HOW TO IMPROVE NONCONFORMITY ROUTINES

SCHOOL OF TECHNOLOGY AND DESIGN,TD

H OW TO IMPROVE NONCONFORMITY ROUTINES

VÄXJÖ,MAY 2006 THESIS NO:TD033/2006 BHARAT GUPTA

DEPARTMENT OF TEROTECHNOLOGY

Institutionen för teknik och design VÄXJÖ UNIVERSITY

School of Technology and Design

Dokumenttyp/Type of document Handledare/tutor Examinator/examiner Examensarbete/ Diplomawork Anders Ingwald Basim Al-Najjar

Titel och undertitel/Title and subtitle How to improve nonconformity routines

Sammanfattning (på svenska)

Nyckelord:

Abstract (in English)

This report is all about quality improvement work with focusing on nonconformities routines. The purpose is to improve the process of nonconformity routines and to identify the most important issues and causes behind nonconformity routines in order to have good quality of the products and satisfied customer to achieve continuous improvement. This project is conducted at a case study at the case company GMV Sweden AB producing lifts and their components. The problem in the case company is how the case company is handling nonconformity routines which consist currently of two streams one for problems in production which leads to internal nonconformities and another is handling customer complaints. The author visits the case company to collect essential information for this work and performs face-to-face user interviews, Q&A via email. The knowledge gained on different quality tools in author's education on Terotechnology department forms the basis of this research. The author plans to solve the problem by analyzing, mapping the existing processes and using different quality tools.

The author analysis is based on theoretical and empirical facts, also different quality tools like process mapping, cause effect diagram, flowchart has been used to identify the problem and relevant suggestions have been proposed to improve their current situation. In the results and conclusions the author has explain the various improvement techniques and suggestions to handle internal nonconformities and customer complaints. The author believes by implementing the suggested improved model company can address their quality issues, which will improve the productivity to a greater extent and enable them to achieve their goal of continuous improvement.

Key Words: Quality, Nonconformities routines, Internal nonconformities, Customer complaints

Utgivningsår/Year of issue Språk/Language Antal sidor/Number of pages

2006 Engelska/English 38, (47)

Internet/WWW http://www.vxu.se/td, http://www.vxu.se/bib/diva/uppsatser/

"Quality is when the customers come back

- not the product"

CEO in a small Swedish company

A CKNOWLEDGEMENTS

I would sincerely like to thank GMV SWEDEN AB in Alvesta for their contribution, but most of all, the respondent Joakim Mörnvik.

I would also like to thank my tutor, Anders Ingwald, who has helped me during this project.

Finally I would like to thank all my friends for their support and special thanks to my close friend Satya Jeet Singh for his encouraging support during tough situations.

______________________

BHARAT GUPTA

LI S T O F CO N T E N T S

1 . IN T R O D U C T I O N ... 1

1.1 BACKGROUND...1

1.2PROBLEM DISCUSSION...1

1.3PROBLEM PRESENTATION...2

1.4PROBLEM FORMULATION...2

1.5PURPOSE...2

1.6RELEVANCE...2

1.7LIMITATIONS...2

1.8TIMEFRAME...2

2 . ME T H O D O L O G Y ... 4

2.1METHODOLOGY INTRODUCTION...4

2.2SCIENTIFIC PERSPECTIVES...4

2.3METHOD FOR INVESTIGATION...4

2.4RESEARCH APPROACH...5

2.5DATA COLLECTION...5

2.6THESIS RESEARCH METHOD...5

3 . TH E O R Y ... 6

3.1QUALITY...6

3.2INTERNATIONAL ORGANIZATION FOR STANDARDIZATION 9000...6

3.3LIFT DIRECTIVE 95/16/EG ...7

3.4CUSTOMERS SATISFACTION...7

3.5INTERNAL NONCONFORMITIES...8

3.6CUSTOMER COMPLAINTS...9

3.7CUSTOMER COMPLAINT MANAGEMENT SYSTEM...10

3.8COST OF QUALITY...10

3.9TOTAL QUALITY MANAGEMENT...11

3.9.1CAUSE AND EFFECT DIAGRAM/FISHBONE DIAGRAM...12

3.9.2FLOW CHART^T...13

3.9.3PROCESS MAPPING...13

3.10SIX SIGMA...14

3.11MODEL FOR IMPROVING NONCONFORMITIES ROUTINES...15

4 . EM P I R I C A L F I N D I N G S ... 17

4.1COMPANY DESCRIPTION...17

4.1.1COMPANY’S PRODUCT...17

4.1.2GMVSWEDEN AB QUALITY POLICY...17

4.2COMPANY’S MANAGEMENT PROCESS...18

4.2.1RECLAMATION HANDLING PROCESS...19

4.2.2CUSTOMER COMPLAINTS...21

4.3PROBLEMS IN THE COMPANY FOR HANDLING ROUTINE FOR NONCONFORMITIES...23

5 . AN A L Y S I S ... 24

5.1STEPS FOR ANALYSIS...24

5.2IDENTIFYING PROBLEMS IN THE COMPANY...24

5.2.1PROBLEM 1-HANDLING CUSTOMER COMPLAINTS...24

5.2.2PROBLEM 2-INTERNAL NONCONFORMITIES...27

6 . RE S U L T S ...30

7 . CO N C L U S I O N S ... 31

7.1CONCLUSIONS...31

7.2FUTURE RESEARCH...32

8 . RE C O M M E N D A T I O N S ...33

RE F E R E N C E S ... 37

LI S T O F AP P E N D I X Appendix I - Reclamation issue Appendix II - Nonconformity report LI S T O F FI G U R E S Figure 1.1: Time frame... 3

