Ch 16 - TQM and IS

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					Chapter 15 Summary

Information Systems
 Questions that the Topic of
      Planning Raises
• How important is planning?
• What is its purpose (Objective)?
• Who needs to do what?
• What is the impact on the organization?
• How can the process be kept dynamic?
• What is the relationship with information
• Is there a right planning methodology?
• Are there consistent planning success factors?
    Strategy Versus Planning
Strategy is thinking through a company’s
basis for competitive advantage.

Planning is a means of establishing a strategy
but it also focuses on making the strategy work.
             Strategic Planning Model
Opportunities        Strategic           Tactical      Business
                       Plan               Plan          Plan
                                       Business Unit   Detailed
                   Goals                               Projects
                   Objectives          Functional
                                       Programs        Resources:
Enterprise         Strategic                           Capital and
                   Positioning         Major
(Internal)                             Projects        Expense


                                                             Figure 15-3
      Planning Methodologies
   There are many planning methodologies.
   Methodologies are seldom the reason for
    planning success or failure.
   Planning methodologies are like systems
    with input, processing and output all being
    key elements.
   Key to planning is communicating the
    intended direction through practice.
Traditional Approach in IS Planning




            Traditional I/S Role
                                   Figure 15-2
                Business - IS Planning
                          Corporate                     Opportunities      Technology
                           Strategy                                        Environment

                          Business       Dictates
                          Strategy                      I/S Strategy

1) Strategic Capability
                              Benefits                           Determines
2) Technology Driven
   Business Change

                                                                       Figure 15-7
       Why IS Planning Fails
Management Authority and Responsibility
1. A lack of support of the planning process.
2. A failure to support the final plan through actual
3. The unexpected happens that was not anticipated by
   the plan. The key here is systems flexibility.
4. Too much time is spent on “turf battles” or other
   political issues and not enough on the desired
5. Impatience by senior management for results.
      Why IS Planning Fails
IS and General Business-related Issues
1. Its outcome is stated in terms of technology and
   not business results.
2. A lack of user understanding of how IS relates to
   the business objective or a failure to accept or
   support the proposed approach.
3. Tends to place blame on today’s environment
   rather than project a new and better way of doing
4. A lack of risk taking leads to an incremental
   approach that fails to motivate people.
   Final Thoughts on Planning
Planning is a tool. There is an organizational
learning curve regarding methodologies.

A good plan with no execution borders on a waste
of the entire effort.

A relatively weak plan with a few strong thoughts
followed by tenacious implementation can provide
major business benefits.
       Possible Exam Questions
1.   Identify and explain three reasons why a
     company would have problems developing and
     implementing a strategic plan.

2.   What factors are most important to successfully
     align information systems with the strategic plan
     of the company?
         Chapter 16

Was -- Total Quality Management and
The Role of Information Systems

 New -- Business Innovation Based
    on Process Reengineering


  SATISFIED               PROUD


                                Figure 16-5
     A Definition of Quality

“Quality” is conformance to customer
wants, needs and expectations, at a price
he or she will pay.
 Total Quality Management

Of the three letters in TQM, the T is most
important. Total says that you maintain a
balanced focus on major business factors
and business results while guarding against
becoming process myopic.
     Business Process Reengineering      Advantage

Competitor       Competitive

                                      TQM Alone

        Today                                  Time
               BPR Reputation
BPR is much discussed, often belittled and even criticized as
the latest business fad or buzz words.

Those that believe in its merits suggest that its critics either
don’t understand what it is or grossly underestimate the
challenge to apply the approach successfully.

