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Benefits of Quality IMS
based on ISO
Management Standards
Dr. Isaac Sheps

Baltika President
Carlsberg Group Senior Vice President Eastern Europe
ICONTEC, Cartagena, August 2014

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This is Carlsberg Group today
No.1
in Northern & Eastern Europe and
fourth largest brewer in the world
150
markets around the world
500
different beer brands
40 000
employees on three continents
36 000 000 000
bottles of beer sold in 2013
Our three regions at a glance
Western
Europe
% of total
beer
volume
% of EBIT
Eastern
Europe
Asia
2013
2013
Group
3
41 35 24
47 36 17
(2009: 43%) (2009: 44%) (2009: 13%)
(2009: 41%) (2009: 52%) (2009: 7%)
Eastern Europe Ensure Profitable Growth
BELARUS
Olivaria
No. 1
Market share: 29%
Breweries: 1
RUSSIA
Baltika
No. 1
Market share: 39%
Breweries: 10
UKRAINE
Carlsberg Ukraine
No. 2
Market share: 27%
Breweries: 3
KAZAKHSTAN
Carlsberg Kazakhstan
No. 2
Market share: 32%
Breweries: 1
UZBEKISTAN
Carlsberg Uzbekistan
Breweries: 1
AZERBAIJAN
Baltika-Baku
No. 1
Market share: 73%
Breweries: 1
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Carlsberg Group owns 4 of the top-10 beer brands in Europe
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1
Baltika 13.3
2
Heineken 12.7
3
Carlsberg 8.6
4
Efes 8.3
5
Amstel 6.9
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Tuborg 6.7
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Obolon 6.5
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Kronenbourg 6.3
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Fosters 6.3
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Chernigivske 6.1
Source: Canadean Wisdom, 5 March 2014
Top 10 Beer Brands
in Europe 2013 (million hl)
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Baltika Breweries Overview
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Baltika is as big as Russia
10 breweries, 3 malt houses, and sales offices in 115 cities
Total production capacity 51 mln dal/month
Breweries Malt houses
6.5
YAROSLAVL
4.5
CHELYABINCK
4.5
NOVOSIBIRSK
2.0
KRASNOYARSK
2.0
2.0
6.5
4.5
KHABAROVSK
ROSTOV-ON-DON
TULA
12.0
ST
PETERSBURG
VORONEZH
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Baltikas market share is over 2 times bigger than
the nearest competitors
Baltika 38.6%
AB Inbev 13.9%
Efes 13.3%
Heineken 13.7%
Ochakovo 2.8%
MPK 2.5%
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Source: AC Nielsen, Urban + Rural, 2013
Others 15.2%
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Baltika has irresistible beer portfolio
Super-premium
Premium
Mainstream
Lower
mainstream
Discount
Non-beer
1
1
1
1
1
4
kvass
1
energy drink
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A Management System Implementation
Process
Advanced Management
Systems
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Development of Competitive Factors
QUALITY
EFFICIENCY
INNOVATION
60 70 80 90
ENVIRONMENT
AGILE
QUALITY
EFFICIENCY
INNOVATION
FLEXIBILITY
QUALITY
EFFICIENCY
INNOVATION
EFFICIENCY
INNOVATION
00
SOCIAL

ENVIRONMENT
AGILE

QUALITY

EFFICIENCY

INNOVATION
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Alice: You cant play like that.
The Queen: Thats the way we play here.
The Queens Croquet-Ground
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Stop Demotivating Your Employees
David Sirrota, Louis Mischkind,and Michael Irwin Meltzer,
Harward Management Update, volume11,Number 1,Jan.2006
Most companies have it all wrong. They dont
have to motivate their employees. They have
to stop demotivating them.

In about 85% of companies employees
morale sharply declines after their first six
months and continues to deteriorate for
years afterward.


Source: survey of about 1.2 M employees at 52 Fortune 1000 companies
from 2001 through 2004, Sirota Survey Intelligence
Strategy Workshop
The Business-Quality-Marketing Triangle
Business
Marketing Quality
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Quality Productivity
Organization Quality Product Quality
The Interested
Parties Model
Garvins 8
Quality Dimensions
Perception
Identifying Product
Attributes
The new Quality
Attractive Quality
The System Concept of
Quality Management
Total and Partial
Productivity
Partial Productivity
In the Beer Industry
The relation between
Quality and Productivity
The relation between
Quality, Productivity and
Financial Outcomes
Quality
Marketing
Business
Quality and Productivity
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HAMURABI LAWS (1700 b.c.)
No. 229: If a constractor built up a house which prooved not
to be strong and falled apart and killed the owner, the
contractor should be killed.