Figure 3.1: Cause effect diagram, Bergman& Klefsjö (2003). ... 12

Figure 3.2: Flow chart symbols, ASQ (2006). ... 13

Figure 3.3: General diagram of a process mapping, LSBU (2006)... 14

Figure 3.4: Model for improving nonconformities routines ... 15

Figure 4.1: Company’s management process, GMV (2006). ... 18

Figure 4.2: Reclamation handling process, GMV (2006). ... 19

Figure 4.3: Handling customer complaint, GMV (2006)... 22

Figure 5.1: Flow chart for handling customer complaints ... 25

Figure 5.2: Cause and effect diagram for registering the complaints ... 25

Figure 5.3: Flow chart for internal nonconformities ... 27

Figure 5.4: Cause and effect diagram for filling the nonconformity ... 28

Figure 8.1: Improvement flow chart for handling customer complaint ... 35

1 . IN T R O D U C T I O N

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1.1 Background

The awareness of quality's importance started, after the Second World War in Japanese industries, when they realised that the cost of poor quality was a significant part of the overall cost. Related cost factors due to poor quality were defects, scrapings, revisions, delays and large safety stocks. These all lead to unsatisfied customers which create a bad reputation in the market. By improving the way they work with quality these companies gain more satisfied customers, which increases the competitiveness and probably market share, Yamada (2004).

All companies strive for reducing production costs in order to improve their competition and to stay in the market place. Company has several techniques and software programs etc. to lower production costs, but different areas in the companies focus at different things.

Organizations around the world have established in terms of improvement actions on all nature of systems, with significant efforts to decrease everything from starting and lead times to non-conformities. The result is more and more companies address variation reduction as their number one improvement opportunity, Magnusson et al (2003).

The non-conformity has a straight effect on quality system or the product or service. The lack of an efficient means of meeting sections will be considered as main non-conformity and this will be a total lack of effectiveness to control the process. The Control of Non Conforming Product and services remain to be an important executive procedure for maintaining the quality system of an organization as per the prescribed section, CSIQ (2006). All organizations have to determine the needs of the customer and identify them as defined requirements for the organization. The goal of this is to accomplish customer assurance in the products or services provided and this is essential to make sure that the defined requirements are understandable which is important to achieve continuous improvement in the organisation, Oakland (2000).

1.2 Problem discussion

The companies thought to care about non-conformities due to the fact that it is important and necessary for the production process, so it works effective in order to deliver on time. This is due to the factors of process that involves filling documents, manual registration to database and time-consuming manual work to put together the data for evaluation. Non-Conformities results in delays and poor quality products could lead to lost of goodwill, sales, customers and cost for breaking agreements due to late deliveries. It is of great importance that the top management is emphasizes in the work of quality improvements due to the fact that it is the management that should encourage the work with quality. It is important because management is allocating the needed resources for projects, Bergman& Klefsjö (2003).

To achieve best efficiency it is good if the company has a system with a sound process. It is a big advantage if the company’s suppliers and customers have system that matching the company’s computer systems because much work can be handled electronically instead of manual, McFadden et al (2002).

The Cost associated to non-conformities is one of the most significant cost entries in any company (15-30% of the invoicing). Reductions of non-conformity directly increase the benefits to the company, Silliker (2006).

1.3 Problem presentation

It is important that companies have control of non-conformities in the process in order to reduce costs, time and effort. The management should be committed in the work of quality and should focus on improving the various nonconformity routines in the organization. The focus should be to come up with a sound and robust process to increase the quality level of the organization.

1.4 Problem formulation

The author examines the following problem in order to handle nonconformity routines:

• How can problems in a nonconformity routine, which are handling customer complaints and internal nonconformities be identified and removed?

1.5 Purpose

The purpose of doing this report is to improve the process of handling nonconformities in the organization by applying various quality tools. The purpose is to remove the errors produced by manual intervention, which also results inaccuracy and consumes lot of company’s productive time. Also the purpose of the doing this project is to measure the performance of the processes and improve those processes by setting up high quality standards.

1.6 Relevance

All companies can benefit from good quality improvement works, and the savings can be great if it is implemented in the right way and therefore this subject is of great relevance. The quality of the products is an important competitive factor for surviving in the today's market.

By having product or services with poor quality it contributes to bad reputation of the product or service and the company's brand gets damaged. By having good control of non- conformities henceforth achieving good quality is an essential part of surviving in the global market today, which is important to achieve continuous improvement in the organisation.

1.7 Limitations

Due to time constraints the author only focuses on one case company. The delimitation is to focus on the problems with nonconformities within some parts of the process and not the entire process.

1.8 Timeframe

In figure 1.1 the timeframe of this report can be seen.

10 11 12 13 14 15 16 17 18 19 20 21

Introduction Methodology

Conclusions Recommendations

Week Activity

Theory

Empirical findings Analysis

Results Project start Selecting company

Figure 1.1: Time frame

2 . M e t h o d o l o g y

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2.1 Methodology introduction

According to Gummesson (2000) "Science is a journey and the existing theory is not destination." The new data are certainly not painful and not demolish existing theory they develop and improve it. It is a continuing generation of theories, models, concepts and categories.

2.2 Scientific perspectives

The two main scientific perspectives are positivistic and hermeneutic approaches.

Positivistic approach

The positivistic approach is a science of assumptions and principles. It is related to facts and figures with a proper verifiable and analytical event. The positivistic approach seeks information, which will be able to predict future what happens in the social world by searching for regularities, causal relationship between its constituent elements. This approach clearly attempts to mark reality linked with knowledge and it does not follow any observatory without knowledge. In comparison with hermeneutic, this approach is quantitative, Järvinen (2001).