There is no doubt that a BPR project represents a major
challenge because of its broad scope and recommended
clean slate approach. A typical high-risk, high-return effort.
     BPR is a Huge Challenge!
For a company to achieve and sustain a competitive
advantage it must continually address:
 Business Strategies
 Core Business Processes
 Organizational Structure
 Company Culture
 Internal Infrastructure and Support Technology

After validating existing business strategies or formulating
new strategies, a vehicle to address the other factors can be
business process reengineering (BPR).
                 BPR Focus
   Core Business Processes
   Organizational Structure
   Company Culture
   Internal Infrastructure and Support Technology

The results can be input to strategies and company
policies and practices.
            BPR Project Team
   The best of five or six experienced people.
   Really know the business.
   Broad business function representation.
   Excellent interpersonal skills.
   Full time for a month or two.
   Empowered with responsibility and authority.
   Clean slate approach.
   May decide to include a consultant.
          BPR in Summary
An approach that incorporates:
  – Business leadership.
  – Rethinking how work is done within the
  – Core business process analysis.
  – Project management.
  – Change management.
             BPR in Summary
   Done well, BPR can make a major contribution to
    the on-going success of a business.

   Done poorly, it can prove costly and very
      Four Logical Phases
. . . minimizing the time to realize sustainable benefits
                                                         4. Continuous
                                    3. Stabilization

                2. Business

       1. Analysis &

                       Dramatic Short                  Continuous Long
                        Term Gains                       Term Gains
    Business Management
                              •    Customer Service
                              •    Flexibility                    Vision

                              •    Lead time
                              •    Innovation                     Values
                              •    Quality                       & Beliefs

                              •    Cost                       COMPANY


      Performance Measures

                 Methodologies & Techniques
    Over Time Companies Have Taken a
   Simple Manufacturing Process and . . .

                             Pack &   CUSTOMER
ORDER   Make      Assemble    Ship
                . . . Complicating It




        Functional            Departmental                                Systems
        Measures                Barriers                                 Constraints
     Complex Manufacturing
   Results In:

• Large Production Batches
• Long Lead Times
• High Inventory Levels
• Many Suppliers
• Inflexibility
• Complex Scheduling & Paperwork
• Wrong Products in Stock
                    Complex Distribution
       Order              Order               Order               Order               Order

                Manufac            Local               Regional            Local              Customer
                -turing           Warehouse           Warehouse           Warehouse           Warehouse

                                      • Long Lead times
                                      • High Stock Levels
               Leads to:              • Poor Service
                                      • Many Parties Involved
                                      • Poor Quality

                                    High Logistics Costs
Complex Business Processes

   Sales   Design     Planning   Purch    Manuf-     Finance    Distr-
                                 -asing   acturing             ibution

                     •More Complexity
  Leads to:
                     •More Overhead Costs
                     •Longer Cycle Times
                     •More Levels of Management

                    Higher Overhead Costs
                 Resulting in a Tendency to
                 Automate the Complexity

                                                                                                    MRP                                                                  CRM

Sales   Design   Planning   Purch    Manuf-     Finance    Distr-   Sales   Design   Planning   Purch    Manuf-     Finance    Distr-   Sales   Design   Planning   Purch    Manuf-     Finance    Distr-
                            -asing   acturing             ibution                               -asing   acturing             ibution                               -asing   acturing             ibution

        Suppliers                                                   Manufacturing                                                       Distribution
   Core Business Processes
       Customer Order Processing
       New Product Introduction

           Supplier Development
            Supply Chain Logistics
. . . 5 or 6 Core Processes Represent 80% of the Costs
            A Better Approach?

             Sales   Design   Planning   Purch    Manuf-     Finance    Distr-
                                         -asing   acturing             ibution

                                                                         Value added (VA)

                                     ‘Ideal’ Process
                                                                         Non Value Added (NVA)

 • Eliminate all non-value add activities
 • The goal is a process consisting of only value-add activities
            Which of These Processes
           Add Value to the Customer?
                       Purchasing          Vendors
*     Planning                                              Expediting

                           *                                                  Receiving

                                                                               *          Inspection

                 *              Data
                              Collection                    Accounting

    Automated                                                                             Stores
           Robots                                                                                  *
                                    Supervision         Work-in-
IS as an Integral Part of the Solution

               Sales      Design   Planning    Purch    Manuf-     Finance    Distr-
                                               -asing   acturing             ibution

Automates much of                              IT Solution
 the Waste (NVA)

               Eliminates Waste               Business Process Reengineering

                       Enhances Value Add                  IT Enhanced

                                      The ultimate
                                       objective               ‘Ideal’ Process
A BPR Case Study

Microsoft Europe
                                 World Class
                               Business Processes
                                  for Europe


