(Management For Professionals) Marc Helmold - Virtual and Innovative Quality Management-Springer (2023)

Management for Professionals
Marc Helmold
Virtual and
Innovative Quality
Management
Across the Value
Chain
Industry Insights, Case Studies and Best
Practices
The Springer series Management for Professionals comprises high-level business
and management books for executives, MBA students, and practice-oriented
business researchers. The topics span all themes of relevance for businesses and the
business ecosystem. The authors are experienced business professionals and
renowned professors who combine scientific backgrounds, best practices, and
entrepreneurial vision to provide powerful insights into how to achieve business
excellence.
Marc Helmold
Virtual and Innovative

Quality Management
Across the Value Chain
Industry Insights, Case Studies
and Best Practices
Marc Helmold
IU International University of Applied Sciences
Berlin, Berlin, Germany
ISSN 2192-8096 ISSN 2192-810X (electronic)

ISBN 978-3-031-30088-2 ISBN 978-3-031-30089-9 (eBook)
https://doi.org/10.1007/978-3-031-30089-9
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Preface
Mega trends, the global COVID-19 pandemic, globalization, the increasing (espe-
cially the digital) interconnection, and the unlimited exchange of data and informa-
tion have led to a maximized transparency of value-adding activities and global
supply chains. This is leading to the question how to generate a competitive advan-
tage for companies in the producing, trading, service, or information industries. In
this context and as a consequence, there is a paradigm shift nowadays to manage the
value chain from the supply side over the entire production toward the customers.
Only the integrative approach with optimum combination of strategies, methods,
and concepts from the customer order, planning, procurement, production, and
logistics up to the reverse logistics process will enable enterprises to make decisions
for the management of their business actions. Quality can be described as the com-
bination of customer satisfaction with a specified state of a product or service. In
this context, modern Quality Management(QM) plays a crucial role to manage cus-
tomer satisfaction.
Quality Management (QM) can therefore be considered as the major competitive
advantage against competition to achieve the ultimate customer-satisfaction. QM,
sometimes also defined as Comprehensive Quality Management, refers to the con-
tinuous, ongoing areas, and all of an organization (company, institution, etc.) that
capture, record, view, organize, and control activity that serve to introduce quality
as a system goal and guaranteed permanently. QM was further developed in the
Japanese automotive industry and finally made a successful model. Total Quality
Management (TQM) needs the full support of all employees to be successful. The
key principles of the QM philosophy include:
• Quality is based on the customers’ needs and expectations.
• Quality is achieved by employees of all areas and levels.
• Quality includes many dimensions that must be operationalized by criteria.
• Quality is not a goal, but a process that never ends.
• Quality refers to products and services.
• Above all, however, to the processes used to produce them quality requires active
action and must be worked for.
The most widespread QM concept in Europe is the EFQM model for Excellence
of the European Foundation for Quality Management. This book provides a holistic
and practical approach to Quality Management (QM) and Total Quality Management
v
vi Preface
(TQM). It combines all functions of the value chain and contains best practices in
performance. It explains, comprehensively, how these new paradigms enable com-
panies to concentrate on value-adding activities and processes to achieve a long-
term sustainable and competitive advantage. The book contains a variety of best
practices, industry examples, and case studies. Focusing on best-in-class examples,
the book offers the ideal guide for any enterprise to achieve a competitive advantage
across all business functions focusing on value-adding activities.
Berlin, Germany Marc Helmold

April 2023
If you can’t explain it simply, you don’t understand it well enough. (Albert Einstein)
vii
Contents
1 Quality Management (QM)�� 1

1.1 Scope and Definition of QM �� 1
1.1.1 What Is Quality? �� 1
1.1.2 Quality Definition by Deming�� 2
1.1.3 Q-C-D Plus Alpha �� 4
1.2 Fit, Form, and Function�� 5
1.3 Quality Definition According to the ISO 9001:2015�� 5
1.4 Quality Across the Supply Chain Management (SCM)�� 7
1.4.1 Scope and Definition of SCM �� 7
1.4.2 Supply Risk Prevention and Mitigation�� 8
1.4.3 Methods of SCM Risk Evaluation�� 11
1.4.4 Sustainability in the SCM �� 11
1.4.5 Fair Trade in the Supply Chain �� 12
References�� 12
2
Integrated Management Systems (IMSs)�� 15
2.1 Scope of IMS�� 15
2.2 Advantages and Disadvantages when Using an IMS�� 16
2.2.1 Advantages of IMS �� 16
2.2.2 Disadvantages of IMS�� 18
2.3 Realization of IMS�� 19
References�� 20
3
Extended Reality (XR) in QM�� 21
3.1 Definition of Extended Reality (XR)�� 21
3.2 Creation of XR�� 23
3.3 Augmented Reality (AR)�� 24
3.4 Mixed Reality (MR)�� 24
3.5 Virtual Reality (VR)�� 25
References�� 26
4
Total Quality Management (TQM)�� 27
4.1 Introduction to TQM�� 27
4.2 TQM Strategy �� 30
4.3 TQM Principles�� 30
ix
x Contents
4.3.1 Principle 1: Holistic Approach�� 30

4.3.2 Principle 2: Team Activity Approach�� 31
4.3.3 Principle 3: Contribution of Employees�� 32
4.3.4 Principle 4: Execution of Risk Analysis �� 33
4.3.5 Principle 5: Data Visualization�� 33
4.4 TQM Success Factors �� 34
4.4.1 Introduction to TQM Success Factors�� 34
4.4.2 Customer-Driven and Customer-Centric Focus�� 35
4.4.3 Full Employee Involvement and Communication�� 36
4.4.4 100% Commitment of Leadership and Communication�� 37
4.4.5 Cross-Functional Improvement Teams �� 37
4.4.6 Process Approach�� 38
4.4.7 Integrated System�� 39
4.4.8 Strategic and Systematic Approach�� 39
4.4.9 Continual Improvement�� 40
4.4.10 Fact-Based and Evidence-Based Decision-Making�� 40
5
History and Evolution in Quality Management (QM) �� 43
5.1 Quality History and Developments�� 43
5.2 Advanced Quality and Product Planning (APQP)�� 44
5.3 Quality Assurance (QA)�� 45
5.4 Quality Control (QC)�� 46
5.4.1 Introduction to QC�� 46
5.4.2 Testing as Element of QC �� 46
5.4.3 QC Methods�� 47
5.4.4 Role of QC Inspectors�� 48
5.4.5 Benefits of QC�� 48
5.4.6 Examples of QC�� 48
5.5 Differences of QA and QC�� 48
5.6 Quality Improvement (QI)�� 49
5.7 Milestones in QM �� 49
5.7.1 Deming, Juran, and Japan �� 50
5.7.2 The American Total Quality Management Response �� 50
5.7.3 From QM Towards Total Quality Excellence �� 50
5.7.4 Quality Function as Central Interface in the Enterprise�� 51
5.7.5 TQM in Virtual and Digitized Value Chains�� 51
5.7.6 From QMS Towards Quality Improvement (QI)�� 52
Reference �� 54
6
Quality Management as Part of the Corporate Strategy �� 55
6.1 Strategic QM�� 55
6.2 Levels of Strategy �� 55
6.2.1 Corporate Strategy�� 56
6.2.2 Business Strategy�� 57
6.2.3 Functional Strategy �� 57
6.2.4 Alignment of Strategies�� 58
Contents xi
6.3 Strategic Triangle�� 59

6.4 Strategic Analysis: Where Are We?�� 59
6.4.1 Analyzing Important Factors�� 59
6.4.2 Analyzing the Environment�� 60
6.4.3 Analyzing the Industry�� 60
6.4.4 Analyzing the Strengths and Weaknesses �� 61
6.4.5 Analyzing the Core Competencies�� 62
6.5 Strategic Choice: Where Are We Going to?�� 63
6.5.1 Generic Strategies �� 63
6.5.2 5P Model by Henry Mintzberg �� 64
6.5.3 Boston Consulting Matrix (BCG Matrix)�� 64
6.5.4 Ansoff Matrix�� 66
6.5.5 Blue and Red Ocean Strategies�� 68
6.6 Strategic Implementation: How Do we Achieve this?�� 69
6.6.1 Assessment of Suitability, Acceptability, and Feasibility �� 69
6.6.2 Suitability�� 70
6.6.3 Acceptability �� 70
6.6.4 Feasibility�� 71
6.7 Strategic Pyramid�� 71
6.8 Mission and Vision�� 72
6.9 Goals and Objectives�� 72
6.10 Core Competencies �� 72
6.11 Strategies�� 73
6.12 Strategic Architecture�� 73
6.13 Control and Execution�� 73
References�� 74
7
Audits and Quality Management Systems (QMS)�� 75
7.1 Quality Management Systems (QMS)�� 75
7.1.1 Definition and Scope of QMS�� 75
7.1.2 Different Types of QMS�� 76
7.2 QMS: DIN EN ISO 9001:2015�� 77
7.3 Aviation QMS: EN/AS 9100�� 77
7.4 Automotive QMS: IATF 16949:2016 �� 78
7.5 Railway QMS: ISO/TS 22163 (IRIS) �� 79
7.6 Healthcare QMS: DIN EN 15224 �� 80
7.7 Medical QMS: ISO 13485�� 81
7.8 Telecommunications QMS: TL 9000�� 81
7.9 What Is an Audit?�� 82
7.10 System Audits �� 83
7.11 Process Audits�� 83
7.12 Product Audits�� 84
7.13 Control Audits�� 85
7.14 Other Audits�� 85
7.15 International Organization for Standardization�� 85
References�� 86
xii Contents
8 Quality Excellence Models�� 87

8.1 BSC, Balanced Scorecard �� 87
8.2 Better Strategic Planning�� 90
8.3 Improved Strategy Communication and Execution�� 91
8.4 Better Alignment of Projects and Initiatives �� 91
8.5 Better Management Information�� 91
8.6 Improved Performance Reporting�� 91
8.7 Better Organizational Alignment�� 91
8.8 Better Process Alignment�� 92
8.9 EFQM, European Foundation for Quality Management�� 92
8.9.1 Concept of the EFQM Excellence Model�� 92
8.9.2 Continuous Process�� 93
8.9.3 Self-Assessment�� 94
8.9.4 Application of the EFQM Excellence Model �� 94
8.10 Baldridge Excellence Model�� 94
8.11 Business Performance Improvement Resource Model (BPIR)�� 95
8.12 P2E Excellence Model�� 96
References�� 97
9
Cost of Quality (COQ)�� 99
9.1 What Are Cost of Quality (CoQ)�� 99
9.2 COQ Measurement and Identification�� 101
9.2.1 COQ Calculation Method �� 101
9.2.2 Cost of Good Quality (COGQ) �� 103
9.2.3 Cost of Poor Quality (COPQ) �� 103
9.3 COQ Optimization�� 104
9.3.1 Analyzing Prevention, Appraisal, and Failure�� 104
9.3.2 The Effect of Improving the QMS Processes on Quality
Costs�� 105
9.4 Reduction of COQ and Quality Prevention�� 105
9.4.1 Failure Prevention Initiatives�� 105
9.4.2 Improving Work Instructions and Process Management�� 105
9.4.3 Implementing the Appropriate Training and Qualification
Initiatives�� 106
9.4.4 Verifying Eqiupment Calibration�� 106
9.5 Reduction of Quality Cost of Appraisal�� 106
9.5.1 Initiatives for Reducing Quality Costs of Appraisal �� 106
9.5.2 Reducing Reliance on 100% Inspection �� 106
9.5.3 Introducing Automated Inspection�� 107
9.5.4 Automatic SPC �� 107
9.6 Appraisal Cost on Supplier Side �� 107
9.6.1 Introducing Measures on the Supplier Side�� 107
9.6.2 Source and Receiving Inspection Checks �� 108
9.7 Reducing Cost of Failures�� 108
9.7.1 Initiatives for Reducing the Cost of Quality Failures �� 108
Contents xiii
9.7.2 Discrepancy Documentation�� 108

9.7.3 Workflow Routing and Flow Principle of Tasks �� 108
9.7.4 Failure Prevention and Rework�� 109
9.8 Cost of External Failures�� 109
9.9 Claim Management�� 110
9.10 Recalls and Retrofits �� 110
Reference �� 112
10 Concept in Quality Management��
5S 113
10.1 Value-Added and Waste�� 113
10.2 Muda, Muri, and Mura�� 114
10.3 Ishikawa Diagram �� 115
10.4 5S Concept�� 116
10.5 TIMWOOD: Seven Types of Waste�� 118
10.5.1 Transportation �� 118
10.5.2 Inventory �� 119
10.5.3 Motion�� 120
10.5.4 Waiting�� 120
10.5.5 Overproduction �� 121
10.5.6 Overprocessing �� 122
10.5.7 Defects�� 122
References�� 126
11
Lean Production as Part of QM�� 127
11.1 Lean Production and Toyota Production System (TPS) �� 127
11.1.1 Introduction to the Lean Production System�� 127
11.1.2 Pull Principle�� 128
11.1.3 Tact Principle�� 128
11.1.4 Flow Principle�� 129
11.1.5 Zero-Defect Principle�� 130
11.2 Andon�� 130
11.3 Poka-Yoke �� 131
11.4 Gemba and Shop Floor Management �� 132
11.5 Shadow Boards �� 132
11.6 Health, Safety, Environment (HSE)�� 133
11.7 Overall Equipment Effectiveness (OEE)�� 134
11.8 Kanban�� 135
11.9 Supermarkets�� 135
11.10 Shisa Kanko�� 136
12
Quality Management on the Supply Side�� 139
12.1 Supply Side �� 139
12.2 QM Objectives in Supply�� 142
12.3 Managing the Supply Side�� 142
12.3.1 Supply Management Process�� 142
xiv Contents
12.3.2 Supply Management Strategy �� 144

12.3.3 Supply Management Selection and Evaluation�� 145
12.3.4 Control Via Supplier Dashboard or Cockpit �� 148
12.3.5 Supply Risks �� 149
12.3.6 Method of Evaluation �� 150
13
Quality Management on the Demand Side�� 155
13.1 QM on the Demand Side�� 155
13.1.1 Introduction to Quality Management
on the Demand Side�� 155
13.1.2 Quality by Using Efficient Consumer
Response (ECR)�� 156
13.1.3 Vendor-Managed Inventory (VMI) �� 157
13.1.4 Enterprise Resource Planning Integration (ERP) �� 157
13.1.5 Quick Response (QR) �� 157
13.2 Incoterms 2020�� 158
Reference �� 159
14
Leadership in Quality Management�� 161
14.1 Leadership in QM �� 161
14.1.1 Tells�� 162
14.1.2 Sells�� 163
14.1.3 Suggests�� 163
14.1.4 Consults�� 164
14.1.5 Joins�� 164
14.1.6 Delegates�� 164
14.1.7 Abdicates�� 164
14.2 Empowerment and Jidoka in Modern QM�� 165
14.3 Autonomous Work Groups �� 166
14.4 Job Rotation�� 166
14.5 Job Enlargement and Job Enrichment�� 167
15
Transformation and Change Management in QM �� 169
15.1 Transformation and Change Management�� 169
15.2 Internal and External Reasons for Change Management�� 170
15.3 Kotter’s Change Management Model �� 171
15.4 ADKAR Change Management �� 173
16 Environmental, Social, and (Corporate) Governance (ESG)
as Part of Quality Management�� 175
16.1 Definition of ESG �� 175
16.2 UN Initiative: Who Cares Wins�� 176
16.3 Standards and Regulations in ESG �� 182
Contents xv
17 Negotiations in QM�� 187

17.1 Negotiations in QM�� 187
17.1.1 Negotiation Competencies and Skills in QM�� 187
17.1.2 The A-6 Negotiation Concept for Successful
Negotiations�� 187
17.2 Negotiation Manuscript in QM as Key Success Factor�� 189
17.3 Personalities and Roles in Negotiations�� 190
17.4 Summarizing the Success Factors for Negotiations in QM�� 191
18
Problem-Solving, Process, and Idea Creation Tools �� 193
18.1 Problem-Solving Tools �� 193
18.2 A3 Method�� 193
18.3 8D Method�� 196
18.4 Kepner–Tregoe�� 197
18.5 TRIZ�� 199
18.6 PDCA�� 201
18.7 Six Sigma�� 203
18.8 Value Stream Mapping�� 204
18.9 RPR Method�� 204
19 Creativity Tools in QM�� 205
19.1 Brainstorming �� 205
19.2 Mind Mapping�� 205
19.3 Design Thinking�� 205
19.3.1 The Concept of Design Thinking�� 205
19.3.2 Understanding and Empathizing�� 206
19.3.3 Defining a Point of View�� 207
19.3.4 Finding Ideas�� 207
19.3.5 Prototyping�� 207
19.3.6 Testing�� 207
19.3.7 Implementing�� 207
19.4 Scribble �� 208
19.5 Pecha Kucha�� 208
19.6 Action Learning�� 208
20 IT-Based QM�� 211
20.1 Industry 4.0 in QM�� 211
20.2 Artificial Intelligence (AI) in QM�� 213
20.2.1 AI Tools in QM �� 213
20.2.2 Autonomous Robots �� 213
20.2.3 Virtual Production and Supply Chains�� 214
20.2.4 Lean Simulations�� 214
20.2.5 System Integration�� 214
20.2.6 Internet of Things�� 214
xvi Contents
20.2.7 Cybersecurity�� 214

20.2.8 Cloud Computing�� 214
20.2.9 Additive Manufacturing�� 215
20.2.10 Extended, Mixed, and Augmented Reality �� 215
20.2.11 Big Data�� 215
21
Future Outlook and Trends in QM�� 217
21.1 Agility and Adaptability in QM�� 217
21.2 Focus on Efficiency in QM �� 217
21.3 Centralized Data Management in QM�� 218
21.4 QM Backed by Lean Management and Six Sigma�� 218
21.5 Focus on Sustainability, ESG, and CSR in QM�� 218
21.6 Use of Sophisticated QM Software, AR, VR, and XR�� 218
21.7 Expanding Boundaries of QM�� 219
21.8 Accountability of QM as Driver of Customer Satisfaction
in the Value Chain �� 219
21.9 Virtual Quality Management (VQM)�� 220
About the Author
Marc Helmold
IU Intern. Hochschule, Berlin, Germany

Dr. Marc Helmold (MBA) is Professor at IU
International University of Applied Sciences in Berlin.
He teaches Bachelor, Master, and MBA in Operations,
Quality Management, Supply Management, General
Management, Strategic Management, and Leadership.
From 1997 until 2017, he had several positions in
top management positions in the automotive and rail-
way industry. Between 1997 and 2010, he worked in
several companies like Ford, Ford-Mazda Japan,
Porsche, and Panasonic Automotive in managerial
functions and executed lean workshops throughout the
value chain.
From 2013 until 2016, he was the General Manager
of Bombardier Transportation in China and led the
sourcing and spare parts sales activities. Since 2016 he
is Professor at the IU and has his own consultancy. In
this capacity, he improves companies in performance.
xvii
Acronyms and Abbreviations
A3 Problem-Solving Method
A6 A-6 Negotiation Concept
ADKAR Awareness, Desire, Knowledge, Ability, Reinforcement
AI Artificial Intelligence
AM Additive Manufacturing
APA Advanced Purchasing Agreement
AR Augmented Reality
BCG Boston Consulting Matrix
BSC Balanced Score Card
BME Bundesverband Materialwirtschaft, Einkauf und Logistik
BMW Bayerische Motorenwerke
BOS Alstom (formerly Bombardier) Operating System
COGQ Cost of Good Quality
COQ Cost of Quality
COPQ Cost of Poor Quality
CSR Corporate Social Responsibility
DIN Deutsche Industrienorm
DSCM Downstream Supply Chain Management
ECR Efficient Consumer Response
EFQM European Foundation of Quality Management
ERP Enterprise Resource Planning
EXW Ex works
IOP Internet of Things
IOP Internet of People
IPO International Procurement Office
ISO International Organization for Standardization
IUBH International University Bad Honnef
JIT Just-in-Time
KPI Key Performance Indicator
MPS Mercedes Benz Production System
OEE Overall Equipment Effectiveness
OKR Objectives Key Results
PDCA Plan, Do, Check, Act
PDSA Plan, Do, Study, Act
xix
xx Contents
PE Physical Education
PESTEL Macro Analysis
PPS Production Planning System
QFD Quality Function Deployment
QM Quality Management
QPMC Quality Performance Management Cycle
QR Quick Response
SFM Shop floor Management
SCM Supply Chain Management
SQC Supplier Qualification Cost
SWOT Strengths, Weaknesses, Opportunities, Threats
TIMWOOD Seven Types of Waste in Manufacturing
TQE Total Quality Excellence
TQM Total Quality Management
TÜV Technischer Überwachungsverein
UN United Nations
USCM Upstream Supply Chain Management
USP Unique Selling Propositions
VD Virtual Design
VR Virtual Reality
VW Volkswagen
XR Extended Reality
5S Seiri, Seiton, Seiso, Seiketsu, Shitsuke
7R 7 Rights
Quality Management (QM)
1
1.1 Scope and Definition of QM
1.1.1 What Is Quality?
Quality and quality management (QM) are terms, which are used across the supply
chain in enterprises and industry. Although the term quality is quite widely used by
practitioners and academics, there is no generally agreed definition of it, since dif-
ferent definitions of quality are appropriate under different circumstances (Helmold,
2023). In the quality management system (QMS) ISO 9001, quality is defined as the
international standard that specifies requirements for a quality management system
(QMS). Organizations use the standard to demonstrate the ability to consistently
provide products and services that meet customer and regulatory requirements
(ISO, 2023). ISO 9001 sets out the criteria for a quality management system and is
the only standard in the family that can be certified to (although this is not a require-
ment). It can be used by any organization, large or small, regardless of its field of
activity. In fact, there are over one million companies and organizations in over 170
countries certified to ISO 9001. This standard is based on a number of quality man-
agement principles including a strong customer focus, the motivation and implica-
tion of top management, the process approach, and continual improvement
(Brugger-Gebhardt, 2016). These principles are explained in more detail in ISO’s
quality management principles. Using ISO 9001 helps ensure that customers get
consistent, good-quality products and services, which in turn brings many business
benefits (ISO, 2023).
© The Author(s), under exclusive license to Springer Nature 1

Switzerland AG 2023
M. Helmold, Virtual and Innovative Quality Management Across the Value
Chain, Management for Professionals,
https://doi.org/10.1007/978-3-031-30089-9_1
2 1 Quality Management (QM)
1.1.2 Quality Definition by Deming
Quality is the designation of a perceptible state of systems and their characteristics,

which is defined in a certain period of time based on certain properties of the system
in this state. In general usage, quality stands for characteristics or properties. In
business, quality describes the value or quality of a product or service from the
user’s point of view (Helmold, 2022). The quality of a product is its suitability for
its intended use. In individual cases, quality is an overall impression of various par-
tial qualities (functional quality, technical quality, permanent quality, execution
quality, concept quality). The concept of quality always includes objective and sub-
jective characteristics that are decisive for a product or service. The American
Deming is one of the most important pioneers in the development of quality assur-
ance and has had a significant influence on quality management with his statements
(Sihn et al., 2016). His ideas found wide acceptance in numerous industries in North
America and Europe and also in the implementation in the Japanese economy.
Deming refrains from an overarching definition of the term quality because, for
him, raising employee awareness of the quality requirements in the company is
crucial. Deming emphasizes two aspects:
• Deming states that quality cannot (absolutely) be checked in terms of results, and
therefore, he focuses his considerations on the value-added process and thus sta-
tistical methods of process control and regulation through systematic and quan-
titative statistical quality control.
• Deming attaches great importance to the management style and thus to the
behavior of employees with regard to motivation, cooperation, communication,
freedom of expression, and an open working atmosphere (Deming et al., 2012).
An important element and tool in quality management is the PDCA cycle in

Fig. 1.1. The PDCA cycle describes the phases in the continuous improvement pro-
cess (CIP). CIP is the basis of all quality management systems and aims for constant
Quality Management: Deming Cycle (PDCA)
A P
C D
A P
Standard
A P
C D
C D
A P
Standard
C D
Quality Management
Continuous Improvements
Fig. 1.1 PDCA cycle. (Source: Author’s source)

1.1 Scope and Definition of QM 3
improvements (Helmold, 2022). In this way, a constant improvement of processes

and procedures is pursued in the company with the aim of improving the efficiency
and customer and employee satisfaction of the company (Helmold, 2022).
The German Society for Quality (DGQ) in Frankfurt was involved in the design
of the DIN standards in Germany and defines the term quality as the sum of proper-
ties and characteristics of a product or an activity that relate to their suitability for
fulfilling given requirements (DIN 55350 Part 11: Terms of quality assurance and
statistics; Terms of quality assurance, basic terms, Berlin). The purpose of the series
of standards is for quality to be assessed and assessed in relation to requirements,
which can include a large number of characteristics and properties. A quality assur-
ance system (quality assurance) should implement the quality requirements in a
cost-effective manner and strengthen the competitive position (DGQ, 2022).
A view of quality often cited in science comes from Harvard Professor Garvin
(Garvin, 1984). In the practical application of the concept of quality, according to
Garvin, a distinction can be made between five different perspectives (Pfeifer &
Schmitt, 2010):
1. The transcendent understanding of quality: Refers to the colloquial view of qual-

ity. Accordingly, quality is a person’s subjective experience of the special, unique
properties or characteristics of a product or service. Quality can neither be mea-
sured nor specified, just as the term beauty cannot be defined in general.
2. The product-related understanding of quality: If the product-related perspective
is used as a basis for the quality assessment, the quality of a product results from
the fulfillment of generally defined requirements and specification features. A
classic example is the realization of smaller gap dimensions in automobile con-
struction compared to competing vehicles. Another example is the aging period
of a wine, which, in simple terms, applies: the longer the wine rests, the higher
the quality. However, product-related requirements are not entirely useful. So,
e.g., B. the reduction of the gap size in an off-road vehicle with high demands on
the body tends to lead to higher repair costs.
3. The customer-related understanding of quality: This perspective defines quality
as the perfect realization of all customer requirements for a product and corre-
sponds to the quality definition of DIN EN ISO 9000:2015 (see Fig. 1.4). The
lack of features (lack of implementation of a customer requirement) has a nega-
tive effect on the quality of the product. Adding further features that are not
desired by the customer cannot positively influence the quality, since they are
useless for the customer. It is therefore also not possible to compensate for miss-
ing features by adding other functions. One problem with this approach lies in
the complete identification of customer requirements. While the customer is
aware of explicit requirements, implicit (unconscious) requirements must be
“extracted from a person” using suitable methods. So, e.g., B. represent a cus-
tomer unaware of the prestige of a motor vehicle requirement, which is acquired
through the purchase. The identification of requirements and their implementa-
tion in products are carried out by the research area of marketing
or market
research. Since the requirements can differ between people, no product can exist
with absolute quality. Rather, the quality of a product can be rated positively by
one person and negatively by another.
4. The value-oriented understanding of quality: According to this view, a quality
product is present when a product can be purchased at a reasonable price with
regard to the realized features (cost-benefit ratio). This view is taken as a basis
for product tests by magazines and takes place in categories such as price, per-
formance, reliability or life-time. However, the relevance of the product’s char-
acteristics for the customer must be considered in this method and definition (cf.
customer-related understanding of quality). A higher price cannot be justified by
useless product features for the customer.
5. The production-related understanding of quality: Fulfillment of drawing specifi-
cations, agreements, and standards according to agreed performance
characteristics.
1.1.3 Q-C-D Plus Alpha
Quality forms the basis for security and mutual trust. In lean management, quality,
along with delivery service and costs, is the essential basic dimension that influ-
ences customer satisfaction. In the so-called QCD triangle, it becomes transparent
how these three basic dimensions influence each other. An often underestimated
influencing factor is employee motivation. Unmotivated employees due to a lack of
framework conditions—for example, due to a lack of training or integration—have
a decisive influence on quality. Within the Q-C-D approach, costs (total costs;
English: total cost of ownership) and delivery performance also represent a central
point. Especially in the last crises, it has been shown that quality also includes sup-
ply chains and availability of primary and semifinished products (Helmold et al.,
2020). Figure 1.2 shows the Q-C-D plus alpha concept. This definition of quality
focuses on quality, costs, and delivery performance alongside other elements (alpha)
such as sustainability or safety (Helmold & Terry, 2021).
Fig. 1.2 QCD plus alpha.

