Quality Practices in

Automobile Industry

Authored by:
HITESH MAHESHWARI – 411
SHIVI MITTAL – 414, (Team Leader)
ANKIT SHARMA – 418
RAHUL GORE – 422
ABHI SHAH – 425
ARNEESH SHAH – 427
DEVANG PRAKASH -

MBA-TECH
Class Of 2011
NMIMS University
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. Amol
Roy for his guidance and for giving us the opportunity to enhance our
knowledge about Quality practices employed by the global
automobile sector.

Page | 2
TABLE OF CONTENTS

Sr. Particulars Page No.

No

1 Executive Summary 5

2 Introduction 6
6
• Quality Management in Automobile Industry
7
• Quality Assurance Management

3 QS-900, Quality Management System 10

13
• Case Study - Hyundai

4 Automotive quality standard: The ISO /TS 16949 15

16
• Understanding ISO/TS 16949
21
• Value Chain Analysis of Maruti Suzuki

5 Zero defect quality in the Automobile Industry: 22

A SIX SIGMA Perspective

22
• Three Pillars of SIX SIGMA

Page | 3
6 European Automakers 24
26
• Regulatory Framework
32
• Copenhagen Summit 2009
7 Japanese Automakers 35
35
• Toyota
43
• Honda
• 9issan 47

• Quality Policy
47
• Quality Management System 47

8 Statistical Process Control 50

52
• Case Study – Cooper Tire

9 Conclusions 56

10 Bibliography 57

Page | 4
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 labour and a worldwide supply chain are the determining factors for where, what,
when and how produced goods reach consumers in an increasingly level global playing field.
This shift has been particularly prevalent in the automotive sector, as automotive
manufacturers obtain parts from hundreds of suppliers, and the standards for quality are
becoming more stringent.

A complex organizational structure is therefore required to line up the end-to-end logistics of

supply chain management, financials, customer relations and human resources. With a
centrally developed and coordinated manufacturing strategy, individual facilities must
execute the various tactics for quality management.
In this environment, opportunities for business success can be fleeting. Even under ideal
circumstances, an unforeseen, outlying factor can determine whether a company wins or loses
an important contract. It is critical to establish a competitive advantage in order to simply
maintain profits, let alone increase revenues. Businesses can simultaneously reduce costs and
remain competitive by investing in process improvements that increase quality. For example,
identifying and implementing efficiencies in production methods can result in reduced scrap,
rework and even labour 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

Page | 5
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

QUALITY MA9AGEME9T I9 AUTOMOBILE I9DUSTRY

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 production-
leads to failure free products, which save costs on the one hand and have thus a positive
influence on the company’s 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 company’s 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
customer’s needs and wants. To fulfil or even exceed their expectations leads to customer
satisfaction, which is a key to success in today’s 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 customer’s perspective.

Today’s 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

Page | 6
eyes of the customer. If they are not satisfied with a product’s performance, they switch to the
competitors brand. Thus the focus on the customer’s 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 favoured 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 fulfil 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.

QUALITY ASSURA9CE MA9AGEME9T I9 AUTOMOBILE

I9DUSTRY

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 today's 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.

Page | 7
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, the American automobile manufacturing industry in the 1960s
demanded an increasing accommodation by the production function for the norms established
by the organizational finance function.

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

Page | 8
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 lightly. 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 Iacocca's, 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.

Page | 9
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.

* GENERAL MOTOR: 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. The Truck Manufacturers who have participated in 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

Page | 10
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.

REQUIREME9TS

The requirements in the standard are contained in three sections:

SECTION 1: 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.

Page | 11
SECTION 3: Customer-Specific Requirements.

IMPLEME9TATIO9

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

CO9CLUSIO9

It has been well recognised 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 improve quality and productivity for the suppliers who implement the
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."

Page | 12
Case study
This case study is an example of how an organisation has been able to successfully adopt the
automotive standard QS 9000.

