1.

Management and Leadership

(18 Questions)
1A.1 Evolution of Quality
Evolution of Quality
• 1901 - Sir John Wolfe-Barry (the man who designed London's
Tower Bridge) instigated the Council of the Institution of Civil
Engineers to form a committee to consider standardizing iron
and steel sections .
• 1924 - Walter A. Shewhart developed the control charts, and
principles of statistical process control.
• 1950 :1960 – Deming, Juran, Japan
• Inspection > QC > SPC > QA > TQM > Business Excellence
Quality Gurus

Edwards
Joseph Juran : Philip Crosby :
Deming : 14
Quality Trilogy Four Absolutes
points

Walter A Kaoru Ishikawa

Genichi Taguchi
Shewhart : : Cause-and-
: Loss Function
Control Charts Effects Diagram
Three
Quality Gurus
W. Edwards Deming
• 1928 - Ph.D. in Mathematical Physics
• 1920’s, 30’s - Western Electric.
• 1946-1993 Professor of Statistics
• 1950 – Taught Quality Control
• 1951 Deming Prize for high level of
achievement in quality practices
• 1980 NBC “If Japan Can…Why Can’t
We?” US discovers
W. Edwards Deming

• Deming’s Quality Chain Reaction

• 14 Principles of Management
• System of Profound Knowledge
• Seven Deadly Diseases
• Variation – Common Cause vs
Special Cause
• Red Bead Experiment
1. Create Constancy of
Purpose
1
Create constancy of purpose
toward improvement of
product and service, with the Create
aim to become competitive Constancy of
and to stay in business and Purpose
to provide jobs. Create
• Long term view Constancy
• Customer focus of
• Invest in innovation, training,
research Purpose
• Improve competitive position
2. Adopt the New
Philosophy
2
Adopt the new philosophy.
We are in a new economic
age. Western management
must awaken to the Create
challenge, must learn their Constancy of
responsibilities, and take Purpose
Adopt
on leadership for change. the
• Be prepared for changes
• Improve the customers’ New
satisfaction Philosophy
• Train people
3. Cease Dependence on
Mass Inspection
3
Cease dependence on
inspection to achieve
quality. Eliminate the need Create
for inspection on a mass Constancy of
Cease
Purpose
basis by building quality
Dependence
into the product in the first
on
place. Mass
• Inspection is too late Inspection
• Build quality in processes
4. Don’t Award Business
on the Basis of Price
End the practice of awarding
4
business on the basis of price
tag. Instead, minimize total
cost. Move toward a single Create
supplier for any one item, on Constancy of
a long-term relationship of Purpose
Don’t Award
loyalty and trust.
• Multiple suppliers lead to Business
increased variability on the
• Volume discounts, fewer Basis of Price
setups
• Supplier-customer bond
5. Improve Constantly
and Forever
5
Improve constantly and
forever the system of
production and service, to Create
improve quality and Constancy of
Purpose
productivity, and thus
Improve
constantly decrease costs.
Constantly
• Reduce causes of variation and Forever
• Engage all employees
• PDCA approach
6. Institute Training on
the Job.
6
Institute training on the job.
• People want to do a good job
• They need training to know Create
how to do a good job Constancy of
• Invest in their future Purpose
• Training should include tools Institute
for Modern
• Identify improvement Methods of
opportunities
• Solving quality problems
Training
7. Institute Leadership
7
Institute leadership. The
aim of supervision should
be to help people and Create
machines and gadgets to Constancy of
Purpose
do a better job.
• Supervisors need to Institute
understand processes. Leadership
• Good supervisors are
coaches, not policemen.
8. Drive Out Fear
8
Drive out fear, so that
everyone may work
effectively for the Create
company. Constancy of
Purpose
• Managers and workers Drive
must have mutual respect Out
• Make workers feel valued Fear
and encourage them to
improve processes.
9. Break Down Barriers
Break down barriers
9
between departments.
People in research, design,
sales, and production must Create
work as a team to foresee Constancy of
problems of production and Purpose
use that may be encountered Break
with the product or service. Down
• Build the concept of internal
customers. Barriers
• Common vision
• Cross functional teams
10. Eliminate Numerical
Goals, Posters and Slogan
Eliminate slogans,
exhortations, and targets for
the work force asking for
zero defects and new levels Create
of productivity. Constancy of
• Slogans assume quality Eliminate
Purpose
problems caused by people Numerical
• Deming thinks the system is Goals,
responsible for problems
• Workers demoralized when Posters and
they cannot fix defects, and Slogan
yet are held accountable
11. Eliminate Numeric
Quotas
a) Eliminate work standards
(quotas) on the factory floor.
Substitute leadership.
b) Eliminate management by Create
objective. Eliminate Constancy of
management by numbers,
numerical goals. Substitute Purpose
leadership. Eliminate
• They do not encourage
Numeric
improvement Quotas
• Arbitrary goals are demoralizing
without a plan of how you can
reach those goals
12. Remove Barriers to
Pride in Workmanship
a) Remove barriers that rob
the hourly worker(s) of
their right to pride of
workmanship. Create
b) Remove barriers that rob Constancy of
people in management Purpose
and in engineering of their Remove
right to pride of Barriers to
workmanship.
Pride in
• Don’t make your people Workmanship
compete against each other
• Abolish annual merit rating
13 Education &
Retraining
Institute a vigorous
program of education
Create
and self-improvement. Constancy of
• Encourage workers to Purpose
learn new skills to face Education
future challenges. &
Retraining
14. Take Action
Put everybody in the
company to work to
accomplish the transfor-
mation. The Create
transformation is Constancy of
everybody’s job. Purpose
• Involve everyone Take
• Start the cultural change Action
with top management
• People will be skeptical
until they start to see
change
Quality Gurus

