of factories, and works with some 900 suppliers and production partners. So it is important to closely monitor the quality of the components supplied. Distance and time differences should not pose any obstacle to the monitoring process, which requires delivering information in an innovative and flexible manner something Information Builders provides through its industry-leading WebFOCUS enterprise business intelligence technology. Good, Better, Best Philips is always looking for new ways to offer consumers innovative products. They strive for zero defects, for top quality. In that respect, Philips put a program in place for achieving consistently higher quality standards for all of its products and services. This quality program impacts on all staff and processes, in every country and within every business unit from the top down. Philips calls this program BEST (Business Excellence through Speed and Teamwork). With BEST, Philips strives to achieve business excellence. Initiatives which have been successful in the past have been integrated into the program ensuring that Philips learns as much as possible from past successes. Speed and collaboration are at the heart of BEST. Everyone at Philips knows that business processes can only be perfected by collaborating optimally with one another and by using practical examples, and the right tools, for example to reduce turnaround times and such. Philips is focused on working smarter and better relying on proven business intelligence information systems. Production Processes Improved Quality management systems are a recurring theme throughout Philips' corporate history. Ten years ago Information Builders developed Philips' FRR (Failure Registration and Reporting) quality monitoring system a parts per million (PPM) management system, which records and analyzes the failure of components at the factory. Quality managers can see what the failure rate is for specific components, the suppliers from which they originate, the factories in which they have been used and where the failure occurred. The information this generates serves to improve the production process and offer direction to the suppliers.

Dozens of factories around the world use the software. Although FRR was state-of-the-art when we created it, it also had its limitations. Installing new versions and functions had to be done locally and manually, a process that sometimes proved problematic. Investments Protected The FRR data was stored locally on a database and uploaded once a month using File Transfer to Information Builders' central FOCUS database. A full picture of the suppliers worldwide could be obtained from the central database. In 2002 Philips decided to modernize the information system and further exploit the possibilities offered by the Internet. They evaluated a number of options. Initially they thought about SAP, because they were standardizing on that worldwide. But they found that the basic reporting function of SAP R/3 was too limited. Building a new system based on SAP was not an option: they did not have the people or the resources. they also looked closely at Lotus Notes. But WebFOCUS turned out to be the best solution, particularly because the existing FRR functionality could be quickly and easily upgraded. their earlier investments in Information Builders technology remain protected. It was also important that WebFRR integrates easily with other systems. With SAP, naturally, but also with the large central Philips database which contains all the codes for components, products, suppliers, etc. Closed Loop BI It took a little over six months to get WebFRR, the new Web-based version of FRR, operational. They transferred the historical data to WebFRR. Users anywhere in the world need only a browser to access the system anytime, anywhere. The physical installation of client software on every user PC is a thing of the past. Management and maintenance are now done centrally from Eindhoven. The WebFRR database is fed directly, partly manually and partly automatically, from SAP. They are working diligently on further developments. WebFRR offers 'closed loop business intelligence': the users not only are provided with information, but they also can use the browser to make changes to the central WebFRR database. It is also system's user-friendliness. You can create your own reports very flexibly by applying filters to the information in an intuitive way. Those filter settings are saved for the next time. The response times are very short, even for wide-ranging queries. WebFRR offers a wide variety of output formats: Word, Excel, pdf and e-mail. They are looking at ReportCaster from Information Builders; it automatically generates and distributes set reports at fixed times. That would be useful for management meetings. Integration of the Production Chain WebFRR gives real-time insight into quality by component, factory, supplier, organization, region, etc. The system provides aggregated management information and trend analyses, but also offers the option of drilling down to more detailed levels. WebFRR helps with further integration of the production chain. It is not just Philips own factories and internal suppliers that

have access to the information for which they are authorized; external suppliers do too. A lot of factories (internal and outsourcing factories) where Philips products are produced are now connected to the system. They can have a new factory or supplier online within half an hour. Subject to authorization, everyone can see exactly what the failure rate is and what is causing it. They no longer have arguments with their suppliers as to where the fault lies. The system reveals the truth. It is easier to perform retrospective costing. Philips distinguishes two 'feedback loops' with the suppliers: tactical and strategic. Tactical feedback relates to day-to-day operations. The fact that the suppliers themselves have real-time access to WebFRR has considerably cut the 'feedback loop' from weeks to hours. This visibility increases the motivation to tackle problems quickly, both at the suppliers and at Philips' own sites. Quality improvements are achieved far more rapidly. Strategically the system helps Philips to evaluate their suppliers' longterm performance and to establish their negotiating position and the supply base strategy. WebFRR reports provide an important underpinning for their purchase management process. Hunger for Information WebFRR satisfies a great hunger for information that exists both inside and outside of Philips. Quality managers want to know exactly how things are going inside the factory. Suppliers want to know how their products are performing in order to be able to respond faster and make improvements quickly. After all, if their components are underperforming, it will cost them money and if the problem is structural could even cost them business. Buyers need pertinent information in order to be able to guide their suppliers. The system also helps Philips to improve its product development. For instance ,If you know that a specific part suffers early or frequent failures, you can decide to choose a different part or to change the design so that it no longer needs to be used. Rapid Payback WebFRR shows a convincing ROI. Fixed annual costs have been cut from 200,000 Euros to 60,000 Euros. The one-off investment was 130,000 Euros. WebFRR paid for itself within one year and on top of that there are the returns from process improvements, There are on-going work on the next function: expanding existing reporting with financial information. However, WebFRR currently only records the failure of components, and not the associated costs. Sometimes you need to replace a faulty part during production. The value of that part is sometimes a fraction of a euro cent, but tracking it down and replacing it can cost dozens of euro in labor costs. They want to know more about this in order to be able to manage it better. Purchasing management also wants to use WebFRR to record what the failure rate is after the products have left the factory and have been sold (Field Failure Rate). It then will also be possible to analyze and further improve that part of the product cycle. After all, it may be that components that have passed through all the quality checks in the factory still break down

prematurely during everyday use and to replace a small part during the guarantee period can result in substantial costs. With Field Failure Rate recording and analysis, Philips will have completed the quality circle. What goes into and comes out of the factory will be checked with WebFOCUS. It is clear that by using WebFOCUS, Philips has laid a solid and future-proof foundation for its information provision.

Summary and conclusion

With Field Failure Rate(FFR) recording and analysis, Philips will have completed the quality circle. What goes into and comes out of the factory will be checked with WebFocus. It is clear that by using WebFocus , Philips has laid a solid and future proof foundation for its information provision which serves to improve the production process when necessary and offer direction to the supplier if need be, because there is a saying that knowledge comes from information and knowledge is power. With BEST( Business Excellence Through Speed and Teamwork), Philips strives to achieve business excellence. Speed and Collaboration are the heart of BEST with everyone at Philips knowing that business processes can only be perfected by collaborating optimally with one another and using practical examples, and the right tools.

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