The company

Hyundai Motors India Limited is 100 per cent subsidiary of the South Korea-based
Hyundai Motor Company. Hyundai India started its operations in the year 1996. In
September 1998, Hyundai India stated mass production of its well-known "Santro". It
launched its second model "Accent" in October 1999. It achieved the milestone of producing
2 lakh cars within a span of 30 months. In the year 2000, it started establishing its products in
the global market. It launched its super luxury sedan "Sonata" in July 2001.

What does quality mean to Hyundai India?

As per Hyundai India's policy quality does not mean meeting the specification. Quality for
Hyundai India means meeting the customer requirements and exceeding their expectations.
They also concentrate on our indirect customers. They were 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.

When and why did Hyundai India go in for QS 9000 Certification?

Hyundai India was certified to QS 9000 in January 2002. QS 9000 is a customer-driven

automotive standard. It 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. It uses disciplined
problem solving methods. As they were already following the above, they realised that by
adopting QS 9000, the above practice could become more focused.

Has this certification helped the functioning at Hyundai India?

Yes. After they got certified to QS 9000, the activities were streamlined; a focused approach
on planning was established. A team of professionals started concentrating on solving
problems and identifying potential areas of improvement. The attitude of workers improved.
Page | 13
They feel motivated to come out with more ideas on mistake proofing, defect prevention,
statistical analysis of a particular activity etc.

Could you briefly mention a before and after scenario in which certification to QS 9000
standard has helped Hyundai India (any two key instances)?

- By adoption of Failure Mode and Effect Analysis (FMEA), they are able to identify
potential failures of the product and take control measures in time.

- They are able to measure the customer satisfaction / dissatisfaction levels, whereby they are
able to improve their products through process control.

Have there been any direct benefits as a result of this certification? Has it affected
Hyundai India's bottom line?

By implementing QS 9000 they have been able to improve the direct pass ratio of their
vehicles. The field claims on their product has also reduced.

Has the quality certification helped you market your products better? Has it helped you
service your clients better?

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

What has been the employee reaction to the adoption of QS 9000?

Employees could relate to QS 9000, as it was close to their work. The employees have now
become more proactive.

What was the certification body's role in implementing the QS 9000 standard effectively?

They realised that the competence of the certification body in implementing a standard helps
a lot as they are our guide to through the process and only if they are competent, can the full
objective of the standard be achieved. TÜV deutschland's auditing approach was practical.
The auditors were looking for facts and activities focused on continuous improvement. They
helped us implement some improvement oriented systems and eliminating some redundant
procedures. This helped us a lot in implementing QS 9000 effectively.

Page | 14
Automotive quality standard: The ISO /TS 16949

The ISO/TS16949 standard unites automotive industry quality requirements that exist
worldwide, and is therefore recognised 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 Organisation for Standardisation (ISO) to satisfy this need. The
document unites the quality requirements that exist worldwide, and is therefore recognised 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.

Page | 15
Understanding the ISO/TS 16949:2002 Standard
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, Citroën, Renault, FIEV)

• VDA 6 (Audi, BMW, VW, Daimler Chrysler)

• AVSQ ‘94 (Fiat Auto, IVECO)

Who authored ISO/TS16949:2002?

ISO/TS 16949:2002 was 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 Peugeot-
Citroen, 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.

Page | 16
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 OEM’s subscribing to this standard.

4. This means that all Tier 1 suppliers providing such products or services directly to IATF
subscribing automotive OEM’s 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.

Page | 17
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 stand-
alone TS 16949 certification. They must be audited and included with the certification
of the manufacturing site they support.

Who is authorized to carry out certification of organizations to TS 1949:2002?

The IATF has developed its own unique and proprietary processes and requirements for
registering organizations to TS 16949, as well as for Certification Bodies (CB) and CB
auditors. Subscribing IATF automotive OEM companies will only recognize and accept a TS
16949 certification which has been conducted using the prescribed registration process (ask
your CB for these rules), and conducted by CB’s that have been qualified and contracted by
the IATF or its regional offices such as the IAOB in Detroit.

Certification to TS 16949 by an IATF qualified registrar is required before such a certificate

can show the IATF mark and indicate IATF recognition. The IATF require all qualified CB’s
to assure that TS16949:2002 (TS-2) registrants meet the following applicability requirements:

1. The organization seeking TS 16949 certification must meet the TS 16949 definition of
supplier applicability. See applicability above.