Edwards
Joseph Juran : Philip Crosby :
Deming : 14
Quality Trilogy Four Absolutes
points

Walter A Kaoru Ishikawa

Genichi Taguchi
Shewhart : : Cause-and-
: Loss Function
Control Charts Effects Diagram
Joseph Juran

• 1920s - Joined Western Electric

• 1951 – Quality Control Handbook
• Taught quality principles to
Japanese in 1950s
Joseph Juran

• Ten Steps of Quality Improvement

• Quality Control Handbook
• The Juran Trilogy
• Top management involvement,
• The Pareto principle
• The definition of quality as fitness for use
• The project-by-project approach to
quality improvement
 10 Steps of Quality Improvement

1. Build awareness of the need 6. Report progress

and opportunity for
improvement 7. Give recognition
2. Set goals for improvement 8. Communicate results
3. Organize to reach the goals 9. Keep score of improvements
4. Provide training achieved
5. Carry out projects to solve 10. Maintain momentum
problems
The Juran Trilogy
• Quality Planning
• Preparing to meet quality goals
• Quality Control
• Meeting quality goals during operations
• Quality Improvement
• Breaking through to unprecedented levels
of performance
Quality Gurus

Edwards
Joseph Juran : Philip Crosby :
Deming : 14
Quality Trilogy Four Absolutes
points

Walter A Kaoru Ishikawa

Genichi Taguchi
Shewhart : : Cause-and-
: Loss Function
Control Charts Effects Diagram
Philip Crosby

• 1952 - His first job in the field of quality

was that of test technician in the quality
department at Crosley Corporation
• 1979 - Crosby started the management
consulting company Philip Crosby
Associates, Inc.
• 1979 - Crosby published his first business
book, Quality Is Free
• Quality is Free – 1 million copies sold
Philip Crosby