Hermeneutic approach

The hermeneutic approach is linked more with the interpretation and understanding of literature and written text. The person who is building the interpretation has a defined understanding in the form of values and beliefs. The term hermeneutic however should not be seen in terms of textual interpretation only this is significant to the understanding of art and music. This can be applied to the understanding of contemporary literary and scholarly works.

This can be seen as an expansion of shared understanding based on listening as well as speaking. In comparison with positivism, this approach is qualitative, Järvinen (2001).

2.3 Method for investigation

There are two kinds of method used to investigate which are:

Qualitative

It has wider explanation in social science studies. In this method the collection of data is done with interviews, questionnaires, analyzing conversation. This method provides lot of information to the researcher for gathering the required data. This method uses inductive approach to the connection of the occurrence and its analytical view, Gummesson (2000).

Quantitative

The quantitative methods are represented by statistical figures like tables, graph or other statistics and this method is measurable in mathematical formulas with focusing on how to conduct a study. This method uses the deductive approach to describe the occurrence of research, Gummesson (2000).

The difference between the qualitative and quantitative methods is the way of analysing and comparing the gathered information. The proper method needs to select by the researcher the result influence the type of data is gathered.

2.4 Research approach

There are three different research approaches while conducting a study, which are induction, deduction and abduction.

Deduction

The deduction or deductive approach begins with existing theories. This approach involves with the compilation of theories and its related concepts that is used to formulate hypothesis for testing, Gummesson (2000).

Induction

The induction or inductive approach formulates the theories from the gathered real time data, models and different sources of data. This approach generates new theory, Gummesson (2000).

Abduction

The transition zone between deductive and inductive approach is identified as abductive approach. This approach can be studies with the start of every research, Gummesson (2000).

2.5 Data collection

In general when starting with a project, the goal is to reach the objective and to comply with the research strategies. To do so, a number of methods for data collection are needed. The most common methods are interviews, observations, and document reviews, Thurén (1991).

Other sources will mostly consist of scientific newspapers and articles

2.6 Thesis research method

This is started by gathering different type of relevant theory for the project by searching for articles and books and other types of information for the areas in this project. The qualitative approach has been used because the data collection for the empirical findings will be obtained at the case company. Most of the data collection will be provided during interviews and by e- mail contact by the quality manager who possesses the relevant competence for providing the information needed to this project. During visits improvisation will be used for open discussion around the subject. The report will consist of comparisons and evaluations of similarities and differences between the theory and the empirical findings. Both inductive and deductive will be used to make the analysis, results and conclusions. The reason for that the author has used as foundation for empirical research existing theories, which formulates theories from the gathered real data.

3 . T h e o r y

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3.1 Quality

The word quality is derived from the Latina "qualitas". Quality is about improving the competitive edge of the company by satisfying the customer, this is because quality is what gives the customer total satisfaction. The customer decides what good quality is and because of that it is important for a producer to fulfill the customer needs and expectations. Regardless of what type of organization you work in, competition is rife. When a company has good internal quality that means that the processes will run smooth and the products will get to the next working station on time. This influences the cost of the finished product. When a company has good external quality they attract customers.

Quality, reliability, price and delivery are all competitive weapons and quality is the most useful one of them. It needs to be used strategically in order to win customers and raise competitiveness, but before being able to put quality into important consideration, the concept of quality needs to be defined. To put it simply - quality is about meeting customer requirements. An important contribution to a company's success lies in customer loyalty, which means that by consistently meeting customer requirements you are less likely to lose them to a competitor. The important thing is to keep in mind that customers cost less to retain than to acquire and that about half of a company's new customers come through recommendation from existing clients. After having understood that quality is linked with customer requirements, the next step is to find out what these requirements are, Oakland (2000). There are several definitions of quality expressed in different ways. Some definitions of quality are:

“Quality should be aimed at the needs of the customer, present and future”, Deming (1986).

“The quality of a product is its ability to satisfy or preferably exceed, the needs and expectations of the customers”, Bergman& Klefsjö (2003).

3.2 International Organization for Standardization 9000

The quality standard international organization for standardization (ISO) 9000 is an international standard for quality control. This is an international standard, which assures that companies certified contain some type of structured method of working. This is concentrated on the quality of way of working and not directly on the quality of the product, Bergman &

Klefsjö (2003). The frequent findings of non conformities and lack of corrective actions to combat non conformities may possibly lead to the withdrawal of ISO 9001 certificate, NQA (2006). ISO-9002 compliant Quality Systems aims at preventing and detecting any non- conformity during production and installation process. Also various procedures are implemented to prevent the occurrence of the non-conformity, CSIQ (2006). The ISO 9000 family is a series of quality system standards and consist of three elements the ISO 9000:2000, ISO 9001:2000 is set for requirements and ISO 9004:2000 which is a guideline to improve the performance. There are eight main principles in ISO 9000:2000 which have been

formulated for quality management to control and they can be used by superior management to lead the organisation to improve. The principles constitute the base to the standards for quality management system within the ISO 9000 – family, Bergman & Klefsjö (2003).

• Customer focus - the companies should fulfil customer demands and should strive for exceeding customers expectations.

• Leadership - the leaders should create and maintain the internal environment where the employees can be engaged to reach the company's goals.

• Co-workers engagement - co-workers complete engagement is very important. That way their ability can be used for the best results.

• Process direction - wished results are to be achieved more effective if the activities and the belonging resources are handled as one process.

• Systematic approach - in a company it is important to decide, understand and handle with cooperating processes to make more effective results.

• Continuous improvement – the objective of a company should be to improve the function of the organisation.

• Fact based decisions - effective decisions are based on analysis of data and other information.

• Mutual advantageous relations with the suppliers - both the organisation and the suppliers want to create value and mutual advantageous relations make it easier to achieve that.