2. Any tier may be certified if it has a direct customer (or potential customer) that requires
either compliance or 3rd party registration to TS16949 and

Page | 18
3. Evidence of being a potential supplier to a customer requiring TS16949 could include an
RFQ issued to it, or the supplier being on the bid list of the TS16949 IATF subscribing
customer.

What should you do if do not qualify for TS 16949 certification?

Those organizations that do not qualify for IATF recognized registration to ISO/TS16949 , or
which supply parts and services to a TS16949 registered organization, are encouraged to
maintain ISO9001:2000 or ISO 17025 certification as the case may apply.

How do I obtain TS 16949 publications and find an IATF qualified certification Body?

A complete and updated list of qualified Certification Bodies may be found on the IAOB
Web site at www.iaob.org <http://www.iaob.org>. You will also be able to purchase all the
required publications for TS 16949 at this site. Please read our article on “Tips on choosing a
Certification Body”, before you make your selection.

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

Page | 19
 • 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 organization’s 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.

Page | 20
Value Chain Analysis of Maruti Suzuki
Value Chain: A value chain is a chain of activities. Products pass through all activities of the
chain in order and at each activity the product gains some value. The goal of these activities
is to offer the customer a level of value that exceeds the cost of the activities so that the
company can charge a premium price for the product hereby resulting in a profit margin.

The primary value chain activities which are used in MUL are:

Inbound Logistics

The receiving and warehousing of raw materials, and their distribution to manufacturing.
MUL’s inputs primarily comprise raw materials and purchased components. In order to
improve quality and generate economies of scale, MUL has reduced the number of vendors
of components in India from 370 as of March 31, 2000 to about 100 as in 2005. By lowering
the time and cost involved in dealing with more vendors, they have increased their supply
chain efficiencies In case of repair and replacements, costs of defective components supplied
are borne by the vendor

So Quality aspect

Periodic vendor quality system audits are conduct in order to ensure that quality standards are
sustained. Vendor Quality Control Quality management system such as ISO 9000/ QS 9000
forms the basis for producing a quality product. To assist small and medium vendors in
achieving ISO 9000 certification, in 1995 MUL adopted a cluster approach wherein vendors
are grouped together, are trained in quality management and are assisted in obtaining ISO
9000 certification. This cluster approach was extended to helping vendors attain QS 9000
certification.

Page | 21
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 optimise 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 recognised 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.

THE THREE PILLARS OF SIX SIGMA

The customer in the Six Sigma concept:

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
customer’s point of view and represent the company’s factors for success.

Page | 22
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 customer’s 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 ±6σ at a mean shift of ±1,5σ.

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. Minimising 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.

Page | 23
 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.

Page | 24
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 alternatively-
fuelled 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. Today’s 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
Page | 25
as well as harder for their opera
operators.
tors. On safety, vehicle technology has helped halve the
number of deaths on Europe’s roads in the last thirty years, despite a three-fold
three increase in
traffic volumes.

REGULATORY FRAMEWORK
RAMEWORK automotive industry is one of

The most regulated sectors

ctors in the EU. Over
Over-regulation
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 sector’s competitiveness.
competitiveness

Page | 26
PART
ART 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 ttheir
heir 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 costs for compliance. Simplifying existing
legislation is much needed, particularly in areas like type approval. Where possible, the EU
Page | 27
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.

Page | 28
HARMONISATION OF RULES AND 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.

Harmonising technical regulations on areas like tests, emission limits and on-board
diagnostics would reduce development costs and help manufacturers roll-out new
technologies more quickly. This would deliver a more competitive auto sector, but also newer

Page | 29
vehicles with lower emissions and bbetter
etter safety technologies in markets across the globe.

FUEL QUALITY
Modern vehicles are fitted with sophisticated engines with components and assemblies
designed to operate at fine tolerances. They are managed by computer to optimise
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 prioritise 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
Witho quality
and standardised 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 re

renewable
newable fuels in road
transport to 10% by 2020. However, they are concerned by the Commission’s 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 rresponsibility
esponsibility to bring safety
technologies to market, and innovation has delivered huge advances in occupant protection,

Page | 30
 friendly design and active technologies that help avoid a crash. Road users,
pedestrian-friendly
planners, governments and enforcement authoriti
authorities
es 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
egrated approach on a global level.