• Quality as Conformity to Specification

• Four Absolutes of Quality
• “Quality is Free” and “Quality Without
Tears”
Four Absolutes of
Quality
1. The definition of quality is
conformance to requirements
(requirements meaning both the
product and the customer's Create
requirements) Constancy of
2. The system of quality is Purpose
prevention Four
3. The performance standard is Absolutes
zero defects (relative to of
requirements)
Quality
4. The measurement of quality is
the price of non-conformance.
1. The definition of quality is
conformance to requirements
• Quality means conformance,
1
not elegance or goodness
• “Do It Right the First Time
(DIRFT)” Create
• Management has 3 tasks Constancy
The of
related to this: Purpose
definition of
• Clearly establish requirements
• Supply means to meet quality is
requirements conformance
• Spend time helping employees to
meet requirements
requirements
2. The system of quality is
prevention
• The system for causing quality
2
is prevention, not appraisal.
• An error that does not exist
can’t be missed. Create
• Secret of prevention is to look Constancy
The of
at process and identify Purpose
system
opportunities for error
of
quality
is
prevention
3. The performance
standard is zero defects
• Not a “motivational” program.
3
It is a management standard
tells people what is expected of
them. Create
• Employees perform to the Constancy
The of
standards of the leaders. Purpose
performance
• Mistakes caused by two
factors: standard
• Lack of knowledge. Knowledge is
can be measured in deficiencies
corrected through tried-and- zero
true means. defects
• Lack of attention. Must be
corrected by the person himself
or herself. An attitude problem.
4. The measurement of quality is
the price of non-conformance
• Traditional quality
4
measurements are technical in
nature, however, they need to
be converted to numbers that Create
management understands. The of
Constancy
• Price of Conformance. All measurement
expenses necessary to make Purpose
things right. Quality functions, of quality
prevention efforts, quality
education. is the
• Price of Non-conformance. All price of
expenses involved in doing
things wrong. Cost of fixing non-
problems, correcting orders, conformance
correcting products,
warranties.
 1A.2 Continuous
Improvement Tools
 Lean

Six Sigma
Continuous
Improvement Theory of Constraints
Tools
Statistical Process Control

Total Quality Management

 The Machine That
Changed the World by
Mass Production - Ford James P. Womack, Daniel
• Walter Shewhart Roos, and Daniel T. Jones

1910 1990

History of
Lean 1950s

Toyota Production System

Lean Philosophy
• Value - specify what creates value from
the customer’s perspective.
• The value stream – identify all the steps
along the process chain.
• Flow - make the value process flow.
• Pull - make only what is needed by the
customer (short term response to the
customer’s rate of demand).
• Perfection - strive for perfection by
continually attempting to produce exactly
what the customer wants.
 • Reduce Waste
• Improved Quality/Customer Satisfaction

Lean •
•
Reduced Inventory
Reduced Cycle Time
Benefits • Flexible Manufacturing
• Safe Workplace Environment
• Improved Employee Morale
 Other Companies Adopt
Six Sigma – AlliedSignal,
GE, Dow Chemical,
Control Charts Dupont, Honeywell,
• Walter Shewhart Whirlpool, IBM

1924 Mid 1990

Six Sigma
History 1987

Motorola Develops Six

Sigma
• Raised Quality Standards
Six Sigma Philosophy

1 2 3 4
Know What’s Reduce Defects Centre Around Reduce
Important to the (DPMO) Target (Mean) Variation
Customer (CTQ) (Standard
Deviation)
 • Generated sustained success
• Project selection tied to organizational strategy
• Customer focused
Six Sigma • Profits
Benefits • Project outcomes / benefits tied to financial
reporting system.
• Full-time Black Belts in a rigorous, project-
oriented method.
• Recognition and reward system established to
provide motivation.
 • The theory of constraints (TOC) was
introduced by Eliyahu M. Goldratt in his 1984
book titled The Goal.

Theory of • Identifying the constraint (factor which limits

throughput / stands in the way of goal) and
Constraints systematically improving that. Repeating this
process to improve the next constraint.
• Constraint is the weakest link in the chain.
 • It helps in identifying what to improve.
• Current constraint should always be the top
priority to make improvement.
Theory of • Improving a non-constraint process will not
Constraints improve the overall throughput.
• Constraints examples – Physical, Policy,
Paradigm, Marketplace
 Identify

• Identify the current constraint

Exploit

• Make improvement using existing resources

Theory of Subordinate

Constraints • Ensure all activities support constraint

Elevate

• If constraint still exists, take further actions

Repeat

• Move to the next constraint

 • Six Sigma is based on SPC
Statistical • Quality Control tool to control processes
based on facts and data.
Process • Common Cause vs Special Causes
Control • Control Charts are used in SPC
 • Total Quality Management is way to achieve
customer satisfaction by every one working in
the organization to improve the product,
Total Quality processes, service.