No. 234: If a boat constructor build up a boat and if it breaks
apart in the very same year, the constructor should repare the
boat on his account
Quality is as old as humanity
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Egyptian Quality Control 1450 b.c.
From an Egyptian tomb painting, Thebes, C. 1450 B.C. The
workman
at the left is dressing the stone block while the inspector at
the right
checks the quality of the work with a piece of string

Source: Norman de G. Davies
The Tomb of Rekh-mi-r at the Thebes, Vol.2, Pl.LXII
New York, Metropolitan Museum of Art, 1943
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1910-1930 Quality = Conformance to instructions

1930-1950 Quality = Conformance to standards

1950-1960 Quality = Conformance to use

1960-1970 Quality = Conformance to demands

1970-1980 Quality = Conformance to needs

1980-1990 Quality = Conformance to expectations

1990-2000 Quality = Conformance to views of life

2000 Quality = Conformance to social values
The Quality Evolution
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3 levels of Quality
September 2013 Advantages of ISO standards application
Production Quality
Product Quality
Organization Quality
Production Quality
No Variance

Every Drop of Beer in Every Bottle
in Every Production Batch,
until Expire Date, Always the same.


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Notes:
L = $ loss
c = cost coefficient
(constant)
x = quality characteristic
under consideration
T = target value
Lower specification
bound
Upper specification
bound
X Quality Characteristic
Target
$- Loss
The Quality of a Product is the Minimum Loss
Imparted by the Product, to Society from the
Time the Product is Shipped
GENICHI TAGUCHI
T+S TS
L=c(x-T)
2

L
Genichi Taguchi
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Drink me Eat me
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Would you tell me please said Alice a little timidly why
are you painting these roses?

Two began in a law voice, Why, the fact is, you see, Miss,
this here ought to have been a red rose tree, and we put a
white one in by mistake.. .
Right First Time
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Theres never
time to do it
right but
theres
always time
to correct it.
Culture Change
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Understanding your customers (inside & outside) needs and
expectations, is a prerequisite to their fulfillment.


It is imperative to understand those expectations and to
include them in the specifications of products, services,
processes.



The definition of quality as Meeting Customer Expectations
will fulfill customers expectations only when there is full
correlation between the customers expectations, needs and
demands.
Quality = Meeting Customers Needs and Expectations
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Product Quality
Sergio Zyman, Marketing Chief Officer Coca-
Cola Co.
RESEARCH


RESEARCH


RESEARCH
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Kanos 3 Types of Quality
Must be Quality a quality attribute that if not existing in a product
or if not well performing it will cause to a non satisfied customer, but
when that attribute exists it wont add to the customers satisfaction.
For example if a car has bad brakes the customer will be for sure
unsatisfied, but when they exist it doesnt add to his satisfaction as
this is the way it should be in any car.

One dimensional Quality - a quality attribute which by each increase
of it the customers satisfaction increases too. As example, with each
improvement in the fuel consumption of our car our satisfaction will
increase.

Attractive/Charming Quality - a quality attribute which doesnt
cause dissatisfaction when not existing but when it exists it surprises
the customer and ads to his satisfaction. The customer is delighted,
charmed or, in other words, attracted to that product. As example, a
cars air condition system that spreads pleasant odors in the car.
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Relationship between various factors and
customer satisfaction ISO/CD.3 10004
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Attractive / Charming Quality of Prof. Kano
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Regular Quality
Non-
Satisfied
Customer
Satisfied
Client
Charmed
Customer
Insufficient
Quality
Charming
Quality
Charming
Quality
Sufficient
Quality
3 Ways to Create New Products with Inherent
Attractive Quality
Technology developing a new technology and adding
it to the existing product/service.
Inspiration and Genuity depending on genius who
will come up with original ideas.
Marketing research learning by marketing research
methods about the product/service environment, the
ways it is used and the values of it to the customers.
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Brand Attributes

Brand Name
Brand Positioning
Reputation
Past Experience
Package
Advertising Level
Quality Cues
?????
Company Attributes

Company name
Country of Production
Plant Reputation
Size of Company
?????
Product Quality attributes