ISO 9000 makes demands on a company's quality system and how to improve the system. The reason a company chooses to introduce ISO 9000 is that it makes big demands on its own activities. Introducing this quality standard is a long and time demanding process, which hits a company with large costs. Education and engagement are two necessary factors, which are demanded as well. The company's routines have to be documented so that all in the company can follow the activities, thus the possibilities to track failures in routines/processes will increase, Bergman & Klefsjö (2003).

3.3 Lift directive 95/16/EG

The lift companies must be completely certified to carry out design and control procedures of entire lift to fulfill requirements for the lift directive 95/16/EG. The lift directive 95/16/EG are set of rules, which are mainly addressed to lift installer companies, and component manufactures. They also have important directions for the owners and users of the lift. Lift installers must conform to the requirements described in the directive. It does not cover lift installed temporarily on construction sites.

3.4 Customers satisfaction

The degree of customer satisfaction is the final goal of quality. External customers are the customers outside the organization (stakeholders). Noriaki Kano has created Kano model,

which explain the external customers needs. In this model he talks about basic, expected and excitements needs. It is very hard to measure external customers satisfaction. By knowing the external customer satisfaction level can improve and make sure that the needs are fulfilled.

Traditionally data about customer satisfaction has usually been gathered by the organization marketing staff and usually never reaches the production floor. This is not good due to the fact that the internal customer also has to be satisfied. Every single employee must be satisfied with his/her daily routines in order to does it and be able to contribute to the process in a positive way. Motivation is the keyword to success and the employee should feel that they are involved in the whole process. By improving the internal customer satisfaction one can make the process more effective which has a major affect on the external customers needs, Bergman& Klefsjö (2003).

3.5 Internal nonconformities

An internal nonconformity is an error which can be found in the process, a part or component that during production not fulfills the requirements or finished products that is not passing the final test and control or may be something which has not been planned to fulfill the requirements internally. The products and services which do not conform to requirements have to be controlled to avoid unplanned use of application or installation and the organization needs to identify record and review the nature and extent of the problem which come across and determine the action to be taken. This needs to contain how the non- conforming service will be:

• Adjusted Corrected or to conform to requirements or

• Accepted under special consideration, with or without correction, or

• Reassigned for an substitute, valid application, or

• Rejected as unsuitable

The organization needs to control production and service delivery process through:

• Visibly understandable the instructions and work standards

• Proper equipment, production and service

• Appropriate working atmosphere

• Appropriate check up, measuring and testing equipment, capable of required accuracy

• Implementation of proper monitoring, check up and testing activities

• Provision for classifying position of the product or service, with respect to necessary quantity and verifying the activities

• The proper methods for release and delivery of product or services

The organization requires identifying the product or service by suitable means throughout all processes where the organization requirement is to trace and required to control the identification of product or service. And also to make sure that, during internal processing and final delivery of the product or service, the identification, packaging, storage, maintenance and handling do not extremely affect conformity with the requirements. This applies equally to products and services. It is very difficult to verify the output by observing, inspection or testing, deficiency in processing may become visible only after the product or service is delivered. The organization should validate the product and service delivery processes to demonstrate their products, services usefulness acceptability, Oakland (2000).

3.6 Customer Complaints

"The single most important thing to remember about any enterprise is that there are no results inside its walls. The result of a business is a satisfied customer." Peter Drucker. Therefore handling of customer complaints is very important for offering Superior Customer Performance. The three important features of the customer complaint method are, IFAS (2006).

Actively Seeking Customer Complaints

There are many organizations that are totally customer-focused but do not immediately respond effectively to the customer complaints. The organization needs to provide customers with simple opportunity to register their dissatisfaction because a few dissatisfied customers will tell others about their problems and many potential customers will be lost. The investigation shows for every customer complaint there is no expressed there are over 25 unregistered complaints. Many of the dissatisfied customers simply take their business somewhere else. The companies, which are truthfully committed to provide superior customer performance they need to, work hard as long as they provide opportunities for their customer to complaint. This needs to consider knowing what opportunities exist in the organization to more aggressively receive and invite customer complaints. Every organization is not so perfect to provide superior customer performance. If there is no information from the customers concerning your performance that is not necessarily to be considering as good for the organization, IFAS (2006).

Types of complainer

There are five different types of complainers, which can be classifying by their different attitudes, beliefs and requirements. The following types are:

• The gentle customer: This type of customer normally does not complain, IFAS (2006).

• The aggressive customer: They are the opposite of the gentle customer, they frequently complaint by rising their voice, IFAS (2006).

• The high-roller customer: This type of customer expects the best and they are ready to pay for it. They like to do complaint with a good manner, as compared to aggressive customer, IFAS (2006).

• The rip-off customer: This type of customer aim is not only to get the complaint with satisfaction also to receive back something, IFAS (2006).

• The chronic customer: This type of customer is not at all satisfied there is always something incorrect. Their aim is to complaint. However he is a customer, they are not rejecting, IFAS (2006).

Handling customer complaints

All the good quality managers want to know about the each and every complaint from their customers. After registering the complaint their job is to take corrective action and correct the customer complaint. With no customer complaint management system, this is often taken for granted by them that everything is all right. For every customer complaint it is estimated that are minimum 26 complaints, which are never spoken. A few dissatisfied customers will tell others about their problems and many potential customers will be lost. For every single complaint received is likely to tell 20-25 other customers. Therefore, all the companies need to define procedure for handling customer complaints, IFAS (2006).

3.7 Customer Complaint Management System

In today’s competitive economy systems for capturing, analyzing and translating customer complaints into different actions for continuous improvement are required for a competitive edge over others. Its doesn’t take much monetary investment to implement a simple customer complaint management system which down the roads returns clear cut profitability and gain to the organization. A successful and well-designed customer complaint management system (CCMS) can change the way company thinks about the customer complaints, it makes a complex and trivial customer complain look simple and more understandable. A successful customer complaint management system provides continuous improvement in products and services of the company. Customer complaint management system turns the customer complaints into knowledge about customers. Customer complaint management system also provided a knowledge bank to the organization, which can be used for many years to solve similar customer issues without many problems, Gonzalez Bosch (2005).