                World Class
                 in Europe

 World Class
  in Ireland

          A New Manufacturing
  FACTORY                     FACTORIES
 Two-stage manufacturing   • Cellular manufacturing
   – Duplicate disk            – Kitted materials
                               – Round Tables
   – Assemble product
                            • Self-directed, multi-skilled
 Functionally organized      flexible teams
 Complex planning and      • Kanban, visible controls
  tracking process          • A few, long-term, quality-
 Many short-term vendors     assured contract vendors
  (Job-by-job tendering)
        Manufacturing Results
   Lead time                 12 weeks to 1 day
   Raw Material & WIP         4 weeks to 1 day
   Finished Goods Inventory 12 weeks to NONE
   Quality (defect rate)      1 in 100 to 1 in million

Result:            Rapid low cost, high quality,
                   response to market demand
Consequence:      Traditional logistics began to
                   look inappropriate . . .
                ‘A’ class (rate-based) products (60% value) - 100 items
  Ireland                                                                 Distributor’s
Manufacturing    Ireland FGS                                              Warehouse
                                          ‘B’ & ‘C’ class products
                                         (40% value) - 2300 items
   Ireland ships to customers every day.
   Rate-based products made every day and shipped directly off
    the manufacturing line every day.
     – 60% of products are not warehoused.
   Non Rate-based products are made periodically as required
    for replenishment and are shipped from the warehouse.
   Lead-time from the warehouse is just transit time.
     – Worst case is three days to Central Europe
   The daily rate of deliveries is reviewed weekly.
     – Safety stock holding is calculated as five days plus the
        difference between the set rate and actual sales rates.
         Results of Better Logistics
    Microsoft Europe

•    1100 customers                          96
•    6 warehouses                        1 warehouse
•    10,000 square meters                1,000 sq. meters
•    Inventory turns from 4 x              32 x

Result:            Short lines of communication with
                   fewer, larger customers

Consequence: Traditional Pan-European business
              processes began to look inappropriate.
 Microsoft Europe                  Results of BPR
• Reduced complexity and volume of transactions allowed closure of
  Regional Business Systems
   – Six AS/400 installations around Europe were closed.
   – The AS/400 installation in Dublin was enlarged.
   – Connections to sales and marketing subsidiaries maintained by MS
• Reduction of Regional Establishments
   – Forecasting/accounting/inventory mgmt/purchasing/distribution/ sales
     order processing/credit control/returns/financials was centralized in

 Result:             Rapid supply through a short supply chain
                     using fewer, simpler transactions.

 Consequence:       Competitive advantage and high customer
           Critical Success Factors
   Find out what the customer really wants and/or needs.
   Do things in the right sequence: Manufacturing - Logistics -
    Business Processes
   Get commitment from senior management at an early stage.
    Functional manager views may need to be overridden.
   Have a clear vision of where you want to get to and communicate
    it internally and externally.
   Meticulously plan all transitional steps. It is during this period that
    customer service is likely to deteriorate.
   When designing pan-European processes, evaluate all local
    differences and then provide a consensus solution where possible.
   Do not underestimate the time required to mobilize and implement
    large scale change programs.
    Improvement Projects

Problem Definition and Linkages: Ensure that
improvement projects are focused on critical business
issues and key success factors.
Project Management and Execution: Provide a
framework for organizing, implementing and
following up on improvement projects.
Improvement Process Effectiveness: Provide a way
for the entire organization to learn from improvement
projects and standardize results learned from them.
Leadership and Participation

Leadership: define management’s role in sponsoring
change and focusing on achieving business success.
   • Managing change
   • Empowerment
   • Employee development

Participation: address methods used to motivate and
involve all employees to contribute to business success.
 Hammer Reengineering Principles
1. Organize around outcome and not tasks.
2. Have those that use the output of the process perform the
3. Integrate information processing work into the real work
   that produces the information.
4. Treat geographically dispersed resources as though they are
5. Link parallel activities.
6. Put decision making where the work is performed and build
   control into the process.
                    BSP Phases