Natural and quality goods
Pure, tasty water
Good recipe
Following GOST and standards
Modern equipment
Packaging quality
?????
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Quality Perception Model of Baltika
September 2013 Advantages of ISO standards application
Perceived quality
Ingredient supply
Equipment
Recipe
Liquid
Price
Corporate Factor Brand Factor
Category myths
Word of Mouth
Employees Stream
Corporate Stream
Customers stream
Suppliers stream
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Quality of an Organization
September 2013 Advantages of ISO standards application
Quality = to meet the needs
and expectation of customers
Organization Quality = to meet the needs and expectations of
all interested parties in a balanced way
Customers of an organization =
all interested parties
Organization Quality is the driver for sustainable
success!
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Quality at Organization level
September 2013 Advantages of ISO standards application
PARTNERS/
SUPPLIERS
SOCIETY EMPLOYEES SHAREHOLDERS CUSTOMERS
INTERESTED
PARTIES
Quality of Work Life
Control or autonomy.
Recognition.
Belonging.
Progress and Development
External rewards.
Decent working conditions
Dignity.
Sustainable
Growth
&
Profitability
QUALITY OF PRODUCT
AND SERVICE
ENVIRONMENT
PROTECTION
&
SOCIAL
RESPONSIBILITY
Sustainable
Partnership
ISO 9000
Family of
standards,
ISO 22000
OHSAS
18000
Family of
standards
ISO 14000
Family of
Standards
ISO 26000
Our understanding is that sustainable success is a result of an organizations
ability to achieve its objectives in the long term with balanced consideration
of the needs and expectations of all its interested parties (customers,
investors/shareholders, employees, suppliers, partners, and society).
Quality of Work Life (QWL)
Control or autonomy
Recognition
Belonging
Progress and development
External rewards
Decent working conditions
Dignity
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A Good Wife Can Bring Balance in Life
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Integrated Management System
Baltika focuses on the needs and
expectations of all interested
parties: shareholders, employees,
society, suppliers and partners. At the
same time our customers remain the
highest priority for the company.
Our customers and consumers are
at the heart of every decision we
make. We put ourselves in the shoes
of our consumers and customers and
have a detailed in-sight into their
needs and preferences.
We base our strategies and plans on
this insight and continuously
evaluate the ways we work to
improve their experience of our
brands, our services and our people.
A shift from functional to process
approach
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IMS policy in large, part 1
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IMS policy in large, part 2
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Transition to Integrated MS (IMS)
New organizational structure for dealing with
management systems was implemented by Baltika
during the last year
Specialists in the areas of Work Safety, Ecology, Food
Safety and Customer Complaints became a part of
integrated service reporting to Quality Management
Director
Quality management departments were established at
the breweries engaging the experts in management
systems headed by functional champions appointed in
HQ
September 2013 Advantages of ISO standards application
Quality Management Department
Quality Management
Director
Quality Control
Department
Management
Systems
Technology
Technology
Control
40 Advantages of ISO standards application
Research
Center
Quality
Management

(ISO 9001)
Environmental
Management

(ISO 14001)
Food Safety
Management

(ISO 22000)
Health & Safety
Management

(OHSAS 18001)
Customer
Satisfaction

(ISO 10002)
Planned ISO 50001
(Energy management)
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Why IMS ?
Common methodology
Competitive factors
Efficiency and Effectiveness
Risk Management is the Ultimate Goal of
Management Systems
All management systems/standards are aimed
to minimize business risks in the different
areas they cover. In all management
systems/standards generic steps of risk
management can be recognized. Those steps
are:
identification of critical aspects and risks;
assessment and prioritization of risks;
determination of requirements;
implementation of monitoring and control systems.
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Risk Management
Risk Assessment
Prevention
Technical
Human
Awareness Training
Hazard Detection
Alarm
Remedy Action
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Brand Equity - Building Blocks
Meet the needs and expectations of
Customers and Consumers
(Product, Market, Mind)
Product Quality
Production Quality
(No Variance)
Organization Quality
Meet the Needs and
Expectations of all
Interested Parties

Brand
Equity
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How will shoppers judge food companies?
9. Support for poorer nations
10. Treatment of staff
11. Profit
12. Local community
13. Contribution to economy
14. Job creation
15. Amount to charities
16. Executive pay

1. Cost
2. Packaging
3. Healthy eating
4. Product information
5. Customer service
6. Environment
7. Where food is from
8. Animal welfare
Source: IGD
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KLM Menu on the flight
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Baltika Breweries Economic
benefits of standards Case Study
Developed jointly by the International Organization for
Standardization (ISO) and Baltika Breweries

June-September 2013

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ISO Study: Benefits of Standards Application
In May 2013 ISO initiated a project together with
GOST R and Baltika to assess the benefits of
standards application in the Company

The study considered use of national, regional,
international and other consensus-based
management standards developed by accredited
organizations
September 2013 Advantages of ISO standards application
Agreed scope included 5 business functions of Baltika value chain
which are mostly impacted by standards application: procurement,
inbound logistics, production, distribution and after-sales service