Management • A culture of continual improvement is

established, by involvement of management.
• Most Quality Awards are based on the
principles established for implementing TQM.
1B.1 Strategic Planning
 • Activities to
• set priorities,
• focus energy and resources,
Strategic • ensure that employees and other
stakeholders are working toward common
Planning goals,
• establish agreement around intended
outcomes/ results,
• assess and adjust the organization's direction
in response to a changing environment.
Strategic • Vision (the dream)
• Mission (what and why)
Planning • Objectives (how much of what)
Process- • Strategies (how)
VMOSA • Action Plans (who will do, what, by when)
1B.2 Deployment Techniques
 •
Techniques •
Benchmarking
Stakeholder identification and analysis
for QMS • Performance measurement tools
Deployment • Project Management
 • The process of comparing
• one's business processes and performance
metrics
Benchmarking to
• industry bests and best practices from
other companies.
 Process benchmarking

• Example: Delivery process, Billing

process

Performance benchmarking
Benchmarking • Features of products and services
e.g. mileage, download speed

Strategic benchmarking

• How companies compete

 Internal Benchmarking

• Easy access to sensitive information

• Less time and resources required
• Limited gain because internal
Internal vs benchmark might not be the best in
External class.
Benchmarking
External Benchmarking

• Just the revise of internal

benchmarking
 • What function to benchmark (D)
• What is the current performance level (M)
• Select the Best-in-Class (M)
Benchmarking • Compare (A)
Process • Agree on actions to achieve or beat the Best-
in-Class and Implement (I)
• Monitor (C )
• Re-do
 • Management support
• Alignment with the strategy
Benchmarking • Lack of Resources
Challenges • Right team
• A suitable and willing partner
• Willingness to change
Stakeholders

Owner, Managers

Suppliers, Customers
Employees, Partners

Local Community,
Associations, Media

Public
 ❖ 4.2 Understanding the needs and
expectations of interested parties
❖ Due to their effect or potential effect on the
organization’s ability to consistently provide
Interested products and services that meet customer
and applicable statutory and regulatory
Parties requirements, the organization shall
determine:
(ISO 9001:2015) a) the interested parties that are relevant to the
quality management system;
b) the requirements of these interested parties
that are relevant to the quality management
system.
❖ The organization shall monitor and review
information about these interested parties
and their relevant requirements.
 Stakeholder Analysis

Manage closely
Keep Satisfied
LATENTS KEY PLAYERS

INTEREST

Monitor Keep informed

APETHETICS DEFENDERS

POWER
 • Metrics to measure performance
• Commonly used performance measures for
outsiders are financial
Performance • Internal metrics include performance levels
Measures • Process yield
• Defect rate
• Average time to answer a call
• Schedule
 • By Robert S.Kaplan and David P. Norton
• Four perspectives
Balanced • Financial
Scorecard • Customer
• Internal Business Processes
• Learning and Growth
 Balanced Scorecard

## ##

Financial Customer

## ##

Internal Processes Learning/Growth

 • Lagging are easy to measure
Leading vs • Lagging are post event (output)
• Leading are predictive measures (inputs)
Lagging • Leading indicators are not guaranteed and are
Indicators the difficult to decide, which one to select.
• Mix of both leading and lagging is good.
 • Gantt Chart
Project • Critical Path Method (CPM)
Management • Program Evaluation and Review Techniques
(PERT)
Tools • Resource Allocation
 • A Gantt chart is a type of bar chart,
• Gantt charts illustrate the start and finish
Gantt Chart dates of the terminal elements and summary
elements of a project.
Gantt
Chart
Gantt Chart
 • To manage number of tasks in a sequence.
Activity • List down tasks
Network • Time for each task
• Predecessor and successor tasks
Diagram • Identify bottlenecks
Activity Network Diagram

• CPM (Critical Path Method) is Activity Duration Depends

commonly used with all forms of on
projects
• It includes: A 2
• A list of all activities required
to complete the project B 4 A
• The time (duration) that each
activity will take to complete, C 1 A
• The dependencies between
the activities and,
• Logical end points such as
D 2 B
milestones or deliverable
items. E 7 B, C
 • Float
Activity • float or slack is the amount of time that a
task in a project network can be delayed
Network without causing a delay
• Critical Path
Diagram • An activity on critical path has "zero free
float"
Activity Network Diagram

