McKinsey core beliefs on how quality journeys
Discussion document
October 2010 CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of McKinsey McKinsey & Company is strictly prohibited prohibited
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Objective of today’s call
Better understand Nissan context on objective on quality
Share a few McKinsey core beliefs on quality
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Agree upon next steps
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In our experience, achieving best-in class quality requires a holistic approach covering 4 major areas
Quality strategy Set aspiration level based on Voice of the customer
1 Quality strategy & KPIs
Quality KPIs Define KPIs Set targets Break down to functions
2 Functional quality processes
Development & product engineering quality
3 Quality organization & governance
SOURCE: McKinsey Quality Service Line
Manufacturing & Process Engineering quality
Supplier quality
Manufacturing quality
Sales and after sales quality
Mindset and capabilities
4 Quality mindset & capabilities
Quality organization, decision making
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We have 7 core beliefs regarding quality management Root causes for quality issues
Implication on quality management approach
1 Lack of customer orientation
2 Search for silver bullet
3 Reaction mode
4 Lack of quality incentives
5 No supplier involvement
6 Weak quality function
7 Missing capabilities
SOURCE: McKinsey Quality Service Line
Customer first: Focus on customers' requirements and external quality metrics Holistic approach: Involvement of all line functions and use of most appropriate tools
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Prevention mode: Cross-functional teams working on end-to-end problem prevention and problem solving Quality KPIs: Comprehensive KPIs embedded into incentives of all line functions
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Quality throughout the value chain: Suppliers and service providers integrated during entire product lifecycle Seat at the leadership table: Quality function empowered to enforce quality standards Mindset and capability building: Role modeling and consistent communication from management team as well as training
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A quality transformation is a multi-year journey typically leads through 3 stages and takes the quality system from reactive to preventative mode IV
Excellence in quality
III II
Single, stable Q-processes
I
Ad-hoc firefighting
Little transparency No standardized processes Reactive quality management
SOURCE: McKinsey Quality Service Line
Good isolated solutions in some functional areas exist Focus of quality processes is on technical departments (R&D, production, procurement) Focus on warranty and goodwill costs
Integrated quality system
Quality is anchored in all functions Quality targets and KPIs are defined holistically Quality contributes significantly to business performance
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Continuous improvement of quality established in all processes Consistent implementation of capable and manageable quality processes Quality and production are considered as a connected, joint theme Quality is rooted in decision making processes
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Example of a quality transformation roadmap: 1-year-program with 16 initiatives for holistic improvement Quick fixes to “stop the bleeding” Phase 1: Jan - Mar Field quality
Production
Phase 2: Apr - Jun
A Failure resolution taskforce (tackle top 100)
G Set-up of new field failure resolution process
B Management shop-floor audits
H Set-up of new quality loop systematic in plants
C Focused end-of line inspection Supplier quality
Stabilization
D Focused incoming parts inspection E Crash program for supplier recovery of warranty cost
Product development
AUTOMOTIVE CLIENT EXAMPLE
Towards excellence Phase 3: Jul - Dec N Establish lessons learned database
I Resident engineers sent to 10 most critical suppliers
O Active supplier development program (wave 1)
J Overhaul of maturity grade management systematic
P New approach to concept quality
K Q-function veto established Quality function
F Employee Q-survey
SOURCE: Quality Service Line; team analysis
L Organizational reset M Q-communication initiative
Transformation starts with reactive activities and seeks to build a preventive system McKinsey & Company
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We have covered many different quality related topics
NOT EXHAUSTIVE
Engagements, 2005 - 09 December Examples of studies Engagements by function and region Supporting a client in driving performance improvement of their Quality and Customer Care organization
100% = 606 client engagements Financial Institutions Group
Other1 Consumer Industry Group High Tech TIME2 Travel Infrastructure Logistics
7
7
21
7
8 25
8 10
Healthcare
South America Rest of world3 23
Supporting a quality transformation of a shipyard in Western Europe Developing a strategy for improving clinical quality and closely linking the quality strategy to the overall institutional strategy for a hospital
Optimizing quality improvement tools/processes and enhancing capability training programs
Diagnosing quality issues across the entire value chain starting from field complaints and internal Quality losses
Supporting the end-to-end implementation of client's quality system including design of a new customer care approach and installer strategy
11
50
North America
Supporting a Quality System transformation focusing on Quality function structure and size, performance management, and capability building
6
Global Energy and Materials Automotive & Assembly
Asia/Middle East
Supporting a client to develop from a cost leader to a quality player
Reducing warranty and goodwill costs and improving quality in launch phase
Europe
33
Redesigning the quality system including strategy, core processes, and quality organization Defining the real Cost-of-non-Quality, including indirect effects like market share impact
Integrating two companies to focus on quality supply chain and introducing performance measurement approach Identifying gaps and designing the quality system to be deployed in manufacturing facilities
1 Professional Services, Public Sector, Social Sector, and Private Equity 2 Telecommunications, and Media and Entertainment 3 Africa, Central America, Australia and New Zealand, and Caribbean SOURCE: McKinsey Quality Service Line, FPIS
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Background and objectives of “No. 1 in Japan”
Background
To increase market share and sustain good profit, reflecting the “Voice Of Customer ” into the entire xxx organization is critical Based on JD Power survey, xxx has constantly been lagging behind its competitors, xxx, xxx and xxx in CSI scores
JAPANESE EXAMPLE
Objectives
To become No.1 in CS in the Japanese market by 2015
To commit reliable quality to customers
To gain trust from customers
To build up a sustainable process of CS improvement activities
xxx needs to understand ‘what it takes to gain customer satisfaction’ and tackle this issue leveraging cross-functional capabilities
SOURCE: McKinsey
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Operational KPIs developed from multiple input factors and designated workshops Input factors Current quality and performance management Best practice elements for KPI systems Benchmarks for performance management Analysis of available external KPIs
Filter potential design requirements
JAPANESE EXAMPLE
Example design requirements
KPI design requirements (examples)
• Quality governance should be performed using a small set of top-level KPIs (e.g., JD Power Heavy-Duty CSI)
• JD Power scores should be cascaded to responsible departments (e.g., engine design should be accountable for engine reliability score)
KPI cascading workshop Quality management repr.