By using Customer complaint management system, companies can enter customer complaints into a database available for everyone to read and respond to. Customer complaint management system should be easily configurable and should be designed precisely to meet the organization's client’s requirements. Screens, including menus, should be designed to suit company's requirements and the terminologies should be easily customizable to make it relevant to the business. All screen, menus and database items should also be translated into the language of organization's choice, Autoscribe (2006).

Customer complaint management system should be easily configurable according to the company's customer requirements. The system should always remains in line with current requirements and business needs of the company. Also not much technical knowledge should be required to configure or maintain the system, this helps in avoiding the cost associated with maintaining the system, Autoscribe (2006).

Customer complaint management system should be designed to track and trace the status of customer complaints. System should be designed to capture both Customer comments and compliments as well. The CCMS should have the potential to cut fraud, identify acts of extortion and deliberate product contamination, and to highlight production faults that are leading to repeated complaints. The Customer complaint management system should deal with every aspect of complaint management, Autoscribe (2006).

Good service is a key for better future of an organization this can be achieved with a successful implementation of Customer complaint management system. It can be implemented in any company irrespective of the size, products, services etc. Customer complaint management system provides a unique learning opportunity for all its employees, Gonzalez Bosch (2005).

3.8 Cost of quality

The cost of quality (COQ) concept developed by Joseph Juran in connection with cost of poor quality issues in the organization because what really cost is the lack of quality. These cost take place when faulty units are produced or services are performed in a way that rework and compensation are essential, Bergman & Klefsjö (2003).

By producing a good quality product, providing a high quality service to achieve customer satisfaction is not sufficient. The cost of attaining these goals has to handle very carefully to

achieve long-term effect in the industry. The cost of quality is not differing from other costs like design, productions maintenance and others. The cost of quality can be divided into four groups, which are internal failure costs, external failure costs, appraisal costs and prevention costs, Oakland (2000).

Prevention costs

The prevention costs are connected with design, production and maintenance of the total quality management system. These costs have to be planned earlier to do all the activities.

The prevention costs are product requirements, implementing quality planning, assurance of the quality, training programs for employees and others, Oakland (2000).

Appraisal Costs

The appraisal costs are connected with the customers and suppliers evaluation of purchasing materials, products or services in order to make sure that they fulfill the specific requirements.

These costs are verifying the materials, inspection for equipments and checking the quality system whether it is functioning properly. The appraisal costs results is ‘cost of checking it is right’, Oakland (2000).

Internal failure costs

The internal failure costs appear when the product fails to reach the requirements needed or notice before transport to the customer. The internal failure costs are waste while doing needless work, scrapping and rework like faulty product and to do rework to correct the faulty product, re-inspection of the product to rectify the problem or the product is usable but does not meet specifications may be need to lower the price and sell, Oakland (2000).

External failure costs

The external failure costs appear when the product fails to reach the requirements needed but not be able to notice before transport to the customer. The external failure costs are complaints, warranty costs, repair and servicing of the returned products and transport costs also good will cost which losses the image of the company and reputation which impact future opportunity for sales or may they loose their contract. Both the internal and failure costs produce the ‘cost of getting it wrong’, Oakland (2000).

3.9 Total Quality Management

Total Quality Management (TQM) is a tool to improve quality "a constant endeavor to fulfill, and preferably exceed, customer needs and expectations at the lowest cost, by continuous improvement work, to which all involved are committed, focusing on the process in the organization". It’s about preventing, changing and improving rather than controlling and repairing quality work. The quality work is a continuous process, developing products and processes because quality issues are the integral part of the activities. TQM as a whole concept focuses on continuous improvements where values methodologies and tools combine to attain higher customer satisfaction with less resource consumption. The improvement possibilities represent the foundation for the organizations improvement plan for the forthcoming years, until the next activity description and evaluation is done. The improvement work must be a natural part of the organizations daily work. It has to be supported, managed and evaluated by the highest management, Bergman& Klefsjö (2003).

It is important that as many co-workers as possible are committed in the improvement work.

In this system, customers both external and internal are the ones who define good quality.

TQM system is based on logical and relevant facts and requires a strategy to make decisions according to the facts. In a TQM system, most organized activities can be regarded as processes. There are different kinds of processes such as main processes, support processes and management processes. Data that is used to improve the processes is generated and the purpose is to satisfy the customers. The commitment part of TQM creates conditions for the suppliers as well as for the employees to be motivated and show involvement in the work towards customer satisfaction, which is important to achieve continuous improvement in the organization. There are a number of various quality management tools, Plan do check act (PDCA) Cycle and seven quality control tools. These various tools are helpful to select what to do at each essential phase of the improvement efforts to achieve continuous improvement in the organization, Bergman& Klefsjö (2003).

3.9.1 Cause and Effect Diagram/Fishbone diagram

Dr. Kaoru Ishikawa developed it in 1943 and it identifies the possible causes and can be used to structure a brainstorming session. The Cause and effect diagram got the name fishbone diagram from its appearance. The first stages of the diagram can be seen as a rough sketch of the possible reasons behind a quality problem, Bergman & Klefsjö (2003).

The next step is to concentrate on one of these causes and describe them in more detail and only move on to the next cause when all the detailed descriptions are investigated. When thinking up these possible causes it helps to refer to something called the seven M's, Bergman& Klefsjö (2003).

Management - are they interested in improving the quality by providing sufficient information?