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 indus
industry
try has become an active participant in the “Choose
ESC” campaign to increase consumer awareness of the benefits of Electronic Stability
Control.

Page | 31
Copenhagen Summit 2009: European Automakers reaffirm
their commitment to sustainable mobility
As world focus turns to the Copenhagen Climate Change Conference in December, European
automakers re-affirm their commitment to sustainable mobility at the heart of their business
strategies. The industry will continue to drive forward in a spirit of collaboration and
openness, carrying the message that a vibrant automotive sector will help drive innovation in
support of the low-carbon economy of tomorrow.

PROGRESS TODAY:

In the last twenty years, CO2 emissions from cars and commercial vehicles have come down
dramatically. Data from car sales reveal a drop of almost 20% since 1995; similar
improvements in efficiency have been reported in the heaviest trucks. The Commission has
acknowledged this progress and the fact that investment in vehicle technology has been its
primary driver. More policy makers now appreciate that, to achieve further significant cuts
from road transport, society must look beyond vehicle technology alone.

PROGRESS TOMORROW:

In-vehicle technology will continue to play a role, particularly in the development of inter-
connected transport networks. But governments must now also involve more cost-effective
means of driving down CO2, such as eco-driving, joined-up fiscal incentives and the
development of alternative fuels and renewable energies as well as their infrastructure.
Investments in road infrastructure and measures to facilitate traffic flow present further
practical means to minimise CO2 emissions. Auto makers are now working towards tough
2012 targets on CO2 for new cars and further goals set for 2020.

WHAT ARE THE CHALLE:GES?

• It means improving road safety by building on investment in vehicle technology,

focusing on better road design, improved driver education and strong enforcement by
the authorities.
• Sustainable mobility is about ensuring consumers have real choices, but also
encouraging them to buy the most suitable vehicle for their needs and educating them
in eco-driving techniques to cut unnecessary pollution and save money.

Page | 32
 • Crucially, during these times of economic recession, sustainable mobility means
designing a regulatory framework that allows Europe’s vibrant auto industry to go on
innovating and delivering the technologies and low-emission vehicles for a
sustainable future.

BAYERISCHE MOTEREN WERKE AG (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.

MISSIO: STATEME:T

"To become most successful premium manufacturer in the car industry"

VISIO: STATEME:T

Uniqueness through diversity, Leadership taking Risk courteous.

QUALITY MA:AGEME:T

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 Group has reorganised its method for supplied parts quality management in the
product development process to meet the demanding challenges of the future.

Page | 33
Page | 34
JAPANESE AUTOMAKERS
TOYOTA
Toyota’s Global Competitive Advantage

Toyota’s 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 that comprises its management philosophy and practices. 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).
Finally the tactical improvements of waste reduction or the elimination of muda are very
valuable. There are seven kinds of muda that are addressed in the TPS:

Page | 35
1. Over-production

2. Motion (of operator or machine)

3. Waiting (of operator or machine)

4. Conveyance

5. Processing itself

6. Inventory (raw material)

7. 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.

PRI:CIPLES

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) Long-Term Philosophy
II) The Right Process Will Produce the Right Results
III) Add Value to the Organization by Developing Your People
IV) Continuously Solving Root Problems Drives Organizational Learning. The
principles are set out and briefly described below:

Section I — Long-Term Philosophy

Principle 1

Base your management decisions on a long-term philosophy, even at the expense of short-
term financial goals. People need purpose to find motivation and establish goals.

Section II — the Right Process Will Produce the Right Results

Page | 36
Principle 2

• 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:

• Overproduction

• Waiting (time on hand)

• Unnecessary transport or conveyance

• Over processing or incorrect processing

• Excess inventory

• Motion

• Defects

Principle 3

• 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.

Principle 4

• 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).

Principle 5

• 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.

Page | 37
Principle 6

• 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.

Principle 7

• 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.

