ICMIND EMBA SOLUTION PAPERS – What is the difference between supplier quality audit and third party quality audit


What is the difference between supplier quality audit and third party quality audit

What is the difference between supplier quality audit and third party quality audit

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Total Quality Management

 

CASE 01: TPM AT MRC BEARINGS

 

CASE 02: Customer Relationship Management at Bharti

 

CASE 03: Hotel Valuation Services ( HVS )

 

CASE 04: IMPLEMENTING QUALITY MANAGEMENT SYSTEM AT HYUNDAI MOTORS

 

CASE 05: Supplier Quality Audit at Tata Motors

 

CASE 01: TPM AT MRC BEARINGS

 

MRC Bearing, the largest producer of aero-engine bearings in the world, is located in Falconer, New York.  The company is the primary aerospace bearings supplier to General Electric, Pratt—Whitney and Rolls Royce, as well as to the world’s leading military and helicopter programmes Problem Identification.

In 1996, the company realized that it was behind on orders.  Their customers were aggressive in their demands for cost reductions and shorter lead times.  The majority of their maintenance hours were dedicated to emergency work orders.  The company decided to implement a TPM programme in order to achieve a turnaround.  After the implementation of TPM, the company was able to achieve a 98 per cent decrease in unplanned maintenance hours.

TPM Journey

The company started its TPM programme by focusing on a small area, which was critical to processes but was experiencing chronic problems.  At first, a lot of people were skeptical and not really interested in getting involved with the TPM activities.  The company had a core team of people who were excited about TPM.  It also enlisted the help of people outside the organization to work with the core team.

TPM at MRC began with a weeklong TPM event. It startd by cleaning, insecting lubricating and performing corrective work on a piece of machinery. Once a machine was cleaned, it would be painted.  At first, people were reluctant to participate in TPM events and ridiculed the TPM programme as “Totally Painted Machines.”  As time elapsed, people started appreciating the improvements brought about by TPM events.  Employees who were totally against TPM started participating in TPM workouts.

MRC  formed equipment improvement teams (EITs) to work on resolving equipment – related issues.  The team initially worked on a piece of equipment with chronic problems.  The equipment was breaking down on a monthly basis and required three or four days each time to fix it.  The team discovered  the original manufacturer had used a sub-spec coupling on a drive unit.  The problem was solved by upgrading to the proper coupling.  The problem was solved by taking the time out to find the root cause of the failures, rather than just fixing the symptoms.  In the years following this repair, the problem was completely eliminated.  That success showed a lot of people in the company that TPM can make everyone’s duly life easier as well as improve productivity.

After the initial success, MRC expanded their TPM efforts to their second facility.  They created a  TPM Steering Committee at their second site and also created  a policy group to co-ordinate the efforts  of both facilities.  MRC trained 10 TPM Area Co-ordinators who undertake TPM activities for one week in each month.  These TPM Co-ordinators organize TPM events in their areas, also lead EITs and make sure the process keeps working.  MRC has begun to create full-time TPM teams.  One such team was able to correct a long-standing equipment problem.  This resulted in reducing the scrap produced by that equipment to almost zero.  The areas that MRCD focused on were.

  1. Preventive maintenance

  2. Putting predictive maintenance process in place (I.e. vibration analysis equipment)

  3. Cleaning the machines, resulting in inspection

  4. Creating standards on the equipment for cleaning, lubrication and daily checks

  5. Collecting data on downtime

  6. Creating equipment improvement teams

  7. Creating TPM area co-coordinators

 

Lessons Learnt

The most important lesson learnt was that training is the key to being successful with TPM.  The company has organized some initial TPM awareness training programmes for the organization for both operators and mechanics.  However, looking back they could have had achieved success faster if more training had been imparted.  The support of the top management, the union, the hard work of the people at MRC and the support of their customers were the factors instrumental to the success of the TPM initiative.

QUESTIONS:

  1. What were the problems faced by MRC?

 

  1. What was the solution used to address the problems at MRC?

 

  1. What were the attributes responsible for the successful implementation of TPM at MRC?

 

  1. Explain the TPM journey at MRC.

 

  1. Comment on the statement “TPM is not totally painted machines but taking pride in our machines.”

 

 

CASE 02: Customer Relationship Management at Bharti

Bharti Tele-ventures is one of India’s leading private sector telecom operators. Its cellular business, Airtel, is a leading mobile telephony brand. Like any telecom organization, Bharti considers information technology as a key business enabler.  According to Amrita Gangotra, vice – president of Information Technology at Bharti, IT works as a support system as well as a key business driver

The company has a wide area network (WAN) in place with a mix of leased lines and E1 and E3 lines.  The company extends different applications to its dealers and partners through its extranet.  The company also has procured a range of high-end servers from Sun and HP.  The company also has a strong area network (SAN) in place because its daily storage requirements are in tetra bytes. The main data centre is located in Gurgaon, Haryana; Bharti has procured billing, fraud management, revenue assurance and data warehousing software.