Activity Duration Depends

on

A 2
B 4 A
C 1 A
D 2 B
E 7 B, C
 • The PERT Network acknowledges that there

Program
will be a time variance (due to uncertainty) in
the completion of each activity
Evaluation • PERT Network uses a probabilistic approach
to estimating for each activity.
and Review • To estimate for an activity, the following
Techniques formula is used:
• Expected time = ( Optimistic + 4 x Most likely
(PERT) + Pessimistic ) / 6
• Standard Deviation = (Pessimistic –
Optimistic)/6
Program Evaluation and Review Techniques (PERT)
 • Resource levelling
• Crashing and compressing schedule
• Crashing involves adding resources to get the
Resource activity done on or before time.
• Compressing (or fast tracking) involves
Allocation performing activities in parallel.

https://www.pmi.org/learning/library/performing-crash-analysis-alternative-cost-
schedule-6750
1B.3 Quality Information
System
 • Information Management System related to
Quality Quality Management to collect, stored,
Information analyze and report data
• Data centric approach of Quality Management
System (QIS)
 • Design reviews
• Audits
Quality • Non conformance
Management • Repair, Returns
Data • Customer surveys
• Test reports, test certificates, performance
data
 • Identify priorities
Quality • Track performance of initiatives and
Information investments
• Track competitor’s performance
System (QIS) • Breaks silos in the organization. All groups
- Benefits have access to the data.
1C. ASQ Code of Ethics for
Professional Conduct
 • ASQ requires its representatives to be honest
and transparent.
• Avoid conflicts of interest and plagiarism.
Fundamental • Do not harm others.
Principles • Treat them with respect, dignity, and fairness.
• Be professional and socially responsible.
• Advance the role and perception of the Quality
professional.

Source:
https://asq.org/about-asq/code-of-ethics
 1 2
Code of Act with Integrity and
Honesty
•Strive to uphold and
Ethics – advance the integrity,
honor, and dignity of the
Quality profession.
Expectations
•Be truthful and
transparent in all
professional interactions
and activities.
of a Quality •Execute professional
responsibilities and make
decisions in an objective,
Professional
factual, and fully informed
manner.
•Accurately represent and
do not mislead others
regarding professional
qualifications, including
education, titles,
affiliations, and
certifications.
•Offer services, provide
advice, and undertake
assignments only in your
Source: areas of competence,
expertise, and training.
https://asq.org/about-asq/code-of-ethics
Demonstrate
Responsibility, Respect,
and Fairness
•Hold paramount the
safety, health, and welfare
of individuals, the public,
and the environment.
•Avoid conduct that
unjustly harms or
threatens the reputation
of the Society, its
members, or the Quality
profession.
•Do not intentionally cause
harm to others through
words or deeds. Treat
others fairly, courteously,
with dignity, and without
prejudice or
discrimination.
•Act and conduct business
in a professional and
socially responsible
manner.
•Allow diversity in the
opinions and personal
lives of others.
3
Safeguard Proprietary
Information and Avoid
Conflicts of Interest
•Ensure the protection and
integrity of confidential
information.
•Do not use confidential
information for personal
gain.
•Fully disclose and avoid
any real or perceived
conflicts of interest that
could reasonably impair
objectivity or
independence in the
service of clients,
customers, employers, or
the Society.
•Give credit where it is
due.
•Do not plagiarize. Do not
use the intellectual
property of others without
permission. Document the
permission as it is
obtained.
1D. Leadership Principles
and Techniques
Team Types

• Functional
• Cross Functional
• Virtual
• Self Managed
• Quality Circles
Tuckman Model of Team Life Cycle

Forming Storming Norming Performing Adjourning

The forming stage During the The norming stage When a team Breaking up the
occurs when team storming stage, begins as the team reaches the team when the
members first teams discover moves beyond the performing stage required task is
come together as teamwork is storming stage it is functioning complete.
a team. more difficult and begins to as a high
than they function as a performance
expected. team. team.
1E. Facilitation Principles
and Techniques
1E.1 Roles and
Responsibilities
 • Leader
• Facilitator
Team Roles • Coach
• Members
 • Provides direction to team members
• Clarity on the roles of team members