 Project     Learning    New       Process     Implement
Objectives     from     Process   Transition      and
and Scope     Others    Design      Plan        Operate
             BSP Motivation
   Improve value to customer.
   Pursue new business opportunities.
   Strengthen alignment of core processes to
    business strategies.
   Optimize cross-functional performance.
   Broaden scope of activities and individual jobs
    to improve operational responsiveness or
   Reduce operating costs.
      Vendor Software/Support
   Project management: budgeting and project scheduling.
   Problem solving and diagnosis, diagramming and
    cognitive mapping.
   Customer requirements analysis.
   Process capture and modeling, flowcharting, activity
    diagramming and interaction modeling.
   Process measurement: activity based costing, statistical
    process control and time and motion studies.
   Process prototyping and simulation.
   IS systems analysis and design and software reengineering.
      Vendor Software/Support
   Business planning such as critical success factors or core
    process analysis.
   Organizational analysis and design: employee and team
    attitude opinion assessment, job design and team building
   Change management: search conferences, assumption
    surfacing, persuasion techniques
   Techniques for project management, problem solving and
    diagnosis are essential for management and basic problem
    Reasons BPR Projects Fail
1) The lack of sustained management commitment
   and leadership.

2) Unrealistic scope and expectations.

3) Employee resistance to change.
   Need to Remember

It is Not Processes, But People that
 Primarily Drive Business Success
    Total Quality Management
Total Quality Management (TQM) advocates incremental

This change typically includes stabilizing work methods,
strengthening employee involvement and teamwork,
heightened customer service, benchmarking processes and a
commitment to continuous improvement.
 Total Quality Management

How do you say to a long time, loyal,
hard working employee that quality
isn’t good enough?
   Total Quality Management
1. We are good, but we must continue to

2. Individually and/or departmentally we may
   be very good but we must be as good in the
   total efforts of the entire organization.
What You’d Get From 99.9% Suppliers

• At Least 20,000 Wrong Drug Prescriptions Each Year.
• More than 15,000 Newborn Babies Dropped by Doctors
  or Nurses Each Year.
• Unsafe Drinking Water at Least One Hour Each Month.
• No Telephone Service or Television Transmission for Nearly
  Ten Minutes Each Week.
• Two Short or Long Landings at O’Hare Airport Each Day.
• Nearly 500 Incorrect Surgical Procedures Each Week.

• 2,000 Lost Articles of Mail Per Hour.
What You’d Get From Six Sigma Suppliers
 • One Wrong Prescription in 25 Years.
 • Three Newborn Babies Dropped by Doctors or Nurses in
   100 Years.
 • Unsafe Drinking Water One Second Every Sixteen Years.
 • No Telephone Service or Television Transmission for Nearly
   Six Seconds in 100 Years.
 • One Short or Long Landing in Ten Years in all the Airports
   in the U.S.
 • One Incorrect Surgical Procedure in Twenty Years.
 • Thirty-five Lost Articles of Mail Per Year.
       A Case Analysis

 Leadership Through Quality at Xerox
Finding a Way to Save the Company that
 Had Once Owned an Industry and Was
    the Darling of the Stock Market
                     Xerox 914
Introduced in 1959, the 914 copier was a money machine
It was also arguably the finest product ever produced by
any company since it combined four technologies: chemical,
optical, mechanical and electronics.
By the time it was retired in 1973, it was the biggest-selling
industrial product of all time, and Xerox was in the
dictionary as a synonym for photocopy.
Success spoiled Xerox. To sustain its rapid growth, it needed
to move beyond copiers, but what could ever measure up to
the 70% gross profit margins of the 914?
                      Xerox History


      1959        1972 1979 1980   1983   1989   1990s

Source: Xerox Corp.                                 Figure 16.1
  Off the Benchmark
Indirect/Direct Ratio      2X

Production Suppliers       9X

Assembly Line Rejections   10X

Product Lead Time          2X

Defects Per 100 Machines   7X
Quality Through Leadership
     Program at Xerox
The strategy was for a cultural change that
enabled and empowered people with quality
tools and processes to:

