Quality Management: Transforming Coq Data As A Management Tool

COQ Data Integration Uses of COQ Data Initially, the COQ system was resented as just another number to be judged against. Carl Sheffer, General Manager of the Motor Controls PCC, recalled his concern: I resented the system, feeling that quality was a virtue in its own right. Attempting to assign costs to quality diminished its value. Value is not in the numbers but in the areas they represent. By 1987, however, the quality indicators and the COQ data in the Blue Book had become widely utilized management tools at M&C. Two factors had contributed to the system's widespread acceptance. First, quarterly financial forecast reviews were supplemented by quality reviews. PCC managers were now allowed to present the results of operations in a less structured format with emphasis on the areas of importance to each business. Second, the Quality Blue Book was not used to "hammer" the PCC managers. Performance was not measured exclusively on the achievement of quality goals nor were quality measures compared across businesses. Rather, the quality measures were used to focus on long term trends of quality improvement and to highlight potential sources of quality problems. The Quality Blue Book was distributed to the Group President, Con-troller, Vice President of People and Asset Effectiveness, and to the responsible Division and PCC managers on a monthly basis. Although not formally distributed to operating personnel, the information was widely available to them. Jim Meehan, PCC Quality Manager, noted: I don't distribute Quality Blue books to anyone below the level of the PCC manager. The PCC manager must take responsibility for getting copies to all the operating functions. Everybody probably sees them and anyone who asks me can have a copy. Different people use different measures-the PCCs use Cost of Quality, manufacturing uses internal failures, operations is interested in on-time delivery and marketing wants to know about external failures. Carl Sheffer discussed his use of the data: The reports go to all of my managers and team members. I take personal interest in Cost of Quality and ask for the numbers. At monthly meetings, the COQ numbers are discussed with the non-exempt employees. I highlight product lines that have improved and lines that have dete-riorated. We primarily focus on Internal Failure and RMR [Returned Material Reports] because they are "hard" numbers. The others are more helpful for trends. This year, the Cost of Quality numbers provided the single best indicator that problems had arisen in production, problems that had caused a bad P&L performance. The Cost of Quality showed deterioration in Internal Failure when the department claimed that scrap rates were down. The discrepancy arose from the department not realizing that it had not reduced the amount of overage (material in excess of the minimum required) issued from the stockroom. Even-tually, a physical inventory check found unused material all around the shop. So, the Cost of Quality report signaled a problem that may have gone undiscovered for a while. COQ Projects Quality improvements were aided by management's willingness to expend funds on projects that produced intangible benefits, such as quality and service, without rigorous financial justification. Concurrent with the financial planning cycle, Quality Improvement Teams, consisting of department managers, their staff, and representatives of support organizations such as Marketing, Engineering, Manufacturing, Production Control, Quality, Finance, and Purchasing, met to establish Cost of Quality improvement projects, using COQ system numbers as priority setting mechanisms. Anticipated savings from the COQ improvement projects were estimated and incorporated into the product line's profit forecast. COQ savings by project were subsequently tracked by the Manufacturing Engineering department.