MS-96 Total Quality Management Previous Exam Paper

MBA - Master of Business Administration

Note: Attempt any three questions from Section A. Section B is compulsory and carries 40 marks.

1. (a) "TQM is a total system approach and is an integral part of corporate strategy. It works horizontally across functions and departments involving all employees from top to bottom." Explain and elucidate the ramifications of the statement.
(b) Juran divided quality management into three parts known as Juran's Quality Trilogy. Briefly explain the three parts of the Trilogy.

2. (a) What are roles and responsibilities of top management of an organisation in developing and implementing TQM concepts in an organisation?
(b) Explain various components of quality costs and strategy for reducing the quality cost.

3. (a) Discuss what are control charts. How could you interpret abnormal patterns in control charts?
(b) Explain what is "Acceptance Sampling". Differentiate between single sampling plan and double sampling plans.

4. (a) What conditions would you keep in mind while empowering people in the context of TQM?
(b) "TQM is not culture-spectific," Discuss.

5. (a) How does implement of ISO 9000 QMS encourage transparency and accountability?
(b) What kind of professional attitude should a quality system auditor have?

SECTION B

Bharat Engineering Industries Ltd. (BEIL)

The somber mood inside the 12th floor room mirrored the dark greedy clouds that hung low over the city. Most of the employees in the Bharat Engineering Industries Ltd. (BEIL) headquarters in south Bombay had left early that evening in order to avoid the impending rains and the inevitable dislocation in traffic. But there was no respite for the company's senior management team, which had assembled in the cabin of the president and managing director, Ramesh Ratnakar. Topping the agenda was a discussion on a report submitted by customer Pulse --- a premier market research agency --- which had been commissioned three months earlier to undertake a customer satisfaction survey.

Under Ratnakar's instructions this secretary had also circulated copies tof two fax messages received earlier on the afternoon from two key customers for discussion at the meeting Present, besides Ratnakar, were" vice-president (marketing), Anil Pandey, vice-president (contracts) Amit Nayak; vice - president (contracts) Amit Nayak; vice-president (finance), K. Sririvasan general manager (HRD), Mahesh Chand, who was also the designated coordinator for TQM; and general manager (production), Mukesh Kumbat. Also attending, as a special invited was Vinod Mathur, the company's marketing advisor.

As coffee was served, Ratnakar picked up the blue-bound volume. "I am sure you have all gone through this. We now seem to have tangible evidence of how customers perceive us, where we stand in relation to the completition, and where we are slipping up. It beats me, though, that we needed this research report to tell us what we ourselves should have recognized. It also vindicates my constant attempt at drawing your attention to the fact that we need to be more customer-focused in order to survive in this business," he began.

That's how it had all begun, BEIL had been incorporated two decades ago as a subsidiary of a European company. A decade later, the overseas parent had divested its entire shareholding, and BEIL, became a wholly Indian company, owned and managed by professional managers and technocrats. Its product-mix consisted of turnkey projects, engineering products, and capital equipment by companies in the continuous process industry. And BEIL had successfully executed more than 300 major contracts in West Asia, Africa, and Asia.

Tailor-made to the specifications of clients and consultants, some of these contracts had been funded by multinational lending agencies, including the World Bank, which laid down stringent norms. Over the years, the company had acquired the expertise to plan and execute projects for industries as diverse as nuclear and thermal power, fertilizers, chemicals, refineries, and petrochemicals. Its high level of technological competence had been attained through affiliations with some of the foremost engineering companies and consultants in the world as through sustained in-house R&D, on which BEIL spent an average of two per cent of turnover every year.

BEIL's R&D centre had, in fact, been recognized by the Department of Science and Technology as a premier research centre. And the company also had a well-trained and experiences team of engineers, who operated as trouble-shooters, ensuring minimum downtimes. The team was also responsible for executing annual service contracts and supplying essential spares. Having built quite a formidable reputation in the rehabilitation of sick plants and streamlining operations, BEIL even services units set up by its competitors.

Despite that recognition, Ratnakar said: "This report points out, quite conclusively, that BEIL scores poorly on various parameters of customer satisfaction. Gentleman, I want you to understand the gravity of the situation. New players like Alpha Projects, Mhatre & Co., and even Cosmic Engineering --- companies no one had heard of six years ago --- are now taking large bites out of our market-shares." Turning to one of his colleagues, he said: "Pandey, you were the one to suggest a survey. What do you think of the report? Pandey had jointed BEIL, as a sales engineer 10 years earlier, and had risen to become the head of marketing in June 1995. "There is one major difference between the way we do business and the way our competitors like. Cosmic engineering cope: we want customers on our terms; they accept customers on the customers' terms. Secondly, I don't agree with you when you say that we were not aware of the fact that the customer perceptions of BEIL were not positive. My department has brought up the fact that customer complaints have been rising for quite some time now. Unfortunately, nobody listened to us," he said.