      1. Meet customer requirements.
      2. Achieve business priorities.
      3. Continuously improve.
       The Plan for Leadership
          Through Quality
   1983--the year of start-up activities
   1984--the year of awareness and
   1985--the year of transition and transformation
   1986--the year when results would achieved
   1987--the year of approaching maturity
       Xerox Policy Statement

   Xerox is a quality company.
   Quality is the basic business principle for
   Quality means providing our external and
    internal customers with innovative products
    and services that fully satisfy their requirements.
   Quality is the job of every Xerox employee.
             Xerox’s Outcome
   – Failed to focus adequately on core work processes
     and statistics.
   – Plan was not integrated with business processes.
   – Not tuned to the company culture and the need to
     change it.
   – Did not pick the right quality czar at the start.
   – Did not push the operating units hard enough.
            Xerox’s Outcome
  –   Found the right cure to the ills of the company.
  –   Quality was the right solution at the right time.
  –   Had a committed senior management
  –   IS was used effectively to complement changes.
  –   Employee compensation was tied to quality.
  –   The pursuit of the Baldridge Award was an
      energizing effort within the company.
Important Supporting Elements
   Recognition          Tools      Transition
      and                and         Team
    Reward            Processes

                                                 Xerox is a
                                                Total Quality

     Training         Communi-

Source: Xerox Corp.                                    Figure 16-3
Information Systems Support
   Xerox had over 375 major information systems
    supporting the total business.
   Over 175 of these systems related specifically to
    the management, evaluation and planning of
   The validity, accuracy and timeliness of
    information systems are assured by the use of a
    Data Systems Quality Assurance process during
    the design, construction and major upgrade of
    each information system.
       What Xerox Did Right
1. It made an appropriate diagnosis of how to cure
   the ills of the company.

2. Quality was the right process for the right solution
   at the right time.

3. The necessary commitment was made by senior

4. A constituency was built starting at the top in a
  very calculated and deliberate way.
5. Information systems use was effectively aligned
  with its business objectives and processes to
  achieve them.

6. Executive compensation was tied to quality.

7. Innovations and successes of the TQM program
   were well publicized.

8. The pursuit of the Baldridge Award was an
   energizing effort within the company.

9. It achieved measured results.
Product and Operations Quality Results
                                                    Production Line
                                                     Defective Parts
         Defects Per            Production
        100 Machines             Suppliers

          Reduced              Reduced                Reduced

          10X                   10X                     15X

   Source: Xerox Corp., Reprinted with permission                      Figure 16-2
           Xerox Perspective
1. It took Xerox nine years to really buy into quality
   as a corporate way of life.
2. It took five years to complete the TQM training
   for all of its employees.
3. The salary of every employee is tied to quality
   improvements and profits.
4. It was concluded that all of this was worth doing.
              BPR Conclusions
1.   A BPR project must start with senior management
     support and sponsorship on an on-going basis.

2.   2. Even with the necessary senior management
     involvement, a project will still be very challenging
     given the dramatic improvements and possible changes
     that it can entail.

3.   3. A talented and experienced project team and a
     professional approach with discipline and interpersonal
     skills will significantly raise the odds of realizing BPR
            BPR Conclusions
4. BPR, as a high risk project, represents possible high return
   as proven by the companies that have successfully done so.

5. Information technology is often the enabler of successful
   BPR and the catalyst for business success.
     Ways to Improve Processes
1.   Traditional systems analysis – incremental
2.   Business Process Reengineering – ambitious
     and dramatic change through a clean slate
3.   Total Quality Management – incremental change
     with a major emphasis on quality.
    Some Valid BPR Questions
   What frequently triggers consideration of a business
    process reengineering effort by an organization? Is it
    likely that a company would decide to implement such
    an effort for the wrong reasons?

   Are there fairly consistent objectives that a company
    would want to pursue that would justify turning to BPR
    as a logical approach?

   What factors will dictate a high probability of success or
    a likelihood of failure?
     Some Valid BPR Questions
   Does the estimation that between fifty and seventy percent
    of BPR projects fail suggest that there is a fundamental
    flaw in the approach?

   How significant a role would or should information
    systems play in the design of new business processes?

   Does Total Quality Management compete with Business
    Process Reengineering or do the two complement each