Jeffrey T. Luftig - Business Performance Excellence

Edited by
Jeffrey T. Luftig and Steven M. Ouellette

Copyright Bloomsbury Information Ltd, 2012

Chapters pp. 317, 91104, 141151 copyright Jeffrey T. Luftig and Steven M. Ouellette
Chapter pp. 179184 copyright John Surdyk
Chapter pp. 209213 copyright David Maister

First published in 2012 by

Bloomsbury Information Ltd
50 Bedford Square
London
WC1B 3DP
United Kingdom

Bloomsbury Publishing, London, Berlin, New York, and Sydney
www.bloomsbury.com

All rights reserved. You may not copy, distribute, transmit, reproduce or otherwise make available this publication (or any part of it) in any form, or by any means (including without limitation electronic, digital, optical, mechanical, photocopying, printing, recording or otherwise), without the prior written permission of the publisher. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages

The information contained in this book is for general information purposes only. It does not constitute investment, financial, legal, or other advice, and should not be relied upon as such. No representation or warranty, express or implied, is made as to the accuracy or completeness of the contents. The publisher and the authors disclaim any warranty or liability for actions taken (or not taken) on the basis of information contained herein.

The views and opinions of the publisher may not necessarily coincide with some of the views and opinions expressed in this book, which are entirely those of the authors. No endorsement of them by the publisher should be inferred.

Every reasonable effort has been made to trace copyright holders of material reproduced in this book, but if any have been inadvertently overlooked then the publisher would be glad to hear from them.

A CIP record for this book is available from the British Library.

Project Director: Conrad Gardner
Project Manager: Ben Hickling
Commissioning Editor: Lizzy Kingston

Jeffrey T. Luftig

Lockheed Martin Professor of Management, Lockheed Martin Engineering Management Program, College of Engineering and Applied Science, University of Colorado, Boulder, USA

Shortly after the seminal NBC White Paper episode If Japan can, why cant we? was televised in June 1980, Don Petersen, who later retired from the Ford Motor Company as its chairman and CEO, hired W. Edwards Deming to assist in the turnaround of the company. Starting with a series of management seminars, Dr Deming quickly evolved into a high-level consultant and guru who would be instrumental in establishing a comprehensive and firm commitment to the quality sciences at Ford.

Deming became a close adviser to Mr Petersen and his management team, and was instrumental in significantly increasing the profitability of the firm. To accomplish this task, Dr Deming strongly suggested (i.e. required, actually) a number of actions be taken in the early days of this effort. A statistical methods office in Dearborn, staffed at the time by Peter Jessup, Bill Scherkenbach, and Ed Baker, became instrumental in directing the quality initiative. Ancillary to this effort was the directive that each operating division of Ford had to engage their own statistical/quality consultant, who would report on a solid-line basis to the president of that division, and on a dotted-line basis to the statistical methods office and to Dr Deming himself.

At this time, I was a professor at Eastern Michigan University (EMU), teaching statistical methods courses for the Electrical-Electronics Division (EED) of Ford (EED was later spun off by Ford as Visteon). EED management funded an endowed chair for research and training in statistical methods in the College of Technology at EMU, and after interviews with the statistical methods office personnel and ultimately Dr Deming himself, I became the approved external consultant for the EED, reporting to Fred Herr, the division president, and Frank Macher, the division vice-president.

My primary role at this time was to facilitate the implementation of the Deming philosophy in the EED. The three primary sets of tools/guidelines brought to Ford by Dr Deming were:

1. the Fourteen Points;

2. the Seven Deadly Diseases;

3. the widespread use of statistical process control (SPC) and its associated tools to bring processes and products into stability so that serious improvements in quality could be achieved.

Many individuals today, unfamiliar with the efforts that were actually conducted inside of Ford at that time, largely view the Fourteen Points as philosophical exhortations that were static through time. The fact is they were neither static nor philosophical. The Fourteen Points when Dr Deming was working with Ford were in many cases stated very differently to how they were presented in later years at firms working with Dr Deming. The point that comes to mind as critical to what we were attempting to accomplish inside Ford was to Reduce the supplier base (which changed in later years to Stop awarding business based on price alone). This was far from a philosophical treatise at the time. The implementation of this point as a management directive eventually led to the development of a Supplier Quality Assurance Group within the procurement department of the EED, and the creation of the Q1 program. The supplier base was reduced from more than 2,000 to less than 1,000 in a three-year period. Many of the suppliers who were de-sourced never shipped Ford-EED a defective partthey simply resisted the idea that they implement statistical process control methods so that EED would receive a stable and predictable supply of incoming material and supplies.

In support of this drive to reduce the supplier base was a directive from Dr Deming that it was managements responsibility to provide their Tier 1 suppliers with an opportunity to understand where Ford was headed in terms of quality, and to join them as partners, rather than adversaries. To implement this directive, two seats in every statistical methods class I taught at the EED during this period were made available to each of the Tier 1 suppliers, free of charge. Many of these suppliers adopted the quality model they learned at Ford (e.g. Molex and Alcoa), and in turn drove those same principles and requirements down through their own supplier base. In this way, it might be argued that it was the NBC White Paper episode that was the fuse that set off the most dramatic change in American quality systems ever seen; at least in my lifetime.

The gains executed and leveraged by Ford, their suppliers, and other OEMs in the automotive industry quickly spread to other sectors and industries, and quality improvements were soon realized across the country. What became immediately obvious after a decade or so, however, was that the initial focus on product quality, once effectively implemented, was starting to deliver diminishing returns. Some of this was a function of having picked all of the low hanging fruit; but slowly, as SPC morphed into statistical quality assurance and incorporated a much more extensive set of tools, methods, and strategies, practitioners started to understand that focusing on products (or services) alone was not enough. To a certain extent, it took the understanding of one of Dr Demings principles as to what the next step might be: Every activity is a process, to be standardized, controlled, and improved on a never-ending basis. This realization, that the improvement effort had to be approached in totality, was the basis for the development of the total quality control (TQC)/total quality management (TQM) movement.