• Sort: Sort out unneeded items

• Straighten: Have a place for everything

• Shine: Keep the area clean

• Standardize: Create rules and standard operating procedures

• Sustain: Maintain the system and continue to improve it

Principle 8

Use only reliable, thoroughly tested technology that serves your people and processes.

Technology is pulled by manufacturing, not pushed to manufacturing.

Section III — Add Value to the Organization by Developing Your People

Principle 9

• Grow leaders who thoroughly understand the work, live the philosophy, and teach it
to others.

Page | 38
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.

Principle 10

• 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.

Principle 11

• 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.

Section IV: Continuously Solving Root Problems Drives Organizational Learning

Principle 12

• 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
firsthand, managers will not have an understanding of how it can be improved. Furthermore,
managers use Tadashi Yamashima's (President, Toyota Technical Centre (TTC)) ten
management principles as a guideline:

1. Always keep the final target in mind.

2. Clearly assign tasks to yourself and others.

3. Think and speak on verified, proven information and data.

4. Take full advantage of the wisdom and experiences of others to send, gather or
discuss information.

5. Share information with others in a timely fashion.

Page | 39
6. Always report, inform and consult in a timely manner.

7. Analyze and understand shortcomings in your capabilities in a measurable way.

8. Relentlessly strive to conduct kaizen activities.

9. Think "outside the box," or beyond common sense and standard rules.

10. Always be mindful of protecting your safety and health.

Principle 13

• Make decisions slowly by consensus, thoroughly considering all options; implement

decisions rapidly (nemawashi).

The following are decision parameters:

1. Find what is really going on (go-and-see) to test

2. Determine the underlying cause

3. Consider a broad range of alternatives

4. Build consensus on the resolution

5. Use efficient communication tools

Principle 14

• 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. Initial problem perception

2. Clarify the problem

3. Locate area/point of cause

Page | 40
4. Investigate root cause (5 whys)

5. Countermeasure

6. Evaluate

7. Standardize

Long-term philosophy

Base your management decisions on a long-term philosophy, even at the expense of short-
term financial goals.

The right process will produce the right results

1. Create continuous process flow to bring problems to the surface

2. Use the "pull" system to avoid overproduction

3. Level out the workload (heijunka). (Work like the tortoise, not the hare.)

4. Build a culture of stopping to fix problems, to get quality right from the first

5. Standardized tasks are the foundation for continuous improvement and employee
empowerment

6. Use visual control so no problems are hidden

7. 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. Develop exceptional people and teams who follow your company's philosophy.

3. Respect your extended network of partners and suppliers by challenging them and
helping them improve.

Page | 41
Continuously solving root problems drives organizational learning

1. Go and see for yourself, and thoroughly understand the situation (Genchi Genbutsu)

2. Make decisions slowly by consensus, thoroughly considering all options

(Nemawashi); implement decisions rapidly.

3. Become a learning organization through relentless reflection (Hansei) and continuous

improvement (Kaizen).

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.

Page | 42
Employee Empowerment: Average Annual Results

1. Toyota’s employees submitted more than 700,000 improvement suggestions.

2. that is an average of over 10 improvement suggestions per employee per year.

3. Over 99% of suggestions were implemented.

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
today’s fast changing world.

Page | 43
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
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.

Employee Focus
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

Page | 44
company’s approach to business and management - and indeed to life generally - so
contradict many of the stereotypical images of Japanese management styles.

Rover entered into collaboration with Honda in order to secure new model designs and
engineering capabilities without which it could no longer survive. Honda’s 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.

Page | 45
To improve Honda’s 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 learning experience for Honda Motors. Institutional learning opportunities abound when
rational confrontation becomes lively in a team because of an analytical approach.

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, Honda’s 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, Honda’s 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

Page | 46
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.

NISSAN
Quality Policy
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.

Quality Management System

• 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 components—as 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.

Page | 47
 • A supplier is a vendor or a company/manufacturer providing parts to a manufacturer.
• SQA, or Supply Quality Assurance, refers to th
thee detailed protocol Nissan employs to
maintain and improve the quality of components from its suppliers.
• Aiming for equal, robust partnerships

To secure a consistent supply of high

high-quality
quality components, Nissan partners with strong and
reputable suppliers.
liers. 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
n
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.