Added Pandey: "The contracts division has often reneged on project deadlines. We delay the submission of our designs and plans. In fact, probably my biggest worry since I took charge of the department has been the steady deterioration in our customer-orientation. The findings of this report not to mention these two fax messages only prove …." He was interrupted at this juncture by Nayak: "Just a minute, Anil You know as well as I do that projects are often delayed for reasons which have a lot to do with the customers themselves. I can cite a number of instances in this regard. Whenever they have a resource crunch on can't extend the credit line with their bankers, the first thing they do is to ask us to hold back supplies."

"This throws our day-to-day planning out of gear and in turn-, impacts on the production schedules. It also affects our cash-flows, a fact which, I am sure, Sririvasan will bear out. Once their short-term financial problems have been started our customers then expect us to resume supplies at short notice. This also creates its own distortions. It has happened frequently," said Nayak.

Kumbat sought the chair's permission to speak. "Anil, you made a very valid point why our competitors are getting the better of us. It is true that the only way to win customers and ensure regular business from them is to comply with their terms. But there is a difference between complying with their terms and dancing to their tune. I have pointed out to you often, in the past, that we can't allow a customer to become whimsical. We should not let this business of the customer always being right upset own schedules."

Nayak supported this point: "I should also mention that a number of our customers do not give us their specifications on time, but expect us to submit our designs according to the original schedule. And I think that marketing seems to feel that we should get business at any cost. How else does one explain those huge discounts that keep popping up in our receivables?"

"I was discussing the issue of discounts with Sririvasan only yesterday," said Pandey. "I can assure you that they are not being given indiscriminately. I have given strict instructions that no discount should be offered unless they are duly authorised by me and certified by the finance department. But let me also tell you" whenever there is a delay in delivery, we have no alternative but to mollify the customer by shaving a bit off the price."

Ratnakar interceded: "Coordination among our various departments appears to leave a lot to be desired. But before we deal with that issue, let us address ourselves to the salient findings of this report." Customer Pulse had measured the competitive image of BEIL's products and brands on the following parameters:

• Reputation of manufacturer/supplier
• Quality and speed of response
• Proximity of the supplier
• Technical back-up from the supplier
• Speed of delivery
• Product quality
• Price.
• Discounts offered
• Credit Period offered
• After-sales service.

Customers were asked to assess each of these parameters on a five-point scale. The interpretation of the scale used to measure the importance of each parameter and customer satisfaction on each variable was as follows:

For purchase parameters
Very Important ………… 1
Important ……………….. 2
Not so important ………… 3
Not at all important ……….4
Can't say ………………… 5

For brand satisfaction
Very satisfied ………. 1
Satisfied ……………. 2
Not so satisfied ……… 3
Not at all satisfied …… 4
Can't say …………… 5

It was observed that for engineering contracts quality was the most critical factor in customer's decision making. Other important factors in descending order of importance in the customer's decision-making process were:

• Technical back-up
• Quality and speed of response
• Speed of delivery
• After-sales service.
• Image of the supplier
• Price

The following factors were found to be of secondary importance to the customers: proximity of the supplier; discounts offered; and credit period. After ascertaining the relative importance of various parameters, the competitive image of BEIL was evaluated vis-a-vis three competitors" Alpha Projects, Mercury, and Cosmic Engineering. It was found that while BEIL satisfied the secondary needs of customers more than their core needs, its competitors satisfied the core needs of customers more than their secondary needs.

The report revealed that in the case in engineering contracts, BEIL fared average on factors like reputation; credit period; proximity to the customer; and discounts. The major areas of dissatisfaction -- in descending order of importance --- among customers were: quality and speed of response; speed of delivery; price; and after-sales service. The quality of BEIL's product was not perceived to be satisfactory. Compared to that of Cosmic Engineering, it was rated poorly as there was a wide gap between the desired and the actual quality delivered by BEIL. Cosmic Engineering's customers rated the quality of its products highly and its performance more than met their expectations.