An ISO project team visited Baltika in June 2013 for interviews with
staff in key management functions. The project was completed by
September 2013, main conclusions and highlights are presented on
the next slides
Based on the performed calculations
it became evident that the
application of various standards
gave Baltika Breweries savings
amounted to 3.4% of the annual
average revenues for the last five
years (2008-2012)
Apart from the benefits of standards
that could be quantified on the basis
of available data and estimations,
there are other benefits resulting
from the use of standards for the
Company mainly qualitative and
process-based
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ISO study: Main results and conclusions
September 2013 Advantages of ISO standards application
Optimized information exchange using
less employee time as a consequence,
inter alia, of the implementation of the
ISO 9001 management system, leading
to higher transparency and sharing of
responsibility between managers and
better work discipline
Integration of the management systems
which reduced the number of corporate
documents; creation of one-page
abridged versions of normative
documents limited to key information
needed specifically at particular work-
sites
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ISO study: Other benefits (Organization)
September 2013 Advantages of ISO standards application
Research and development of new types
of beer and packaging based on GOST
standards played an important role in
developing and introducing new products
adjusted to consumer tastes and needs,
thus conserving Baltikas market share
under difficult market conditions
The implementation of ISO 22000
standard and their prerequisite programs
have led to enhanced control of the
production process resulting in stable
and high quality and food safety, as well
as customer and consumer satisfaction
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ISO study: Other benefits (Production)
September 2013 Advantages of ISO standards application
Company standards based on GOST and
other standards allowed flexible
redistribution of production and sale of
products to different regions using a
computerized optimization tool for the
allocation of production and sales where
it is most profitable for the Company
Use of EAN-standard permitted easier
tracing of products sold on the market
thanks to barcodes and the traceability
system, resulting in prompt corrective
and preventive actions. Additionally, the
use of EAN-based barcodes and
traceability system led to more efficient
warehousing with fewer employees
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ISO study: Other benefits (Distribution)
September 2013 Advantages of ISO standards application
Due to increased awareness of its
environmental impacts and
implementation of ISO 14001, Baltika
was able to reduce environmental risk.
Lesser environmental damage resulted
in fewer penalty sanctions and better
Company reputation
Reduction of CO
2
emissions: This is an
environmental benefit that is currently
not regulated in Russia so that the
reduction has therefore no direct
financial benefit for the Company, but
helped Baltika to fulfill Carlsberg
Group policies on CO
2
emission
reduction
Using returnable bottles as much as
possible is also a way to reduce
environmental impact
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ISO study: Other benefits (Environment)
September 2013 Advantages of ISO standards application
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The Change Formula


SHARED
DISSATISFACTION


GUTS

FIRST
PRACTICAL
STEPS


VISION
CHANGE =
WHY? WHAT? HOW?
RUSSIA 2015-17
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SCOPE
Focus on beer as core
Selectively pursue market opportunities
in support of our beer business


OBJECTIVES
Market Share
EBIT
TWC


COMPETITIVE ADVANTAGE
Strategy Wheel
Elements of our strategy
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The Ingredients of Leadership
Unity of Purpose Clarity of Direction
Consistency
of Message
Challenging
Target
Tolerance
of Mistakes
Focus on what can be done not why it cant
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Plans are nothing, planning is everything
D. Eisenhower, American President
Challenging And Ambitious Targets
The greatest danger for
most of us is not that our
aim is too high and we
miss it, but that it is too
low and we reach it!


Michelangelo
61 Strategy Workshop
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The 3 C of Management





Competence be GOOD in what you are doing
Confidence express your views with NO FEAR
Caring show you CARE for 3 C
Customers
Company
Colleagues
Strategy Workshop
Quality is the difference between
things

(Aristo, 300 B.C.)
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Why international standards?
They said, "Come, let us build for ourselves a
city, and a tower whose top will reach into
heaven, and let us make for ourselves a name,
otherwise we will be scattered abroad over the
face of the whole earth."

The LORD said, "Behold, they are one people,
and they all have the same language. And this
is what they began to do, and now nothing
which they purpose to do will be impossible
for them.

Therefore its name was called Babel, because
there the LORD confused the language of the
whole earth; and from there the LORD scattered
them abroad over the face of the whole earth.

Genesis, Chapter 11
September 2013 Advantages of ISO standards application
Indira Gandhi, former prime minister of India
My grandfather once told me that there are two kinds of
people:
Those who do the work and those who take the credit
He told me try to be in the first group; there was
less competition there.
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