(Source: Author’s source)
Quality
(Q)
Alpha
Delivery Cost
(D) (C)
1.3 Quality Definition According to the ISO 9001:2015 5
1.2 Fit, Form, and Function
Fit, form, and function in Table 1.1 (German: passen, form, und funktion) is a qual-
ity definition that describes a quality for products, services, processes, or informa-
tion that meets the expectations of stakeholders, e.g., customers, users, or clients.
Freely translated into German, fit can be understood as “fulfills the purpose.” Form
means that the product has all the external characteristics that the customer asks for.
Function means that all functions agreed between manufacturer and customer are
fulfilled. Figure 1.3 shows the fit, form, and function concept:
1.3 Quality Definition According to the ISO 9001:2015
According to the ISO 9001, quality is defined as the international standard that
specifies requirements for a quality management system (QMS). Organizations use
the standard to demonstrate the ability to consistently provide products and services
that meet customer and regulatory requirements. The term quality is defined in ISO
9000 as the degree to which a set of inherent characteristics of an object fulfils
requirements.
• “Degree” implies quality is a variable.

• “A set of” implies quality is not a single characteristic.
• “Inherent” as opposed to “assigned” means existing in the object; therefore, nei-
ther price nor delivery is a quality characteristic of a product but can be a charac-
teristic of a service.
• “Object” means anything perceivable or conceivable; therefore, the term quality
can be used relative to both tangible and intangible objects, e.g., the quality of
commitment.
• “Requirement” means a need or expectation that is stated, generally implied, or
obligatory.
Table 1.1 Fit, form, and function

Term Description
Fit Ability of an item to be physically connected to all other components. This also
includes tolerance changes.
Form Shape, size, dimensions, mass, or other visual parameters that uniquely characterize
an item. It defines the appearance of the part or item. Sometimes weight, balance,
and center of mass also play a role.
Function The function refers to the specific action(s) that an object is intended to perform or
for what purpose it was developed.
Source: Author
Fig. 1.3 Fit, form, and

function. (Source: Author’s Fit
source)
Quality
Function Form
Fig. 1.4 ISO 9001:2015. (Source: Author’s source)
The ISO 9001:2015 consist of 10 clauses as shown in Fig. 1.4.
Clause 0–3—Introduction and scope of the standard.

Clause 4—Context of the organization.
Clause 5—Leadership.
Clause 6—Planning.
Clause 7—Support.
Clause 8—Operation.
Clause 9—Performance evaluation.
Clause 10—Improvement.
1.4 Quality Across the Supply Chain Management (SCM) 7
1.4 Quality Across the Supply Chain Management (SCM)
1.4.1 Scope and Definition of SCM
Supply chain management (SCM) can be described as the process of planning man-
aging, executing, and improving the key business process that ensures effective
delivery of products and services from suppliers through to the end customer as
shown in Fig. 1.2 (Helmold & Terry, 2021). SCM involves the process of enabling
the effective flow of information, materials, and services from suppliers from
upstream supply chain with raw materials and materials to operation and to finally
deliver products and services to end customer or the downstream supply chain.
SCM allows the simultaneous integration of customer specifications which is an
important aspect that helps in enhancing better performance of the internal process,
which ultimately influences greater upstream supplier performance. Based on these
definitions, it is evident that the common feature of SCM is to enhance end-to-end
coordination as a result of effective integration of both internal and external pro-
cesses in the supply chain in order to deliver value to the end customer. Therefore,
it can be argued to suggest that the potential benefits of an enhanced SCM can be
considered to provide higher quality of products or services, effective cost savings,
shorter and more reliable delivery times, fewer disruptions, and risk reduction.
Customer satisfaction and effective service delivery can be seen to be the key factors
that enable a business to survive in the highly competitive market (Bozarth &
Handfield, 2013). Effective supply chain management (SCM) practices have
become valuable in enhancing competitive advantage by reducing waste, increasing
efficiency, therefore improving overall organizational performance and its strategy
(Fig. 1.5).
By concentrating on core competencies and shifting services to supplier net-
works that are in competition with one another, new models, strategies, and pro-
cesses emerge, which lead supplier management into a central role in every
company. For a long time now, the focus in the future has not only been on increas-
ing company-internal cost advantages, but much more on the exchange of informa-
tion and the exploitation of global cross-company potential. The scope of added
value can no longer be handled by the manufacturer alone, but must rely on innova-
tive, efficient, and flexible supplier structures. Increasing competition, global trends,
the COVID-19 pandemic, sustainability elements, technological change, and short-
ened product life cycles place ever higher demands on companies and their suppli-
ers in numerous industries. The increasing variety of products, shorter innovation
cycles, and cross-sector business models with digital business processes also
increase the complexity of future control of value networks. However, the planning,
control, and monitoring of the upstream value creation networks, i.e., the supplier
networks, become more difficult, so that these tasks have to be covered by holistic,
standardized and innovative supplier management. But modern supplier structures
are becoming increasingly volatile. The control of the external value-added
Supply Chain Management (SCM)
Tier 3 Tier 2 Tier 1 Tier 1 Tier 2
Supplier
Supplier Supplier
Supplier Customer
Customer
Supplier
Supplier Supplier Customer
Customer
Supplier Operations
Supplier Customer
Supplier Customer
Supplier
Supplier Customer
Supplier
Supplier
Supplier
Upstream Supply Chain Management Downstream Supply Chain Management

Supply Side Demand Side
Fig. 1.5 Quality management in the supply chain. (Source: Author’s source)
networks must therefore also adapt to the new requirements. Risk prevention in the
supply chain is therefore of central importance to every company, but only 17% of
companies operate preventive supplier management with early and standardized
involvement of their suppliers, and more than two-thirds only assess a selection of
suppliers (Dust, 2016). These alarming figures emerge from the study “Total
Supplier Management - Strategic Competitive Advantages through Risk Prevention
in Supplier Management.” The representative survey of 221 companies from differ-
ent sectors from industry, trade, and services was carried out by the Technical
University of Berlin in cooperation with the BME region Berlin-Brandenburg (Dust,
2016). Figure 1.2 shows the proportion of peripheral competencies being trans-
ferred to external suppliers to more than 80% (outsourcing). In contrast, own core
competencies, i.e., processes and skills from which competitive advantages are
developed for your own company, are around 20% (Fig. 1.6).
1.4.2 Supply Risk Prevention and Mitigation
Supply disruptions are defined as “unplanned and unanticipated events that disrupt
the normal flow of goods and materials within the supply chain.” They distinguish
between coordination risks and disruption risks. Supply chain complexity is
Fig. 1.6 Shifting activities to the upstream supply chain management. (Source: Author’s source,
adopted from Dust (2016))
described by Adenso-Diaz et al. (2012) as “the sum of the total number of nodes and
the total number of forward, backward and within-tier material flows” in the
upstream supply chain network. Such complexity has a huge impact on supply
chain reliability and supply chain stability. The overall recommendation made in
several papers is to reduce the number of suppliers, since supply chain complexity
increases the risk of disruption. Adenso-Diaz et al. (2012) highlighted the defini-
tions of various authors, using a variety of criteria: (1) function, (2) type of risk, (3)
drivers of risks, and (4) likelihood of occurrence. While the literature on supply
management and risk management is growing, there is no organized structure
regarding the sources of causal factors for supply chain risks and supply disrup-
tions. Several papers show that supply disruptions can lead to high monetary recov-
ery cost, waste, and sharp decreases in sales as pointed out in one of the previous
sections by Haslett (2011), Jing (2011), and Grant (2010). As well as findings in
literature, other sources such as field research, internal reports, and interviews dis-
play that supply disruptions have severe impacts on companies in the analyzed
European transportation industry. Supply disruptions and their associated risks have
been classified in the literature using a variety of criteria, e.g., function type of risk,
and drivers of risk. Hendricks and Singhal (2005) pointed out that enterprises with-
out operational slack and redundancies in their supply chains experience negative
stock effects. They also revealed the tremendous impacts of supply chain disrup-
tions on stock price performance and shareholder value. Causal factors for supply
disruptions are automatically associated with risks in the supply network, as as
stated by Zsidisin (2003), Tomlin (2006), and Wieland and Wallenberg (2012).
Several authors outline incidents in which supply disruptions caused production
standstill or temporary stops in manufacturing companies in the European industry.
Strategic Preventive Reactive

Supply Chain Risk Supply Chain Risk Supply Chain Risk
Management Management Management
Supply Chain Supply Chain Supply Chain Supply Chain Supply Chain Supply Chain
Risk Risk Risk Risk Risk Risk
Analysis Simulation Identification Prevention Actions Mitigation
Supply Chain Risk

Feedback Cycle
Fig. 1.7 SCM risk management as part of the quality function. (Source: Author’s source)
Other authors refer to capacity management in terms of supply disruptions as being

a crucial risk factor for supply chain discrepancies. Due to such risks, specific mea-
sures are necessary in terms of overcoming potential supply disruptions caused by
supplier capacity shortages. Mitigations and preventive measures can take the form
of diverse capacity management, backup equipment, or alternative manufacturing
locations, as recommended by Hittle and Leonard (2011) (Fig. 1.7).
It is useful to compare the supply chain strategies of companies and their result-
ing ability to cope with some of the abovementioned disruptions. Zsidisin (2003)
and Rao and Goldsby (2009) created models which can be used by managers to
measure and assess the vulnerability of their company and supply chain in relation
to the associated risks. Typology may also provide avenues for future research and
thus guide practitioners in the management of their supply chain risk portfolio. Such
a classification is a useful tool for supply chain managers in differentiating between
independent and dependent variables and the mutual relationships which would
help them to focus on those key variables that are most important for effective risk
minimization in a supply chain. Zsidisin typologized causal factors for supply dis-
ruptions into different categories—high, medium, and low risk—based on manage-
rial perception. Other authors besides Zsidian have built on this typology and
outlined causal factors for supply disruptions as follows, which comprise the
following:
–– Capacity shortages.
–– New product launches.
–– Disaster issues (e.g., earthquake, flood).
–– Lack of supply chain transparency.
–– Labor-related issues (e.g., strike).
–– Constraints on market capacity.
–– Pricing instabilities.
–– Quality discrepancies.
–– Transport issues.
–– Product transfers to sites or plants.

–– Inflexible production capacities.
1.4.3 Methods of SCM Risk Evaluation
Once a company has decided what it is going to evaluate, the next step is to establish
how it will evaluate the performance of the supplier. There are many ways to do this
and some are more costly, time-consuming, and resource intensive than others. By
quantifying the level of risk and the projected benefit of a method of evaluation,
company personnel can determine the most appropriate method or combination of
methods that should be used. Some methods that companies commonly use to eval-
uate and measure supplier performance include the following:
–– Site visits by cross functional teams.

–– Supplier audits (process, special process, or product audits).
–– Paper supplier questionnaires.
–– Web-based supplier questionnaires.
–– Organizing existing data.
–– Internal questionnaires.
–– Requiring external certifications.
–– Developing own certifications.
–– Third-party reviews.
–– Phone call with a supplier.
–– Independent ratings.
–– Contacts with other supplier customers.
1.4.4 Sustainability in the SCM
Organizations and enterprises have the responsibility to use and transform resources
and other input factors in a sustainable way. Sustainability can be defined as meet-
ing the needs of current generations without compromising the needs of future gen-
erations, while ensuring a balance between economic growth, environmental care,
and social well-being. Sustainability has therefore three main pillars: economic,
environmental, and social. These three pillars are informally referred to as people,
planet, and profits. A sustainable quality management system (SQMS) is an
approach to quality management that emphasizes continuous improvement and
innovation. It focuses on the long term and aims to improve the overall performance
of the organization. Sustainability is essential in quality improvement because it
helps to reduce waste and increase efficiency. If organizations want to be successful
in business, they must learn how to use resources efficiently. This means reducing
the amount of waste produced and increasing the amount of output per unit of input
(Dathe et al., 2022).
1.4.5 Fair Trade in the Supply Chain
Fair trade is a controlled trade in which the producers receive a minimum price for
their products, which is determined by a fair-trade organization. This is intended to
enable producers to earn a higher and more reliable income than in conventional
retail even at lower market prices. The amount of a fair price has been a topic of
business ethics that has been discussed for decades. In addition, this form of trade
tries to build long-term “partnership” relationships between traders and producers.
In production, international environmental, and social standards as well as those
prescribed by the organizations should also be complied with. The very heteroge-
neous fair-trade movement mainly focuses on goods that are exported from devel-
oping countries to industrialized countries. Fair trade encompasses agricultural
products as well as products from traditional handicrafts and industry and is
increasingly expanding into new areas such as tourism under the name “fair travel.”
Fairly traded products are offered in natural food and world shops as well as in
supermarkets and restaurants. According to the umbrella organization Fairtrade
International, over 1.5 million farmers took part in such programs in 2015
(Helmold, 2022).
References
Adenso-Diaz, B., Mena, C. H., Garcia, S., & Liechty, M. (2012). Supply chain management: The
impact of supply network characteristics on reliability. An International Journal, 17(3), 1–36.
Bozarth, C. C., & Handfield, R. B. (2013). Introduction to operations and supply chain manage-
ment (3rd ed.). Harlow Pearson.
Brugger-Gebhardt, S. (2016). Die DIN EN ISO 9001:2015 verstehen: Die Norm sicher interpretie-
ren und sinnvoll umsetzen. Springer.
Dathe, T., et al. (2022). Corporate Social Responsibility (CSR), Sustainability and Environmental
Social Governance (ESG). Approaches to ethical management. Springer.
Deming, W., et al. (2012). Leadership principles from the: Leadership principles from the father
of quality. McGrawHill.
Deutsche Gesellschaft für Qualität (DGQ). (2022). www.dgq.de
Dust, R. (2016). Lieferanten−/Risikomanagement. Bislang wenig Risikoprävention in der
Supply Chain. In BME. Abgerufen am 28.9.2020. https://www.bme.de/bislang-wenig-
risikopraevention-in-der-supply-chain-1468/
Garvin, D. A. (1984). What does product quality really mean? Sloan Management Review,
1984, 25–43.
Helmold, M. (2022). Strategic performance management. Achieving Long-term Competitive
Advantage through Performance Excellence. Springer.
Helmold, M. (2023). Qualität neu denken. - Innovative, virtuelle und agile Ansätze entlang der
Wertschöpfungskette. Springer.
Helmold, M., & Terry, B. (2021). Operations and supply management 4.0. Industry insights, case
studies and best practices. Springer.
Helmold, M., Einmahl, R., Rassmann, K. & Carvalho, L. (2020). In IUBH discussion paper.
Lessons from the COVID-19 situation: Rethinking global supply chain networks and strength-
ening supply Management in Public Procurement in Germany. Abgerufen 31.10.2020. https://
www.iubh-university.de/wp-content/uploads/DP_Logistik_Helmold_4_2020fin.pdf
References 13
ISO. (2023). ISO 9001 family. Quality Management. Retrieved 10.12.2022. https://www.iso.org/
iso-9001-quality-management.html
Pfeifer, T., & Schmitt, R. (2010). Qualitätsmanagement. Strategien-Methoden-Techniken. 4.
Auflage. Hanserverlag.
Rao, S. & Goldsby, T. J. (2009). Supply chain risks: A review and typology. International Journal
of Logistics Management, 20(1), 97–123.
Sihn, W., et al. (2016). Produktion und Qualität. Organisation, Management, Prozesse.
Hanserverlag.
Zsidisin, G. A. (2003). Managerial perceptions of supply risk. Journal of Supply Chain
Management, 39(1), 14–25.
Integrated Management Systems (IMSs)
2
If you can’t describe what you are doing as a process, you don’t
know what you’re doing.
W. Edwards Deming
2.1 Scope of IMS
Organizational complexity has increased dramatically in recent years. The result is

a lot of low value-adding activities and a high level of administrative tasks. In the
medium term, this leads to lower employee motivation, which can set a dangerous
downward spiral in motion. Management systems have been developed to better
deal with these framework conditions. The term management system originally
comes from the field of quality management. Basically, this is a methodically con-
sistent approach by organizations to achieve their goals. The essential business pro-
cesses and their interfaces are described. Management systems are described and
standardized by management system standards (MSS). The description of the busi-
ness processes also lays the foundation for an organizational culture that promotes
continuous improvement. For this purpose, performance must be regularly evalu-
ated and weaknesses corrected. This requires clear guidelines from management
and a high level of employee commitment.
The use of management systems offers the following advantages in particular:
–– Reduced use of resources and improved results.

–– Increased transparency of business processes and their interfaces.
–– Improved risk management.
–– Increased customer satisfaction through holistic consideration of requirements
and their targeted implementation.

Switzerland AG 2023
16 2 Integrated Management Systems (IMSs)
Management system standards are developed by international experts with expe-

rience in global management, leadership strategies, and efficient and effective pro-
cesses and approaches and can be used by organizations large and small. There are
over 80 different management system standards in total, with the following being
particularly well known:
–– ISO 9001: Quality Management Systems.

–– ISO 14001: Environmental Management Systems.
–– ISO 45001: Occupational Health and Safety Management Systems.
–– ISO 50001: Energy Management Systems.
In addition to these general management system standards, there are three other
document types for organizational management:
–– Sector-specific management system standards: management system standards

that specify additional and specific requirements for application in a specific
industry such as medical devices.
–– Management system-related standards and implementation guidelines: standards
that provide further guidance or requirements for the implementation of a man-
agement system.
–– Management standards: standards that support the implementation of specific
aspects of a management system.
The specific context of an organization defines the complexity of a management

system. A smaller organization can do without extensive documentation of the man-
agement system thanks to strong management with clear goals for the individual
employees. On the other hand, more complex organizations in strictly regulated
areas and high documentation requirements also require more extensive documen-
tation of the management system.
Figure 2.1 shows the three IMSs, ISO 9001, ISO 14001, and ISO 45001, cover-
ing quality, energy, environment, and health and safety.
Figure 2.2 shows the structure of management systems into standards for man-
agement systems, industry-specific management systems, management system-
related norms and management standards.
2.2 Advantages and Disadvantages when Using an IMS
2.2.1 Advantages of IMS
An IMS combines all aspects of an organization’s systems, processes, and standards

into one smart system. This merger allows a business to streamline its management,
save time, and increase efficiency by addressing all elements of the management
system as a whole. IMSs help organizations to conduct integrated audits and assess-
ments, as well as optimize processes and resources. When enterprise can
2.2 Advantages and Disadvantages when Using an IMS 17
Health & Safety Energy
ISO 45001 ISO 50001
Internal Audits,
Reviews, Contineous
Improvements
ISO 9001 ISO 14001

Quality Environment
Fig. 2.1 Integrated management systems (IMSs). (Source: Author’s source)
• ISO 9001: Quality Management System (QMS)

Standards for Management • ISO 14001: Environmental Management System
Systems • ISO 45001: Management System for Health, Safety,
Environment
Industry specific Management • ISO 13485: Medical Qualiy Management System

Systems • ISO/TS 22163: Raiway Qualtiy Management System
Management Systems related • ISO 19011: Guideline for Auditing

Norms and Directives • ISO/TS 22003: Fodd Saftey Management System
• ISO 26000: Sustainability Management Systems

Management-Standards
• ISO 31000: Risik Management Systems
Fig. 2.2 Management systems. (Source: Author’s source)
successfully integrate these systems into the company culture, it can help reduce the
time it takes to do certain activities, eliminate the amount of time interrupted, and
therefore reduce costs.
–– A thoroughly planned and executed IMS will help the company and organization
to operate more cost-effectively than separate management systems and facilitate
decision-making that best reflects the overall needs of the organization.
–– An IMS offers the prospect of more rewarding career opportunities for special-
ists post holders in each discipline.
–– The objectives and processes of management system are essentially the same.
–– Integration should lead to the avoidance of duplication, e.g., in personnel, meet-
ings, electronic record keeping software, audits, and paperwork.
–– Integration should reduce the possibility of resolving problems in one area at the
expense of creating new difficulties in other disciplines.
–– An IMS should involve timely overall system reviews where momentum in one
element of an IMS may drive forward other elements that might otherwise stag-
nate. In contrast, independent systems could develop without regard to other
management system elements, leading to increased incompatibility.
–– A positive culture in one discipline may be carried over to others.
2.2.2 Disadvantages of IMS
In certain organizations the separate management system in each department might

be functioning properly and its results could be considered acceptable; however,
once the integrated management system gets introduced and implemented, many
departments fail to catch up and the following occurs as a result of the integrated
management system process:
–– Existing system may work well already. Integration may threaten the coherence
and consistency of current arrangements that have the support of everyone
involved.
–– Relevant specialists may continue to concentrate on the area of their core exper-
tise and further specialist training may not be needed.
–– Uncertainties regarding key terms, already a problem in occupational health and
safety, would be exacerbated in an IMS.
–– System requirements may vary across topics covered, e.g., an organization may
require a simply quality system, but a more complex health and safety or envi-
ronmental performance system. An IMS could introduce unreasonable bureau-
cracy into, in this case, quality management.
–– Health, safety, and environment performance are underpinned by legislation and
standards, but quality management system requirements are largely determined
by customer specification.
–– Regulator and single topic auditor may have difficulty evaluating their part of the
IMS when it is interwoven with other parts of no concern to the evaluator.
–– A powerful, integrated team may reduce the ownership of the topics by line
management.
–– A negative culture in one topic may unwittingly be carried over the others.
2.3 Realization of IMS 19
–– Due to integration, the probability of lengthy document reviews and team meet-
ings is usually unavoidable. Lengthy documents are practically never seen by
anyone. If integration process is not planned and implemented correctly, signifi-
cant aspects of individual standard can be absent, and finally, if all concerns
raised by workforce are not addressed by the management team, then probably
the benefits of IMS certification will not be achieved within the organization, and
more worst, it could lead to management system stagnation.
2.3 Realization of IMS
The ISO manual “The Integrated Use of Management System Standards (IUMSS)”
(ISO, 2018) provides important guidelines for setting up integrated management
systems. In addition to basic considerations about the context of the organization, its
goals, processes, and resources, the essential steps in the integration of management
systems are discussed (see Fig. 2.3):
–– Prepare.
–– Link (connect).
–– Incorporate.
–– Sustain.
In addition to the ISO, the Association of German Engineers (VDI) also provides
instructions for the practice-oriented introduction of integrated management sys-
tems with the guideline VDI 4060 (VDI, 2005). However, due to the fact that it was
published some time ago, the latest developments in management systems are not
taken into consideration. Further support is offered by a number of standard works
on this topic, such as in (Koubek & Pölz, 2014).
Integrated Management Systems (IMS)
Prepare Connect Incorporate Sustain
Structuring of IMS Gap Analysis

Definition of Scope Control & Execution
Definition of Corrective Actions to
Planning of Integration Improvement Actions
Requirements for IMS mitigate Deviations
Fig. 2.3 Realization of IMS into real life in organizations. (Source: Author’s source)
References
ISO. (2018). ISO Handbook – The integrated use of management system standards (IUMSS), ISO,
www.iso.org, Geneva, Switzerland.
Koubek, A., & Pölz, W. (2014). Integrierte Managementsysteme: Von komplexen Anforderungen
zu zielgerichteten Lösungen. Hanser Verlag.
VDI. (2005). VDI 4060 – Integrierte Managementsysteme (IMS) – Handlungsanleitung zur prax-
isorientierten Einführung. www.vdi.de, Düsseldorf.
Extended Reality (XR) in QM
3
Clearly, the thing that’s transforming is not the technology —

the technology is transforming you.
Jeanne W. Ross, MIT Sloan’s Center for Information Systems
Research.
3.1 Definition of Extended Reality (XR)
Extended reality (XR) is an umbrella term encapsulating augmented reality (AR),

virtual reality (VR), mixed reality (MR), and everything in between. Although AR
and VR offer a wide range of revolutionary experiences, the same underlying tech-
nologies are powering XR. XR applications are used in industries like healthcare,
defense, education, construction, engineering, gaming, or manufacturing (Lang &
Müller, 2020).
Extended reality advances the potential of AR, VR, and MR and merges our real
and virtual worlds to create new environments and visualizations where physical
and digital objects coexist, interact, and communicate (Marr, 2021). Instead of
removing users completely from the real world, or simply layering flat content on
top of their immediate view, MR adds intelligence, even personality, to digital con-
tent relative to the world around them.
As part of the technological evolution of how we engage with the digital world,
in both our personal and work lives, we are smashing through the barriers that inter-
fere with our ability to make smart decisions quickly; absorb, retain, and process
critical information; visualize possible scenarios before acting; or share knowledge
and tasks. The XR trend is ushering in a new world of simulated experiences
grounded in the ways business gets done and how customers actually use products.

Switzerland AG 2023
22 3 Extended Reality (XR) in QM
Augmented reality (AR) or extended reality (XR) enables a gradual full or partial
virtual representation of reality, which can either closely resemble reality or com-
pletely deviate from it. The boundaries between reality and the virtual world are
becoming increasingly blurred thanks to new hardware and computing power as
well as high-performance networks with high bandwidth, opening up new, breath-
taking impressions that until recently could only be imagined in science fiction
films. Augmented reality is also a key technology for what is known as the meta-
verse, the third major generation of the Internet, also known as Web 3.0. This fol-
lows on from documents and their linking based on the first generation and the
second generation shaped by social media.
Augmented reality systems have been researched and developed for quite some
time. The first systems for computer games were already commercially available in
the 1990s. However, only in the last 10 years have systems been developed that
enable good performance while remaining cost-effective. The simplest systems
consist of cardboard constructions into which the smartphone can be installed.
Figure 3.1 shows a first overview of the augmented reality systems (virtual, mixed,
and augmented reality), which are described in detail in the next sections.
User views static User interacts with

digital or visual responsive virtual
elements integrated elements integrated
into the real world into the real world
Augmented Reality Mixed Reality

(AR) (MR)
Virtual Reality
(VR)
User is immersed in
an interactive,
digitally-generated
environment
Fig. 3.1 Extended reality (XR). (Source: Author’s source)

3.2 Creation of XR 23
3.2 Creation of XR
The realities mentioned above are generated by suitable hardware. First of all, these
include glasses, which are also referred to as head-mounted displays (HMDs).
There are three categories: connected (tethered), wireless (mobile), and fully auton-
omous (standalone) devices.
–– Tethered: These glasses must be tethered to a powerful computer.

–– Wireless (mobile): This solution consists of an attachment in which smartphones
approved for this purpose can be used. A cable connection is no longer required,
which significantly increases the range of use and enables new applications.
–– Autonomous (standalone): Devices that do not require a connection to a com-
puter or the use of a smartphone are referred to as autonomous or standalone.
They offer the greatest possible flexibility and the implementation of demanding
applications.
Regardless of this category, the following parameters are important when choos-
ing a suitable solution:
–– Display: resolution and type (AMOLED, OLED, LCD, etc.)