The Case for CRM

During the initial stages of its operations, the company’s systems were run manually.  Only 40 per cent of customer issues were getting resolved. The company decided to equip itself with tools that would help in resolving 90 percent of its customer issues.  The company decided to opt for a CRM solution to manage customer expectations and provide them with innovative products and services.

 

Oracle CRM Platform

Bharti wanted to fulfill its vision of providing the same quality of services anywhere and at any time. The company was particular that its customers should get the same quality of service no matter which of its call centers he or she contacts.  It evaluated many options before choosing its centralized CRM tool.  The factors considered were proper workflow automation, facilitation of knowledge sharing and integration with the billing system. After a thorough evaluation exercise, it decided to go ahead with the Oracle CRM platform.

 

Rolling out

After the company started its operations in Delhi, it acquired many circles and sought new licenses in other circles.  The CRM tool was implemented immediately whenever it obtained a new license.  However, the company had to put in place a phased migration strategy in the acquired circles, which had an existing subscriber base.  The migration had to be done in such a manner that the existing customer base did not suffer.  The migration was completed in a phased manner by the first quarter of 2004. The biggest challenge for Bharti was to have a unified process in lace.  They also faced the challenge of imparting training.  The company was successfully able to overcome to technical difficulties that it faced during implementation.

The CRM strategy at Bharti revolves around two aspects—operational CRM and analytical CRM. Operational CRM revolves around improving the workflow of call centres and helping them in their day-to-day activities.  Analytical CRM provides staff with the required information on customers and is used for business development.

The company has successfully used its CRM solution to provide products tailor-made to the needs of its customers.  Thus, customers receive more value for money.  Customers now have access to different schemes and services depending on airtime usage.  Bharti has also managed to segregate its workflow with the help of the CRM tool.

 

QUESTIONS:

 

  1. Why did Bharti Tele-ventures opt for a CRM solution?

 

  1. What were the challenges faced by Bharti in its CRM implementation process?

 

  1. Discuss the strategy used by the company for implementing CRM and why.

 

  1. Explain the various benefit received by Bharti after implementing CRM.

 

CASE 03: Hotel Valuation Services ( HVS )

Hotel Valuation Services (HVS) was founded in1980 by Steve Rushmore.  It is the world’s leading consulting and services organization focused on the hltel, restaurant, shared ownership, gaming and leisure industries.  Rushmore began his career as a consultant ion the hospitality division of a prominent New York City real estate firm.  He quickly realized that a limited body of knowledge was available to assess the value of hotels.  He founded HVS to fill this perceived gap.

The HVS method of providing an economic study and appraisal for hotels and motels immediately became the industry standard.  HVS is focused on the hotel, restaurant, timeshare, gaming and leisure industries.  The company has more than 300 consultants offering specialized services through its network of 25 offices worldwide.

Studies conducted by HVS indicate that 2010 is going to be a challenging year for the Indian hospitality industry.

Challenges for the Hospitality Sector

The tourism industry is highly susceptible to changes in the macro-environment.  The aviation and hospitality sectors are among the first to get affected by an adverse environment and also the last to recuperate.

The main challenges faced by the hospitality sector in India include lack of infrastructure and facilities, lack of human resources and training, the hotel rating system not being at par with international standards, intense competition from global players and multiplicity of taxes.

HVS Recommendations

HVS has made the following recommendation in order to address the challenges faced by the hotel industry.

  • Grant hotels industry status across India

  • Include tourism as a subject in the Concurrent List of the Constitution of India

  • Grant hotels infrastructure status under Sec 80-IA of IT Act

  • Impose a single uniform luxury tax, based on the actual room tariff only, across all Indian sates

  • Impose uniform tax rates on rooms, food and beverages, and liquor across the country

  • Give incentives, in the form of tax breaks, to re-invested capital in the hotel industry

  • Extend the benefits of Sec 80-ID to other parts of India

  • Develop a more scientific rating system to truly benchmark hotel quality

Hotel Rating Process

Various approaches are used across the globe to classify hotels.  The most common approaches followed are;

What is the difference between supplier quality audit and third party quality audit

Registration:  This involves basic  level listing of properties that meet agreed minimum standards.

Classification: Hotels are classified into various categories based on the amenities offered. All establishments have to follow certain minimum standards.

Grading: Hotels are graded according to the quality of services delivered to customers. Assessment of this nature is highly complex and time consuming.

