Supply chain managers know that the integrated nature of 21st century supply chains requires the breaking down of operational silos to build a connected, effective entity. Different players within the supply chain must be aware of each other’s functions and activities and how these connect to their own roles. In this way, the entire supply chain can ensure that it is working toward a common goal and cooperating on the best way to reach it.
Similarly, when integrating total quality management (TQM) with supply chain strategy, supply chain professionals must connect all of the components of the strategy to ensure that it is as successful as possible. TQM is a management approach that seeks long-term supply chain success through customer satisfaction, and, appropriately, it happens to be about breaking down silos among individuals. According to the APICS Dictionary, “TQM is based on the participation of all members of an organization in improving processes, goods, services and the culture in which they work.” In order to maximize effectiveness, though, the entire supply chain — and not just the individual members of an organization — must embrace the system plan and fully participate in improvement efforts. This bridges TQM — which focuses on the immediate customer — and supply chain management strategy — which focuses on satisfying the ultimate customer.
Along the same lines, research suggests that the integration of TQM and supply chain management strategy will strengthen the organizational competitiveness of a supply chain and improve customer satisfaction. This is because TQM is a vehicle for making sure the voice of the customer is incorporated into strategy.
The team trifecta
The three components of TQM also must work with each other to produce a successful supply chain management strategy. In their article “Relationship between JIT and TQM: Practices and Performance,” researchers Barbara B. Flynn, Sadao Sakakibara and Roger G. Schroeder suggest that there are three core dimensions to TQM: and manufacturing, incorporating interfunctional design efforts, and focusing on new product quality. This also involves trial runs, extensive prototyping and rounds of design modifications prior to releasing the final product.
- Customer focus encourages the inclusion of customer needs and assesses the organization’s success in meeting them.
- Product design focuses on product improvement by designing for efficient and reliable engineering and manufacturing, incorporating interfunctional design efforts, and focusing on new product quality. This also involves trial runs, extensive prototyping and rounds of design modifications prior to releasing the final product.
- Statistical process control (SPC) is the use of statistical data charts to inform operators, which enables them to better handle the variability of the manufacturing process.
If these three facets each operate in a silo, they cannot contribute as much of a competitive advantage to a supply chain management strategy. One might expect that incorporating the voice of the customer in strategy would result in the formulation of better strategic plans and provide feedback about the effects of those plans as they are implemented. However, this often is not the case. Researchers at Sam Houston State University in Huntsville, Texas, and Southern Arkansas University in Magnolia, Arkansas, found that, when connecting TQM and supply chain management strategy, customer focus alone does not sufficiently provide the actionable information necessary to drive the methodology.
However, when product design and SPC are added as intermediaries, actionable information is produced to inform supply chain management strategy, the researchers note. The relationship between customer focus and product design is straightforward: It is essential to consider the voice of the customer when creating a new product or service in order to ensure that it meets customer needs. Product design transforms the voice of the customer from raw data into actionable insights about whether customer needs are being met.
The relationship between customer focus and SPC requires a deeper look. Although SPC can effectively assess the state of process control with no need for customer input, it is impossible to assess how well the in-control process meets customer needs without knowing what the customer requires.
Consider that a variation in quality can result in rejected product, which in turn causes delayed shipments, missed deadlines and increased expenses. If the defective product is detected after shipment, companies have to factor in extra transportation and disposition costs as well as customer dissatisfaction. If the defect is not detected, additional liabilities may be incurred when the product fails the ultimate customer in the supply chain. SPC can transform the voice of the customer from customer focus to in-control processes that are centered on customer requirements and quality control. In this way, customer focus provides the raw data for SPC, which transforms these insights into actionable data for supply chain management strategy.
The combination of these three components of TQM informs a successful supply chain management strategy and helps ensure that the ultimate customer is properly served.
The risks of skipping TQM
Unfortunately, empirical research shows that not many companies focus on TQM or supply chain management strategy, and even fewer integrate all of the components of TQM with that strategy. This begs the question, Are these approaches necessary?
Consider the cautionary tale of Toyota Motor Corp. In the 1990s, Toyota was a leader in the TQM space. The automaker encouraged its suppliers to adopt TQM methods so that all members of its supply chain could focus on ultimate-customer satisfaction. This emphasis on continuous improvement helped the company build its market share.
However, prior to 2010, Toyota changed its approach to focus on quantity instead of quality in an attempt to become the world’s number-one automaker. By early 2010, the company had recalled 5.3 million vehicles, its U.S. sales dropped 16 percent in the first month of 2010, and its stock lost $21 billion in value in a single week, according to the Time Magazine article “Toyota’s Flawed Focus on Quantity Over Quality.” The recalls were spurred by a problematic floor mat that could slip and cause the gas pedal to stick and an issue with the gas pedal mechanism itself, both of which could cause dangerous and unexpected acceleration. The article author, Bill Saporito, reports that these issues also spurred legal trouble for the company, including a class-action lawsuit, fines from the U.S. Department of Transportation and a public admonishment from then U.S. Secretary of Transportation Ray LaHood noting that consumers should stop driving Toyotas.
Akio Toyoda, president of Toyota, explained the issue to the U.S. Congress in February 2010: “Toyota has, for the past few years, been expanding its business rapidly. Quite frankly, I fear the pace at which we have grown may have been too quick. I would like to point out here that Toyota’s priority has traditionally been the following: first, safety; second, quality; and third, volume. These priorities became confused, and we were not able to stop, think and make improvements as much as we were able to before, and our basic stance to listen to customers’ voices to make better products has weakened somewhat. We pursued growth over the speed at which we were able to develop our people and our organization, and we should sincerely be mindful of that. I regret that this has resulted in the safety issues described in the recalls we face today.”
Following these issues, Toyota decided to return to its TQM and supply chain management strategy approach, but the rebuilding has been difficult and taken some time. Seven years later, J.D. Power and Associates ranked Toyota 13th overall in initial quality. This experience showed Toyota, and those who follow its story, that TQM is crucial. Now, implementation of supply chain management strategy, enabled by the three components of TQM, may be the company’s best hope of regaining its former position in the marketplace.
Rival automaker Hyundai resolved to learn from Toyota’s lesson and in 2012 announced that it was going to focus on quality instead of sales numbers, according to Financial Times. Today, J.D. Power and Associates ranks it sixth overall in initial quality.
As customers and consumers expect higher-quality products and excellent customer service, it’s imperative to integrate TQM into supply chain strategy, not silo it and make it a lower-priority item. As these anecdotes show, the consequences of skipping quality controls hurt business and brand reputation, which is counterproductive to efforts to satisfy the end consumer. Instead, companies must heed and incorporate the voice of the customer from the start and weave it into the core aspects of TQM to support a strategy that will ultimately meet the consumers’ needs.
Victor E. Sower, PhD, CQE, is a distinguished professor emeritus of management at Sam Houston State University in Huntsville, Texas. He may be contacted at firstname.lastname@example.org.
Kenneth W. Green Jr., DBA, is the LeMay professor of management at Southern Arkansas University in Magnolia, Arkansas. He may be contacted at email@example.com.
Pamela J. Zelbst, PhD, PMP, is a professor of supply chain management and the director of the Sower Business Technology Laboratory and the Center for Innovation and Technology at Sam Houston State University. She may be contacted at firstname.lastname@example.org.
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