Man - can the problem you are facing lie in inexperienced workers? Is Lack of employee motivation?

Method - do we have the proper tools for the job?

Measurement - are there any disturbing environmental factors?

Machine - are the machines maintained properly?

Material - does the supplier fulfil our quality standards? Are we buying bad material?

Milieu - how do environmental effects affect our production?

Bergman & Klefsjö (2003).

Machinery Measurement Management

Quality Problem

Material Man Method

Milieu

Figure 3.1: Cause effect diagram, Bergman& Klefsjö (2003).

3.9.2 Flow chart

The flow chart is a picture of the separate steps of a process. The flowchart often includes elements such as; materials or services entering or leaving the process (inputs and outputs), time involved in each step. The process that needs to be described doesn't have to be a manufacturing process - a flow chart works well with an administrative or service process.

The use of flowcharts is often called blueprinting. It can enable facilities to trace and solve future quality problems at an early stage. The flowchart also explains the interaction between different parts of a company, Bergman & Klefsjö (2003).

Explanation of symbols used in detailed flowcharts:

- A step in the process

- Direction from one step to another

- Represents question based decisions where the questions are written in the diamond

- Delay or wait

- Link to another flow chart - Represents input or output

- Symbol for start and end points of the flow chart

Figure 3.2: Flow chart symbols, ASQ (2006).

3.9.3 Process Mapping

The process is an activity that takes several inputs and transforms into an output. The process mapping creates a chart, which shows how all inputs, and outputs are connected to each other.

The process mapping brings new ideas and this will provide knowledge about the existing processes by mapping them into a picture. The reason to do this is to understand deeply the existing processes and must be easy to follow-up. We can also see how the existing process is working and this is the most important factor if we need to change something to develop the business process reengineering. The aim of this is to attain improvement in the organisation by changing the design process. The figure 3.3 shows the essential features of process mapping, LSBU (2006).

Outputs

Products

Services

Information

Paperwork

Process

Materials Procedures Methods Information People and skills

Knowledge and Training Plant/ equipment

Inputs

Figure 3.3: General diagram of a process mapping, LSBU (2006).

3.10 Six Sigma

Six Sigma is a quality improvement tool. It is a well-organized quality approach to eradicate defects with the aim to reduce variation in process, minimize cycle time, and increase productivity in production processes, which lead to increased profit. It is a long-time initiative that requires hard work and close attention. The primary aim of Six Sigma is to obtain high profit. An approach to this helps in attaining high quality. The Six Sigma requires top management to be process oriented and fully committed to achieve high customer satisfaction. A big advantage with Six Sigma is that it works in a structured way and is relatively easy to implement drastic changes. CEO's develops the goals and they are involved in formulation of the goals. They also follow up in order to see if new processes create return on investment. To get total commitment Six Sigma has belt structure for education and for that employees have to participate in DMAIC/DMADV training programmes, which are meant for improving the current processes, or to come up with new processes, Yamada (2004).

DMAIC (define, measure, analyze, improve and control) are associated with process improvement and not necessarily for the breakthrough improvement. DMIAC includes tollgates (or detailed activities) that are recommended in most improvement projects, Magnusson et al., (2003).

‰ Define

o Generate project and prioritise o Develop project and team charter o Identify y or y:s to be improved o Determine performance/map process

Clarify the reason of the project. The impact, expected effect, etc. should be discussed, Magnusson, et al., (2003).

‰ Measure

o For each y, identify x:s o Develop measurement plan o Data collection of y and x:s

Explore "what the real problem is" by utilizing data, Magnusson et al., (2003).

‰ Analyse

o Get to know the y

o Identify x:s that influence y o Establish improvement targets

Exploring the relation of the response and causes by utilizing data, Magnusson et al., (2003).

‰ Improve

o Design solution(s) o Cost/benefit analysis o Implement best solution

Clarify the relation between response and input factors. Design of experiments is often very useful. Derive counter measures. These are derived based on the knowledge in the field and results of statistical data analysis Confirm the effect of counter measure by experiments, pilot plant etc, Magnusson et al., (2003).

‰ Control

o Verify the planned improvements in y o Estimate the cost saving

o Institutionalise and document

o Communicate and visualise

Implement the counter measures at the process and check the availability of the measures in practice. Obtain the remaining problems for future activities, Magnusson et al., (2003).

3.11 Model for improving nonconformities routines

Identifying problems in

non- conformities

Generate suggestions

for improvement

Follow up Present condition

Problems with nonconformities routine handling Company’s Process for nonconformities

Implementation

Further improvement

Observed internally

Observed externally (reclamation from customer) Process mapping

Continuous improvement

Identifying problems in

non- conformities

Generate suggestions

for improvement

Follow up Present condition

Problems with nonconformities routine handling Company’s Process for nonconformities

Implementation

Further improvement

Observed internally

Observed externally (reclamation from customer) Process mapping

Continuous improvement

Figure 3.4: Model for improving nonconformities routines

The figure 3.4 shows a model for improving nonconformities routines. The model follows the following steps:

Present condition

The first step is to study the present condition of the company. This will involve studying the current processes and preparing the pictorial representation of the exact steps, procedures followed by the company. The purpose of doing this will be to get the true picture of company’s, as is process and to get acquainted with their real situation and scenarios. Special care will be taken to map the company’s current process as it is without any deviation from their current way of working.

Identifying problems in nonconformities

The next step is to identify the problems in their process the problem lies with nonconformities routine handling, which follows internal nonconformities and reclamation from customer. This can be measured by asking person, surveys and interviews in the company. After knowing the problem expands this further to know about the problem in detail and this can be done by mapping the process. The purpose of doing this is to know where exactly the problem exists in their process, why this problem exists and what are the reasons behind that and what can be done to remove causes. This can be done by redesign the process to see what has to do to eliminate the problem. The quality tools can be used like process mapping, cause effect diagram etc.