Hotel Rating System in India: India has been using the “Classification” system with mixed results for over four decades; HVS recommends that the present rating system in India should be upgraded to the “Grading” system to enable it to employ a more discretionary approach to the process.  Hotels, motels and other lodging in India are inspected and categorized according to their products and services by the Hotel and Restaurant Approval and Classification Committee (HRACC), a body instituted by the Ministry of Tourism. However, the checklist used by HRACC has some serious shortcomings.  The minimum standards are too weak and lenient.  Hotels that do not adhere to minimum standards are penalized.  However, benefits are not offered to hotels that offer services above the minimum standards.  The checklist focuses on physical infrastructure alone and is not very effective in assessing the quality of services.

The present system needs a complete overhaul in order to remain relevant in the dynamic market scenario.  Safety and hygiene should be the first parameters in the classification process.  The government should focus on the safety and hygiene parameters than on the commercial aspects of classification.  The HRACC classification should be revamped so that it provides a more accurate indication of a hotel’s quality and services.

Questions:

 

  1. What are the challenges facing the Indian hospitality industry?

 

  1. What is HVS? What are the recommendations of HVS mentioned in this case study?

 

  1. What are the limitations of the present hotel rating system in India?

 

  1. If you are hired as the consultant, what measures do you suggest to imprve the present hotel rating system in India?

 

 

CASE 04: IMPLEMENTING QUALITY MANAGEMENT SYSTEM AT HYUNDAI MOTORS

Hyundai Motors India Limite3d, a 100 per cent subsidiary of the South Korea-based Hyundai Motor Company, started its operations in 1996. In September 1998, Hyundai India started mass production of its well-known hatchback “Santro.” It launched its second model “Accent” in October 1999.  It started establishing its products in the global market in 2000.  It launched its super luxury sedan “Sonata” in July 2001.

As per Hyundai India’s policy, quality simply does not mean meeting specifications.  Quality for Hyundai India means meeting customer requirements and exceeding their expectations.  The Company also concentrates on indirect customers and was the first to introduce MPFI(Multi-point fuel injection) in 1998 for the small car segment, even when the Euro II standards were not  mandatory.  This case study focuses on how Hyundai has been able to successfully adopt the automotive standard QS9000.

QS 9000

QS 9000 is a sector specific common supplier quality standard for the automotive industry.  In 1988, Chrysler Corporation, Ford Motor Company and General Motors Corporation came together to form the Supplier Quality Requirements  Task Force to standardize reference manuals, reporting formats and technical nomenclature for all documents related to supplier requirements.  In 1992, the task force harmonized the fundamental supplier quality systems manuals and assessment tools.  This gave rise to Quality System Requirements QS 9000—a common supplier quality requirements standard that was adopted by all three automotive companies.  It is based on the ISO 9001.  However, it contains additional requirements peculiar to the automotive industry.  Today many automotive companies have adopted QS 9000.

QS 9000 defines the fundamental quality system expectations of Chrysler, Ford, Genera; Motors and other subscribing companies for internal and external suppliers of production and services parts and materials.  QS 9000 is a harmonization of Chrysler’s Supplier Quality Assurance Manual, Ford’s Q-1011 Quality Systems Standard and General Motors’ NAO Targets for Excellence and supersedes all editions of these documents.  The benefits of QS 9000 certification

Include improved quality, improved efficiency, improved delivery and company morale, improved internal and external communication.

The QS 9000 applies to all internal or external, potential or existing suppliers’ vendors/subcontractors of production materials, Production or service Parts, heat-treating, painting, plating, finishing services who supply to OEM ( Original Equipment manufacturers ) customers subscribing to the QS 9000 standard.

QS 9000 is a supplement to ISO 9000 with additional requirements for each ISO 9001.  The standard has undergone two revisions since its inception.  The third edition of QS 9000 standard comprises two primary sections.  Section 1 deals with ISO 9000 – based requirements and sector specific requirements while Section II deals with customer-specific requirements.

QS 9000 at Hyundai

Hyundai India was certified to QS 9000 in January 2002, QS 9000 is a customer-driven automotive standard that focuses on defect prevention, continuous improvement and reduction of wastage or variation in the supply chain, development of sub-contractors, product quality, cost, delivery and service.  It is based on a preventive methodology and uses disciplined problem-solving methods.

 

Benefits of QS 9000 Certification for Hyundai

After QS 9000 certification, activities were streamlined and a focused approach to planning was established.  A team of professionals started concentrating on solving problems and identifying potential areas of improvement.  The main benefits of QS 9000 were.

  • The attitude of workers improved. They felt encouraged to come out with more ideas on mistake-proofing, defect-prevention, statistical  analysis  of a particular activity, etc.

  • The company was able to identify potential failures of the product and take control measures in time by adoption of Failure Mode and Effect Analysis ( FMEA ).

  • Hyundai was able to measure the customer satisfaction/dissatisfaction levels, whereby they were able to improve products through process control.

  • Hyundai has been able to improve the direct pass ratio of vehicles. The field claims on product have also reduced.