–– Resolution (per eye).
–– Connections (USB, Bluetooth).
–– Position tracking.
–– Field of view.
In standalone systems, the processor (e.g., Intel, Snapdragon or Nvidia) and the
platform (Windows MR, Google Daydream) play a particularly important role.
Of course, different systems are possible for VR applications and AR applica-
tions. In the field of VR, HTC Vive and Oculus Rift are very popular systems.
Microsoft HoloLens is a leading system for AR applications. For the realization of
AR on mobile phones, Apple’s ARKit and Google’s ARCore are very widespread
and powerful systems.
In order to bring the virtual world closer to reality, HMD can be supplemented
with wearable elements such as tactile gloves, suits, or vests. The impression in the
virtual world is thereby again clearly strengthened. Haptic gloves enable the posi-
tion of fingers and hands to be recorded, thereby creating another interface for con-
trol between humans and machines. Such gloves also enable feedback such as
vibrations, impressions of force, or even the feeling of surface structures. Holding
and interacting with objects can be simulated with controllers.
Only the combination of these hardware elements with suitable software then
enables the creation of a suitable XR system.
The current forecasts for market growth from 12 billion dollars in 2020 to over
72 billion dollars in 2024 show the great potential of this technology (cf. Statista
2021). Of course, this development is supported by the games market, but these
systems are also increasingly found in production environments. However, some
prerequisites must be created for their smooth use. This includes, for example, suf-
ficient lighting conditions or the detection and removal of highly reflective parts.
3.3 Augmented Reality (AR)
Augmented reality is an interactive experience that combines the real world and
computer-generated content. The content can span multiple sensory modalities,
including visual, auditory, haptic, somatosensory, and olfactory. AR incorporates
three features: a combination of digital and physical worlds, interactions made in
real time, and accurate 3D identification of virtual and real objects.
Quality assurance could be done in real time by a human or even by an AI with
AR applications as shown in Fig. 3.2. Either AR glasses could place 3D models on
the products or the comparison can be left to an AI.
3.4 Mixed Reality (MR)
Mixed reality enables interaction with and manipulation of digital or virtual and real
objects in real time. Mixed reality is sometimes also referred to as hybrid reality and
makes it possible to interact with virtual objects. Mixed reality requires a suitable
headset (e.g., Microsoft HoloLens) and significantly more computing power than
VR or AR. Virtual objects can then be placed in space, rotated, and further inter-
acted with.
MR applications can also be implemented on smartphones or tablets, although
the boundaries between AR and MR are becoming increasingly blurred here. One
example is Google 3D Experience, which allows virtual objects such as animals to
be placed and scaled in real space. This can be used for training, for example. It is
also possible to get an idea of how certain objects, such as furniture, fit into a room.
Fig. 3.2 Augmented and virtual reality (VR) in QM

3.5 Virtual Reality (VR) 25
3.5 Virtual Reality (VR)
Virtual reality (VR) is a simulated experience that employs pose tracking and 3D
near-eye displays to give the user an immersive feel of a virtual world. VR is the use
of computer technology to create a simulated environment which can be explored in
360 degrees. Unlike traditional interfaces, VR places the user inside the virtual envi-
ronment to give an immersive experience. VR enables users to explore and interact
with a virtual surrounding in a way that approximates reality, as it is perceived
through the users’ senses. The environment is created with computer hardware and
software, although users might also need to wear devices such as helmets or goggles
to interact with the environment. The more deeply users can immerse themselves in
a VR environment.
The VR industry still has far to go before realizing its vision of a totally immer-
sive environment that enables users to engage multiple sensations in a way that
approximates reality. However, the technology has come a long way in providing
realistic sensory engagement and shows promise for business use in a number of
industries.
VR systems can vary significantly from one to the next, depending on their pur-
pose and the technology used, although they generally fall into one of the following
three categories:
• Non-immersive. This type of VR typically refers to a 3D simulated environment

that is accessed through a computer screen. The environment might also generate
sound, depending on the program. The user has some control over the virtual
environment using a keyboard, mouse, or other device, but the environment does
not directly interact with the user. A video game is a good example of non-
immersive VR, as is a website that enables a user to design a room’s decor.
• Semi-immersive. This type of VR offers a partial virtual experience that is
accessed through a computer screen or some type of glasses or headset. It focuses
primarily on the visual 3D aspect of virtual reality and does not incorporate
physical movement in the way that full immersion does. A common example of
semi-immersive VR is the flight simulator, which is used by airlines and militar-
ies to train their pilots.
• Fully immersive. This type of VR delivers the greatest level of virtual reality,
completely immersing the user in the simulated 3D world. It incorporates sight,
sound, and, in some cases, touch. There have even been some experiments with
the addition of smell. Users wear special equipment such as helmets, goggles, or
gloves and are able to fully interact with the environment. The environment
might also incorporate such equipment as treadmills or stationary bicycles to
provide users with the experience of moving through the 3D space. Fully immer-
sive VR technology is a field still in its infancy, but it has made important inroads
into the gaming industry and to some extent the healthcare industry, and it is
generating a great deal of interest in others.
References
Lang, M., & Müller, M. (2020). Von Augmented Reality bis KI - Die wichtigsten IT-Themen, die Sie
für Ihr Unternehmen kennen müssen. Hanserverlag.
Marr, B. (2021). Extended reality in practice: 100+ amazing ways virtual, Augmented and mixed
reality are changing business and society. Wiley.
Total Quality Management (TQM)
4
Without changing our patterns of thought, we will not be able to

solve the problems that we created with our current patterns of
thought.
(Albert Einstein)
4.1 Introduction to TQM
Total quality management (TQM) refers to the continuous, ongoing activity that
covers, records, inspects, organizes, and controls all areas of an organization (com-
pany, institution, etc.) and serves to introduce quality as a system goal and guaran-
teed permanently (Oakland et al. (2020). Total quality management (TQM) is a
management strategy that emphasizes a continuous, organization-wide effort to
maintain quality customer service and satisfaction. The goal of TQM is to foster
customer loyalty by delivering service levels that keep customers from coming back
again. The strategy requires consistent feedback from employees and customers to
determine how services and products can be improved across the organization and
is designed to help companies find a path to strengthen their position in the market,
increase productivity, improve customer loyalty and satisfaction, boost employee
morale, and improve processes. Whereas many quality management strategies focus
on specific departments, TQM includes every department in continually improving
a company’s products and services. According to the TQM philosophy, the more
you improve processes in every department, the easier it will be to deliver higher-
quality products and services to customers. With TQM, everyone in the company
should be focused on quality improvement with the shared goal of boosting cus-
tomer loyalty and satisfaction. TQM is the approach to implement a customer-
focused and centric quality mindset across all functions in the company and across
all areas in the value chain as shown in Fig. 4.1.

Switzerland AG 2023
28 4 Total Quality Management (TQM)
Focus on
Customers
Total
Quality
Management
(TQM)
Total
Connuous
Integraon
Improvement
into Company
Fig. 4.1 TQM approach. (Source: Author’s source)
TQM was further developed in the Japanese automotive industry and finally
made a successful model. TQM needs the full support of all employees to be suc-
cessful. The key principles of the TQM philosophy include the following:
• Quality is based on the customer.

• Quality is achieved by employees of all areas and levels.
• Quality includes many dimensions that must be operationalized by criteria.
• Quality is not a goal, but a process that never ends.
• Quality refers to products and services.
• Above all, however, to the processes used to produce them.
• Quality requires active action and must be worked for.
The most widespread TQM concept in Germany is the EFQM model for excel-
lence of the European Foundation for Quality Management (Helmold & Terry
2021). This model has a holistic, result-oriented approach. The criteria of this model
are used to award the most important German-quality prize, the Ludwig Erhard Prize.
In traditional management, quality is the adherence to internal specifications and
standards. Inspection is required to control defects. In TQM, quality is defined as
products and services that go beyond the present needs and expectations of custom-
ers. Innovation is required for improving the quality continuously. Table 4.1 com-
pares TQM with the traditional approach of quality management.
Total quality management (TQM) is a process-related management approach
with a focus on quality. It builds on the quality management created by William
Edwards Deming (Rothlauf 2014). Toyota, as a Japanese company with many
4.1 Introduction to TQM 29
Table 4.1 TQM versus traditional quality management (QM)

TQM Traditional QM
Processes provoke mistakes and errors Human beings make mistake and errors
All employees are responsible for errors Individual employees are responsible for errors
Zero defect goal Zero defect is not achievable
TQM is a team and holistic approach Quality is managed in every department
TQM must be rolled out throughout the Every part in the value chain has its own quality
value chain management system
Suppliers are partners Suppliers are necessary
Companies are configured towards Customers have to accept what companies deliver
customer satisfaction in terms of quality
Source: Author’s source
Total Quality
• Quality of Work
• Integration of Suppliers
• Integration of own Operations Total Quality •
•
Quality of Processes
Quality of the Enterprise
• Integration of Customers
• Quality as Part of the Corporate
• Application throughout the
Strategy
Value Chain
Management
Management
• Leadership Tasks
• Leadership Blueprint
• Team and Group Dynamics
• Endurance and Durability
Fig. 4.2 TQM characteristics. (Source: Author’s source)
technical functions, adopted Deming’s theses early on and operationalized the crite-
ria. The Deming Prize, which is awarded to companies with particular success in
TQM, is also named after him. TQM is a consistent process orientation, which
ultimately leads to the fulfillment of the needs of customers, employees, suppliers,
and society. Maximum customer satisfaction, which was not always the focus
before, provides the basis for sales growth. The prerequisite for this is the holistic
orientation of the corporate philosophy towards absolute customer orientation.
Figure 4.2 shows the major elements of the TQM concept. TQM integrates all stake-
holders, internal employees in production, other departments, and suppliers into the
quality system. TQM is a concept which spans over the entire value chain from the
upstream value chain (supply side) over the own operations to the downstream value
chain (demand side) and customers (Helmold & Terry 2022).
4.2 TQM Strategy
Total quality management (TQM) is a strategy for continuously improving perfor-

mance at every level and in all areas of responsibility. It combines fundamental
management techniques, existing improvement efforts, and specialized technical
tools under a disciplined structure focused on continuously improving all processes.
Improved performance is directed at satisfying such broad goals as cost, quality,
schedule, and mission need and suitability. Increasing user satisfaction is the over-
riding objective. There are several goals associated with TQM:
1. Detect, reduce, and eliminate manufacturing errors.

2. Prevent problems before they occur.
3. Streamline supply chain management.
4. Improve customer service.
5. Make sure employees are trained in quality.
6. Increase employee productivity.
7. Focus on continual process improvement of procedures.
4.3 TQM Principles
4.3.1 Principle 1: Holistic Approach
Total quality management is the practice of promoting and ensuring excellence and
safety in products by involving all relevant stakeholders, including but not limited to:
• Employees.
• Leadership.
• Suppliers.
• Manufacturers.
• Customers.
This practice involves all internal and external stakeholders (manufacturing,

marketing, product development, research and design, sales, purchasing, or human
resources) working towards improvements to the business’ creation of goods and
services. When successful, this unified approach makes it easier to monitor quality-
related issues, no matter what department they originate in (Fig. 4.3).
Let us say someone on the production line notices a device part is faulty after it
has already been sent to packaging. This person reports this issue to their manager,
who then reports it to your quality team. The quality team finds a possible solution
to the problem: the device will require either cooler storage conditions or a new
adhesive. Without strong total quality management practices in place, your team
may not have reported this problem in the first place and the faulty part may never
have been fixed.
4.3 TQM Principles 31
Fig. 4.3 TQM principles.

Holistic
(Source: Author’s source) Approach
Team
Visualisation TQM Activity
Principles
Employee
Risk Analysis
Contribution
There is more to total quality management than simply telling your team about
the importance of quality. Implementation of TQM requires scalable quality man-
agement tools, like QMS software purpose-built to serve the unique needs of the
medical device industry. Total quality management tools make prioritizing quality
more feasible by streamlining various aspects of quality and quality-related
processes.
4.3.2 Principle 2: Team Activity Approach
Total quality management is a structured and systematic approach, which must be

initiated by the top management and which must be integrated into the company’s
culture and values. Engaged teams are a must for TQM to be performed success-
fully and engagement starts at the higher management. The leadership team must
fully understand the processes involved in TQM. Moreover, it must understand and
stay on top of training their teams and, ultimately, act as coaches, mentors, and
ambassadors for total quality management (Zairi 2021). The Deming cycle in
Fig. 4.4 is a scientific approach to product management, emphasizing continuous
improvement and learning. The Deming cycle involves four main steps that guide
your management team through identifying, analyzing, and acting on quality issues:
• Plan: To plan the process must be planned before it is actually planned: the plan
includes identifying potential for improvement (usually by the employee or team
leader on site), analyzing the current status, and developing a new concept (with
intensive involvement of the employee).
• Do: Contrary to widespread opinion, do does not mean the introduction and
implementation on a broad front, but trying out or testing and practical optimiza-
tion of the concept with simple, quickly realizable means (e.g., temporary
devices) at a workplace with strong involvement of the employees.
• Check: The process flow implemented on a small scale and its results are checked
and, if successful, generally approved for implementation on a broad front.
• Act: In the act phase, the new general requirement is introduced across the board,
laid down and regularly checked for compliance (audits). This is actually a “big
action” that in individual cases involves extensive organized activities (e.g.,
Fig. 4.4 Deming cycle
Act Plan
P-D-C-A Cycle
Check Do
changing work plans, NC programs, master data, conducting training courses,

adapting the structural and process organization) as well as considerable invest-
ments (in all comparable jobs, in all plants). Improving this standard begins with
the plan phase.
The preceding steps play a pivotal role in a manager’s ability to quickly identify
flaws, perform tests, analyze the findings, and act on the best course of action, in
other words, create higher-quality products and processes.
4.3.3 Principle 3: Contribution of Employees
Total quality management is “total” only if everyone is on the agenda of the execu-
tive management board. This includes all single employees, teams, and depart-
ments, not only those in management roles. Do not worry; there is a pillar for that.
The right training goes a long way when it comes to rolling out total quality man-
agement. It should include guidance on applicable regulations and standards as well
as any company policies around quality practices. For example, if your company is
using a new project management tool to track quality-related issues, implement
proper training practices to ensure that the tool is used properly. Next, build a pro-
cess around using that tool and build it into your employees’ routines. The best way
to simplify and manage training is by integrating training into your quality manage-
ment system. Connecting training activities to other areas within your QMS allows
your team to easily manage related tasks, check the status and history of those
activities, and gain valuable knowledge about the latest policies or compliance
requirements. Regulatory knowledge plays a large role in ensuring quality, making
a formal training management tool a must. Beyond integrating a training into a
company’s QMS, there are a few additional aspects and aids, which enterprises can
initiate to involve employees:
• Implementing a suggestion scheme, which gives employees a way to submit

ideas and improvements, no matter their job title. Quality-related improvements
can come from anywhere, which is why a suggestion scheme is important. A
suggestion scheme gives everyone a chance to help.
4.3 TQM Principles 33
• Laying out clear measurements for success. Employee quality wins could range
from little victories, like promptly completing quality forms, to larger achieve-
ments, like identifying a quality- or risk-related issue.
• Hiring and recruiting quality experts and trainers to drive strategic quality initia-
tives. Quality professionals can educate your management on best practices,
making it easier for them to guide and support your entire team.
• Treating the task of training your staff on total quality management like any other
training Staying vigilant and run refresher courses on an ongoing basis.
4.3.4 Principle 4: Execution of Risk Analysis
Risk analysis is a cornerstone of both quality and good decision-making. The risk
analysis process involves calculating the pros, cons, and potential cost (financial or
otherwise) of any decision. With proper risk analysis practices in play, you can more
accurately determine if a decision is safe enough to make. Going back to our earlier
scenario with the faulty product part, risk analysis would allow you to compare the
risks of either changing the adhesive or the storage conditions of the product. A dif-
ferent storage facility might prevent the adhesive from coming undone. But will the
adhesive still hold when the device is in someone’s home or in a hospital? And if the
adhesive is replaced, will there be other climate-related impacts or potential allergen
risks with the new adhesive? Effective risk analysis methods will give you the
framework to plan for, mitigate, and manage any risks that arise throughout the
product life cycle. By pairing the Deming cycle with thorough risk analysis prac-
tices, you can better predict and manage change so you are not working from a
reactive state. You can create your own risk management strategy or use an existing
one. Whichever route you choose, ultimately you want to ensure you have a clear-
cut process in place that guides your team towards educated decision-making that
yields high-quality products.
4.3.5 Principle 5: Data Visualization
Visualizations make data easier to interpret and quicker to present to any stakehold-
ers involved with your medical device. When you are running numerous tests, ana-
lyzing results, and weighing risks, proper data interpretation is huge. After all, what
good are tests if you cannot fully discern any meaningful trends from them? There
are a number of quality data tools that are used for total quality management, but
few are as reliable and renowned as the statistical tools listed below. These seven
statistical tools are a set of visual aids that make it easier to identify quality-related
issues and dive into risk analysis:
• A cause-and-effect diagram (or fishbone diagram) provides a streamlined view

of various scenarios and tests and the outcome of the action taken. This diagram
is especially useful during the planning phase, because it provides a quick over-
view of potential inputs and outputs.
• A check sheet is a basic chart that allows an observer or participant to keep track
of how many times something takes place. The check sheet is particularly helpful
in the early phases of testing out a theory or looking for a cause.
• A control chart is a line graph that details how a manufacturing or business pro-
cess shifts over time. This chart is great to use after changes are implemented,
because it provides a look at the impact of those shifts.
• A histogram shows how often particular events happen during a set event, like an
experiment or process. It simplifies the process of analyzing how one change
impacts the outcomes within a single process. This is especially helpful if you
are trying to determine how process changes impact outcomes.
• A Pareto chart is a type of bar graph used for examining similar data points
across various sample sets. For example, you could use a Pareto chart to compare
the number of manufacturing defects that occur when using different adhesives.
• A scatter diagram is a visual that depicts two variables on an X/Y axis to look for
patterns or correlations. This visualization is particularly useful when you are
trying to look for any relation between two different events or sets of data.
• Stratification is a method used to compare numerous data sets from different
sources. This technique is useful for comparing data after experiments, but it is
also helpful when trying to find any risk-related trends while looking for a
root cause.
The best QMS platforms for TQM have visual tools already embedded within its
software architecture to allow for fast, data-driven decision-making. For example,
Greenlight Guru Visualize makes it possible to see all connected processes and arti-
facts within a single view so that teams can ensure they are working in the most
informed, up-to-date environment.
4.4 TQM Success Factors
4.4.1 Introduction to TQM Success Factors
Total quality management is a structured system for satisfying internal and external
customers and suppliers by integrating the business environment, continuous
improvement, and breakthroughs with development, improvement, and mainte-
nance cycles while changing organizational culture. During the global recession of
the late 1970s and early 1080s, the United States (and the rest of the world) faced
stiff competition from Japan. The Japanese had captured the world automotive and
electronics markets because they found a way to produce high-quality goods at
lower prices. And as a result, corporations in the United States looked more closely
at the quality of Japanese goods and services, trying to find ways to improve pro-
duction and recapture market share. Their solution was total quality management
(TQM) including ten fundamental principles as shown in Table 4.2.
4.4 TQM Success Factors 35
Table 4.2 TQM No. Description

success factors 1. Customer -driven and customer-
centric focus
2. Employee commitment and new
leadership
3. Full employee involvement and
communication
4. 100% commitment of leadership and
communication
5. Cross-functional improvement teams
6. Process approach
7. Integrated system
8. Frequent auditing, including internal
and external audits
9. Continual improvement
10. Fact-based and evidence-based
decision-making
4.4.2 Customer-Driven and Customer-Centric Focus
Central to all successful TQM systems is an understanding that quality is deter-

mined by the customer. No matter what measures you introduce to improve the
quality of your products and services, the only way of knowing if they have been
successful is customer feedback, whether in the form of reviews, return rates, or
satisfaction surveys. This principle puts the focus back on the people buying a com-
pany’s product or service (Herrmann & Fritz 2021). Clients and consumers deter-
mine the quality of the product and service of a company. If a company’s product
fulfills a need and lasts as long or longer than expected, customers know that they
have spent their money on a high- and superior-quality product (Kamiske 2000).
When companies understand what their customer wants or needs are, they have a
better chance of figuring out how to get the right materials, people, and processes in
place to meet and exceed their expectations. To implement this TQM principle, it is
important to implement the following elements a spart of the principal cus-
tomer focus:
• Conducting market research and understanding the customers’ needs and

expectations.
• Aligning the organization’s mission, vision, and strategic objectives with cus-
tomer needs.
• Communicating with customers via direct or indirect market channels, measur-
ing satisfaction.
• Using the results of market research to find ways to improve processes and cus-
tomer satisfaction.
• Managing customer relationships in a proactive way.
• Finding a balance for satisfying customers and other interested parties (such as
owners, employees, suppliers, and investors).
The benefits of being customer-focused include:
• More sales, increased revenue, market share, and mindshare.

• Strong customer loyalty leading to repeat business.
• Increased possibility that satisfied customers will tell others about your products
and services.
4.4.3 Full Employee Involvement and Communication
Every person in an organization, from entry-level workers to management, has a

responsibility for the quality of products and services. However, employees can
only be invested if they feel empowered to make their own decisions, something that
depends on management creating the right workplace environment.
Any company cannot increase productivity, processes, or sales without the total
commitment of all employees. They need to understand the mission, vision, and
goals that have been communicated. They must be sufficiently qualified and trained
and given the proper resources to complete tasks in order to be committed to reach-
ing goals on time. Companies must therefore do the following to achieve the full
commitment of employees:
• Clearly communicating and acknowledging the importance of each individual

contribution to the completed product.
• Stressing that each team or individual accepts ownership and giving them the
responsibility and opportunity to solve problems when they arise.
• Encouraging employees to self-evaluate performance against personal goals and
objectives and making modifications as necessary to improve workflow.
• Acknowledging successes and optimized performance to build confidence in
employees and your stakeholders.
• Making roles and responsibilities transparent and clear.
• Providing adequate training and making sure that resources are used and config-
ured as efficiently as possible.
• Encouraging people to continually seeking opportunities to learn and move into
other roles to increase their knowledge, competence, and experience.
• Creating an environment where employees can openly discuss problems and
suggest ways to solve them.
The key benefits of total employee commitment include:
• Increased employee retention because employees are motivated, committed, and

actively involved in working towards customer satisfaction.
• Individual and team innovation and creativity in problem-solving and process

improvement.
• Employees who take pride and accountability for their own work.
• Enthusiasm for active participation and contribution to continual improvement.
4.4.4 100% Commitment of Leadership and Communication
Organization applying TQM must have good and effective leaders who provide
unity of action and direction to all those working in the organization. The leaders
should strive the organizational efforts towards achievement of overall goals.
Everybody in your organization needs to be aware of plans, strategies, and methods
that will be used to achieve goals. There is a greater risk of failure if you do not have
a good communication plan. To implement this TQM principle, companies and
leaders have to apply the following aspects:
• Establishing an official line of communication so that all employees know about

updates, policy changes, and new processes.
• Empowering employees in all functional areas.
• Involving employees in decision-making.
• Making sure everybody in every department understands their roles and how
they fit in with the rest of the company.
Benefits include:
• Boost in morale and motivation when employees understand how their contribu-
tions help the company achieve its goals.
• Interdepartmental coordination and cooperation.
• Elimination of silos.
• Ability to more accurately measure the effectiveness of current policies and
procedures.
• Higher motivation from employees to achieve goals because they are part of the
decision-making process.
4.4.5 Cross-Functional Improvement Teams
A TQM company will have a steering committee made from top management. The
committee creates projects, forms project teams, and monitors the teams’ improve-
ment efforts. The projects will have significant and long-term benefits to the com-
pany. Improvement does not happen by itself or from one person’s ideas. Every
person contributes a unique and valuable point of view to the team. Train team
members in the process improvement tools. There are two types of teams:
1. Functional teams are from one area or department. They focus on issues that are
internal to that area only.
2. Cross-functional teams are created from members from multiple departments or
areas. Empower members of cross-functional teams to make changes. They
focus on processes, systems, and problem projects.
4.4.6 Process Approach
A process is a high-level description of the quality requirements, summarizing the

objectives, specifications, and required resources. A procedure adds more detail,
specifying the responsibilities, the tools to be used, what is to be measured, and
how. A work instruction is a step-by-step guide of the process and procedure, writ-
ten for the person who will be doing the work. In general terms, a process can
describe any input that is turned into an output using defined resources. Process
quality refers to the degree to which an acceptable process, including measurements
and criteria for quality, has been implemented and adhered to in order to produce the
goods. A process should define measurable objectives, inputs, outputs, activities,
and resources. This includes:
• The information needed to start working and from where that information comes.
• The processes have an input, process, and output.
• The basic jobs involved in the department and a description of the operations,
activities, and subprocesses required to produce the output.
• The requirements of a finished output.
• The recipient of the output.
• The objectives for a job well done.
A basic process for processing a sales order could involve filling out an order
form (input), ensuring the client’s account is in good standing, emailing the order to
the client for verification, and then emailing the purchasing department with a copy
of the verified order (output). Adhering to processes is critical in quality manage-
ment. Processes ensure that the proper steps are taken at the right time to ensure
consistency and speed up production. To implement this TQM principle, companies
must follow the rules:
• Use quality tools such as process flowcharts to define and delineate clear roles
and responsibilities so everybody knows who does what at certain times.
• Create a visual action plan so everybody can easily see the specific activities that
need to be completed to achieve the desired result.
• Analyze and measure current activities to see where improvements can be made
or where steps in the process are creating bottlenecks.
• Evaluate the impact your processes and activities may have on your customers,
suppliers, and all stakeholders.
Benefits of a process approach include:
• Faster development and production cycles, lower costs, and increased revenue.
• More consistency and predictable outcomes.
• Focus on continued improvements and success.
4.4.7 Integrated System
Typically, a business has many different departments, each with their own specific
functions and purposes. These departments and functions should be interconnected
with horizontal processes that should be the focus of total quality management. But
sometimes these departments and functions operate in isolated silos. In an inte-
grated system, everybody in every department should have a thorough understand-
ing of policies, standards, objectives, and processes. Integrated systems help the
company to look for continual improvement in order to achieve an edge over the
competition.
To implement this TQM principle as part of an integrated system, it is necessary
to comply with the following guidelines:
• Promote a work culture focused on quality.

• Use flowcharts and other visual aids to help employees understand how their
functions fit in with the rest of the company.
• Use as-is process analysis to see where improvements can be made.
• Make training available for employees who need to learn new processes and who
want to explore opportunities for advancement.
Benefits include the focus on quality that will help a company’s business achieve
excellence and meet or exceed customer expectations.
4.4.8 Strategic and Systematic Approach
The International Organization for Standardization (ISO) describes this principle

as: “Identifying, understanding and managing interrelated processes as a system
contributes to the organization’s effectiveness and efficiency in achieving its objec-
tives” (ISO 2022). Multiple processes within a development or production cycle are
managed as a system of processes in an effort to increase efficiency. To implement
this TQM principle as part of an integrated system, it is necessary to comply with
the following elements:
• Provide your people with the proper training and resources that will help them
complete their individual steps in the process.
• Continually improve processes and products, and upgrade equipment as neces-
sary to reach goals.
• Make continual improvement a measurable objective for all employees.

• Recognize, acknowledge, and reward innovations and process improvements.
Benefits include:
• An ability to quickly identify, react, and fix process bottlenecks or breakdowns.

• Overall improved organizational capabilities and improved performance.
4.4.9 Continual Improvement
Optimal efficiency and complete customer satisfaction will not happen in a day. A
company’s business should continually find ways to improve processes and adapt
your products and services as customer needs shift.
Companies that deliver products and services of substandard quality are bound
to lose out to competition. To stay ahead of the game and to keep up with the ever-
changing trends in the market, they need to accept and act on the importance of
continuous improvement. According to TQM principles, all departments of the
organization must contribute and work hard to improve the quality of their respec-
tive operations. To implement this TQM principle, it is necessary to apply the fol-
lowing aspects:
• Implementing policies to establish product, process, and system improvements

as measurable goals fo.r individuals, teams, and departments.
• Recognizing, acknowledging, and encouraging innovation to improve processes
and development.
• Encouraging employees to participate in available training sessions to learn and
take on new and additional roles.
Benefits include:
• Improved knowledge and capabilities to increase performance.