Generate suggestions for improvement

After finding the problems clearly the next step is to generate suggestions, which are necessary for improving nonconformities routines. This can be done using different quality tools like cause effect diagram, DMAIC, process mapping, flow chart etc. and implementing the suggested solution. The purpose of doing this is to implement new suggestions into the process by doing changes.

Follow up

After implementing the suggested solution the next step is to follow up the suggestions for further improvement. The follow up is important to see whether the implementation of suggestions is improving the nonconformities routines. The purpose of doing this is to have continuous improvement in the organization.

4 . E m p i r i c a l f i n d i n g s

___________________________________________________________________________

T

___________________________________________________________________________

4.1 Company description

GMV Sweden AB is a subsidiary of the Italian company GMV Martini and was established in 1993. Today the GMV group is a global leader and the world’s biggest producer in the manufacture of hydraulic lift components and represented in a wide range of countries worldwide. While 1997, company has a completely owned subsidiary in Poland. The local markets include the Nordic countries, Poland and the Baltic States. The additional sales are also made through distant markets like Australia and United Kingdom and plus some other markets cover through our parent company GMV Martini. Some part of the production is distributed and sold by the parent company GMV Martini. GE-Capital a General Electric group is a minority shareholder in GMV Martini Italia since the autumn of 2000. GMV Sweden AB is placed in Alvesta, has approximately 60 employees and an annual turnover of 120 million Sek. GMV Sweden AB is certified by ISO 9001:2000 and also accepted by lift directive 95/16/EG Accreditation according to their specifications. The company manufactures more than 30,000 hydraulic units per year and over 550,000 installations globally operated with GMV hydraulic components, which contain 50% of hydraulic elevators in Europe and 40% in the world. GMV represents in 22 countries, and have 14 partners with 9 distributors and has approximately 500 employees.

4.1.1 Company’s product

The company product varieties cover the main components and some parts are not produced by GMV group and they buy and combine with their systems and make a complete lift and sell. At GMV Sweden they mainly focus on development of jacks, power units, car frames, cabins and other components with the help of parent company. The GMV group products are:

Combined Systems:

• Components for the entire lift systems

• Components for the standard TML passenger lift

• Power packages for hydraulic lifts

• Documentation and design according to lift Directive 95/16/EG Single components:

• Hydraulic tank units with electronically regulated control device

• Telescopic jacks

• Indirect and direct acting car frames

• Centre and side opening doors

4.1.2 GMV Sweden AB quality policy

GMV Sweden quality policy is to make long term trust with their customers through quality orientated activities, products and deliveries. This will be accomplished by:

• A high level of personality and company commitment

• Co-operation, inspiring support and teamwork spirit with in the company

• Our customers perceiving us a reliable and competent company providing modern products with the right quality

• Products that fulfilled specified requirements

• Deliveries being made to agreed schedule

• Positive administration of warranty claims and deals with their problems in a constructive way

• Follow up continuous improvements

• Build responsibility to own and others hard work

• The products accomplish requirements for the lift directive 95/16/EG

4.2 Company’s Management Process

Mainprocess

Design and development

Order Handling

Supportprocess

Purchase

Production- & measuring devices

Supportprocess

Nonconformities

Manu- factoring

Manu- factoring Purchase Purchase Order

registration Order

registration DeliveryDelivery Ordercontract

Level 5 4 3 2 1

Calibration Calibration Measuring

devices Measuring

devices Maintenance Maintenance

Subcontractor agreemnet Subcontractor

agreemnet SuborderSuborder

Reclamation From customer

Reclamation

From customer Internal Nonconformities

Internal Nonconformities Product

development

Drawing design and Adapt to order

Mainprocess

Design and development

Order Handling

Supportprocess

Purchase

Production- & measuring devices

Supportprocess

Nonconformities

Manu- factoring

Manu- factoring Purchase Purchase Order

registration Order

registration Manu- DeliveryDelivery factoring

Manu- factoring Purchase Purchase Order

registration Order

registration DeliveryDelivery Ordercontract

Level 5 4 3 2 1

Calibration Calibration Measuring

devices Measuring

devices Maintenance

Maintenance Measuring CalibrationCalibration devices

Measuring devices Maintenance Maintenance

Subcontractor agreemnet Subcontractor

agreemnet SuborderSuborder

Reclamation From customer

Reclamation

From customer Internal Nonconformities

Internal Nonconformities Product

development

Drawing design and Adapt to order

Figure 4.1: Company’s management process, GMV (2006).

The figure 4.1 shows the organization structure of the whole management process at GMV Sweden. The company follows three types of processes. The first type in management process is support process in that design and development of the product carried out while drawing designs making prototypes. Every part of the components goes with testing and inspection to make sure they fulfill requirements. The nonconformities in the support process are internal nonconformities and can be traced by filling the documents, which is shown in appendix 2.

This procedure helps in finding the nonconformity and helps taking decision for reclamation.

The second type is the main process there is order handling and how the company handles their orders from the customers there are five levels the first level is customer order where the order is placing directly. In the second level customers know what they want but they do not know the code numbers and prices. The level third is standard lifts where customer knows and type is approved. The fourth level is any hydraulic lifts where customers do not now anything and the level five is not standard lifts its about special requirements from the customers. After knowing the order they register and then started doing production and purchase if anything requires in order to fulfilling the requirements and then delivers to the customer they used highly developed logistics system to make sure quick and reliable delivers to their customers.

Doing daily maintenance and preventive maintenance for machines can check the production measuring devices.

The third type is support process where the purchasing can be done by questions, inquiring prices to their subcontractors and agreements can be signed and orders can be processed.

of reclamation handling process and how it is related to internal .