  • Customer complaints were analysed by the auditors at length and they also looked at the corrective and preventive action plan.  By adopting QS 9000, the company has eliminated all unrelated/waste processes, non-value added solutions, thereby focusing only on the customer requirements.

  • Employees could relae to QS 9000, as it was close to their work. The employees became more proactive.

The company also realized the importance of the competence of the certification body in implementing a standard.  The full objective of the standard can be achieved only if the certification body is competent.

Questions:

 

  1. Why did Hyundai decide to implement the QS 9000 system?

 

  1. What is the difference between ISO 9000 and QS 9000?

 

  1. Explain the QS 9000 system.

 

  1. What were the benefits of QS 9000 implementation at Hyundai?

 

CASE 05: Supplier Quality Audit at Tata Motors

 

Tata Motors Private Limited is a leading manufacturer of trucks in India and India’s largest automobile company.  It is the second-largest manufacturer of passenger vehicles in the World.  The company is the world’s fifth-largest medium and heavy commercial vehicles manufacturer and the world’s second-largest medium and heavy bus manufacturer.

Tata Indica

Ratan Tata, the chairman of Tata Motors, had always dreamed of building the country’s first indigenous small car.  In 1995, the company announced that it planned to build the Tata Indica, a car as spacious as the Ambassador, priced close to the Maruti 800 and shaped like the Zen.  Tata Motors had to face many challenges in the process of designing and building the India.

 

Outsourcing

Tata Motors had to take its primary make or buy decisions for the key inputs such as design, engine and transmission.  Outsourcing was one of the most difficult aspects of producing the Indica.  The company did not have the expertise either to design a car or to build an engine for it.  It had to create a supplier base from scratch.  The company decided to shop globally for the best deals and use its own expertise to make whatever modifications were needed.  Exhibit 18.1 provides a list of components outsourced for developing the Indica.

Exhibit  18.1 Components Outsourced  by Tata Motors

       Sl.No.                                                   Components                                               Supplier

  1. Five door hatch back                                                               Idea Italy

  2. Engine                                                                              Institute Francais, France

  3. Assembly line                                                                  Nissan’s Plant Australia

  4. Presses                                                                             Mercedes Benz

  5. Pistons and piston rings                                                   India Pistons

  6. Electrical components and fuel  injection systems         Lucas — TVS              

  7. Steering systems                                                              Rane TRW Steering system

  8. Clutch facings and rear drum brake linings                       Sundaram Brake Linings (SBL)

  9. Seating systems                                                               Tata – Johnson Controls

  10.     Radiators                                                                         Tata – Toyo

  11. Rear View Mirrors                                                          Tata – Ficosa

  12. Front and rear bumper, dash board, inside trims           Tata – Auto Plastics

  13. Air – conditioning kits                                                     Subros Ltd.

  14. Wind screens and windows                                            Asahi Glass

  15. Fuel lines                                                                         Imperial Auto

  16. Differential assemblies                                                  Sona Koyo Steering

  17. Sheet metal items                                                          IBM Tools             

Supplier Quality Audit

After making the make or buy decisions, the next step was to identify the suppliers.  Most of the parts and components were sourced locally.  Only about two per cent of the component value was secured from other global players.  Localization of the components was the most important challenge for the company.  The Indica was totally indigenous.

Tata Motors undertook supplier audits to select and monitor suppliers during the development of the Indica.  Supplier audit is an integral part of the decision process for supplier selection.  It enables guarantees regarding design, manufacturing, system, product, raw material and services.  It also enables answering to regulatory requirements which impose these audits.  A supplier quality audit team was formed with a view to ensuring acceptable supplier quality, which became very critical.  The yardstick employed by the company for selecting suppliers was the ability to supply components at the negotiated quality, cost and quantities.

 The selection of supplier by the team involved following steps:

 

  • An initial assessment team from Tata Motors evaluated the supplier.

  • Self-evaluation of the supplier based on the format provided by the company.

  • Quality system survey design validation.

  • Manufacturing validation.

  • Product Part Approval Process (PPAP) for certifying the product quality.

Tata Motors also set up Supplier Quality Improvement Teams to improve the vendors’ system to ensure that they produced defect-free parts.  It applied a thirteen – step quality improvement programme covering supplier self-evaluation, through design-validation and audit of supplier quality. Another key to the company’s successful vendor-base was a modern system of process management.  Tata Motor’s target-costing was broken up into vendor – wise cost targets, and the suppliers had to carry out their own value-engineering exercises to lower cost and improve quality.

Questions:

 

  1. What were the challenges faced by TATA Motors while selecting its suppliers for India?

 

  1. What were the reasons for setting up a supplier quality team at TATA motors?

 

  1. What was the approach followed by the supplier quality audit team?

 

  1. What is the difference between supplier quality audit and third party quality audit?

 

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