As far as spare parts and components were concerned, BEIL was perceived by customers as satisfying their on the following parameters: reputation of the supplier; proximity to the customer; and credit period. BEIL was found to be weak on product quality technical back-up; price, and after-sales service. BEIL and Cosmic Engineering were seen as close competitors and, by and large, the customer was indifferent to the source of his spare parts and components.

The most significant factors were price and off-the-shelf availability of the product. The frequency of salespersons contacts was also an important consideration BEIL was found wanting on technical back-up; quality and speed of response; product quality; after-sales- service; and speed of delivery. Then, Ratnakar asked the assembled group to turn their attention to the facsimile transactions received from two of the company's major customers. They read:

Fax 1:
The above mentioned to be developed a crack on May 25. After detailed discussions with your manager (QC), S. Ramachandran, the boiler was dispatched from our site at Pune to your fabrication vendor in Nashik on June 10 for repairs. Since then, there has been no progress in rectifying the same. We have called your concerned managers on the telephone on several occasions requesting expeditious action. Finally, I personally visited your vice-president (contracts), Amit Nayak, at his office in Bombay on July 10. He promised to look into the problem.

As per the minutes of the meeting that day, where your senior manager (contracts), Anil Dhawan, and your manager (QC), S. Ramachandran, were also present, the final inspection was to be scheduled for July 25. But considering that little-progress has been made so far, we are constrained to think that there is little possibility that our boiler will be returned to us in proper working condition before the end of October. We must express our serious concern over the casual and cavalier manner with which the problem is being attended to. Needless to say, the capacity utilisation of our plant has suffered considerable due to the delay in the repair to the boiler ……

Fax 2:
We had, with some hesitation, placed an order with BEIL for the supply of equipment for our food processing unit near Delhi. We experienced difficulty in getting all the specifications in time and the civil were help up for several weeks for want of details. Thereafter, despite several reminders to your Delhi and Bombay offices, simple requests for drawings were not attended to for weeks.

We haa problems getting your engineers to visit our site, resulting in further delays. Now, we have been waiting for three weeks for your commissioning personnel to arrive. Would you please look into the matter and let us know when we can commission the equipment….. "I don't mean to blame the contracts, Amit," said Pardey, "but it is obvious that it is the execution personnel who are responsible for these two days." There was silence in the room for a few moments. "Anil, may I go back briefly to the issue of discounts?" interjected Srinivasan. "We have problems in recovery even where discounts have been offered. Remember the Madras Synthetics case, where you reduced the price by almost 30 per cent and the customer still reneged on his payment? We recovered the amount after a lot of delay and that too, in instalments."

"Well, I agree with your assertion that we have to be competitive and that we must do our homework well," said Pandey, "I have told my boys to get the costs right and keep margins in mind when bidding. In fact, Mathur, who is present here, will conduct a training programme on competitive bidding for the marketing staff next week. At the same time," continued Pandey, "I must mention that there is always pressure from finance to keep booking orders so that the bottomline looks attractive. The boys go all the way and, in their enthusiasm to close a deal, they often forget to consider the profitability of each transaction in an individual deal. The new training programme should of course, set right that lacuna."

"BEIL has been a trend-setter and a pioneer in project-management for the last decades. But, during the last three years, the competition has been getting hotter," said Ratnakar, "While our competitors have all been growing at the rate of 40 per cent per annum, our growth last year, as you are all aware, ahs been 15 per cent. We cannot afford to rest on our reputation of we have to move from last year's turnover of Rs. 350 crore to the targeted turnover of Rs, 500 crore this year. Therefore, I think we need to train our people in quality service, customer orientation, and marketing," he continued.

"Anilm, why don't you and Mathur sit together and plan the training intervention? Mahesh Chand will coordinate with both of you. If we do not take the right steps immediately, we could be heading for trouble," he added, looking at his watch and glacing at the weather outside. He brought the meeting to a conclusion by saying. "I only hope that this dark night doesn't last too long. Mathur, I suggest that you examine this report and all other communications received from customers more closely and develop a marketing intervention plan."

As they all rose to leave, Ratnakar said: "Let's us meet next week with your customer locus plan, Mathur," As he walked towards the door, questions were flooding Mathur's mind. How could BEIL be made more customer-focused? Could training and retraining alone help? If so, who should be included in such a programme? What about marketing systems and management information systems? Could BEIL regain the service advantage it had before its rivals overlook it?

Questions:

1. Identify the main issue(s) the company is faced with.
2. How can BEIL regain its competitive service edge? How can the company become more customers-focused?
3. Do other systems like marketing system and management information system need to be modified/improves? Give reasons.