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 ac
accelerated
celerated 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
ality standards.

Page | 48
Implementing an organic system to achieve a virtuous 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 par

parts
ts 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 si
simple:
mple: 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

o 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
n every process deliver the type of quality our customers have

Page | 49
come to expect. When we combine that quality with innovation, we create the kind of quality
that satisfies every customer.

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 acceptab
acceptable limits for process variation—
—“control limits”.
Control limits fall well within product specification limits so that unstable processes can be
identified before problematic product characteristics are produced. With real-time
real SPC,
operators monitor processes
sses 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.
time. The principles of SPC take into account the following:

Page | 50
 • 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.

To execute process improvements, workers participate in the PDCA cycle – as in Plan Do

Check Act, also known as the Shewhart cycle. PDCA involves planning a process
adjustment, executing the adjustment, reading the results of the process adjustment to validate
results, and taking corrective action if the results don’t align with the original goals. This
pattern is repeated until there is a minimal statistical margin of error.2

The PDCA cycle illustrates one of the most valuable concepts of SPC: out-of-control
processes present opportunities for improvement. When applied correctly, control charts and
limits identify an inconsistency that manufacturers need to know about. Control limits denote
what is normal behaviour, and conversely, what’s abnormal. By addressing inconsistencies
properly, manufacturers proactively approach process changes that, if ignored, could
potentially disrupt future operations.

Page | 51
A Case Study in SPC for Continuous
Improvement: Cooper Tire

Background

Cooper Tire & Rubber Company is a global organization that specializes in the design,
manufacture, marketing and sales of passenger car, light truck, medium truck tires and
subsidiaries that specialize in motorcycle and racing tires. With headquarters in Findlay,
Ohio, Cooper Tire has 67 manufacturing, sales, distribution, technical and design facilities
within its family of companies located around the world.

In 2007, Cooper reported record sales of $2.9 billion with an operating profit of $134 million,
a marked improvement since restructuring and other cost saving initiatives were undertaken
in 2006. Cooper delivered $100 million in cost savings and profit improvement initiatives
while successfully launching the CS4 line and ramping up production of Cooper Kenda Tire.

The Cooper brand is one of the most well established names in the automotive industry. The
company always ensures that it is on the leading edge of industry innovations for quality
improvement and production efficiencies in high-volume environments that produce
thousands of tires each day.. Although the functional purpose of a tire has remained the same
for over a century, improvements to materials and design are allowing Cooper to bring a
more effective, longer lasting tire to the market. To maintain its competitive advantage,
Cooper is working to establish long term strategies for continuous improvement, operational
effectiveness and product differentiation.

Cooper differentiates its products with a winning portfolio of high performance tires
marketed under the brand name Zeon. This portfolio also includes the Cooper CS4,
Discoverer and Roadmaster lines as well as associate brands Avon, Mastercraft, Dean and
Kenda. The Cooper brand is distributed and well positioned in passenger, light truck, sport
utility vehicle, commercial and high performance markets.

Page | 52
Challenge

Along with creating cost effective operations, Cooper has sought to streamline its supply
chain with low-cost, high quality raw materials that include natural rubber, synthetic rubbers,
carbon black, reinforcing fabrics and steel.

Cooper’s continuous improvement activities are leading the company to continue to develop
innovative quality improvements. To achieve their objectives for establishing highly efficient
production processes, they first had to understand and benchmark their baseline capabilities.
One goal was to make better use of production data and, from an operations standpoint, use
the data to help guide the decision making process. They needed a quality solution that could
satisfy their scalability needs while offering insight into potential quality improvements.

“We were trying to gain a perspective about what the data is telling us. What does it point to
about opportunities we have? We wanted to do less troubleshooting and work on improving
processes rather than resolving production issues,” said Donald S. Bruce, Director of
Reliability Engineering.