Team Roles - • Establishes ground rules for working with

each other
Leader • Ensures successful completion of team goal
• Preparing for and conducting team meetings
• Assigns roles to team members
 • Facilitator provides leadership to the team
Team Roles - without formal authority to make decisions.
• Facilitator helps team understand the
Facilitator objective and support the team on how to
achieve the objective.
 • Coach provides one to one support after
Team Roles - training.
• Coach is the first person to be contacted if the
Coach team has an issue and needs help.
• GROW Model of Coaching
GROW
G - Goal What team wants to achieve
R - Reality Current reality and challenges the team has
O - Obstacles What stops team from achieving the goal.
W – Way forward Steps needed to be taken to achieve the goal
 • Participate in team meetings

Team Roles - • Perform the tasks assigned to them

• Actively participate in brainstorming and idea
Members generation
1E.2 Facilitation Tools
 Brainstorming

Nominal Group Technique

Team Tools
Conflict Resolution

Force-field Analysis
 • Brainstorming is a group or individual
creativity technique by which efforts are
made to find a conclusion for a specific
problem by gathering a list of ideas
Brainstorming spontaneously contributed by its member.
• Defer judgment,
• Reach for quantity
 • Four Rules:

• Focus on quantity
Brainstorming • Withhold criticism
• Welcome unusual ideas
• Combine and improve ideas
Nominal Group
Technique
• The nominal group technique (NGT) is a
group process involving problem
identification, solution generation, and
decision making.
• Five Steps
• Introduction and explanation
• Silent generation of ideas
• Sharing ideas
• Group discussion
• Voting and ranking
 • Brainstorming generates a long list of ideas
• Multi-voting technique is used to reduce
/narrow down this list with group consensus.
• Out of big list of ideas each member selects 5
Multi-voting (or any other number of ideas).
• Each member ranks his/her choice. (5 for
most preferred and 1 for least)
Multi-
voting
 Conflict • Two underlying dimensions of conflict

Resolution My interest
(concern for self,
or assertiveness)

Your interest
(concern for
others, or
empathy)
 C C

Assertiveness
Competing Collaborating
Conflict Resolution

maximizes concern for self and minimizes collaborators willingly invest time and resources
empathy (i.e., concern for others) into finding a “win-win” solution

Compromising
Empathy
A A
Avoiding Accommodating
when an individual has withdrawn in dealing characterized by a high level of concern for others
with the other party. and a low level of concern for oneself.
Force Field
Analysis
• Balance between
forces driving
change and forces
resisting change.
Force Field
Analysis
Forces
against
the
change

Forces in
favor of
change
Force Field
Analysis
- Reduced over time
- Initial investment
- Fear of new
technology

- Customer looking
for less defects
- Low down time
- Increased sale
1F. Communication Skills
 • Create right environment of open
Team communication
Communication • Encourage communication
 Noise

Sender Receiver

Encode Channel Decode

Communication
Model
Feedback
 • Verbal
Communication • Non-verbal
Methods • Written
1G. Customer Relations
 • Customer Relations Tools:
Customer • Quality Function Deployment

Relations • Customer satisfaction survey

 ❖ Developed by Yoji Akao in 1970s.

Quality ❖ Quality Function Deployment (QFD) is a

method to acquire and analyze the voice of
Function the customer and then transform it into
product requirements and quality assurance
Deployment measures throughout the design, build, test,
commercialization, and even product
retirement process.
 Quality
Function
Deployment
 Surveys

• Listen to your customers

• Mail, Phone, Web surveys
• Feedback

Customer Focus Groups

Satisfaction
• A group of people are asked about their
perceptions, opinions, beliefs, and attitudes.