Figure 4.

clamation handling process and routines for andling internal nonconformities. The purpose is to secure correct handling of the 4.2.1 Reclamation handling process

The block diagram

nonconformities is shown in figure 4.2

2: Reclamation handling process, GMV (2006).

The figure 4.2 shows the block diagram of re h

nonconformities that is nonconforming products and nonconforming administrative service.

The possibility is to see that all nonconforming material, parts, components and products that during the production not fulfils the requirements or finished product that is not passing the final test and control, other products or processes that do not fulfils the requirements. After getting the reclamation from customer makes sure that it is a reclamation matter and then the reclamation issue has to be fulfilled in the document shown in appendix 1. After filling the document for reclamation issue the direct action has to be taken register the reclamation issue

Reclamation issues

Direct action

Corrective action

Credit

Evaluation

Internal non- conformities

Control of non- conformity

Decision of action

Responsible manager (action and follow up)

Registration

Fill in a paper non- conformity report

Operator

Goods receiver Admini- stration

Non-

conformity to subcontractor

Components in return to subcontractor

Follow up costs

Manually enter to database Reclamation

from customer

Reclamation issues

Direct action

Corrective action

Credit

Evaluation

Internal non- conformities

Control of non- conformity

Decision of action

Responsible manager (action and follow up)

Registration

Fill in a paper non- conformity report

Operator

Goods receiver Admini- stration

Non-

conformity to subcontractor

Components in return to subcontractor

Follow up costs

Manually enter to database Reclamation

from customer

Control of nonconformity: To control the nonconformity the following persons must

• Operator: The role of operator is to fill nonconformity report for all nonconforming

Administration: The role of administration is to handle the deviation inside the

Goods receiver: The role of goods receiver is to receive goods after checking if there

Decision of action: The decision of action must be taken seriously due to some reasons if and then follows the problem and start to do corrective actions this leads to internal nonconformity. To prevent the internal nonconformities the following steps must follows:

¾

follow the instructions:

products in the workshop. They print the nonconformity document in a paper and fill the document manually as shown in appendix 2. The description of the nonconformity should be filled in. Regarding material produced at GMV, the nonconformity report is handed to the office. Regarding purchased material the nonconformity report is handed to purchase department. If required the nonconformity report is handed directly to the production responsible or the purchase responsible, if they are not available hand the nonconformity report to the quality manager. If a decision cannot be taken immediately the material/product is marked “stopped goods” and if possible moved to a place for stopped goods. The operator has the authority to take an action that has been approved by the quality manager and decide to get new material from the store when the nonconformity report is filled in.

•

department this is done immediately the responsible person is the one who noticed the deviation. The deviation should be removed so that it is not reoccurring. If the removal of the deviation is leading to changes the quality responsible should be contacted. If a deviation can be handled immediately the nonconformity report appendix 2 is filled in.

The description of the deviation should be filled in. They print the nonconformity document in a paper and fill the document manually as shown in appendix 2. The nonconformity report is handed to the head of the department.

•

is nonconforming material received. They print the nonconformity document in a paper and fill the document manually as shown in appendix 2. The description of the nonconformity should be filled in. The nonconformity report is put in a box marked

“nonconformity report purchase”. If a decision cannot be taken immediately the material/product is marked “stopped goods” and if possible moved to a place for stopped goods. Put the control document together with the delivery note in the box marked “stopped goods, under investigation”. The purchase department puts together the documents from the box marked “stopped goods, under investigation” with a decision regarding action and put it in a box marked “Investigated Stopped Goods”.

Receiving personnel/Responsible for control inform production office when the action is decided.

¾

a decision cannot be taken immediately the material/product is marked “stopped goods”

and if possible moved to a place for stopped goods. The nonconforming products are not used in production. The Production manager, marketing manager, purchase department or quality manager fills in “decided action” in the non conformity report and the nonconformity report sends to the subcontractor. The Responsible for the decided action is responsible for that it is carried through. In case extra time is required for handling of the nonconforming goods or replacement material should be manufactured.

The written nonconformity report should follow the replacement material

nsible for hand it to

Responsible manager: The nonconforming product is nonconforming until the decided

• Rework: The nonconformity report and control document to production office that

• ake note on the nonconformity report package and weight and

• eport and the control document to production office

When the nonconformity report is coming back from production office

• If return to supplier a copy of the nonconformity report should follow the returned

• nconformity report is handed to quality responsible

Registration: The nonconformity document is registered and put in a document. That

fter following the corrective actions the reclamation issue is stored in a file and then

.2.2 Customer Complaints

iew of the workflow for the customer complaint:

•

• At each work place the type of operation and the time is filled in

• The work place where the nonconformity report is written is respo the responsible person

¾

action is taken and the result is checked according to instructions. The quality manager decided what actions to be taken. The production manager and purchase department check and decide regarding products of GMV own production and responsible for the components in return to subcontractor. The quality manager responsibility is to investigate possible actions and follow up costs.

create a rework order Return to supplier: M

hand the nonconformity report and the control document to production office and secure that material is sent back

Scrap: Hand the nonconformity r

goods The no

¾

nonconformity report is written based on customer complaints and other internal nonconformities. The administrative responsibilities are carrying through an action and document it. The quality manager does this manually and enters into database.

A

evaluate the reclamation issue and the decision is documented in appendix 1. A filled in appendix 1 is handed to the quality manager. The quality department provides the reclamation matter appendix 1 with an ok to credit. Get the copy of the invoice from the file. Make a note on it about the credit the date and that it are approved by the quality department and send invoice to the customer. The reclamation matter, appendix 1 is handed back to the quality department with “credited by” and “date” filled in.

4

The figure 4.3 the schematic v