• Improvement goals strategically aligned with organizational capabilities
and goals.
• Quick reaction times to recognize and fix bottlenecks and broken processes.
4.4.10 Fact-Based and Evidence-Based Decision-Making
Analysis and data gathering lead to better decisions based on the available informa-
tion. Making informed decisions leads to a better understanding of customers and
your market. To implement this TQM principle, companies must follow the rules:
• Analyzing and checking data to ensure that it is reliable and accurate.

• Making relevant data available to stakeholders.
TQM Success Factors
Customer Centric Focus Employee Empowerment
Process Management Improvement Teams
Long-term Thinking Management and Control
Continual Improvement Auditing System
100 % Commitment Measuring Success
Fig. 4.5 TQM success factors
• Using valid methods to gather and analyze data.

• Making decisions based on the facts learned from the data in addition to your
experience and intuition.
Benefits include:
• Ability to make informed decisions.

• Ability to analyze and defend past decisions by referencing factual records.
• Ability to change past decisions based on data review.
Figure 4.5 summarizes the 10 principles for successful implementation of total

quality management (TQM).
History and Evolution in Quality
Management (QM) 5
Quality needs to be constantly improved, but it is just as

necessary to make sure that quality never deteriorates.
(Shigeru Mizuno)
5.1 Quality History and Developments
The quality movement started with Shewhart control charts in the 1940s. But qual-
ity has always been present in our historical monuments, artwork, and literature.
There are various aspects of quality such as consumer’s viewpoint of quality, pro-
ducer’s viewpoint of quality, personal quality, behavioral quality, quality practices,
and other tools. Reliability, education, training, teamwork, and management com-
munication are other important aspects which are also included in quality discus-
sions. Overall demand for most of the goods and services has been on the increase,
year after year. Due to rise in the purchasing power of people, effective demand for
many products and services has also been ever increasing. In many areas there is
also scarcity of goods and services. Present-day consumer or the customer is better
informed and enlightened. He is no longer prepared to accept things on their trace
value or to take things for granted thanks to spread of general education and aware-
ness, mass media, TV, radio, and other marketing and publicity techniques. He
wants genuine return for the money he is prepared to part with. Consumers have
nowadays a wide variety of products and attractive to choose from among a wide
range of variety. People are interested in a better alternative of value and worth, for
the money they are prepared to expend, rather than to compromise with cheap sub-
stitutes or products of inferior quality and standard. After the ravages of World War
II, Japan was obsessed with the desire to rebuild the nation on the ashes of the war
in general and of Hiroshima in particular. It was keenly felt by the Japanese that

Switzerland AG 2023
44 5 History and Evolution in Quality Management (QM)
experts were the only hope for putting their tattered economy back on its feet. For
this, they also realized that they must wipe out their earlier reputation for producing
cheap and shoddy goods if at all they hope to find a place for their products in the
international markets.
It was then that General Douglas McArthur in command of the allied forces in
Japan felt that something had to be done to improve the nation’s image, and for that
purpose, he requested the US government to send some management experts to help
the Japanese to rejuvenate their industries. Dr. Edward Deming, the eminent expert
on statistical quality control techniques of the United States, was sent to train man-
agement personnel in Japan from 1940 to 1950. During the period 1954 to 1955,
another famous management consultant, Dr. J.M. Juran, started visiting Japan to
lecture on “quality management.” Based on the teachings of these two Americans,
the beginnings of the quality movement in Japan were made in 1949. Dr. Deming
was the guiding support behind the introduction of statistical quality control, which
could substantially improve product quality. He believed in the philosophy of
entrusting the responsibility for quality improvement in the hands of a few. Dr.
Juran’s proposal was of total quality control with the responsibility for improving
quality with the management and not with a special depart.
5.2 Advanced Quality and Product Planning (APQP)
Quality planning (QP) is the task of determining what factors are important to a
project and figuring out how to meet those factors. Such factors often include the
resources that will be used, the steps needed to complete the project, and any other
specifications. Advanced product quality planning is a process developed in the late
1980s by a commission of experts who gathered around the “Big Three” of the US
automobile industry: Ford, GM, and Chrysler. Representatives from the three auto-
motive original equipment manufacturers (OEMs) and the Automotive Division of
American Society for Quality Control (ASQC) created the Supplier Quality
Requirement Task Force to develop a common understanding on topics of mutual
interest within the automotive industry. This commission worked 5 years to analyze
the then-current automotive development and production status in the United States,
Europe, and especially Japan. At the time, the Japanese automotive companies were
successful in the US market. APQP is utilized by US automakers and some of their
affiliates. Tier 1 suppliers are typically required to follow APQP procedures and
techniques and are also typically required to be audited and registered to IATF
16949. This methodology is also being used in other manufacturing sectors. The
Automotive Industry Action Group (AIAG) is a nonprofit association of automotive
companies founded in 1982. The basis for the process control plan is described in
AIAG’s APQP manual. These tools include the following methods:
• Design of experiments (DoE).

• Failure mode and effects analysis (FMEA).
5.3 Quality Assurance (QA) 45
• Statistical process control (SPC).

• Measurement system analysis (MSA).
• Production part approval process (PPAP).
• Quality function deployment (QFD).
• Production control plan (PCP).
5.3 Quality Assurance (QA)
Quality assurance (QA) is a way of preventing mistakes and defects in manufac-

tured products and avoiding problems when delivering products or services to cus-
tomers, which ISO 9000 defines as “part of quality management focused on
providing confidence that quality requirements will be fulfilled.” This defect pre-
vention in quality assurance differs subtly from defect detection and rejection in
quality control and has been referred to as a shift left since it focuses on quality
earlier in the process (i.e., to the left of a linear process diagram reading left to
right). The terms “quality assurance” and “quality control” are often used inter-
changeably to refer to ways of ensuring the quality of a service or product. For
instance, the term “assurance” is often used as follows: Implementation of inspec-
tion and structured testing as a measure of quality assurance in a television set
software project at Philips Semiconductors is described. The term “control,” how-
ever, is used to describe the fifth phase of the define, measure, analyze, improve, and
control (DMAIC) model. DMAIC is a data-driven quality strategy used to improve
processes. Quality assurance comprises administrative and procedural activities
implemented in a quality system so that requirements and goals for a product, ser-
vice, or activity will be fulfilled. It is the systematic measurement, comparison with
a standard, monitoring of processes, and an associated feedback loop that confers
error prevention. This can be contrasted with quality control, which is focused on
process output. Quality assurance includes two principles: “fit for purpose” (the
product should be suitable for the intended purpose) and “right first time” (mistakes
should be eliminated). QA includes management of the quality of raw materials,
assemblies, products, and components, services related to production, and manage-
ment, production, and inspection processes. The two principles also manifest before
the background of developing (engineering) a novel technical product: The task of
engineering is to make it work once, while the task of quality assurance is to make
it work all the time. Historically, defining what suitable product or service quality
means has been a more difficult process, determined in many ways, from the subjec-
tive user-based approach that contains “the different weights that individuals nor-
mally attach to quality characteristics” to the value-based approach which finds
consumers linking quality to price and making overall conclusions of quality based
on such a relationship.
5.4 Quality Control (QC)
5.4.1 Introduction to QC
Quality control (QC) is a process by which entities review the quality of all factors
involved in production. QC is a process through which a business seeks to ensure
that product quality is maintained or improved. Quality control requires the com-
pany to create an environment in which both management and employees strive for
perfection. This is done by training personnel, creating benchmarks for product
quality, and testing products to check for statistically significant variations. A sig-
nificant aspect of quality control is the establishment of well-defined controls. These
controls help standardize both production and reactions to quality issues. Limiting
room for error by specifying which production activities are to be completed by
which personnel reduces the chance that employees will be involved in tasks for
which they do not have adequate training. The ISO 9001 defines quality control as
“A part of quality management focused on fulfilling quality requirements” (ISO,
2022). The key elements of QC are as follows:
• Quality control (QC) is a process through which a business seeks to ensure that
product quality is maintained or improved.
• Quality control involves testing units and determining if they are within the spec-
ifications for the final product.
• The quality control used in a business is highly dependent on the product or
industry, and several techniques exist for measuring quality.
• The food industry uses quality control methods to ensure customers do not get
sick from their products.
• Quality control creates safe measures that can be implemented to make sure
deficient or damaged products do not end up with customers.
5.4.2 Testing as Element of QC
Quality control involves testing units and determining if they are within the specifi-
cations for the final product. The purpose of the testing is to determine any needs for
corrective actions in the manufacturing process. Good quality control helps compa-
nies meet consumer demands for better products. Quality testing involves each step
of the manufacturing process. Employees often begin with the testing of raw materi-
als, pull samples from along the manufacturing line, and test the finished product.
Testing at the various stages of manufacturing helps identify where a production
problem is occurring and the remedial steps it requires to prevent it in the future.
The quality control used in a business is highly dependent on the product or indus-
try. In food and drug manufacturing, quality control includes ensuring the product
does not make a consumer sick, so the company performs chemical and
5.4 Quality Control (QC) 47
microbiological testing of samples from the production line. Because the appear-
ance of prepared food affects consumer perception, the manufacturers may prepare
the product according to its package directions for visual inspection. In automobile
manufacturing, quality control focuses on how parts fit together and interact and
ensure engines operate smoothly and efficiently. In electronics, testing might involve
using meters that measure the flow of electricity.
5.4.3 QC Methods
There are several methods of measuring the performance of quality control. A qual-
ity control chart is a graphic that depicts whether sampled products or processes are
meeting their intended specifications—and, if not, the degree by which they vary
from those specifications. When each chart analyzes a specific attribute of the prod-
uct, it is called a univariate chart. When a chart measures variances in several prod-
uct attributes, it is called a multivariate chart.
5.4.3.1 X-Bar Chart

Randomly selected products are tested for the given attribute or attributes the chart
is tracking. A common form of a quality control chart is the X-bar chart, where the
y-axis on the chart tracks the degree to which the variance of the tested attribute is
acceptable. The x-axis tracks the samples tested. Analyzing the pattern of variance
depicted by a quality control chart can help determine if defects are occurring ran-
domly or systematically.
5.4.3.2 Taguchi Method

The Taguchi method of quality control is another approach that emphasizes the
roles of research and development, product design, and product development in
reducing the occurrence of defects and failures in products. The Taguchi method
considers design to be more important than the manufacturing process in quality
control and tries to eliminate variances in production before they can occur.
5.4.3.3 100% Inspection Method

This 100% inspection method is a quality control process that involves looking at
and assessing all parts of a product. This type of quality control is done to rule out
flaws in products. This method is often used to evaluate valuable metals and pro-
duce. Conducting the 100% inspection method calls for data about the manufactur-
ing process and software to analyze inventory. The challenge for using this method
is that looking at every single item that makes up a product is expensive, and it could
destabilize or render the product unusable. For example, if you use this method to
examine organic strawberries, you would risk the delicate berries being bruised or
mushed, rendering them unsellable to customers. Quality control methods help
standardize both production and reactions to quality issues in various industries
from food production to automobile manufacturing.
5.4.4 Role of QC Inspectors
Quality control inspectors protect the consumer from defective products and the
company from damage to its reputation due to inferior manufacturing processes. If
the testing process reveals issues with the product, the inspector can fix the problem
himself, return the product for repairs, or tag the product for rejection. When issues
arise, the inspector notifies supervisors and works with them to correct the problem.
5.4.5 Benefits of QC
Implementing quality control procedures ensures you are selling the best products
to your customers. In addition, practicing quality control has a positive impact on
employee conduct. Quality control can inspire employees to create high-quality
goods leading to greater customer satisfaction. Quality control protocols may help
you lower your inspection costs and use your resources in a more cost-effective
manner, too.
5.4.6 Examples of QC
In 1986, Motorola, Inc. created a quality control methodology called Six Sigma,
which uses data-driven review to keep defects to a minimum. The process focused
on cycle-time improvement to reduce defects in its manufacturing of products to no
more than 3.4 occurrences per million units. This methodology was created to mini-
mize mistakes while documenting all the manufacturing procedures. Motorola
introduced this method because, at the time, they faced fierce competition from
similar companies overseas, primarily the success of the Japanese manufacturing
market, and complaints by Motorola’s customers were high. After implementing
this then-new form of quality control, the company’s performance improved dra-
matically. By the end of the initial five-year period (1986–1991), Motorola had
reached its target for improvement in every sector of business. The continued use of
Six Sigma and Lean Six Sigma (another form) occurs in the twenty-first century and
is used by Microsoft and local governments. Six Sigma uses a five-factor approach
(DMAIC) to define, measure, analyze, improve, and control to help companies
identify and address quality control problems and fix them.
5.5 Differences of QA and QC
Quality assurance can be defined as part of quality management focused on provid-

ing confidence that quality requirements will be fulfilled. The confidence provided
by quality assurance is twofold—internally to management and externally to cus-
tomers, government agencies, regulators, certifiers, and third parties. An alternate
definition is all the planned and systematic activities implemented within the quality
5.7 Milestones in QM 49
system that can be demonstrated to provide confidence that a product or service will
fulfill requirements for quality. Quality control can be defined as part of quality
management focused on fulfilling quality requirements. While quality assurance
relates to how a process is performed or how a product is made, quality control is
more the inspection aspect of quality management. An alternate definition is “the
operational techniques and activities used to fulfill requirements for quality.”
5.6 Quality Improvement (QI)
Quality improvement is a structured approach to evaluating the performance of sys-

tems and processes and then determining needed improvements in both functional
and operational areas. Successful efforts rely on the routine collection and analysis
of data. A quality improvement plan describes an ongoing, or continuous, process
through which an organization’s stakeholders can monitor and evaluate initiatives
and results. Based on the thinking of such experts as W. Edward Demings, QI prin-
ciples were developed in manufacturing in the 1940s. In the last two decades, QI
processes have also become popular in healthcare and education. Although organi-
zations take many approaches, QI at its foundation concerns process management.
If organizations operate according to many processes, by reviewing and improving
one process at a time and leveraging the Pareto principle, they can more easily and
gradually improve their entire system. Quality improvement aims to create efficien-
cies and address the needs of customers. In healthcare, the main purpose of quality
improvement is to improve outcomes. In healthcare settings, quality improvement
may be associated with continuous quality improvement, the method used to iden-
tify problems and implement, monitor, and provide corrective action. Quality
improvement processes share these characteristics:
• Quality improvement is data-driven and regards the quantitative approach as the

only reliable means to influence the qualitative elements. This principle is
expressed in the following saying of quality improvement guru W. Edwards
Deming: “The right data in the right format in the right hands at the right time.”
• QI focuses on processes, not people. In other words, the individual is never
at fault.
• QI involves people as part of the improvement solution and looks for what is
attributed to Deming as “the smart cogs,” the employees who are directly
involved in and best understand the processes in an organization.
5.7 Milestones in QM
The birth of total quality in the United States was in direct response to a quality
revolution in Japan following World War II, as major Japanese manufacturers con-
verted from producing military goods for internal use to producing civilian goods
for trade. At first, Japan had a widely held reputation for shoddy exports, and their
goods were shunned by international markets. This led Japanese organizations to

explore new ways of thinking about quality.
5.7.1 Deming, Juran, and Japan
The Japanese welcomed input from foreign companies and lecturers, including two
American quality experts:
W. Edwards Deming, who had become frustrated with American managers when
most programs for statistical quality control were terminated once the war and gov-
ernment contracts came to an end. Joseph M. Juran, who predicted the quality of
Japanese goods would overtake the quality of goods produced in the United States
by the mid-1970s because of Japan’s revolutionary rate of quality improvement.
Japan’s strategies represented the new “total quality” approach. Rather than relying
purely on product inspection, Japanese manufacturers focused on improving all
organizational processes through the people who used them. As a result, Japan was
able to produce higher-quality exports at lower prices, benefiting consumers
throughout the world.
5.7.2 The American Total Quality Management Response
At first, US manufacturers held onto their assumption that Japanese success was
price-related and thus responded to Japanese competition with strategies aimed at
reducing domestic production costs and restricting imports. This, of course, did
nothing to improve American competitiveness in quality. As years passed, price
competition declined while quality competition continued to increase. The chief
executive officers of major US corporations stepped forward to provide personal
leadership in the quality movement. The US response, emphasizing not only statis-
tics but approaches that embraced the entire organization, became known as total
quality management (TQM). Several other quality initiatives followed. The ISO
9000 series of quality-management standards, for example, were published in 1987.
The Baldrige National Quality Program and Malcolm Baldrige National Quality
Award were established by the US Congress the same year. American companies
were at first slow to adopt the standards but eventually came on board. Table 5.1
shows major quality milestones in the recent history.
5.7.3 From QM Towards Total Quality Excellence
QM has evolved over time and methods or principles for quality improvement have
been gradually introduced. Figure 5.1 shows how QM has improved over time.
Currently, there is a movement from TQM towards customer-centric and
Table 5.1 Milestones in quality management

Terminology Year Description
Statistical quality 1930s The application of statistical methods (specifically control charts
control (SQC) and acceptance sampling) to quality control
Total quality 1956 Popularized by Armand V. Feigenbaum in a Harvard Business
control (TQC) Review article and book of the same name stresses involvement
of departments in addition to production (e.g., accounting,
design, finance, human resources, marketing, purchasing, sales)
Statistical process 1960s The use of control charts to monitor an individual industrial
control (SPC) process and feedback performance to the operators responsible
for that process; inspired by control systems
Company-wide 1968 Japanese-style total quality control including all areas of the
quality control value chain
(CWQC)
Lean production 1980 Lean management application beyond Toyota and Japanese
and lean companies
management (LM)
Total quality 1985 Quality movement originating in the US Department of Defense
management that uses (in part) the techniques of statistical quality control to
(TQM) drive continuous organizational improvement
Six Sigma (6σ) 1986 Statistical quality control applied to business strategy; originated
by Motorola
Lean Six Sigma 2001 Six sigma applied with the principles of lean manufacturing and/
(L6σ) or lean enterprise; originated by wheat et al.
customer-focused total quality excellence (TQE). Enterprises aim to implement

excellence principles throughout the value chain. Moreover, sustainability is becom-
ing more and more important as part of quality and quality excellence. The EFQM
model supports here many enterprises to achieve this goal.
5.7.4 Quality Function as Central Interface in the Enterprise
Figure 5.2 shows that quality must be executed throughout the value chain from raw
materials suppliers towards the end customers. The quality function must be the
central interface to all functions and departments.
5.7.5 TQM in Virtual and Digitized Value Chains
The TQM function must be deployed throughout the value chain as shown in
Fig. 5.3. Fig. 5.3 displays the quality responsibilities and roles in the value chain.
Total Quality
Excellence (TQE)
Total Quality • Customer and
Management (TQM) stakeholder-
Quality centric Quality
• Customer
Management (QM) Satisfaction Strategy
Quality • Customer-centric • Striving for
• Quality Processes Excellence
Quality Assurance (QC) • Process Manuals Quality Strategy
• Striving for • Environmental
• Software QM
Control (QC) • Quality Assurance Excellence Social Governance
• Quality Assurance (ESG) & Impact on
• Process • Empowerment
• Product Timing and Standards, e.g Society
Documentations and Leadership
• Statistics, e.g. ISO 9001 • Empowerment
and Qualifications Change
Number of • Everybody and New
• Quality Standards • Impact on Society
Defects responsible Leadership
• End of Line • TQM as Part of
• Workmanship • Quality Change
Quality Checks the Corporate
Control Improvement • Excellence as Part
• Complaints Actions Strategy
• QMS and Quality of the Corporate
• Quality Awreness Strategy and
• Measuring of Cost Audits
• Quality Awards, Culture, e.g.
of Quality (CoQ) EFQM Model
e.g. EFQM Model
1960 - 1970 1970 - 1980 1980 - 1990 1990 - 2020 2020 - 2030
Outlook
Fig. 5.1 Evolution of TQM and outlook to TQE. (Source: Author’s source)
5.7.6 From QMS Towards Quality Improvement (QI)
Quality management (QM) ensures that an organization, product, or service is con-

sistent. It contains the five main elements, quality management system (QMS),
quality planning (QP), quality assurance (QA), quality control (QC), and quality
improvement as (QI) shown in Fig. 5.4. Quality management is focused not only on
product and service quality, but also on the means to achieve it. Quality manage-
ment, therefore, uses quality assurance and control of processes as well as products
to achieve more consistent quality. What a customer wants and is willing to pay for
it determines quality. It is a written or unwritten commitment to a known or unknown
consumer in the market. Thus, quality can be defined as fitness for intended use or,
in other words, how well the product performs its intended function.
Strategy
Corprate Social function
Responsibility
function
Engineering/ Understanding of the Reaearch & Design
capabilities and constraints
Technical of the operations process function
function
Analysis of new Supplied
technology options Understanding of Goods Procurement
process technology
needs New product and
service ideas
Finance Provision of Understanding of the
function relevant data capabilities and constraints of
the operations process
Quality
Financial analysis for Function
performance and
decisions Market requirements
Supply Chain Marketing &
Management Understanding of human Provision of systems for Sales
resource needs Understanding of design, planning and control
infrastructural and and improvement
system needs
Recruitment
development and
Zero Defect Policy and
Lean
training Management
Lean Management
Human Information
Resources Technology (IT)
function Operations
Logistics Management
function
Fig. 5.2 Quality function as central interface in the enterprise. (Source: Author’s source)
Quality Management in the Value Chain
Tier 3 Tier 2 Tier 1 Quality Management Tier 1 Tier 2
Supplier Quality Planning
Quality Control
Supplier Customer
Quality Assurance
Supplier
Supplier Quality Improvement Distributor
Supplier Customer
Supplier Enterprise
Supplier Customer
Operations
Supplier Customer
Supplier Customer
Supplier Quality Consultancies
Supplier External Auditors Customer
Supplier Logistics Systems Audits

Provider
Process Audits Customer Quality
Supplier Quality
Assurance (CQA)
Assurance (SQA) Products Audits
Other Audits Quality Auditors

Quality Auditors
Supplier Side Supply Customer Side Demand
Fig. 5.3 Evolution of TQM and outlook to TQE. (Source: Author’s source)
Fig. 5.4 Quality management elements. (Source: Author’s source)
Reference
ISO. (2022). International Organization for Standardization. https://www.iso.org/standards.html
Quality Management as Part
of the Corporate Strategy 6
The Essence of Strategy is choosing what not to do.

(Michael Porter)
6.1 Strategic QM
Strategy is the process of overseeing tasks and activities that should be executed to
achieve the desired level of excellence in QM across the value chain. It involves
developing a quality policy, quality control and improvement, and quality assurance
throughout the organization. The proper QM strategy will help to ensure that all the
organization’s stakeholders work together to improve processes, products, services,
and culture. QM strategies are the techniques and standards that are aimed at fol-
lowing the set plan and achieving the desired outcome. Strategic management is the
formulation and deployment of QM tools, procedures, and tools within the overall
framework of strategic planning, in a way that is aligned with all the other initiatives
such as process reengineering, cost management, inventory control, and target anal-
ysis. Quality management has therefore to be aligned with the corporate strategy on
all levels and properly coordinated (Srinidhi, 1998).
6.2 Levels of Strategy
A corporate quality strategy is a broad marketing plan that creates guidelines to be

used throughout the company. Part of this strategy can include suppliers, operations,
and the after-service. A quality strategy is typically designed at the senior manage-
ment level (Helmold, 2021). The three levels of strategy, developed by Gerry
Johnson and Kevan Scholes along with other major managerial thinkers, are a way

Switzerland AG 2023
56 6 Quality Management as Part of the Corporate Strategy
of defining the different layers of strategy which, in tandem, orient the direction of
the organization and define its success (Johnson et al., 2017). The three levels are as
follows:
1. Corporate and strategic quality level.

2. Business and tactical quality level.
3. Functional and operational quality level.
When synchronized and coordinated, successful quality and TQM strategies at

each of these levels will contribute to successful overall organizational strategy
including right measures to prevent and avoid inefficiencies in the supply chain and
other functions of an enterprise (Khojasteh, 2018). This is the top layer of strategic
planning and is often associated with the organization’s mission and values, though
it is developed in much more significant depth (Helmold, 2021). Corporate strategy
is defined by those at the very top of the organization and is an outline of the overall
long-term direction and allocation of resources. Questions related to the strategy are
normally:
• Generally, overall strategy and direction in terms of quality management.

• How do we align our QM system with the overall corporate strategy.
• Which markets the organization will operate in.
• What marketing tools and concepts to apply.
• How do we implement QM or TQM Principles.
• What quality management tools can be used.
• Which suppliers and supply chains to procure from.
• How the markets will be entered and the general activities of the organization.
• How to prevent risks in the upstream or downstream supply chains.
• How to apply risk management plans and initiatives.
6.2.1 Corporate Strategy
Corporate strategy is crucial as it will define all other decisions that are made within
the organization along the line. Smaller, newer organizations which are targeting a
very specific niche market, or operate with a small set of unique products/services,
will find it far easier to develop a corporate strategy as there are fewer variables to
consider. However, larger and more developed organizations will find the process
much simpler, as they may need to diverge from activities and behaviors which
define who they are in order to reach out into new markets and to take new
opportunities.
6.2 Levels of Strategy 57
6.2.2 Business Strategy
The business strategy generally emerges and evolves from the overarching corpo-
rate strategy which has been set by those at the helm (Tomczak et al., 2018). They
are usually far more specific than corporate strategy and will likely be unique to
different departments or subdivisions within the broader organization. In general,
they use corporate strategy as an outline to:
• Define specific tactics and strategies for each market the organization is
involved in.
• Define how each business unit will deliver the planned tactics.
Due to their nature, they are more common in larger firms that engage in multiple
activities, than they are in small businesses. However, they can still be engaged in
smaller organizations who wish to define how they go about each different subsec-
tion of their operations, by breaking down the overall scope of the corporate strategy.
6.2.3 Functional Strategy
The functional long-term strategy, also defined as market-level strategy, refers to the
day-to-day operation of the company, which will keep it functioning and moving in
the correct direction. While many organizations fail because they do not have an
overarching corporate strategy, others fail because they have not developed plans
for how to engage in everyday activities. Even with an overall direction you wish to
head in, without a plan for how to successfully operate, an organization will be
unable to progress. These will be numerous and will define very specific aspects and
operations within smaller departments, teams, groups, and activities. Overall,
they define:
• Day-to-day actions which are required to deliver corporate and business

strategies.
• Relationships needed between units, departments, and teams.
• How operational goals will be met and how they will be monitored.
It is at this level, the lowest in strategic development, that leaders should define
how different departments and functions will work together to achieve higher goals.
There will be managers that will oversee departments (e.g., manufacturing and HR)
that do not perform the same functions, but need to be synchronized in order to
achieve the goals set out by the corporate and business strategies.
6.2.4 Alignment of Strategies
Though corporate strategy will get all of the attention, it is success at the bottom of
the hierarchy—through day-to-day functions—which will truly define where the
organization as a whole will succeed. Companies must build from the ground up, in
small steps, in order to keep moving forward. If operations break down, so does the
organization. As mentioned previously, it is crucially important that each level of
strategy is synchronized, both from top to bottom and horizontally across the orga-
nization. Feedback should be down from both corporate strategy and functional
strategy, and vice versa, in order for all three levels to ensure that they are operating
in line with one another (Helmold, 2021). Strategy itself will not define organiza-
tional success; however, it is a very good place to start. Once sound strategies are in
place, an organization can move forward and begin to execute said strategies. They
may need some adjustment along the way—and you should be prepared to do so, in
response to feedback from different levels and from the external environment—but
they should be initially developed in such a way that they will keep the organization
in line with its long-term objectives.
Quality Management (QM) Strategy
Strategic
Analysis
How to achieve? Where are we?
Introduction of Analysis of
sustainable and Elements that
long-term Mission Impact my
Strategies that Organisation and Corporate Level
provide a Vision the Future
competitive
advantage Strategic Business Level
Objectives
Funconal Level
Strategic Strategic
Implementation Where are we Choice
going?
Selection of suitable
Strategic Options
Fig. 6.1 Strategic triangle. (Source: Author’s source, adapted from Johnson et al., 2017)
6.4 Strategic Analysis: Where Are We? 59
6.3 Strategic Triangle
The process of strategic management cycle is a process with three elements as out-
lined in Fig. 6.1 (strategic triangle or strategic cycle). The three steps are (1) the
strategic analysis, (2) the strategic choice, and (3) the strategic implementation and
will be described in the following sections. The triangle is raising the following
questions:
1. Where are we? What is our strategic location or position?