Interviews / Meetings

Observations
 • What is the goal of the survey?
• Clarity of questions
• Unambiguous
• Scale of 1 to 10
Survey • Historical relevance (to compare year to
year change)
• Open ended questions
• Review the survey
• Send the survey to target audience
• Analyze
 • A group of people are asked about their
perceptions, opinions, beliefs, and attitudes.
Focus Group • Generally 6-10 people having open discussion
with skilled moderator.
 • Engagement questions
• Start discussion to make participants
comfortable with the process.
• Exploration questions
Focus Group • Main questions
• Exit question
• Anything else members want to add
1H. Supplier Management
1H-1 Techniques
 • Boeing
• intended to reduce the 787's development
time from six to four years and development
Supplier cost from $10 to $6 billion.
• increase outsourcing to 70 percent (from 30-
Management 50% done previously)
• outsourced the engineering and construction
- Challenges of the plane long before the product was
defined and the relative costs established.
• over budget
• over three years late
• https://www.forbes.com/sites/stevedenning/
2013/01/21/what-went-wrong-at-boeing/
 • What all can go wrong with supply chain?
• At supplier end:
Supplier • Natural causes (flood, earthquake ….)
• Man made cause (strike, fire, unrest ….)
Management • Economic (insolvency, sub-supplier failure
- Challenges …)
• In Transit – Natural or man made causes
• On receipt – defective, reputation issues
 • There continues to be a high level of
outsourcing
Supplier • For mid to large corporations, the level of
spend on purchased products and services
Management averages around 50% of revenue - focus on
core competencies and outsource their non-
- Challenges core operations
• Managing supplier is the key factor for the
organization’s success
 • Supplier Lifecycle Management is a best
practice approach for selection, monitoring,
classification and creation a long term
Supplier partnership to:
• Mitigating risk
Lifecycle • Reduce costs
Management • Ensure compliance
• Sustainable supplier relationship
• It is end-to-end approach to managing
suppliers in a transparent and structured way.
 Supplier Lifecycle Management

Supplier Performance Supplier Partnerships

Selection
Supplier selection, qualification
including the identification of
sub-tier suppliers.
Monitoring
Expected levels of performance,
process reviews, performance
evaluations, improvement
plans, and exit strategies.
Classification
Supplier classification system,
e.g. non-approved, approved,
preferred, certified,
partnership, and disqualified
& Alliances
Strategies for developing
customer-supplier partnerships
and alliances.
 • Identifying Potential Suppliers
• Shortlisting
• Prequalification
Supplier • Establish bidders list

Selection • Request bids

• Evaluate bids
• Select supplier/Award

Identify supplier Shortlist Prequalify Establish list Request bids Evaluate bids Select
 • Identify Potential Suppliers
• Selection or screening would need extra
Supplier effort on part of the organization.
• New supplier might offer cost or quality
Selection advantage
• Promoting local suppliers

Identify supplier Shortlist Prequalify Establish list Request bids Evaluate bids Select
 • Shortlisting or screening
• To avoid likelihood of late delivery, poor
Supplier quality, non-responsible suppliers
• Method used for shortlisting
Selection • Market reputation
• Public information

Identify supplier Shortlist Prequalify Establish list Request bids Evaluate bids Select
 • Prequalification
• Financial status
Supplier • Capacity available
• Quality – ISO 9001 or other certifications
Selection • Client approval if required

Identify supplier Shortlist Prequalify Establish list Request bids Evaluate bids Select
 • Establish Bidders List
Supplier • To avoid repeating the prequalification
process next time
Selection

Identify supplier Shortlist Prequalify Establish list Request bids Evaluate bids Select
 • Request Bids
• Request for Proposal (RFP) – when buyers
indicate the preferences and ask bidder to
Supplier provide the details, how these
requirements will be fulfilled.
Selection • Request for Quote (RFQ) – when buyer
can develop exact specification for the
product needed

Identify supplier Shortlist Prequalify Establish list Request bids Evaluate bids Select
 • Evaluate Bids
• Based on pre-determined criteria such as
price, quality, schedule, and commercial
Supplier terms etc.
• Other criteria includes: Finance,
Selection production capability, communication,
responsiveness to queries, Health, Safety ,
Environment, Society responsibility etc.

Identify supplier Shortlist Prequalify Establish list Request bids Evaluate bids Select
 • Award
Supplier • Place the Purchase Order to the selected
Selection supplier.