Logistically, Cooper needed an enterprise-wide standard for reports in a system that would
initially be implemented in North American, with the ability to go worldwide. As a global
entity, Cooper’s implementation would take place in phases, so they needed a solution that
was flexible with training, consulting and support. One of Cooper’s objectives was to employ
a quality expert at each location to oversee the implementation and ensure the stability of
corporate standards. Solution

To achieve their process improvement goals, Cooper standardized with InfinityQS Statistical
Process Control (SPC) software.

“Because quality is synonymous with the Cooper brand, we looked to InfinityQS to ensure
that every process met the Cooper standard,” said Bruce. “We investigated a few different
options and decided that InfinityQS provided the best SPC solution to handle the
complexities of our manufacturing operations.” InfinityQS integrates with MES and ERP
systems to provide real-time detailed quality analysis capabilities at the process level that
MES and ERP products were never designed to provide. The unique capabilities of
InfinityQS solutions contribute to more fluid processes and allow the quality personnel to
take a proactive approach to improving the capabilities of the various processes throughout
the operations.

Page | 53
As opposed to the other real-time SPC solutions that Cooper was initially considering,
InfinityQS uses a relational database structure, a simple, flexible format that was able to give
Cooper the versatility they needed for a thorough analysis of parts across various production
processes. InfinityQS’ unique relational databases allows users to quickly and easily manage
thousands of parts in a single set-up (project) as opposed to the hundreds of thousands of data
files other SPC systems force users to configure. This structure allows Cooper to conduct
comparative analysis of any part running across any process with just a few clicks of a
mouse.

InfinityQS International is currently helping Cooper instil a culture of innovation throughout

all the manufacturing sites. Rather than a reactive approach that dedicates resources to putting
out fires, Cooper is bringing about change with a data-driven culture. InfinityQS’ data
analysis functions give Cooper a full grasp of their process capabilities. InfinityQS control
charts illustrate process control limits, and create automated alerts when a process exceeds
these limits. Instituting process control across production lines helps ensure that each Cooper
tire is produced to the highest quality standards.

This robust data analysis allows Cooper to shift resources away from processes within
specification and control limits toward areas that can enhance the overall operations. The first
phase of Cooper’s corporate-wide InfinityQS implementation took place in four North
American facilities. Work has also begun to install trial one of the software packages in
China.

Results

Cooper was able to drive and sustain continual improvement using the InfinityQS SPC
system. The software gave them additional tools to help them as they head down the path to
become ISO 9001 certified in 2008. With InfinityQS, Cooper effectively monitors processes
to ensure effectiveness, keeps adequate records, checks output for issues and applies CAPA
where necessary – all requirements of ISO 9001.

Cooper Tire & Rubber Company was able to use InfinityQS software to drive operational
process improvements with significant cost savings and increased productivity. In one plant,
Cooper realized $400,000 in annual savings on the belt line by analyzing the dimensional
data of components. These cost savings represent just one line in one plant. Similar savings
were recognized on other production lines and throughout other facilities using InfinityQS

Page | 54
software. Cooper also attained measurable process performance index improvements in the
inner line, extrusion, and cutting processes.

Cooper’s road to success is driven by a combination of lower production costs and increased
productivity. The significant annual savings on the belt line alone demonstrates how Cooper
is able to significantly reduce its costs of production. In addition to cost savings, Cooper also
made substantial improvements in process performance index. With the InfinityQS solution,
Cooper Tire is systematically driving process improvements that ensure the optimal quality
levels that consumers have come to expect from the Cooper brand.

Cooper’s road to success is driven by a combination of lower production costs and increased
productivity. The significant annual savings on the belt line alone demonstrates how Cooper
is able to significantly reduce its costs of production. In addition to cost savings, Cooper also
made substantial improvements in process performance index. With the InfinityQS solution,
Cooper Tire is systematically driving process improvements that ensure the optimal quality
levels that consumers have come to expect from the Cooper brand.

Page | 55
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.

The Cooper Tire case study and the Hyundai case study that were presented in the report are
examples of the positive impact Quality Management Systems can have on the prospects,
operations and overall efficiency and results of the company.

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.

The report also helps shed some light on the role of the Automobile Sector at the ongoing
Copenhagen Summit 2009.

Page | 56
Bibliography

Page | 57