2. Where do we want to go? What options do we have?
3. How do we achieve this? What measures to take to execute our targets?
6.4 Strategic Analysis: Where Are We?
6.4.1 Analyzing Important Factors
The strategic analysis of an organization is about understanding the strategic posi-

tion of the organization in terms of lean management. This stage requires a pro-
found analysis where the organization stands in terms of lean management tools and
processes. The existing competencies and resources of the organization need to be
assessed to determine if there are any opportunities to be gained from these and to
determine if they need to be enhanced in order to pursue strategic objectives and
goals. The major stakeholders which influence the organization and the opinions or
viewpoints must be taken into consideration as the purpose of all of the strategic
analysis is to define the potential future direction of the organization. The purpose
of this phase (strategic analysis) is to create a suitable starting position and to under-
stand the key influences on the present and future state of the organization and what
opportunities are afforded by the environment and the competencies of the organi-
zation. Assessing the strategic position consists of evaluating the following ele-
ments as shown in Table 6.1.
Strategy is concerned with the position a business takes in relation to its environ-
ment; an understanding of the environment’s effects on an organization is of central
Table 6.1 Tools for the Tools Description

strategic analysis PESTEL analysis Environmental or macro analysis
Industry analysis Porter’s five forces (P5F) or micro
analysis
SWOT analysis Internal and external factors
Cultural analysis Environmental or macro analysis
Benchmarking Comparing the own company with
analysis the best competitor
Stakeholder analysis Understanding the groups involved
importance to the strategic analysis. The historical and environmental effects on the
business must be considered, as well as the present effects and the expected changes
in environmental variables. The analysis of the environment can be done via macro
and micro analyses (PESTEL, Porter’s 5 forces). Additionally, strengths, weak-
nesses, opportunities, and threats complete the assessment of the environment
(SWOT). This step is a major task because the range of environmental variables is
so great. Another area of the strategic analysis is the evaluation of the strategic capa-
bility of an organization and where it is able to achieve a competitive advantage.
Considering the resource areas of a business such as its physical plant, its manage-
ment, its financial structure, and its products may identify these strengths and weak-
nesses. The expectations of stakeholders are important because they will affect what
will be seen as acceptable in terms of the strategies advanced by management.
Stakeholders can be defined as people or groups inside or outside the organization,
who have an interest in the activities of the organization. A typical list of stakehold-
ers for a large company would include shareholders, banks, employees, managers,
customers, suppliers, government, and society. Culture affects the interpretation of
the environmental and resource influences (Helmold & Terry, 2021).
6.4.2 Analyzing the Environment
A PESTEL analysis or PESTLE analysis is a framework or tool used to analyze and

monitor the macro-environmental factors that may have a profound impact on an
organization’s performance. This tool is especially useful when starting a new busi-
ness or entering a foreign market. It is often used in collaboration with other analyti-
cal business tools such as the SWOT analysis and Porter’s five forces to give a clear
understanding of a situation and related internal and external factors. PESTEL is an
acronym that stands for political, economic, social, technological, environmental,
and legal factors. However, throughout the years people have expanded the frame-
work with factors such as demographics, intercultural, ethical, and ecological
resulting in variants such as STEEPLED, DESTEP, and SLEPIT. In this article, we
will stick simply to PESTEL since it encompasses the most relevant factors in gen-
eral business. Each element will be elaborated as shown in Fig. 6.2.
6.4.3 Analyzing the Industry
Porter is best known for his strategic frameworks and concepts in his paper, which
was published in 1980 (Porter, 1980). The five forces model (industry analysis) has
five elements that can be utilized to assess the attractiveness and competitive situa-
tion of the industry as outlined in Fig. 6.3. The five elements are as follows:
1. Rivalry among competitors.

2. Bargaining power of suppliers.
6.4 Strategic Analysis: Where Are We? 61
Fig. 6.2 PESTEL analysis. (Source: Author’s source)
3. Bargaining power of buyers.

4. Threat of new market entrants.
5. Threat of new substitutes.
The stronger the threat posed by these five competitive forces, the less attractive
the industry under consideration and the more difficult it is to achieve a sustainable
competitive advantage. Companies should therefore try to be active in an industry
with an attractive industry structure and to build up a defensible position in their
industry, i.e., a position in which the five competitive forces are as less threatening
as possible. Companies can also influence the five forces with the help of appropri-
ate strategic orientation. This can increase the attractiveness of an industry. If, how-
ever, companies influence the distribution of competitive forces to the advantage of
their own competitive position without being aware of the long-term effects or con-
sciously accepting them, this can also destroy the structure and profitability of an
industry.
6.4.4 Analyzing the Strengths and Weaknesses
The SWOT (strengths, weaknesses, opportunities, and threats) analysis in Fig. 6.4
is a framework used to evaluate a company’s competitive position and to develop
strategic planning. SWOT analysis assesses internal and external factors, as well as
current and future potential. This technique, which operates by peeling back layers
of the company is designed for use in the preliminary stages of decision-making
processes and can be used as a tool for evaluation of the strategic position of orga-
nizations of many kinds (for-profit enterprises, local and national governments,
NGOs, etc.). It is intended to specify the objectives of the business venture or
Threat of
new
Substitutes
Porter´s 5 Forces Analysis (Micro)
Bargaining Bargaining
Rivalry amongst
Power of Power of
Competitors
Suppliers Buyers
Threat of
new
Market Entrants
Fig. 6.3 Industry analysis. (Source: Author’s source)
Fig. 6.4 SWOT analysis.

Strengths Weaknesses
Internal
SWOT
Analysis
External
Opportunities Threats
project and identify the internal and external factors that are favorable and unfavor-
able to achieving those objectives. Users of a SWOT analysis often ask and answer
questions to generate meaningful information for each category to make the tool
useful and identify their competitive advantage.
6.4.5 Analyzing the Core Competencies
The core competency concept describes a product, feature, process, skill, brand, or
activity that a company can perform better than the competition and has thus
achieved a competitive advantage. It is determined by the certain characteristics like
customer value or benefits, protection against imitation, differentiation, diversifica-
tion, and innovation or unique features as shown in Fig. 6.5. In business, a competi-
tive advantage is the attribute that allows an organization to outperform its
competitors.
6.5 Strategic Choice: Where Are We Going to? 63
Value for
Customers
Core Competencies
Protection Unique
against Features and Diversification
Imitation Innovation
Dif ferentiation
Fig. 6.5 Core competencies. (Source: Author’s source)
6.5 Strategic Choice: Where Are We Going to?
6.5.1 Generic Strategies
Strategic choice typically follows strategic analysis. Strategic choice involves a

whole process through which a decision is taken to choose a particular option from
various alternatives. There can be various methods through which the final choice
can be selected upon. Managers and decision-makers keep both the external and
internal environment in mind before narrowing it down to one. It is based upon the
following three elements: first, the generation of strategic options, e.g., growth,
acquisition, diversification, or concentration; second, the evaluation of the options
to assess their relative merits and feasibility; and third, the selection of the strategy
or option that the organization will pursue. There could be more than one strategy
chosen but there is a chance of an inherent danger or disadvantage to any choice
made. Although there are techniques for evaluating specific options, the selection is
often subjective and likely to be influenced by the values of managers and other
groups with an interest in the organization. The generic strategies differentiation
and cost leadership in Fig. 6.6 are a good method to define, in which direction a
company should go to increase profitability and to acquire a competitive advantage
(Porter, 1980, 1985; Helmold, Dathe & Hummel 2019). Companies can strive for a
differentiation strategy and provide superior quality. On the other hand, cost leaders
must make sure that quality practices are properly applied, too. Figure 6.6 depicts
the generic strategies.
Fig. 6.6 Generic strategies. (Source: Author’s own figure, adapted from Porter, 1985)
6.5.2 5P Model by Henry Mintzberg
Mintzberg provides five definitions of strategy, plan, ploy, pattern, position, and
perspective (Mintzberg et al., 1995). First, strategy is always a plan. A plan inte-
grates intended action activities based on previous assessment of the situation.
Second, as a plan, a strategy can be a ploy too, really just a specific maneuver
intended to outwit an opponent or competitor. If strategies can be intended (whether
as general plans or specific ploys), they can also be realized. In other words, defin-
ing strategy as a plan is not sufficient; we also need a definition that encompasses
the resulting behavior. Third, strategy is a pattern. The definitions of strategy as plan
and pattern can be quite independent of one another. Plans may go unrealized, while
patterns may appear without preconception. Plans are intended strategy, whereas
patterns are the realized strategy. Fourth, strategy is a perspective. A perspective is
not just of a chosen position, but consists of an ingrained way of perceiving
the world.
6.5.3 Boston Consulting Matrix (BCG Matrix)
The BCG matrix is named after the Boston Consulting Group (BCG), whose
founder Bruce Henderson developed this matrix in 1970 (Fig. 6.7). This concept
should clarify the connection between the product life cycle and the cost experience
curve. The matrix is often visualized as a scatter or bubble diagram; the area of a
circle then represents the sales of the respective product. The BCG matrix is, put
simply, a portfolio management framework that helps companies decide how to
prioritize their different businesses and supply chains. It is a table, split into four
Fig. 6.7 Boston Low Market High Market

Consulting Group (BCG) Share Share
matrix. (Source: Author’s
source)
High Market
Growth
Question Marks Stars
BCG Matrix
Low Market
Growth Dogs Cash Cows
quadrants, each with its own unique symbol that represents a certain degree of prof-
itability: question marks, stars, dogs, and cash cows. By assigning each business to
one of these four categories, executives could then decide where to focus their
resources and capital to generate the most value, as well as where to cut their losses.
The products or business units of a company are assigned to one of the four areas
based on their values. Each area embodies a standard strategy. It should give a good
recommendation on how to proceed. The life cycle of a typical product runs from
the question mark to the star and cash cow to the poor dog. There are also products
that do not follow this ideal path. Many product failures and flops do not even reach
the star range. An imitating product, on the other hand, may skip the question mark
area. The question marks, normally young products, are the newcomers among the
products. The market has growth potential, but the products only have a small rela-
tive market share. Management is faced with the decision of whether to invest or
abandon the product. In the case of an investment, the product requires liquid funds,
which it cannot generate itself. A typical strategy recommendation is selection and
possibly an offensive penetration strategy to increase market share. The stars are the
company’s most promising products. You have a high relative market share in a
growth market. They already cover the investment needs resulting from market
growth with their own cash flow. The strategy recommendation is investment and
possibly a skimming strategy to increase profit margins without endangering market
share. The cash cows (milking cows) have a high relative market share in an only
slightly growing or static market. They produce stable, high cash flows and can be
“milked” without further investment. A fixed price strategy or price competition
strategy is appropriate. The poor dogs are the discontinued products in the company.
They have low market growth, sometimes market contraction, and low relative mar-
ket share. At the latest as soon as the contribution margin for these products is nega-
tive, the portfolio should be adjusted (disinvestment strategy). In addition to
assessing the individual products using the standard strategies, the entire portfolio
should also be considered. Pay attention to the static financial equalization—the
products in the portfolio should support and finance each other. A question mark can
only expand if a cash cow finances this expansion. Future developments can also be
seen. The products should be evenly represented in the individual areas—a com-
pany without question marks would have little chance in the future market. The
matrix reveals two factors that companies should consider when deciding where to
invest, company competitiveness, and market attractiveness, with relative market
share and growth rate as the underlying drivers of these factors. Each of the four
quadrants represents a specific combination of relative market share and growth:
• Low growth, high share. Companies should milk these “cash cows” for cash to
reinvest.
• High growth, high share. Companies should significantly invest in these “stars”
as they have high future potential.
• High growth, low share. Companies should invest in or discard these “question
marks,” depending on their chances of becoming stars.
• Low share, low growth. Companies should liquidate, divest, or reposition
these “dogs.”
6.5.4 Ansoff Matrix
The product-market matrix in Fig. 6.8 (also Ansoff matrix, after its inventor Harry
Igor Ansoff or Z-matrix) is a tool for the strategic management of companies. It can
be used by a management (= company management) who has decided on a growth
strategy as an aid for planning this growth. When it comes to market penetration, the
focus is on gaining additional market shares with existing products. The company is
trying to sell more of its products to existing, new, and competitive customers.
Existing marketing activities usually have to be adapted to achieve this goal.
Although the product portfolio does not change, companies often have to experi-
ment with new advertising concepts in order to further promote product adoption in
the existing market.
Fig. 6.8 Ansoff matrix. Existing Superior Quality

New Superior Quality
On new Markets for new Products
(Source: Author’s source) Products Products
Existing Markets
Market Product
Penetration Development
Ansoff
Matrix
New Markets
Market
Diversification
Development
However, this market penetration can only be successfully implemented up to the

point at which the market has not yet been fully saturated. The focus of the market
development strategy is on creating new sales markets for existing products. By
entering new market segments or opening up further geographical regions, a com-
pany puts itself in the position of attracting new target groups for its existing
products.
A regionally operating bakery can also offer its own products nationwide, for
example, by setting up digital sales channels, and thus generate growth. Of course,
the implementation of this strategy is initially offset by considerable investment
costs. The chances of success should therefore first be assessed by means of careful
planning and a comprehensive risk analysis. If opening up new markets is not an
option, it is often worth taking a look at the product development strategy. The exist-
ing range is expanded through product innovations or the creation of product vari-
ants in the existing market. The resulting added value should encourage consumers
to buy. This strategy is particularly attractive for companies in niche markets in
which acquiring new customers and upselling would be almost impossible with a
pure market penetration strategy. The reluctance to enter new markets is reinforced
by high development costs and the risk of failure of the newly developed product.
The most risky quadrant of the Ansoff matrix is that of diversification. This requires
the development of a new product while at the same time opening up a new market.
The associated investment costs in terms of product development, business analy-
ses, setting up local subsidiaries, etc. can quickly mean the end of a company if the
corresponding ROI is not achieved. The diversification strategy can be broken down
into horizontal, vertical, and lateral diversification, depending on the degree of risk
tolerance of a company:
• Vertical diversification.
• Horizontal diversification.
6.5.4.1 Horizontal Diversification

Horizontal diversification describes the development of a new product that is still
factually related to the product range previously offered. The existing value chain
can continue to be used with minimal adjustments. With horizontal diversification,
a company expands its offerings at the same economic level to reach new custom-
ers. An example of this type of diversification is the development of the iPad, which
with its introduction gradually expanded Apple’s existing smartphone and computer
portfolio.
6.5.4.2 Vertical Diversification

With vertical diversification, a company deepens its commitment to sales-oriented
activities (forward integration) and/or the actual manufacturing process of its prod-
ucts (backward integration). Diversification does not take place on the same level of
the value chain as with horizontal diversification, but on the upstream or down-
stream one. With forward integration, a company takes the sales of its products and
services into its own hands, for example, by opening its own branches or an online
shop. Backward integration describes the safeguarding of a company’s reference

markets, for example, by taking over production processes that were previously
outsourced to external companies. While horizontal diversification aims to reduce
dependency on one product line, vertical diversification focuses on reducing depen-
dence on suppliers and dealers. The acquisition of the necessary skills and know-
how for the successful implementation of sales and production processes is in turn
associated with high investment costs and thus increased financial risks.
6.5.4.3 Lateral Diversification

With the lateral diversification strategy, companies expand into completely new
markets that have no material connection with the existing business.
The aim and purpose of this alignment is to minimize the dependence on devel-
opments in the existing market segment. Google can be mentioned as a good exam-
ple in this context: In addition to the search engine core business, the company
expanded early on into other market segments such as telecommunications (fiber),
biotechnology (Calico), or autonomous automotive technology (Waymo). The lat-
eral diversification strategy is used by multinational companies in particular to
respond flexibly to changes and trends in the market. The necessary know-how is
usually acquired through the acquisition of specialized companies that are already
represented in the market of interest. Accordingly, this strategy requires enormous
investment costs and harbors not only financial but also immaterial risks, such as a
diluted brand image due to product offerings that are too diversified.
6.5.5 Blue and Red Ocean Strategies
Blue ocean strategy is a method for developing permanently profitable business

models from the field of strategic management (Table 6.2). The basic idea is that
only through the development of innovative and new markets, which really differ-
entiate and relevant benefits for the broad mass of customers or noncustomers, “blue
oceans” offer lasting successes. Among other things, this is to be achieved through
competition that has become meaningless, new customer acquisitions, and opti-
mized cost structures. The concept of the blue ocean strategy was developed by
W. Chan Kim and Renée Mauborgne at the Insead Business School, where it was
Table 6.2 Red ocean and blue ocean strategy

Red ocean strategy Blue ocean strategy
Compete in existing market spaces Create uncontested market spaces
Defeat the competition Make the competition irrelevant
Apply differentiation or cost leadership Apply differentiation and cost leadership
Achieve a competitive advantage Achieve value innovations
Segment smartly existing customers Attract new customers
Exploit existing demand Create and capture new demands
6.6 Strategic Implementation: How Do we Achieve this? 69
initially referred to as value innovation. Based on empirical studies over a period of

15 years and based on the analysis of more than 100 leading companies, examples
of companies were found that opened up new, previously unused submarkets and
thus made the previous competition irrelevant. The term ocean describes a market
or branch of industry in connection with the blue ocean strategy. “Blue oceans” are
understood as untouched markets or branches of industry with little or no competi-
tion. Anyone who plunged into the blue ocean would find undiscovered markets or
industries. “Red oceans,” on the other hand, designate saturated markets, character-
ized by tough competition, overcrowded with competitors who all offer the same
service or the same products. The term “red ocean” is based on the image of bloody
fights of predatory fish (the competitors), while the “blue ocean” is free from bloody
fights. Table 6.2 shows the red and blue ocean strategy.
6.6 Strategic Implementation: How Do we Achieve this?
6.6.1 Assessment of Suitability, Acceptability, and Feasibility
Strategic implementation is concerned with the translation of the selected strategy

into action. The ways in which strategies are implemented are described as the stra-
tegic architecture or framework of the organization. Successful implementation of
the chosen strategy will be dependent on several factors such as stakeholder’s
expectations, the employees, the company culture, the will to change, and the coop-
eration within the organization. These elements and how the management and
employees work together to adopt the new plan will decide about how successful
the strategy implementation is. The available skills and/or the ability to develop new
skills when required for the planned change and issues like the structural reorgani-
zation and resulting cultural disturbance would also affect success. Resource avail-
ability and planning for the utilization of such resources need to be addressed as part
of the implementation plan. The entire process necessitates the management of stra-
tegic change and will concern handling both hard and soft factors of the organiza-
tion, i.e., structure and systems and culture and motivation. Implementing a strategy
has three elements.
• Organizational structure and layout: Where and how should the organization be
split into European, US, and Asian divisions? How autonomous should divisions
be? What parenting style should be applied?
• Resources: Enabling an organization’s resources should support the chosen strat-
egy. What are the appropriate human and nonhuman resources? What assets are
needed to be acquired?
• Change management: Most strategic planning and implementation will involve
change, so managing change, in particular employees’ fears and resistance, is
crucial.
Johnson and Scholes argue that for a strategy to be successful, it must satisfy
three criteria. These criteria can be applied to any strategy decision such as the com-
petitive strategies, growth strategies, or development strategies:
1. Suitability—whether the options are adequate responses to the firm’s assessment

of its strategic position.
2. Acceptability—considers whether the options meet and are consistent with the
firm’s objectives and are acceptable to the stakeholders.
3. Feasibility—assesses whether the organization has the resources it needs to
carry out the strategy.
6.6.2 Suitability
Suitability is a useful criterion for screening strategies, asking the following ques-
tions about strategic options:
• Does the strategy exploit the company strengths, such as providing work for
skilled craftsmen or environmental opportunities, e.g., Does it help in establish-
ing the organization in new growth sectors of the market?
• How far does the strategy overcome the difficulties identified in the analysis? For
example, is the strategy likely to improve the organization’s competitive posi-
tion, solve the company’s liquidity problems, or decrease dependence on a par-
ticular supplier?
• Does the option fit in with the organization’s purposes? For example, would the
strategy achieve profit targets or growth expectations, or would it retain control
for an owner-manager?
6.6.3 Acceptability
Acceptability is essentially about assessing risk and return and is strongly related to
expectations of stakeholders. The issue of “acceptable to whom?” thus requires the
analysis to be thought through carefully. Some of the questions that will help iden-
tify the likely consequences of any strategy are as follows:
• How will the strategy impact shareholder wealth? Assessing this could involve
calculations relating to profitability, e.g., net present value (NPV).
• How will the organization perform in profitability terms? The parallel in the
public sector would be cost/benefit assessment.
• How will the financial risk (e.g., liquidity) change?
• What effect will it have on capital structure (gearing or share ownership)?
6.7 Strategic Pyramid 71
• Will the function of any department, group, or individual change significantly?

• Will the organization’s relationship with outside stakeholders, e.g., suppliers,
government, unions, or customers, need to change?
• Will the strategy be acceptable in the organization’s environment, e.g., higher
levels of noise?
6.6.4 Feasibility
Assesses whether the organization has the resources it needs to carry out the strat-
egy. Factors that should be considered can be summarized under the M-word model.
• Machinery. What demands will the strategy make on production? Do we have

sufficient spare capacity? Do we need new production systems to give lower
cost, better quality, more flexibility, etc.?
• Management. Is existing management sufficiently skilled to carry out the
strategy?
• Money. How much finance is needed and when? Can we raise this? Is the cash
flow feasible?
• Manpower. What demands will the strategy make on human resources? How
many employees are needed, what skills will they need, and when do we need
them? Do we already have the right people or is there a gap? Can the gap be filled
by recruitment, retraining, etc.?
• Markets. Is our existing brand name strong enough for the strategy to work? Will
new brand names have to be established? What market share is needed for suc-
cess—how quickly can this be achieved?
• Materials. What demands will the strategy make on our relationships with sup-
pliers? Are changes in quality needed?
• Makeup. Is the existing organizational structure adequate or will it have to be
changed?
6.7 Strategic Pyramid
A useful tool for the translation of the corporate strategy and strategic objectives
into negotiations is the strategic pyramid in Fig. 6.9. Strategy in this context is the
long-term positioning as well as the decision of the enterprise, which business
fields, and which strategies to choose. Strategy is therefore “the fundamental, long-
term direction of three to five years and organization of a company in order to gain
competitive advantages in a changing environment through the use of resources and
competences and to realize the long-term goals of the stakeholders”.

Mission
Lean Vision
Goals & Values
Objectives (specific)
Core Competencies
Marketing and Sales Strategies
Strategic Architecture
Control & Execution (KPI System)
Fig. 6.9 Strategic pyramid. (Source: Author’s own figure)
6.8 Mission and Vision
Enterprises must manifest in their strategy to strive for lean excellence. The mission
is the starting point of the strategic pyramid. The mission statement of an enterprise
is the long-term purpose of the company and the strategic direction as defined by
Johnson and Scholes (1997). The vision or strategic intent describes more specifi-
cally what an organization aims to achieve and the long-term aspirations.
6.9 Goals and Objectives
The mission and vision are followed by generic goals and specific objectives. Generic
goals are not quantified and more general, but specific objectives are quantified and
specific (Helmold, Dathe & Hummel 2019). The strategists Johnson and Scholes
distinguish in longer-term and generic (English: goals) as well as shorter and quanti-
fied objectives (English: objectives) for the company. Quantified goals can include
sales, financial, quality, logistics, cost, and alpha goals.
6.10 Core Competencies
The next level in the strategic pyramid is the identification of core competencies.
Core competences are those competences which allow companies to gain a superior
or competitive advantage and that are very difficult for your competitors to emulate.
6.13 Control and Execution 73
These describe the resources, skills, knowledge, or any other feature that leads to a
competitive advantage. Core competencies must be perceived by customers and
clients.
6.11 Strategies
After defining mission, vision, goals, and core competencies, the elements must be
translated into strategic objectives and key performance indicators (KPI). The
long-term implementation of these elements is defined as the formulation of stra-
tegic objectives and important for the negotiations (Helmold, Dathe & Hummel
2019). In implementing the strategic goals, negotiations will take place with many
stakeholders. Become a lean differentiator by answering customer demands:
Reduce operating cost by 25% in 12 months from now, and increase customer sat-
isfaction by 10%.
6.12 Strategic Architecture
In addition to buildings, machines, plants, offices, resources, or employees, the

infrastructure in the sense of strategic management also includes knowledge and
innovations of the company that ensure long-term success (Helmold, Dathe &
Hummel 2019). This requires facilities, buildings, factories, or offices that represent
the strategic infrastructure. In addition, however, other success criteria such as
resources, knowledge, experts, name recognition, network, or innovations are of
central importance.
6.13 Control and Execution
The final element of the strategic pyramid is the performance control (control and
execution) and a target-performance comparison. A suitable tool for this step is the
balance score card (BSC) or an action plan. The instrument of the BSC was already
developed in 1992 by the professors Norton and Kaplan. The BSC is an instrument
in strategic management and includes four categories:
1. Customer satisfaction.
2. Financial category.
3. Internal processes and improvements.
4. Learning organization.
In practice, it seems that companies are adapting or expanding the original four
dimensions to their specific needs.
References
Helmold, M. (2021). Successful management strategies and tools. Industry insights, case studies
and best practices. Springer.
Johnson, G., et al. (2017). Exploring strategy (11th ed.). FT Prentice Hall.
Khojasteh, Y. (2018). Supply chain risk management. Advanced tools, models, and developments.
Springer.
Mintzberg, H., Quinn, J. B., & Ghoshal, S. (1995). The strategy process. Revised Euro-pean edi-
tion. Prentice Hall.
Porter, M. E. (1980). Competitive strategy: Techniques for analyzing industries and competitors.
Free Press.
Porter, M. E. (1985). Competitive advantage. Creating and sustaining superior performance.
Free Press.
Srinidhi, B. (1998). Strategic quality management. International Journal of Quality Science,
3(1), 38–70.
Tomczak, T., Reinecke, S., & Kuss, A. (2018). Strategic marketing. Market-oriented corporate and
business unit planning. Springer.
Audits and Quality Management
Systems (QMS) 7
There are two kinds of people, those who do the work and those
who take the credit. Try to be in the first group; there is less
competition there.
(Indira Gandhi)
7.1 Quality Management Systems (QMS)
7.1.1 Definition and Scope of QMS
A quality management system (QMS) is the combination of methods, principles,

and processes of quality excellence applied in an organization. A QMS focuses
always on meeting and overachieving customer requirements. The QMS has a set of
guidelines that are defined by a collection of policies, processes, documented pro-
cedures, and records. This system defines how a company will achieve the creation
and delivery of the product or service they provide to their customers. When imple-
mented in your company, the QMS needs to be specific to the product or service you
provide, so it is important to tailor it to your needs. However, in order to help ensure
that you do not miss elements of a good system, some general guidelines exist in the
form of ISO 9001 (Quality Management System—Requirements), which is intended
to help standardize how a QMS is designed. ISO 9001 is the international standard
for quality management systems (QMSs), published by ISO (the International
Organization for Standardization). The standard was most recently updated in 2015
and is referred to as DIN EN ISO 9001:2015. In order to be released and updated,
ISO 9001 had to be agreed upon by a majority of member countries so that it would
become an internationally recognized standard, which means it is accepted by a