Finance representative
• Lead indicators are needed for successful governance (e.g., engine performance in durability test is a suitable lead indicator of JD Power score)
Facilitator
Head of unit (e.g., plant mgr.) Controlling representative
SOURCE: McKinsey
• Support functions cannot be Examine potential design requirements for consistency with KPI best practices, e.g., cascadeability and existence of matching lead indicators
governed by impact KPIs, but will be governed by process KPIs instead
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Bridging customer insights and cross-functional operations KPI pyramid
JAPANESE EXAMPLE
Positive experience is driven by delivering on factors that matter most to customers to create the perception of a service commitment to them Drivers of perception of servicecommitment
Relative importance 59
Resolve problems quickly
Important factors
Knowledgeable about my business
18
Competent,well-trained employees
13
“There will always be problems –it’s really how well they resolve it and whether I have confidence they will resolve it in the future”
• Providing a positive
CS#1 in Japan CS KPIs Concept Product (production, suppliers) Sales After sales Operational KPIs R&D Procurement Quality Management Product Sales After sales
SOURCE: McKinsey
Factors that matter less
Superior cost
6
Call center excellence
5
Convenience
4
Courteous and professional atmosphere
2
One-on-one personal relationship
1
“I will forget about the mistakes banks make as long as the customer service is nice about it and fixes it”
“The most important thing is to be treated with respect, because it is your money”
“If someone is really going to treat me well, you can charge me more per month for the service”
experience is creating the perception of the service commitment, driven by consistently delivering at moments of truth
• Moments of truth are those interactions during which customers invest significantenergy (sometimes emotional)in the outcome
What are the priorities for the customers? What are the ‘stated’ needs vs. ‘true needs’?
52
Sales
After sales
R&D
Examples of customer-relevant attributes Proximity of dealers Sales skills (e.g., technical knowledge, waiting time, knowledge of financial options, understanding of customer business friendliness) Service availability incl. proximity and opening hours Repair time incl. diagnosis and spare parts On-time delivery of repaired vehicle Product characteristics TCO (e.g., fuel efficiency) Available options vs. competitors Ease of maintenance (“design-for-repair”
Supply
On-time delivery of parts for new vehicles and for service/repair Spare parts cost
QM
Problem resolution speed incl. campaigns/recalls Quality of supplier parts
Production
On-time delivery of new vehicle Initial quality (first 0-3 months) Rework
How CS KPIs are linked to operational KPIs? How can we come to a cross-functional agreement?
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X
One key driver of customer satisfaction is effective and fast field failure resolution – best practice example
Time limit (working days, not cumulative) JAPANESE EXAMPLE
COO/CEO Cross-functional escalation committee
30
Cross-functional defect elimination team
s s e c o r p n o i t a l a c s E
Defect analysis
Prioritization Done by central coordinative department
7
Short-term measures
Long-term defect elimination 14
30
Documentation of lessons learned 7
How to speed up the process
HQ
Observe online data from the field (W&G rates, diagnosis data, etc.) and from the production line automatically 2
Quality measurements Internal External E.g., E.g., W&G rates JD Power Production failures NCBS Dealer feedback
Number of defects Threshold Maximum gradient
Shorten time limits/ speed up process
Time
Forward-looking estimates Defect elimination process McKinsey & Company
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Transparency on factors affecting CS and required cross-functional activities JAPANESE EXAMPLE JD Power CSI factor LDT 2009, Percent
100% Lifecycle cost
13
Quality
10
Purchasing experience
After-sales experience
21
56
SOURCE: Team analysis
Examples of relevant factors
Examples of improvement activities
Related line functions
Fuel efficiency Vehicle price Maintenance cost (service, parts)
Improvement of fuel efficiency of engine and transmission Variable cost reduction Productivity of mechanic Parts pricing
Development, design Production Procurement After-sales
Product design optimization Increase in supplier quality Increase in production quality Increase in maintenance and service quality
Development, design Production Procurement After-sales
Product spec Quality of parts and production process Durability
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Explanation capability of sales reps Purchasing process Delivery process
Education and motivation of sales reps Product description (brochure) Delivery by deadline
Sales Production Distribution
Delivery time and reliability of service Stable supply of parts Relationship with sales reps Fast field defect elimination
Maintenance friendly specs Service scheduling Speed-up of service Inventory management Cross-functional elimination
After-sales Development, design Distribution
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Example of mechanism to sustain impact
JAPANESE EXAMPLE
Monitoring
Target setting Counter measure definition
Project leadership
Assign KPI responsibility
Approve targets
Counter measure execution Instruct support
Assess plan vs. actual Push organization to define counter measures
Review activity progress
Quality planning
Quality monitor
Analyze and priori-tize KPI data Define KPI targets
Collect KPI data and distribute reports
Breakdown tar-gets into opera-tional KPI level
Coordinate crossfunctional activities
Reflect on evaluation
Report progress review
Define and instruct measures
Platform leader
Functions manager
Conduct hearing with plat-form and functional managers
Assess plan vs. actual
Verify operational targets with managers
Initiate counter measure definition
Report progress of measures
Execute counter measures
Feedback loop with DB inputs Establish clear link to eradication teams
Timing Annually
Monthly reporting
Ad hoc (as problem identified)
Monthly report
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