Identify supplier Shortlist Prequalify Establish list Request bids Evaluate bids Select
1H-2 Improvement
 Supplier Lifecycle Management

Supplier Performance Supplier Partnerships

Selection
Supplier selection, qualification
including the identification of
sub-tier suppliers.
Monitoring
Expected levels of performance,
process reviews, performance
evaluations, improvement
plans, and exit strategies.
Classification
Supplier classification system,
e.g. non-approved, approved,
preferred, certified,
partnership, and disqualified
& Alliances
Strategies for developing
customer-supplier partnerships
and alliances.
 • The level of monitoring will depend upon the
Supplier risk level.
Performance • Establish criteria for evaluating and
Monitoring monitoring supplier performance against the
contractual obligations
 Supplier • The level of monitoring will depend upon the
risk level.
Performance • High value, high risk good and services will
Monitoring require higher level of monitoring
 • Typical Performance Parameters:
• Cost
• Under/over budget, cost savings
Supplier • Quality
• Defect rate, returns, failures, damages
Performance • Schedule
Monitoring • On time delivery, shortages
• Responsiveness
• Willingness to change the order details
(quantity, design etc.)
1H-3 Risk
 • Effect of uncertainties on objectives (ISO 31000:2009)
• NOTE 1 An effect is a deviation from the expected —
positive and/or negative.
• NOTE 2 Objectives can have different aspects (such as
financial, health and safety, and environmental goals) and
Risk - can apply at different levels (such as strategic, organization-
wide, project, product and process).

Definition • NOTE 3 Risk is often characterized by reference to

potential events and consequences, or a combination of
these.
• NOTE 4 Risk is often expressed in terms of a combination
of the consequences of an event (including changes in
circumstances) and the associated likelihood of occurrence.
• NOTE 5 Uncertainty is the state, even partial, of
deficiency of information related to, understanding or
knowledge of an event, its consequences or likelihood.
Risk Management
Coordinated activities to direct and control an organization with regard to risk.
 • Positive risks is called opportunities.
• You would like to take maximum
advantage of these positive risks.
Risk - • Risk is associated with future event, which has
Definition not happened yet.
• A risk which has already occurred is
considered as an “issue”.
Risk Management - Benefits

Better decision-making through a good

understanding of risks and their likely impact.

Fewer Effective use Reassuring

surprises of resources stakeholders
 Risk Management

Prioritize Mitigation Mitigation

Identify Risks
Risks Control Effectiveness
 • Focus on suppliers at risk
• All suppliers are not equally risky. Keep
focus on risky suppliers.
• Specific organization or even specific
Risk country can represent higher risk
• Allocate your limited resources to higher
Strategies risk suppliers
• Hope for the best, prepare for the worst
• Business Continuity Plan
• Contingency Plan
• Resiliency
 • Process of creating systems of prevention
and recovery to deal with potential
Business threats to a company.
• Potential threats and recovery steps are
Continuity included in the BCP.
Plan (BCP) • Common treats include – Fire, flood,
strike, earth quack, war, outages, cyber
attack, terrorist attack etc.
 • A contingency plan is a plan devised for
an outcome other than in the usual
(expected) plan.
Contingency • Events covered in the contingency plan
Planning are not as extreme as the Business
Continuity Plan.
• Examples: Supplier going out of business,
bankruptcy, price/currency fluctuations
 • The capacity to recover quickly from
difficulties; toughness.
• The ability of business operations to
Resiliency rapidly adapt and respond to internal or
external dynamic changes
 • Resilient infrastructure: Improving your
business resilience – IBM White Paper
• Six Blocks:
• Recovery
Resiliency • Hardening
• Redundancy
• Accessibility
• Diversification
• Autonomic Computing

Reference: https://www-935.ibm.com/services/us/its/pdf/resilientinfra.pdf
1I. Barriers to Quality
Improvement
 • Confusion over the definition of quality
• Lack of leadership
Barriers to • Long term commitment
Quality • Lack of data (e.g. benefits, magnitude of
Improvement the problem etc.)
• Right qualified people to make the change
(e.g. CQE)