Switzerland AG 2023
76 7 Audits and Quality Management Systems (QMS)
majority of countries worldwide. ISO has a range of standards for quality manage-
ment systems that are based on ISO 9001 and adapted to specific sectors and indus-
tries. QMs are accredited by globally applied standards. The advantages of a QMS
can be outlined as follows:
• Increasing customer satisfaction by using a globally applied standard and

improvement system.
• Becoming more cost-efficient, increasing credibility, and securing
competitiveness.
• Optimizing costs and creating shorter cycle times through effective use of
resources.
• Enhanced customer satisfaction and improved customer loyalty leading to repeat
business.
• Increased revenue and market share obtained through flexible and fast responses
to market opportunities.
• Integration and alignment of internal processes which will lead to increased pro-
ductivity and results.
• Ensuring a consistent and streamlined delivery of the products or services
requested by customers.
• Improved communication, planning, and administration processes throughout
the organization.
7.1.2 Different Types of QMS
A quality management system (QMS) describes in enterprises and organizations the

management function and all organizational activities, which serve the improve-
ment of the process quality, the work quality, and thus the product and service qual-
ity. QMSs are using lean features for process improvements. Table 7.1 outlines the
most common standards of QMS in certain industries.
Table 7.1 Quality Name Industry

management systems (QMSs) DIN ISO General quality management system
9001:2015
EN/AS 9100 Aviation
IATF 16949:2016 Automotive
DIN EN 15224 Health care
ISO/TS 22163 Railway, replacing IRIS
ISO 13485 Medical industry
TL 9000 Telecommunications
7.3 Aviation QMS: EN/AS 9100 77
7.2 QMS: DIN EN ISO 9001:2015
The DIN EN ISO 9001:2015 (ISO 9001) quality management system (QMS) is the
world’s most popular quality management standard, with over one million certified
organizations in 180 countries worldwide. ISO 9001 provides a quality manage-
ment framework that companies can use to ensure the quality of their products and
services is consistent. Companies choose ISO 9001 certification to show that they
have taken due care to maintain high standards. This reduces the chance of product
faults and recalls or service shortcomings and ensures that your customers can buy
with confidence. ISO 9001 certification demonstrates your organization’s ability to
consistently meet and exceed customer expectations. Many enterprise buyers and
retailers require their suppliers to be ISO 9001-certified in order to minimize their
risk of purchasing a poor product or service—being ISO 9001-certified boosts your
sales potential. A business that achieves ISO 9001 certification can attain significant
improvements in organizational efficiency and product quality by minimizing waste
and errors and increasing productivity. Our comprehensive guideline on ISO 9001
provides useful information on requirements and benefits. The elements of the ISO
9001:2015 are as follows:
• Section 1: Scope.
• Section 2: Normative references.
• Section 3: Terms and definitions.
• Section 4: Context of the organization.
• Section 5: Leadership.
• Section 6: Planning.
• Section 7: Support.
• Section 8: Operation.
• Section 9: Performance evaluation.
• Section 10: Continual improvement.
Figure 7.1 depicts the DIN ISO 9001:2015 elements.
7.3 Aviation QMS: EN/AS 9100
Aviation thrives on safety like hardly any other industry. Therefore, quality manage-
ment systems according to EN/AS 9100ff are becoming increasingly important in
the aviation industry. They enable your company to meet all quality requirements
and to continuously improve. ISO 9001 forms the basis for the formulation of EN/
AS 9100ff. Certification according to EN/AS 9100ff therefore also includes certifi-
cation according to ISO 9001. The EN/AS 9100 series of standards includes the
following requirements in the appendix.
DIN EN ISO 9001:2015

• Section 1: Scope
• Section 2: Normative references
• Section 3: Terms and definitions
• Section 4: Context of the organization
• Section 5: Leadership
• Section 6: Planning
• Section 7: Support
• Section 8: Operation
• Section 9: Performance evaluation
• Section 10: Continual Improvement
Fig. 7.1 DIN EN ISO 9001:2015. (Source: Own source according to PTC)
• Completely traceable recording procedure over the entire supply chain of a

product.
• Definition of the interfaces to customers and aviation authorities in the procedures.
• Definition, implementation, and documentation of verification and validation
activities.
• Execution, implementation, and documentation of initial sample tests.
7.4 Automotive QMS: IATF 16949:2016
The International Automotive Task Force (IATF) is a group of automotive manufac-

turers which aims at providing improved quality products to automotive customers
worldwide. The standard IATF 16949 contains general requirements for quality
management systems of the mostly North American and European automotive
industry. They were developed jointly by the IATF members and published based on
EN ISO 9001. About 30% of the more than 100 existing car manufacturers agree
with these harmonized requirements of the seven IATF members (BMW, Daimler,
Ford, General Motors, Renault, Stellantis, and VW)—but the large Asian car manu-
facturers in particular have differentiated, own requirements for the quality manage-
ment systems of your group and your suppliers. The IATF16949:2016 can be
applied throughout the automotive supply chain. Certification is based on the certi-
fication specifications (rules) issued by the IATF (International Automotive Task
Force). The certificate is valid for 3 years and must be confirmed annually by IATF-
certified auditors (third-party auditors) from accredited certification companies.
This is followed by recertification for a further 3 years with renewed annual confir-
mation. IATF16949:2016 must not be regarded as an independent QMS standard,
but is to be understood as a supplement to ISO 9001:2015. Certifications must
7.5 Railway QMS: ISO/TS 22163 (IRIS) 79
therefore include both standards. The certification may only be carried out by bod-
ies that have been approved by the IATF (so-called certification bodies). A certifi-
cate according to IATF16949:2016 should justify the trust of the (potential) customer
in the system and process quality of a (possible) supplier. Today, a supplier without
a valid certificate has little chance of supplying a Tier 1 automotive supplier and
certainly not an automotive manufacturer (OEM) with series parts. Certification
according to the previous ISO/TS 16949 standard was only possible until September
2017. Since October 1, 2017, certifiers are only allowed to carry out audits and issue
certificates according to the new standard IATF 16949. This applies to initial audits,
surveillance audits, and recertification audits. The previous certificates according to
ISO/TS 16949 lost their validity in September 2018.
The 10 chapters of the IATF 16949 standard (high-level structure) are as follows:
• Chapter 0–3: Introduction, scope, normative references, terms.

• Chapter 4: Context of the organization.
• Chapter 5: Leadership.
• Chapter 6: Planning.
• Chapter 7: Support.
• Chapter 8: Operation.
• Chapter 9: Evaluation of performance.
• Chapter 10: Improvement.
7.5 Railway QMS: ISO/TS 22163 (IRIS)
End of May 2017, the Association of the European Rail Industry (UNIFE) announced
the release of the new global standard for quality management systems in the rail
industry, ISO/TS 22163, by the Technical Committee 269 of the International
Organization for Standardization (ISO). ISO/TS 22163 is based on the structure and
requirements of the ISO 9001:2015 standard, but also includes additional require-
ments for the rail industry. Within the timeframe of the defined transition phase,
ending in September 2018, organizations certified according to IRIS Rev. 02 will
have to undergo transition audits to update their certificates to ISO/TS 22163. As
IRIS Rev.02 certificates will expire after September 14, 2018, and all nonconformi-
ties need to be closed for all audits before a new ISO/TS 22163 certificate can be
issued, the last transition audits should be completed by July 2018. The International
Railway Industry Standard (IRIS) is based on the ISO 9001 standard and is tailored
to the requirements of the international rail industry. IRIS certification ensures uni-
formity of language and guidelines for evaluation, as well as mutual acceptance of
audits, ensuring a high level of transparency across the supply chain. IRIS is appli-
cable to companies engaged in the manufacture and/or design and/or maintenance
of rolling stock and signaling systems: equipment manufacturers, systems integra-
tors, operators, or business partners. IRIS has been developed by the European
Railways Association (UNIFE) with the aim of becoming a commonly recognized
system for assessing the quality of rolling stock suppliers and related equipment and
components, internationally recognized.
For sales in Europe, IRIS certification is mandatory. The certification procedure
is as follows:
• Organization registers for membership at the UNIFE portal.

• Compilation of the information questionnaire.
• Preaudits to verify potential gaps in compliance with the IRIS standard.
• Readiness review audits to verify compliance with IRIS prerequisites.
• Certification audit.
• Issue of the certification.
• Annual supervision audits.
• Recertification audit (after 3 years).
The successful implementation of the IRIS certification creates a win-win situa-

tion for all stakeholders in the rail sector, be they equipment manufacturers, system
integrators, operators, or business partners. More broadly, the IRIS certification
scheme helps to develop the attractiveness of rail moving our daily mobility toward
more sustainable modes of transportation. ISO/TS 22163:2017 is the standard spec-
ifying business management system requirements for rail organizations. ISO/TS
22163:2017 is largely based on ISO 9001:2015 that is a general quality manage-
ment system standard used by millions of companies around the world. In addition,
the ISO/TS 22163:2017 includes specific requirements tailor-made for the high-
quality business management in the railway sector. The standard functions as a for-
mula describing the best practices for business management in the rail sector.
7.6 Healthcare QMS: DIN EN 15224
Healthcare providers today rely on the ISO 9001 quality management system as a
framework for success. However, in order to truly achieve organizational efficiency,
drive productivity, and profitability, the continued reliance on ISO 9001 is insuffi-
cient. Healthcare providers seeking to differentiate themselves to ensure that the
core health-related issues such as patient safety and management of clinical risks
are addressed and properly handled as well. This particular point is not covered
under the ISO 9001 standards. The DIN EN 15224 quality management system is a
sector-specific standard of quality management for healthcare organizations. It is
based on the ISO 9001 standard and it includes tangible requirements for patient
safety and management of clinical risks in the planning, realization, and manage-
ment processes.
The DIN EN 15224 system brings together the advantages of ISO 9001 with
comprehensive healthcare quality requirements. It defines issues ranging from the
effectiveness and suitability of care to the safety and reliability of care processes. In
DIN EN 15524, there are 11 quality features which characterize the quality of
7.8 Telecommunications QMS: TL 9000 81
healthcare and must be verified as part of a certification. The 11 central features of

DIN EN 15224 are as follows:
1. Appropriate, correct care.

2. Availability.
3. Continuity of the care.
4. Effectiveness.
5. Efficiency.
6. Consistency.
7. Evidence-based, knowledge-based care.
8. Patient care, including physical and psychological integrity of the care.
9. Integration of the patient.
10. Patient safety.
11. Timeliness and accessibility.
Compliance with the DIN EN 15224 quality management system allows your
business to commit to a long-term goal of providing the best in healthcare services.
By adhering to the requirements for the certification, not only do you increase orga-
nizational efficiency and product quality, you also minimize waste and mistakes
made, thereby increasing overall productivity.
7.7 Medical QMS: ISO 13485
QMS elements of the ISO 13485 in the medical industry are crucial for safety and
security reasons. The ISO 13485 is a harmonized standard, which lays down the
requirements for quality management systems (QMSs) for medical devices. Medical
device manufacturers have to therefore, above all, according to ISO 13485 be certi-
fied, because, according to Appendix II of the Medical Device Directive MDD, they
can explain the compliance of their products themselves. For medical devices which
incorporate software or standalone software, the IEC 62304 also demands a QMS
and recommends an ISO 13485. The validity of the quality management system will
be examined by external auditors (usually notified bodies) and internal audits.
7.8 Telecommunications QMS: TL 9000
The telecommunication industry is a fast-growing industry and established the TL

9000 as QMS in this industry. TL 9000, based on the ISO 9001 system, is a quality
management system (QMS) designed to meet supply chain requirements of the tele-
communication industry. The system ensures quality by defining system require-
ments central to design, development, production, delivery, deployment, and
maintenance of telecommunication products and services. It also provides a mea-
surement system for tracking performance and improving results. TL 9000 certifica-
tion eliminates the need for multiple quality management standards, making it a
one-stop solution for telecommunication industry providers who are looking to

demonstrate their commitment to quality standards. Adopting the TL 9000 manage-
ment system allows your company to demonstrate its compliance to the high stan-
dards required by the ICT and telecommunication industry. It also aids in the
validation of the quality of your processes, products, and services. TL 9000 enables
your company to create value for customers and stakeholders through continuous
improvement, strategic partnerships, and high standards achieved through a solid
measurement system.
7.9 What Is an Audit?
Audits can be described as a systematic and structured performance evaluation and

assessment of a system, process, or product or any other area by internal or external
auditors. The aim of an audit is to evaluate and approve or disapprove the assessed
area by standardized criteria and questions, to define areas for actions, and to ensure
the sustainable implementation of the actions and improvement areas. Assessment
criteria in audits are based on customer and stakeholder expectations. Audits can be
clustered in systems, process, product, control, and special audits as shown in
Table 7.2. Lean audits are conducted to determine if the business is properly imple-
menting and signaling lean management methodologies are implemented into the
company and value chain (Helmold & Terry, 2016). This is achieved by a detailed
360-degree analysis of lean processes with a goal toward recognizing opportunities
to improve processes and to eliminate waste (Helmold, 2022).
Table 7.2 Audit types

Audit
type Description
System Evaluation of the (quality management) system of the organization by external
audit certification agencies (TÜV, DEKRA, Bureau Veritas). Examples: DIN EN ISO
9001:2015, IATF 16949, International Railway Industry Standard (IRIS)
Process Evaluation of a (manufacturing or service) process (input-transformation-output) to
audit qualify or disqualify a process-oriented example of a product or service by assessing
a reference process from the supply side, incoming material to the dispatch (also
from other customers). Examples: VDA 6.3, SEAP (supplier evaluation approval
process—Railway).
Product Planning and execution of the assessment of a finished product to be delivered to the
audit customer. The audit consists of checking the specification, drawings, capacity, and
other important aspects and normally involves the trial run of the entire
manufacturing process (e.g., 300 parts, run at rate). Examples: VDA 6.5, part
production approval process (PPAP), production approval process (PAP).
Control Control audits (normally after 1, 3, or 6 months) with the aim to control (verify or
audit falsify) the progress of previously conducted audits. Control audits normally target
the reduction of the previously found corrective action requests (CARs).
Other Any other audits in areas like safety, health, environment, tax, and financials.
audits Examples: 5S audits, tax audits, environmental audits (ISO 14001), IT audits (ISO
27001), financial audits, or health, safety, and environment (HSE) audits.
7.11 Process Audits 83
7.10 System Audits
The system audit evaluates the standard requirements for quality management sys-
tems (QMSs). The term system audit, the auditing of a management system, e.g.,
according to DIN EN ISO 9001:2015, is referred to as a system audit. This can also
be a combination of several management systems such as environment, quality, and
occupational safety, which are then referred to as an integrated management system.
DIN EN ISO 9001 specifies the minimum requirements for a quality management
system for the manufacture of products or services (QM system [QMS]), which an
organization must meet in order to be able to provide products and services that
meet customer expectations and any official requirements. At the same time, the
management system should be subject to a continuous improvement process.
Although the process-oriented approach was already introduced with the 2000 revi-
sion, there were considerable problems with the implementation. This should be
made easier by the revision. The standard also calls for a more risk-based approach.
A formal QM manual will no longer be necessary if the organization otherwise
provides adequate documentation. There will also no longer have to be a “top man-
agement representative” in the formal sense. The current version of ISO 9001 was
last revised in 2015. Based on EN ISO 9001, IATF 16949 exists for series produc-
tion in the automotive industry. Compared to EN ISO 9001, it places more extensive
requirements on the quality management system. The basic idea of ISO 9001:2015
is that for long-term success, companies must consider the requirements of their
stakeholders (Brugger-Gebhardt, 2015). That is why the standard emphasized the
interested parties even more as a separate point. In contrast to ISO 9001:2008, the
focus is no longer just on the customer, but on the interest groups (interested par-
ties). In addition to customers, this includes also the suppliers, owners, employees,
authorities, business partners, or even competitors. ISO 9001 continues to follow
the approach of planning (plan), performing (do), checking (check), and acting
(act), or the PDCA cycle for short, in order to continuously and effectively improve
the quality management system as a whole and its processes (Weidner, 2020).
7.11 Process Audits
A process audit is used in supplier management to assess the quality and perfor-
mance of input factors, processes, and their outputs (Helmold, 2022). The process
audit is a central part of supplier management and is intended to lead to capable and
controlled processes at suppliers that are robust to disruptions. By stabilizing the
processes, the product quality is increased and complaints are prevented (Helmold,
2021). The following objectives are pursued with process audits:
• Prevention: recognizing, pointing out, and initiating measures that prevent defi-
cits from occurring.
• Correction: analyzing known deficiencies and taking actions to correct and pre-
vent recurrence.
• Continuous improvement process: further improve implemented measures from

a process audit to make the process more capable and robust.
Process audits can be applied throughout the product life cycle. This includes
internal and external processes, e.g., the entire supply chain. By using process
audits, possible process risks in the entire product development process (PEP) can
be identified at an early stage. Process audits evaluate company process chains from
input through transformation to output. Due to the process-oriented approach, the
standard is easy to apply and independent of the size of the company and the pur-
pose of the company. The effectiveness and efficiency of the organization in achiev-
ing the set goals is improved and customer satisfaction is also increased by meeting
expectations. A process is a set of interrelated or interacting activities that convert
inputs into results (output). The process approach enables an organization to under-
stand requirements better and meet them more consistently (improved, consistent,
and predictable outcomes). A product audit focuses:
• On quantitative and qualitative characteristics.

• In physical products.
• After completion of a production step.
• Before passing it on to the next customer (internal/external).
• Based on target specifications.
• By an independent auditor.
7.12 Product Audits
As part of the product validation and the testing of a defined number of products, the
product audit confirms the quality capability of the production process based on the
quality characteristics of a product. It is checked whether the product corresponds
to the specified specifications, special customer, and supplier agreements. A product
audit is the planning, implementation, evaluation, and documentation of tests
(Helmold 2020).
A product audit is used to assess compliance with the company’s own quality
requirements. In addition, it aims to assess compliance with the expressed and
unspoken customer requirements (with the “eyes of a very critical customer”): The
product audit represents a measure to check the effectiveness of quality checks and
control measures carried out and leads directly and in the short term to process and
product improvements. Finally, it creates an internal basis of trust with regard to the
requirements of product liability and checks the conformity of the products, also
with legal requirements. Within the automotive industry, the PPAP is a common
product qualification process (Helmold, 2011). The production part approval pro-
cess (PPAP) (Engl.: production part approval process [PPAP]) is a procedure from
the QS 9000, which has now been replaced by ISO/TS 16949, in which series parts
are sampled. This procedure originates from the automotive industry and has been
successfully implemented there for years It is all about the quality of the parts
7.15 International Organization for Standardization 85
supplied, which means that the parts from the series tools or series processes must
correspond to the drawings. In addition to the parts delivered for inspection, the part
submission warrant (PSW) is a central element of the sampling process.
7.13 Control Audits
The control audit is a special type of audit outside the regular audit plan within the
value chain to verify and control the progress of audits and can have the following
reasons:
• Progress control.
• Special process audits, e.g., for processes such as gluing, painting, welding, etc.
• Escalation audit.
• Audits based on customer requests.
7.14 Other Audits
Other audits include all possible assessments of standard requirements in subareas

through 5S audits, environmental audits, financial audits, security audits, etc. Other
audits can be the environmental standard ISO 14001, IT standards like ISO 27001,
or others (Heras-Saizarbitoria, 2018).
7.15 International Organization for Standardization
The International Organization for Standardization (ISO) is an independent, non-

governmental international organization with a membership of 167 national stan-
dard bodies (Geiger & Kotte 2008). Through its members, it brings together experts
to share knowledge and develop voluntary, consensus-based, market-relevant inter-
national standards that support innovation and provide solutions to global challenges.
• Full members (or member bodies) influence ISO standard development and strat-
egy by participating and voting in ISO technical and policy meetings. Full mem-
bers sell and adopt ISO international standards nationally.
• Correspondent members observe the development of ISO standards and strategy
by attending ISO technical and policy meetings as observers. Correspondent
members that are national entities sell and adopt ISO international standards
nationally. Correspondent members in the territories that are not national entities
sell ISO international standards within their territory.
• Subscriber members keep up to date on ISO’s work but cannot participate in it.
They do not sell or adopt ISO international standards nationally.
References
Helmold, M. (2021). Kaizen, Lean Management und Digitalisierung. Mit den japanischen
Konzepten Wettbewerbsvorteile für das Unternehmen erzielen. Springer.
Helmold, M. (2022). Strategic performance management. Achieving long-term competitive advan-
tage through performance excellence. Springer.
Helmold, M., & Terry, B. (2016). Global sourcing and supply management excellence in China.
Procurement guide for supply experts. Springer.
Heras-Saizarbitoria, I. (2018). ISO 9001, ISO 14001, and new management standards. Springer.
Quality Excellence Models
8
Get closer than ever to your customers. So close that you tell
them what they need well before they realize it themselves.
(Steve Jobs)
8.1 BSC, Balanced Scorecard
The balanced scorecard (BSC) in Fig. 8.1 is a strategic planning and performance
management tool and was first introduced by the accounting academic Dr. Robert
Kaplan and business executive and theorist Dr. David Norton. It was first published
in 1992 in a Harvard Business Review article (Helmold, 2022). Dr. Kaplan and Dr.
Norton took previous metric performance measures and adapted them to include
nonfinancial information. The BSC is the performance metric used in strategic man-
agement to identify and improve various internal functions of a business and their
resulting external outcomes. It is used to measure and provide feedback to organiza-
tions. Data collection is crucial to providing quantitative results, as the information
gathered is interpreted by managers and executives and used to make better deci-
sions for the organization. The BSC system connects the strategic elements like
mission, vision, core values, and strategic objectives with the more operational ele-
ments such as performance measures, key performance indicators, targets, and
actions (projects that help you reach your targets) of the enterprise or organization
(Kaplan & Norton, 1992, 1996). The BSC suggests that management views the
organization from four perspectives in order to develop objectives, measures (KPIs),
targets, and initiatives (actions) relative to each of these points of view:

Switzerland AG 2023
88 8 Quality Excellence Models
Financial Perspective
Measurables
Objectives
Actions
Targets
Customer Internal Business
Perspective Processes Perspective
Mission
Measurables
Measurables
Objectives
Objectives
Actions
Actions
Targets
Targets
Vision
Strategic Strategic
Objectives Planning
Organisational
Perspective
Measurables
Objectives
Actions
Targets
Fig. 8.1 Balanced scorecard (BSC). (Source: Author’s own figure)
• Financial: often renamed stewardship or other more appropriate name in the pub-
lic sector, this perspective views organizational financial performance and the
use of financial resources.
• Customer/stakeholder: this perspective views organizational performance from
the point of view the customer or other key stakeholders that the organization is
designed to serve.
• Internal process: views organizational performance through the lenses of the
quality and efficiency related to our product or services or other key business
processes.
• Organizational capacity (originally called learning and growth): views organiza-
tional performance through the lenses of human capital, infrastructure, technol-
ogy, culture, and other capacities that are key to breakthrough performance.
Figure 8.1 outlines the BSC including objectives, measurable, targets, and
actions. For each objective on the strategy map, at least one measure or key perfor-
mance indicator (KPI) will be identified and tracked over time. KPIs indicate prog-
ress toward a desirable outcome. Strategic KPIs monitor the implementation and
effectiveness of an organization’s strategies, determine the gap between actual and
targeted performance and determine organization effectiveness and operational effi-
ciency. The BSC ensures the following areas:
8.1 BSC, Balanced Scorecard 89
Advantages of the BSC are as follows:

• It provides an objective way to see if the strategy is working.
• It offers a comparison that gauges the degree of performance change over time.
• It focuses the employees’ attention on what matters most to the success in the
organization.
• It allows measurement of accomplishments, not just of the work that is performed.
• It provides a common and simple language for communication by using numeric
indicators.
• It helps to reduce intangible uncertainty by applying tangible and hard figures.
• It shows clarity of mission, vision, and strategy as part of the strategic pyramid.
• It is a transparent way in cascading down corporate objectives to all areas in the
organization.
• It uses customer and stakeholder expectations as focal point and starting point.
• It enables permanent and endurable monitoring of performance, objectives, and
outcomes.
• It ensures a cross-disciplinary and hierarchy traversing communication process.
• It enables the integration of performance measure objectives and an appropri-
ate level.
• It displays cause-and-effect relationships as instrument for functions and
management.
• It results in a sustainable action plan and functional action plan, which can be
easily reviewed.
Disadvantages of the BSC are as follows:

• It is based on historical data from the past and may thus lead to a distorted
picture.
• It can lead to a lack of long-term commitment and leadership for management
due to short-term objectives (micromanagement).
• It does not always express the interests of all stakeholders, but on few stakeholders.
• It uses only quantitative key performance indicators and the approach may not
show the real world.
• It has the danger to overload the system with key performance indicators (KPIs).
• It may have a potential lack of employee awareness or a failure to communicate
information to all employees.
• It is constructed as a management reporting tool rather than an improvement tool.
• It shows the benchmarking based on KPIs in BSC and specific measures difficult.
Figure 8.2 outlines the logic between the four perspectives. The balanced score-
card is used to improve the performance by strengthening the organization. The
improvements will lead to a better Q-C-D plus alpha ratio throughout the organiza-
tion and thus satisfy the customers. As a result, financial performance will be out-
standing. The BSC is used to attain objectives, measurements, initiatives, and goals
that result from these four primary functions of a business. Companies can easily
identify factors hindering company performance and outline strategic changes
Financial Results Financial perspective
Customer Q-C-D +
Satisfaction alpha Customer perspective
Product and
Process Internal business process
Service
Know How
Know How
perspective
Knowledge and Skills Organisational perspective
Fig. 8.2 Logic behind the BSC. (Source: Author’s own figure)
tracked by future scorecards. With the balanced scorecard, they look at the company
as a whole when viewing company objectives (Kühnapfel, 2019). An organization
may use the balanced scorecard to implement strategy mapping to see where value
is added within an organization. A company also utilizes the balanced scorecard to
develop strategic initiatives and strategy objectives.
Cascading a balanced scorecard means to translate the corporate-wide scorecard
(referred to as Tier 1) down to first business units, support units, or departments
(Tier 2) and then teams or individuals (Tier 3). The end result should be focused
across all levels of the organization that is consistent. The organization alignment
should be clearly visible through strategy, using the strategy map, performance
measures and targets, and initiatives. Scorecards should be used to improve account-
ability through objective and performance measure ownership, and desired employee
behaviors should be incentivized with recognition and rewards. There are several
factors that are linked to the usage of the BSC.
8.2 Better Strategic Planning
The balanced scorecard provides a powerful framework for building and communi-
cating strategy. The business model is visualized in a strategic map which helps
managers to think about cause-and-effect relationships between the different strate-
gic objectives. The process of creating a strategy map ensures that consensus is
reached over a set of interrelated strategic objectives. It means that performance
8.7 Better Organizational Alignment 91
outcomes as well as key enablers or drivers of future performance are identified to

create a complete picture of the strategy.
8.3 Improved Strategy Communication and Execution
Having a one-page picture of the strategy allows companies to easily communicate

strategy internally and externally. We have known for a long time that a picture is
worth a thousand words. This “plan on a page” facilitates the understanding of the
strategy and helps to engage staff and external stakeholders in the delivery and
review of the strategy. The thing to remember is that it is difficult for people to help
execute a strategy which they do not fully understand.
8.4 Better Alignment of Projects and Initiatives
The balanced scorecard helps organizations map their projects and initiatives to the
different strategic objectives, which in turn ensures that the projects and initiatives
are tightly focused on delivering the most strategic objectives.
8.5 Better Management Information
The balanced scorecard approach helps organizations design key performance indi-
cators for their various strategic objectives. This ensures that companies are measur-
ing what actually matters. Research shows that companies with a BSC approach
tend to report higher-quality management information and better decision-making.
8.6 Improved Performance Reporting
The balanced scorecard can be used to guide the design of performance reports and
dashboards. This ensures that the management reporting focuses on the most impor-
tant strategic issues and helps companies monitor the execution of their plan.
8.7 Better Organizational Alignment
The balanced scorecard enables companies to better align their organizational struc-
ture with the strategic objectives. In order to execute a plan well, organizations need
to ensure that all business units and support functions are working toward the same
goals. Cascading the balanced scorecard into those units will help to achieve that
and link strategy to operations.
8.8 Better Process Alignment
Well-implemented balanced scorecards also help to align organizational processes

such as budgeting, risk management, and analytics with the strategic priorities. This
will help to create a truly strategy-focused organization.
8.9 EFQM, European Foundation for Quality Management
8.9.1 Concept of the EFQM Excellence Model
The EFQM excellence model is a nonprescriptive business excellence framework

for organizational management, promoted by the European Foundation for Quality
Management (EFQM) and designed to help organizations to become more competi-
tive. Regardless of sector, size, structure, or maturity, organizations need to estab-
lish appropriate management systems to be successful. The EFQM excellence
model is a tool to help organizations do this by measuring where they are on the path
to excellence, helping them understand the gaps, and promoting solutions. EFQM is
an acronym that stands for European Foundation for Quality Management. EFQM
was founded in 1988 with the objective to create a platform where organizations can
learn from each other to continuously improve their performance. Benchmarking
with other European organizations will lead to sustainable economic growth. The
EFQM wants to open the chance to the organizations to define their current “level
of excellence” and where they need to focus improvement efforts. Moreover, the
model helps to ensure that organization decisions incorporate the needs of all stake-
holders and are aligned with the organization’s objectives. That in turn support man-
agers and directors in training, sharing ideas, and innovating with the aid of the
so-called EFQM model as a common framework. The EFQM model or EFQM busi-
ness excellence model is the most popular quality management tool in Europe, used
by more than 30.000 organizations to improve performance. It supports you to self-
assess and reflect. Eighty-four percent of the EFQM members say that the EFQM
model helps to improve their organization. This quality management model aims at
sustainable excellence in which quality, efficiency, and sustainability are the key
elements. The basis of the EFQM model consists of the total quality management
(TQM) concept (Peris-Ortiz et al., 2015). It consists a universal framework of con-
cepts, thus enabling organizations to share information in an effective way, irrespec-
tive of the different sectors, cultures and life stages in which they are located.
Organizations can thus take other organizations as a model, so that they obtain
insight into how far they meet the image of a high-quality organization. The EFQM
model consists of nine criteria that are subdivided into five enablers and four results:
This is the model behind the European Business Excellence Award, an award pro-
cess run by the European Foundation for Quality Management (EFQM) (Fig. 8.3).
This framework is used as the basis for national business excellence and quality
awards across Europe. The model consists of nine categories:
8.9 EFQM, European Foundation for Quality Management 93
Enablers Results
People People
10% Results
10% Business
Processes, Results
Leadership Strategy Products & Customer Key
10% 10% Services Results Performance
10% 15% Results
15%
Partnerships Society
& Resources Results
10% 10%
Innovation, Learning and Improvements
Fig. 8.3 EFQM excellence model. (Source: Author’s own figure, adjusted from the EFQM model)
• Leadership
• Policy and strategy
• People
• Partnerships and resources
• Processes
• Customer results
• People results
• Society results
• Key performance results
The fundamental concepts that underpin the EFQM excellence model are as
follows:
• Results orientation
• Customer focus
• Leadership and constancy of purpose
• Management by processes and facts
• People development and involvement
• Continuous learning, innovation, and improvement
• Partnership development
• Corporate social responsibility
8.9.2 Continuous Process
The EFQM model must be read from right to left, as a result of which it becomes
clear that the result areas focus on “what can be achieved?,” after which it becomes
clear that these organizational areas focus on “how can these results be achieved?”
The bottom arrow, “learning, creativity, and innovation” indicates that measuring,
evaluating, and adjusting are not one-off actions but a continuous process. In the
same process organizations complete a step-by-step development.
8.9.3 Self-Assessment
The EFQM model consists of an EFQM assessment that enables an organization to

determine where they are in the quality process. The assessment starts with a review
of the results. This is the underlying principle of this model. To improve results,
measures should be taken in at least one of the organizational areas: the EFQM
model and the assessment. This is represented in five development stages.
8.9.4 Application of the EFQM Excellence Model
The assessments allow an organization to gain insight into the quality of its current
operational management. Improvements are formulated and these can be imple-
mented by an organization in stages. The assessment itself consists of five steps:
• Setting standards for all of the nine key areas

• Determining the current quality of operational management
• Formulating and prioritizing of improvements
• Application and inclusion of improvements in the various (annual) plans
• Actual implementation and monitoring of the remedial actions
8.10 Baldridge Excellence Model
This is the model behind the US Malcolm Baldrige National Quality Award, an
award process administered by the American Society for Quality (ASQ) and man-
aged by the National Institute of Science and Technology (NIST), an agency of the
US Department of Commerce. This framework is used as the basis for over 70 other
national business excellence/quality awards around the world. The model consists
of seven categories:
1. Leadership
2. Strategic planning
3. Customer and market focus
4. Measurement, analysis, and knowledge management
5. Workforce focus
6. Process management
7. Business results
8.11 Business Performance Improvement Resource Model (BPIR) 95
The core concepts of the Baldrige criteria for performance excellence are as
follows:
• Visionary leadership
• Customer-driven excellence
• Organizational and personal learning
• Valuing employees and partners
• Agility
• Focus on the future
• Managing for innovation
• Management by fact
• Social responsibility
• Focus on results and creating value
• Systems perspective
8.11 Business Performance Improvement Resource

Model (BPIR)
The Business Performance Improvement Resource (BPIR) model provides an alter-

native, comprehensive, and simple way to classify benchmarking and best practice
information within the website. The model classifies information through over 250
business processes. The high-level processes are shown below:
• Understand markets and customers

• Develop vision and strategy
• Design products, processes, and services
• Market and sell
• Produce and deliver for manufacturing-oriented organizations
• Produce and deliver for service-orientated organizations
• Invoice and service customers
• Deliver leadership
• Develop and manage human resources
• Manage information and knowledge
• Manage financial and physical resources
• Execute environmental management program
• Manage external relationships
• Manage improvement and change
• Measures of organizational performance
Primary value Value chain PM2E

contributors
Corporate strategy
Supply side Purchasing Operations Marketing & Demand side
Organisationl improvement
(Suppliers) Management Management Sales (Customers) Supply management
Supplier and partnerships
Cooperation and collaboration
Value chain visiblity
B2B and B2C collaboration
Risk management
Secondary value Demand scheduling & operations
contributors
Quality performance
Learning and growth
Leadership and management
Global activities
Digitalisation and AI
Information Human Finance and Business
systems Legal Contineous improvement
resources controlling ethics
Fig. 8.4 PM2E excellence model by Dr. Marc Helmold. (Source: Author’s own figure)
8.12 P2E Excellence Model
The PM excellence model by Dr. Helmold focuses on the value chain with its pri-
mary and secondary functions as outlined in Fig. 8.4. Primary functions are supply,
operations, and marketing and sales. Secondary or support functions are IT, HR, or
finance. The model is process oriented and focuses on the following 15 categories,
where value is generated:
• Corporate strategy
• Organizational improvement
• Supply management
• Supplier and partnerships
• Cooperation and collaboration
• Value chain visibility
• B2B and B2C collaboration
• Risk management
• Demand scheduling and operations
• Quality performance
• Learning and growth
• Leadership and management
• Global activities
• Digitalization and artificial intelligence (AI)
• Continuous improvement
References 97
References
Helmold, M. (2022). Strategic performance management. Achieving long-term competitive advan-
tage through performance excellence. Springer.
Kaplan, R., & Norton, D. P. (1992). The balanced scorecard (BSC). Measures that drive perfor-
mance. In: Harvard Business Review, 01-02/1992.
Kaplan, R., & Norton, D. P. (1996). Using the balanced scorecard as a strategic management sys-
tem. In: Harvard Business Review, 01-02/1996.
Kühnapfel, J. (2019). Balanced scorecards im vertrieb. Springer.
Peris-Ortiz, M., et al. (2015). Achieving competitive advantage through quality management.
Springer.
Cost of Quality (COQ)
9
The biggest cost of poor quality is when your customer buys it

from someone else because they didn’t like yours.
(W. Edwards Deming)
9.1 What Are Cost of Quality (CoQ)
Cost of quality (COQ) is defined as a methodology that allows an organization to

determine the extent to which its resources are used for activities that prevent poor
quality, that appraise the quality of the organization’s products or services, and that
result from internal and external failures. The cost of quality consists of four catego-
ries such as prevention cost, appraisal cost, internal failure, and external failure (see
Fig. 9.1). The cost of quality consists of two categories of cost of conformance and
cost of nonconformance and four subcategories such as prevention cost, appraisal
cost, internal failure, and external failure. Another purpose the cost of quality infor-
mation can serve is to help management evaluate the relative importance of quality
problems and identify opportunities for cost reduction. They can also aid in budget-
ing and cost control activities.
The central theme of quality improvement is that larger investments in preven-
tion drive even larger savings in quality-related failures and appraisal efforts.
Feigenbaum’s categorization allows the organization to verify this for itself. When
confronted with mounting numbers of defects, organizations typically react by
throwing more and more people into inspection roles. But inspection is never com-
pletely effective, so appraisal costs stay high as long as the failure costs stay high.
The only way out of the predicament is to establish the “right” amount of preven-
tion. Once categorized, quality costs can serve as a means to measure, analyze,
budget, and predict.

Switzerland AG 2023
100 9 Cost of Quality (COQ)
Financial Perspective
Measurables
Objectives
Actions
Targets
Customer Internal Business
Perspective Processes Perspective
Mission
Measurables
Measurables
Objectives
Objectives
Actions
Actions
Targets
Targets
Vision
Strategic Strategic
Objectives Planning
Organisational
Perspective
Measurables
Objectives
Actions
Targets
Fig. 9.1 Cost of quality (COQ)
Cost of quality is a methodology used to define and measure where and what
amount of an organization’s resources are being used for prevention activities and
maintaining product quality as opposed to the costs resulting from internal and
external failures. The cost of quality can be represented by the sum of two factors.
The cost of good quality and the cost of poor quality equal the cost of quality, as
represented in the basic equation:
CoQ CoGQ CoPQ
The cost of quality equation looks simple, but in reality, it is more complex. The
cost of quality includes all costs associated with the quality of a product from pre-
ventive costs intended to reduce or eliminate failures, cost of process controls to
maintain quality levels, and the costs related to failures, both internal and external.
Feigenbaum defined the following quality cost areas:
COQ COGQ COPQ
COQ: cost of quality

COGQ: cost of good quality
COPQ: cost of poor quality
9.2 COQ Measurement and Identification 101
The cost of quality equation looks simple, but in reality, it is more complex. The
cost of quality includes all costs associated with the quality of a product from pre-
ventive costs intended to reduce or eliminate failures, cost of process controls to
maintain quality levels, and the costs related to failures, both internal and external.
Effective use and implementation of the cost of quality methodology enables an
organization to accurately measure the amount of resources being used for cost of
good quality and cost of poor quality. With this valuable information, the organiza-
tion can determine where to allocate resources to improve product quality and the
bottom line. To further illustrate the value of cost of quality, review the following
example. The name of the company has been changed but the content represents
actual events and results. Alpha Company once measured the cost of quality as the
amount of warranty cost versus total sales. This method only examined the cost of
poor quality. This data did reveal a problem area in the facility. It was discovered
that customer part shortages originating from one work cell were resulting in war-
ranty costs of over $400,000 in 1 year. A team was formed to investigate and per-
form root cause analysis (RCA) of the shortages and a plan was developed to
redesign the work cell for an estimated cost of $60,000. With management approval,
the work cell was redesigned with a revised layout, pick bins, and dedicated loca-
tions for all the parts, process controls were defined and implemented, and several
additional improvements were made. The changes reduced tact times and the num-
ber of operators required for the process. This provided resources for the addition of
quality technicians to regularly audit and maintain the process on all shifts. Within
the first year of operation, shortages were reduced by 50% equaling a $200,000
reduction in warranty costs. The project resulted in a positive impact on the bottom
line of $140,000 in the first year. Alpha Company has since implemented processes
to measure and reduce scrap, improved process controls, and introduced new qual-
ity metrics throughout the organization. They are now actively measuring and evalu-
ating both the cost of good quality and poor quality.
In the example above, the cost of poor quality (CoPQ) was having a major impact
on the bottom line. Through an investment in the cost of good quality (CoGQ), Alpha
Company achieved a significant reduction in the cost of quality. There are opportuni-
ties for improvement in processes at most organizations. It has been estimated that
the cost of quality usually amounts to between 15% and 40% of business costs. The
goal of implementing the cost of quality methodology is to maximize product quality
while minimizing cost. The cost of quality methodology provides the detailed infor-
mation that management needs to accurately evaluate the effectiveness of their qual-
ity systems and identify problem areas and opportunities for improvement.
9.2 COQ Measurement and Identification
9.2.1 COQ Calculation Method
The methods for calculating cost of quality vary from company to company
(Table 9.1). In many cases, organizations, like the one described in the previous
example, determine the cost of quality by calculating total warranty dollars as a
Table 9.1 COQ overview

Cost area Description Examples
Costs of control (costs Prevention Arise from efforts to keep Quality planning
of conformance) costs defects from occurring at all Statistical process
control
Investment in
quality-related
information systems
Quality training and
workforce
development
Product design
verification
Systems
development and
management
Appraisal Arise from detecting defects Test and inspection
costs via inspection, test, audit of purchased
materials
Acceptance testing
Inspection
Testing
Checking labor
Setup for test or
inspection
Test and inspection
equipment
Quality audits
Field testing
Costs of failure of Internal Arise from defects caught Scrap
control (costs of failure costs internally and dealt with by Rework
nonconformance) discarding or repairing the Material
defective items procurement costs
External Arise from defects that Complaints in
failure costs actually reach customers warranty
Complaints out of
warranty
Product service
Product liability
Product recall
Loss of reputation
percentage of sales. Unfortunately, this method is only looking externally at the cost
of quality and not looking internally. In order to gain a better understanding, a more
comprehensive look at all quality costs is required.
The cost of quality can be divided into four categories. They include prevention,
appraisal, internal failure, and external failure. Within each of the four categories,
there are numerous possible sources of cost related to good or poor quality. Some
examples of typical sources of cost of quality are listed below.
9.2 COQ Measurement and Identification 103
9.2.2 Cost of Good Quality (COGQ)
The cost of good quality (COGQ) consists of the cost of quality conformance,
including any associated costs with both appraisal and prevention.
The Cost of Good Quality (CoGQ)

Prevention costs—costs incurred from activities intended to keep failures to a mini-
mum. These can include, but are not limited to, the following:
• Establishing product specifications

• Quality planning
• New product development and testing
• Development of a quality management system (QMS)
• Proper employee training
Appraisal costs—costs incurred to maintain acceptable product quality levels.

Appraisal costs can include, but are not limited to, the following:
• Incoming material inspections

• Process controls
• Check fixtures
• Quality audits
• Supplier assessments
9.2.3 Cost of Poor Quality (COPQ)
The cost of poor quality (COPQ) involves all the nonconformance costs that are
both internal and external to the company.
The Cost of Poor Quality (CoPQ)

Internal failures—costs associated with defects found before the product or service
reaches the customer. Internal failures may include, but are not limited to, the fol-
lowing examples:
• Excessive scrap
• Product rework
• Waste due to poorly designed processes
• Machine breakdown due to improper maintenance
• Costs associated with failure analysis
External failures—costs associated with defects found after the customer receives
the product or service. External failures may include, but are not limited to, the fol-
lowing examples:
• Service and repair costs

• Warranty claims
• Customer complaints
• Product or material returns
• Incorrect sales orders
• Incomplete BOMs
• Shipping damage due to inadequate packaging
These four categories can now be applied to the original cost of quality equation.
Our original equation stated that the cost of quality is the sum of cost of good qual-
ity and cost of poor quality. This is still true; however, the basic equation can be
expanded by applying the categories within both the cost of good quality and the
cost of poor quality.
The cost of good quality is the sum of prevention cost and appraisal cost
(CoGQ = PC + AC).
The cost of poor quality is the sum of internal and external failure costs
(CoPQ = IFC + EFC).
By combining the equations, the cost of quality can be more accurately defined,
as shown in the equation below:
COQ PC AC IFC EFC

One important factor to note is that the cost of quality equation is nonlinear.
Investing in the cost of good quality does not necessarily mean that the overall cost
of quality will increase. In fact, when the resources are invested in the right areas,
the cost of quality should decrease. When failures are prevented/detected prior to
leaving the facility and reaching the customer, the cost of poor quality will be
reduced.
9.3 COQ Optimization
9.3.1 Analyzing Prevention, Appraisal, and Failure
The most widely accepted method for measuring and classifying quality costs is the
prevention, appraisal, and failure (PAF) model which divides quality costs into the
four categories in Fig. 9.1.
The PAF model is a combination of ideas developed in the 1960s by multiple
quality gurus including Crosby and Juran. Their concepts emphasized that it is bet-
ter to have more upfront investment utilizing preventive activities to minimize the
costs caused by quality failures later in the product life cycle. Research shows that
the cost of poor quality (including rework, returns, and reduced repeat sales) can
range from 15% to 35% of business costs.
9.4 Reduction of COQ and Quality Prevention 105
9.3.2 The Effect of Improving the QMS Processes

on Quality Costs
There is a natural cost tradeoff between how much an organization spends on pre-
vention versus how much it spends on fixing failures.
A traditional way to tackle reducing the cost of quality is to reduce the number
of defects. This is the focus of most six sigma projects. The following diagram
shows how improving the sigma level would reduce defects and reduce the costs of
the related failures, but at some point, the cost of quality will go up to achieve higher
levels of six sigma unless the cost of quality is tackled directly.
A second way to reduce the cost of quality is to make the processes for handling
preventions and failures more efficient.
The use of an MES (manufacturing execution system) which fully integrates an
EQMS (enterprise quality management system) can make a big difference on the
efficiency of quality management processes. The following are some specific exam-
ples on how to reduce the cost of quality with improved quality management
processes.
9.4 Reduction of COQ and Quality Prevention
9.4.1 Failure Prevention Initiatives
Prevention costs are incurred to prevent or avoid quality problems. These costs are
associated with the design, implementation, and maintenance of the quality man-
agement system. They are planned and incurred before actual assembly of the prod-
uct at the shop floor. The prevention costs include specifications and inspection
requirements for incoming materials, processes, and finished products and worker
training and gauge calibration.
9.4.2 Improving Work Instructions and Process Management
The manufacturing of a complex product (such as an aircraft, satellite, medical

device) involves the management of a continuous stream of engineering changes
directed at work in process.
On a shop floor with a paper system, changes to work instructions are written
into the margins with red ink and stamped by a liaison planner. A copy of the red-
lined document is routed back to a process planner to get the changes incorporated
into future releases of the work instructions.
An MES can combine (1) the redlining of the work instructions on the shop floor,
(2) the update of the template work instructions maintained by the manufacturing
engineers, and (3) the notice to the shop floor operator who must acknowledge the
change to the work instructions.
9.4.3 Implementing the Appropriate Training

and Qualification Initiatives
Personnel must be certified as competent based on education, training, skills, and

experience. Personnel qualification processes must be standardized and docu-
mented. On paper, certification of an employee for the task is left for the supervisor
to verify. An MES can validate each employee’s skills and certifications against the
latest training records before they can sign on to a job. In addition, it warns the
employee if the certification needs to be renewed in the next 30 days.
9.4.4 Verifying Eqiupment Calibration
Equipment resources must be maintained to assure their optimal performance to

capabilities, especially measurement equipment used to verify the product. The
maintenance and calibration processes for equipment and tools must be standard-
ized and documented.
An MES can verify calibration status for equipment and gauges specified to be
used for data collection. Tools can be calibrated more efficiently based on actual
usage instead of using the traditional date-driven expiration scheme which ends up
in more calibration work than is needed. Each work center is notified of tools that
need to be checked in for calibration.
9.5 Reduction of Quality Cost of Appraisal
9.5.1 Initiatives for Reducing Quality Costs of Appraisal
Quality appraisal activities are the most conventional quality practice and these
activities have the most visible expenses. It is easy to see the cost of inspectors,
testers, and their equipment in the balance sheet.
Appraisal is an expensive and unreliable way of achieving quality. Appraisal in
its best form is a verification that the production processes and preventive measures
are working. Appraisal in its least productive form is separating the good from the
bad product, counting defects, scrapping, and calculating yield. While this is a nec-
essary part of the quality program, it is important to move toward more preventive
methods to reduce the cost of failures—the cost of poor quality.
9.5.2 Reducing Reliance on 100% Inspection
Ideally, the preference is to move away from 100% inspection and toward more
inspection by production personnel, leaving only a small percentage of random
overinspection for quality management personnel. An MES enables these types of
strategies.
9.6 Appraisal Cost on Supplier Side 107
One way to reduce inspection levels from 100% inspection, 100% of the time, is
to only trigger a comprehensive inspection based on production process validation
(PPV) or first article inspection (FAI) rules when there is (a) a change in design,
affecting fit, form, or function of the product, or (b) a change of manufacturing
sources, processes, inspection methods, location, tooling, or materials, which affects
fit, form, or function.
9.5.3 Introducing Automated Inspection
Where inspection is needed, and a lot of data needs to be collected, there might be
possibility of reducing manual clerical effort using automated inspection methods
such as CMM (coordinate measurement machines) or visual inspection machines
that are integrated directly into the MES inspection data collection records.
9.5.4 Automatic SPC
Inspection and test results coming out of measurement and inspection machines can
be imported directly into the MES. Critical measures and results can be tied to data
collection points and to SPC (statistical process control) run charts to monitor con-
trol levels. The automation and integration allow new levels of efficiency over the
traditional processes of inspectors running spreadsheets and separate SPC software
on the side.
9.6 Appraisal Cost on Supplier Side
9.6.1 Introducing Measures on the Supplier Side
For assemblies manufactured internally, a company takes great care to specify

detailed inspection and data collection requirements, to verify in-process the quality
of a product to engineering specifications. But today, companies depend more and
more on suppliers for critical subassemblies. How do you ensure that the quality of
subassemblies provided by suppliers is managed and given the same level of atten-
tion? Companies spend a lot of time evaluating suppliers before honoring contracts
and periodically auditing them. But this type of oversight comes way short of the
kind of oversight given to internally manufactured subassemblies. What if we could
manage quality into the supply chain similar to how it is done internally? How can
this be done efficiently with fewer personnel? A supplier portal is more than a place
to post files for the supplier. It is a place to collaborate online with suppliers by
exchanging communications and dispatching tasks, tasks requiring action including
source inspection orders, audits, and response to discrepancies and corrective
actions. Besides outstanding tasks, the portal also provides visibility to the supplier
status and supplier performance ratings.
9.6.2 Source and Receiving Inspection Checks
Current practices for supplier quality appraisal focus on supplier certification and
receiving inspection. However, companies are also minimizing inventory levels
and pushing delivery dates as close as possible to the point of use. What happens
when an issue is discovered during receiving inspection? Oops, instant impact on
production schedule! This is why companies today are looking to move more
inspection requirements into the supply chain using more source inspections.
Inspection templates allow requirements to be managed for both source and receiv-
ing locations. Source inspection orders are then dispatched to suppliers through the
supplier portal.
9.7 Reducing Cost of Failures
9.7.1 Initiatives for Reducing the Cost of Quality Failures
During inspections performed at production, receiving, or supplier site, it is possible

to find some aspects of products, materials, and components to be nonconforming
to specifications. These nonconformances could lead to rework, scrapping, returns,
and recalls, all of which should be documented in nonconformance or discrepancy
reports and classified in a database in such a way that the organization can use the
data to determine costs and areas for improvement.
9.7.2 Discrepancy Documentation
The cost of filling out a nonconformance report on manufactured or purchased parts

includes the cost of good problem identification. The use of standard codes and
descriptions for symptom, defect, and cause types can simplify (and speed up) the
documentation process and provide more consistent data for analysis.
9.7.3 Workflow Routing and Flow Principle of Tasks
The costs of routing a discrepancy for disposition through a workflow process

across multiple departments can be controlled by limiting the participants in each
discrepancy. Limit the participants to those who are needed, instead of including the
entire multidiscipline material review board (MRB) in every review. By adjusting
the workflow with a different escalation process for different types of issues and
disposition actions, it is possible to make the best use of everyone’s time.
9.8 Cost of External Failures 109
9.7.4 Failure Prevention and Rework
One of the advantages of the integration of the EQMS and MES is the handling of
rework instructions to correct an issue. The integration makes it easy to use the same
process planning tools, to either append work to the work order or edit the instruc-
tions for the affected units only. This is done as part of the integrated discrepancy
disposition workflow. The resulting rework instructions and operations appear in the
same job list, along with the planned work, so technicians at the shop floor do not
have to learn a different process for rework, reinspection, and retesting. However,
these activities do get classified (and segregated in reporting) to the financial system
as cost of poor quality.
9.8 Cost of External Failures
The intangible costs of external quality failures (including customer dissatisfaction,

loss of reputation, and loss of future sales) might be hard to calculate, but are not
hard to picture as having a huge negative impact on the future of the business. The
best way to reduce external failure cost is to not have them at all! The best way to
avoid external quality failure costs is to focus on improving the other three costs of
quality. Figure 9.2 depicts the failure costs in relation to the prevention and
appraisal costs.
Financial Results Financial perspective
Customer Q-C-D +
Satisfaction alpha Customer perspective
Product and
Process Internal business process
Service
Know How
Know How
perspective
Knowledge and Skills Organisational perspective
Fig. 9.2 Total cost of quality (TCOQ)

9.9 Claim Management
A claim is a legally grounded demand or assertion for commercial and monetary

compensation, payment, or reimbursement by a claimant for an error, disturbance,
disorder, disruption, or failure of an agreed state of a product, a process, or a func-
tion in performance under a contract or agreement. Claims can be divided into
offensive or defensive claims (Helmold & Terry, 2021). The characteristics of
claims are as follows:
• Deals with bad performance, nonconformities, deficiencies, or disruptions.

• Legally contractually agreed specifications and characteristics.
• A claim is the legally grounded demand or assertion for commercial and mone-
tary compensation, payment, or reimbursement by a claimant for a disturbance,
disorder, disruption, or failure of an agreed state of a product, a process, or a
function in performance under a contract or agreement.
• Synonyms are nonconformity management, compensation management, or qual-
ity management.
• Often claim management is conducted by the legal, sales, or procurement depart-
ment (Fig. 9.3).
9.10 Recalls and Retrofits
A product recall is a request from a manufacturer to return a product after the dis-
covery of safety issues or product defects that might endanger the consumer or put
the maker/seller at risk of legal action. The recall is an effort to limit ruination of
Enablers Results
People People
10% Results
10% Business
Processes, Results
Leadership Strategy Products & Customer Key
10% 10% Services Results Performance
10% 15% Results
15%
Partnerships Society
& Resources Results
10% 10%
Innovation, Learning and Improvements
Fig. 9.3 Offensive and defensive claims. (Source: Author’s source)

9.10 Recalls and Retrofits 111
the corporate image and limit liability for corporate negligence, which can cause
significant legal costs. It can be difficult, if not impossible, to determine how costly
can be releasing to the consumer a product that could endanger someone’s life and
the economic loss resulting from unwanted publicity. Recalls are costly. Costs
include having to handle the recalled product, replacing it, and possibly being held
financially responsible for the consequences of the recalled product. A country’s
consumer protection laws will have specific requirements in regard to product
recalls. Such regulations may include how much of the cost the maker will have to
bear, situations in which a recall is compulsory (usually because the risk is big
enough), or penalties for failure to recall. The firm may also initiate a recall volun-
tarily, perhaps subject to the same regulations as if the recall were compulsory. A
product recall usually involves the following steps, which may differ according to
local laws:
• Maker or dealer notifies the authorities responsible of their intention to recall a

product. In certain situations, it is possible that the government can also request
a recall of a product.
• Consumer hotlines or other communication channels are established. The scope
of the recall, that is, which serial numbers or batch numbers are recalled, is often
specified.
• Product recall announcements are released on the respective government agen-
cy’s website (if applicable), as well as in paid notices in the metropolitan daily
newspapers. In some circumstances, heightened publicity will also result in news
television reports advising of the recall.
• When a consumer group learns of a recall, it will also notify the public by vari-
ous means.
• Typically, the consumer is advised to return the goods, regardless of condition, to
the seller for a full refund or modification.
• Avenues for possible consumer compensation will vary depending on the spe-
cific laws governing consumer trade protection and the cause of recall.
Retrofit is understood to mean the modernization or expansion of existing (usu-

ally older and no longer produced) systems and equipment. Reasons for retrofits can
be as follows:
• Extension of life span

• Increase in production volume or product quality
• Higher system efficiency, e.g., by saving energy
• Fulfillment of legal requirements (e.g., emission reduction, occupational safety)
• Ensuring the supply of spare parts
• Creating the possibility of embedding old machines in a modern IT environment
(Industry 4.0) monument protection
Primary value Value chain PM2E

contributors
Corporate strategy
Supply side Purchasing Operations Marketing & Demand side
Organisationl improvement
(Suppliers) Management Management Sales (Customers) Supply management
Supplier and partnerships
Cooperation and collaboration
Value chain visiblity
B2B and B2C collaboration
Risk management
Secondary value Demand scheduling & operations
contributors
Quality performance
Learning and growth
Leadership and management
Global activities
Digitalisation and AI
Information Human Finance and Business
systems Legal Contineous improvement
resources controlling ethics
Reference
5S Concept in Quality Management
10
Most Business Processes Are 90% Waste and 10% Value-

Added Work.
(Jeffrey Liker)
10.1 Value-Added and Waste
Added value can be defined as products, services, processes, and activities, which
generate a certain value to the organization and enterprise. Value-added must be
regarded from the customer viewpoint and is everything for which the customer is
willing to pay for. It is important that value-added is recognized and perceived as
value by the client (Bertagnolli, 2020). Many studies have shown that we only add
value to a product for less than 5–15% of the time; the rest of the time is wasted
(Helmold & Terry, 2021). The opposite is non-adding value or waste. Waste
(Japanese: muda, 無駄) is anything which adds cost or time without adding any
value or any activity which does not satisfy any of the above conditions. Value-
added is a waste or a non-value-adding activity in a process. The focus of operations
management must therefore be in eliminating such activities like waiting time or
rework. Enterprise must target value-added process and eliminate or reduce waste,
whereby waste can be visible (obvious) or invisible (hidden) as shown in Fig. 10.1
(Lehmann, 2021). The main idea of lean management is about highlighting the
things that add value by reducing or eliminating everything else (waste) (Sahoo,
2019). As a proven consequence, when you eliminate waste, the quality of products
improves, while production time and costs are reduced. Figure 10.2 illustrates that
waste must be ideally eliminated or reduced.

Switzerland AG 2023
114 10 5S Concept in Quality Management
Fig. 10.1 Value-added

and waste. (Author’s
source)
Hidden Value-added
Waste Activities
(reduce) (increase)
Obvious
Waste
(eliminate)
Category Impact Principle

Value add
• Added value for product
• Customer pays for it Increase
Task • Customer recognizes this
a value add
Hidden waste
• No added value for
Task •
product or service
Task is necessary for Minimize
production
Obvious waste
• No added value for
product or service
Task • Task not necessary for Eliminate
production
Fig. 10.2 Actions for value-added and waste. (Author’s source)
10.2 Muda, Muri, and Mura
The Toyota Production System, and later on the concept of lean, was developed
around eliminating the three types of deviations that show inefficient allocation of
resources. The three types are muda (無駄) (waste), muri (無理) (overburden), and
mura (斑) (unevenness). Muda means wastefulness, uselessness, and futility, which
is contradicting value addition. Value-added work and activities are process that add
value to the product or service that the customer is willing to pay for. There are
seven categories of waste under muda type 2 that follow the abbreviation
TIMWOOD. The seven wastes are (1) transport, i.e., excess movement of product;
10.3 Ishikawa Diagram 115
Muda
Waste
Mura Muri
Uneveneness Overburden
Fig. 10.3 Muda (無駄), muri (無理), and mura (斑). (Author’s source)
(2) inventory, i.e., stocks of goods and raw materials; (3) motion, i.e., excess move-
ment of machine or people; (4) waiting; (5) overproduction; (6) overprocessing; and
(7) defects. Muri means overburden, beyond one’s power, excessiveness, impossi-
ble, or unreasonableness. Muri can result from mura and in some cases be caused by
excessive removal of muda (waste) from the process. Muri also exists when
machines or operators are utilized for more than 100% capability to complete a task
or in an unsustainable way. Muri over a period of time can result in employee absen-
teeism, illness, and breakdowns of machines. Standardize work can help avoid muri
by designing the work processes to evenly distribute the workload and not overbur-
den any particular employee or equipment. Mura means unevenness, nonunifor-
mity, and irregularity. Mura is the reason for the existence of any of the seven
wastes. In other words, mura drives and leads to muda. For example, in a manufac-
turing line, products need to pass through several workstations during the assembly
process. When the capacity of one station is greater than the other stations, you will
see an accumulation of waste in the form of overproduction, waiting, etc. The goal
of a lean production system is to level out the workload so that there is no uneven-
ness or waste accumulation. Figure 10.3 shows the elements muda, muri, and mura.
10.3 Ishikawa Diagram
Ishikawa diagrams (also called fishbone diagrams, herringbone diagrams, cause-

and-effect diagrams, or Fishikawa) are causal diagrams created by Kaoru Ishikawa
(Japanese: 石川馨 Ishikawa Kaoru, 1915–1989) that show the cause-effect
Man Material Machine
Value add
(Quality)
Method (Process) Milieu (Environment) Money
Fig. 10.4 Ishikawa diagram. (Source: Author’s source)
situation of a specific event. Common uses of the Ishikawa diagram are areas of
design, supply, production, and quality defect prevention to identify potential fac-
tors causing an overall effect. Each cause or reason for imperfection is a source of
variation. Causes are usually grouped into major categories to identify and classify
these sources of variation. The target of value-add and quality is shown as the fish’s
head, facing to the right, with the causes extending to the left as fishbones; the ribs
branch off the backbone for major causes, with subbranches for root causes, to as
many levels as required. Figures 10.4 and 10.5 show two examples of the Ishikawa
diagram. Advantages of using this method are the application of a highly visual
brainstorming tool which can spark further examples of root causes. It serves to
quickly identify if the root cause is found multiple times in the same or different
causal tree. The Ishikawa diagram is also a good visualization tool for presenting
issues to stakeholders.
10.4 5S Concept
The 5S concept in Fig. 10.6 is the name of a workplace organization method that
uses a list of five Japanese words: seiri, seiton, seiso, seiketsu, and shitsuke.
Transliterated into Roman Script, they all start with the letter “S.” 5S is used to
stabilize, maintain, and improve the safest, best working environment thus support-
ing sustainable QCD-plus alpha. 5S is a systematic and structured workplace opti-
mization, originally developed and used by Toyota. The objective is the identification
and elimination of waste. In simple terms, the five S methodology helps a work-
place remove items that are no longer needed (sort), organize the items to optimize
efficiency and flow (straighten), clean the area in order to more easily identify prob-
lems (shine), implement color coding and labels to stay consistent with other areas
(standardize), and develop behaviors that keep the workplace organized over the
long term (sustain) (Pinto et al. 2018). 5S is a workplace organization method that
10.4 5S Concept 117
Man Material Machine

X missing qualification X defects from suppliers X insufficient maintenance
X insufficient training √ capacity of machine
√ engagement operators
Value add
(Quality)
X Sequence not logical X Insufficient flow X material cost

√ Process description X Distance too long X Work in progress
X Process intransparent X Layout deficiencies X Loss
Method (Process) Milieu (Environment) Money
Fig. 10.5 Ishikawa diagram with waste and value-added. (Source: Author’s source)
Fig. 10.6 5S system.

1. Sort
(Seiri )
2. Set in
5. Sustain
Order
(Shitsuke )
(Seiton )
5S-
Concept
4.
Standardise
3. Shine
(Seiketsu ) (Seiso )
uses a list of the five Japanese words seiri (sort), seiton (set in order), seiso (shine),
seiketsu (standardise) and shitsuke (sustain).
1. Seiri (整理)
2. Seiton (整頓)
3. Seisō (清掃)
4. Seiketsu (清潔)
5. Shitsuke (躾)
These five words can be translated as “sort,” “set in order,” “shine,” “standard-
ize,” and “sustain.” The 5S methodology describes how to organize a work space for
efficiency and effectiveness by identifying and storing the items used, maintaining
the area and items, and sustaining the new order (Niemann, Reich & Stöhr 2021).
The decision-making process usually comes from a dialogue about standardization,
which builds understanding among employees of how they should do the work. In
some quarters, 5S has become 6S, the sixth element being safety or self-discipline.
The advantages of the 5S system are the following:

• Creation of transparent layout
• Visualization of processes
• Transparency of hidden and obvious waste
• Eliminates unnecessary activities
• Improvement of efficiency
• Focus on safety measures
• Increases employee motivation through simplification of the work environment
• Ensuring that all materials are instantly available
• Ensuring that tools are available at the right time in the right place (screwdriver,
devices)
• Ensuring that required (work procedures, work sequence etc.) information is
instantly available
• Reduction of waste
The first element in the 5S concept is sorting (seiri). In this step it is important to
distinguish between necessary and unnecessary things. Things in this context are
materials, components, tools, gauges, information, things, and people. Unnecessary
things must disappear. Removing these items which are not used in the working area
may take a reasonable amount of time. Classification of all equipment and materials
by frequency will help to decide if these items can be removed or not. The second
step is the setting in order (seiton), the practice of orderly storage so the right item
can be picked efficiently at the right time, easy to access for the operators.
Identification and allocation of materials, information, tools, and necessary things at
fixed and visualized locations are important in this step. In the next and third step
(seiso), it is mandatory to create a clean worksite without garbage, dirt, and dust, so
problems can be more easily identified (leaks, spills, excess, damage, etc.). In the
fourth step (seiketsu), standards for a neat, clean, workplace and operations will be
set up through visual management. In the fifth and last stage (shitsuke), it is impor-
tant to create the environment, patterns, management style, and behaviors that
established standards are executed over the long term and making the workplace
organization the key to managing the process for success (Helmold & Terry, 2017).
10.5 TIMWOOD: Seven Types of Waste
10.5.1 Transportation
Excess transportation is a significant waste because the time, manpower, energy,

efforts, and resources required to move items are something the customer does not
care and does not want to pay (Ohno, 1990). Examples of wastes of transport are the
10.5 TIMWOOD: Seven Types of Waste 119
Transportation
Definition Possible reasons
• Unnecessary transport of material • Insufficient arrangement of needed material and
• Transport is a necessary type of waste however it devices
should be reduced to a minimum • Physical distance between material delivery and
usage
• Interim storage of material (buffer)
Consequences Examples
• Additional space for transport • Long or additional transport of:
• Blocking of capacity due to additional logistic effort • Raw material
• Possible damage of products • Finished goods
• Tools and devices
Fig. 10.7 Transportation. (Source: Author’s source)
transport of product from one functional area such as pressing to another area such as
welding or the use of material handling devices to move batches of material from one
machine to another within a work cell. It wastes time because operators are dedicating
the available time of the workday to moving items from one place to another. It wastes
energy and resources in that employee time could be better utilized and because some
tools used for transportation (forklifts, trucks, pallet jacks) consume energy like elec-
tricity or propane. Also, by dedicating machines and operators’ time to waste activi-
ties, they are no longer free and available to take on value-added activities. Figure 10.7
shows transportation waste. Reasons can be insufficient layouts and long distances
between individual operations. The consequences of this waste are the increased time
requirements and the decreased productivity. Decreased productivity will result in
higher operating cost and can harm the profitability of the enterprise.
10.5.2 Inventory
Inventory consists of excessive material of finished goods, semifinished goods, or

raw material. Finished goods inventory is generally the most expensive inventory as
it has labor and other overhead attached to it along with the cost of material con-
sumed during production. In order to reduce this inventory, process improvements
as well as a higher accuracy in forecasting customer requirements is required.
Inventory waste refers to the waste produced by unprocessed inventory. This
includes the waste of storage, the waste of capital tied up in unprocessed inventory,
the waste of transporting the inventory, the containers used to hold inventory, the
lighting of the storage space, etc. Moreover, having excess inventory can hide the
original wastes of producing the said inventory. The environmental impacts of
Inventory
• More material than needed according to planning in • Problems regarding planning and logistic processes
terms of: • Bad supplier delivery performance and quality
• Raw material • High product variety
• Semi-finished parts
• Work in progress (WIP)
• Finished goods
• Capital costs • Overfilled warehouses
• Double handling, possible damages based on • Overfilled place in production areas
double handling, rework • Buffer stocks in production
• Genuine problems won’t be discovered and • Crammed corridors
therefore not solved
• Crammed desks
• Search effort
• Scrap
Fig. 10.8 Inventory
inventory waste are packaging, deterioration, or damage to work-in-process, addi-

tional materials to replace damaged or obsolete inventory, and the energy to light, as
well as either heat or cool, inventory space. Figure 10.8 displays the definition,
reasons, consequences, and examples for inventory. Inventory will have a negative
impact on working capital and on cash flow, so that sophisticated production plan-
ning must focus on the optimum levels of inventory throughout the value chain and
operations (Helmold et al., 2022).
10.5.3 Motion
Motion waste is the excessive movement of man, material, or machines within the
workspace. Motion waste will lead to higher cost as the productivity decreases.
Another problem of motion is the necessity for more time and capacity in operations
than actually required. A proper workflow analysis and value stream mapping help
to minimize this waste. Figure 10.9 outlines the definition, possible reasons, conse-
quences, and examples of this waste.
10.5.4 Waiting
Idle time of operators or other employees in operations and waiting for work to
arrive or to be told what to do is a significant waste. Waiting or standstill times must
be avoided as waiting results into reduced efficiency and productivity. Other out-
comes are longer lead times and decreasing engagement and motivation of employ-
ees as illustrated in Fig. 10.10.
Motion
• Every type of movement that doesn‘t directly serve • Inaccurate analysis of all workflows
value creation Inappropriate layout
• Insufficient delivery of material and arrangement of
tools
• Decrease of productivity • Long ways between tools, material and product or
• Increase of lead time and capacity machine
• Insufficient ergonomics • Missing material or tools
Fig. 10.9 Motion. (Source: Author’s source)
Waiting
• A period in which no activities take place. • Insufficiently synchronised material and information
• The employee is forced to wait and can‘t fulfil any flows
value added activities. During the holding period the • Insufficient line balancing of all processes
product is waiting for processing • Missing material or tools
• Lack of documentation
• Waiting for quality approval
• Reduced productivity • Waiting for material or tools e.g. crane
• Decreasing efficiency • Quality employees are not available
• Increased lead time • Stopped processes due to missing resources
• Increase of capacity (employees, defective machines, IT,...)
• Decreased of employee motivation
Fig. 10.10 Waiting. (Source: Author’s source)
10.5.5 Overproduction
Overproduction waste is defined as producing too many products too early and in
advance. That means that parts in a big quantity are existing inside operations man-
agement, even though these parts are not needed. Figure 10.11 displays possible
Overproduction
Definition
Possible reasons
• If more is produced than the internal or external • Insufficient transparency of real demand
customer needs • Production according to supposed optimal batch
sizes
• Instable processes
• Early use of available capacity
Consequences
• Generation of inventory (warehouse, WIP) • A lot of material in front of machines or assembly
• Additional use of space lines
• Blocking of capacities (machines, employees) • Crowded warehouses
• Double handling, decrease of product quality
Fig. 10.11 Overproduction. (Source: Author’s source)
reasons such as demand nontransparency or inadequate batch sizes. A consequence

of this waste is that inventory increases drastically and that work-in-progress cost
rises significantly.
10.5.6 Overprocessing
Overprocessing is related to all activities and processes in operations, which are

more than the customer really needs. Figures 10.12 highlights possible reasons such
as insufficient technology, bad design, inefficiencies, or unawareness of customer-
specific requirements. Overprocessing refers to any component of the process of
manufacture that is unnecessary. Painting an area that will never be seen or adding
features that will not be used are examples of overprocessing. Essentially, it refers
to adding more value than the customer requires. The environmental impact involves
the excess of parts, labor, and raw materials consumed in production. Time, energy,
and emissions are wasted when they are used to produce something that is unneces-
sary in a product; simplification and efficiency reduce these wastes and benefit the
company and the environment.
10.5.7 Defects
Defects as shown in Fig. 10.13 refer to a product deviating from the standards of its
design or from the customer’s expectation. Defective products must be replaced;
they require paperwork and human labor to process it; they might potentially lose
Overprocessing
Definition
Definition Possible
Possible reasons
reasons
• Process weakness in terms of sequence, content, • Insufficient technology
technologies and resources • Not the most efficient procedure for the process
• Insufficient analysis and design of processes
• Due to process problems the product requirements
in the specification are higher than required by the
customer
Consequences
• High production costs • High tolerances
• Waste of material • Wrong, faulty and not needed process steps
• Low efficiency • Not optimal utilisation of resources
• High need for resources (employee, machine, • Duplication of efforts
material)
Fig. 10.12 Overprocessing
Defects
Definition
Possible reasons
• If right first time is not achieved • Lack of machine and tool maintenance
• Insufficiently trained employees
• Product not according to customer requirements
• Unstable or not standardized processes
• No problem solving process established
• Additional need for material, tools and capacity • Increase of non-conformities
• Additional space for rework • Retrofitting and repairing defect parts
• Increase of quality employees and checks • Increased quantity of scrap
• Increase of lead time • Supply issues due to bad quality
Fig. 10.13 Defects. (Source: Author’s source)
customers; the resources put into the defective product are wasted because the prod-
uct is not used. Moreover, a defective product implies waste at other levels that may
have led to the defect to begin with; making a more efficient production system
reduces defects and increases the resources needed to address them in the first place.
Environmental costs of defects are the raw materials consumed, the defective parts
How many times?
T Transport Which routes?

Empty containers?
How much material is in front of a
I Inventory line/machine?
What is the material range?
Motions of employee within the
W Motion workstation: Destination?

How many times? Routes? Duration? ˛
Waiting for material, devices or
W Waiting supervisor?
All information available? Missing
documents?
O Overproduction Compliance with quality?

Batch size?
Proper tools? Proper settings?
O Overprocessing Proper instructions?

Proper tolerances?
Which mistakes?
D Defects How often does it happen?

Problem solving system?
Fig. 10.14 TIMWOOD checklist
of the product requiring disposal or recycling (which wastes other resources

involved in repurposing it), and the extra space required and increased energy use
involved in dealing with the defects.
The checklist in Fig. 10.14 is the ideal tool to assess operations in terms of the
seven wastes. It is a proven method for identifying waste in process and activities
(Helmold & Terry, 2021).
References
Bertagnolli, F. (2020). Lean management. Springer.
Helmold, M., & Terry, B. (2021). Operations and supply management 4.0 (Industry insights, case
studies and best practices). Springer.
Helmold, M., et al. (2022). Lean Management, Kaizen, Kata and Keiretsu. Best-practice examples
and industry insights from Japanese concepts. Springer.
Lehmann, M. (2021). Lean Management mit der 5S-Methode: Praktische Anleitung für effiziente
Arbeitsplatzgestaltung und reibungslose Prozesse. Schäfer Pöschel.
Niemann, J., Reich, B., & Stöhr, C. (2021). Lean Six Sigma. Methoden zur Produktionsoptimierung.
Springer.
Ohno, T. (1990). Toyota production system. Beyond large scale production. Productivity Press.
Pinto, J. L., et al. (2018). Just in time factory. Implementation through lean manufacturing tools.
Springer.
Sahoo, S. (2019). Lean manufacturing practices and performance: The role of social and technical
factors. International Journal of Quality & Reliability Management, 37(5), 732–754.
Lean Production as Part of QM
11
Quality needs to be constantly improved, but it is just as

necessary to make sure that quality never deteriorates.
(Shigeru Mizuno)
11.1 Lean Production and Toyota Production System (TPS)
11.1.1 Introduction to the Lean Production System
The lean or Toyota Production System (TPS), the just-in-time production system or
lean production system can be described as the ideal combination of four principles
(Imai, 1986). These principles are the (1) zero defect principle, the pull principle,
the tact principle, and the flow principle as displayed in Fig. 11.1 (Helmold &
Samara, 2019). The TPS is an integrated socio-technical system, developed by
Toyota, that comprises its management philosophy and practices. The TPS is a man-
agement system that organizes manufacturing and logistics for the automobile man-
ufacturer, including interaction with suppliers and customers. The system is a major
precursor of the more generic lean manufacturing (Bertagnolli, 2020).
The pull system is one of the lean manufacturing principles and is used to reduce
waste in the production process. In this type of system, components used in the
manufacturing process are only replaced once they have been consumed so compa-
nies only make enough products to meet customer demand (Pascual, 2013). The
opposite principle is the push system, in which as many products as possible are
generated to be sold via marketing activities. The principles aim to avoid overpro-
duction and stockpiling, thereby saving working capital, by letting demand dictate
the rate at which goods or services are delivered. In this way the customer, or the
next step in the chain, “pulls” value through the process.

Switzerland AG 2023
128 11 Lean Production as Part of QM
Fig. 11.1 Four major

principles in a lean Zero-Defect Tact
production system. Principle Principle
Pull Flow
Principle Lean Principle
Production
System
11.1.2 Pull Principle
The starting point in Toyota’s success story, zero defects, is all about identifying
errors or defects as closely as possible to where they occur. By so doing and by
neither accepting nor passing on defects, issues are resolved quickly and efficiently,
avoiding subsequent rework and quality issues. The zero-defect principle is a con-
cept of the Toyota Production System and is aimed at the reduction of defects
through error prevention. It is directed at motivating people to prevent mistakes by
developing a constant, conscious desire to do their job right the first time. In reality,
zero defects are not possible; however, the concept ensures that there is no waste
existing in a project (Helmold & Terry, 2016). Waste refers to all unproductive pro-
cesses, tools, employees, and so on. Anything that is unproductive and does not add
value to a project should be eliminated, called the process of elimination of waste.
Eliminating waste creates a process of improvement and correspondingly lowers
costs. Common with the zero defects theory is the concept of “doing it right the first
time” to avoid costly and time-consuming fixes later in the project management
process (Belekoukias et al., 2014). The concept of zero defects is grounded on four
major elements for implementation in real projects:
• Quality is a state of assurance to requirements. Therefore, zero defects in a proj-

ect means fulfilling requirements at that point in time.
• Right the first time. Quality should be integrated into the process from the begin-
ning, rather than solving problems at a later stage.
• Quality is measured in financial terms. One needs to judge waste, production,
and revenue in terms of budgetary impact.
• Performance should be judged by the accepted standards, as close to perfection
as possible.
11.1.3 Tact Principle
Tact refers to the rhythm at which goods or services are produced to meet customer
demand. With a consistent, continuous rhythm providing a heartbeat for your pro-
duction processes, it is far easier to regulate, responding flexibly and effortlessly as
11.1 Lean Production and Toyota Production System (TPS) 129
Fig. 11.2 Tact time and

other ratios Available production time
Tact time:
(Customer tact)
Customer demand
Optimum Sum of cycle times

Manning
level: Customer tact (Takt)
Sum of cycle times

LBR: x 100 %
(Line balance ratio)
Longest OP x No. OP
Sum of cycle times

LER: x 100 %
(Line efficiency ratio)
Customer tact (Takt) x No. OP
demand rises or falls. Takt time is defined as the average time available (time avail-
able minus breaks, maintenance, or setup) divided by the customer-requested quan-
tity as shown in Fig. 11.2.
This is the average time between the start of production of one unit and the start
of production of the next unit, when these production starts are set to match the rate
of customer demand. For example, if a customer wants 15 units with the available
time of 9 minutes and the steady flow through the production line, the average time
between production starts should be 36 seconds for one part or unit (9 minutes mul-
tiplied by 60 seconds = 540 seconds; 540 seconds divided by 15 units requested by
the customer = 36 seconds per part). In fact, the tact time simply reflects the rate of
production needed to match the demand. In the previous example, whether it takes
4 minutes or 4 years to produce the product, the tact time is based on customer
demand. If a process or a production line is unable to produce at tact time, either
demand levelling, additional resources, or process reengineering is needed to cor-
rect the issue (Helmold & Terry, 2016).
• Directly tie production efficiencies to fiscal reporting

• Reduce investigation time for root cause analysis
• Shorten equipment ROI through increased utilization
• Decrease costs through waste elimination
• Increase customer satisfaction through quality improvement
11.1.4 Flow Principle
Value should be added in a smooth, uninterrupted flow, from the start to the end of
the production process. The ultimate effect of this principle is that all process steps
are focused and aligned to adding value, one piece at a time, removing all wasteful
U-Type flow Zick-Zack-Type flow Line-Type flow
OP 1 Pre- OP 3 Assembly 2
OP 1 Pre- OP 2 Assembly 1 assembly Pre-
assembly OP 1 assembly OP 2 Assembly 1 OP 3 Assembly 2
OP 4
OP 2 Assembly 1
OP 4 Finishing
OP 4 Finshing OP 3 Assembly 2
Fig. 11.3 Types of flows in operations. (Source: Marc Helmold)
and unnecessary activities from the process. The advantage of a continuous flow in
operations is that it features stability, continuity, and balance and does not waste
time (the nonrenewable resource). No time wasted on waiting between steps means
time is being maximized for its capabilities. Operations are not able to introduce a
wasteless process without the continuous flow, as it is the truly ideal process state.
However, the troubles with continuous flow are that it is very hard to achieve, pro-
cess steps are not generally balanced, and all processes contain inherent waste activ-
ities. When one starts out to achieve continuous flow, many process problems will
appear and come to the surface. Most individuals think this is bad—it is actually a
good thing. The optimal process features continuous flow, and any problems that
stand in your way from achieving continuous flow are problems that are now visible
and can be rectified. The ideal flow is the one-piece flow as shown in Fig. 11.3.
11.1.5 Zero-Defect Principle
Zero defect is a concept or philosophy that encourages the adoption of measures to

correct manufacturing errors to achieve optimal production, in other words, a pro-
duction with minimal errors, tending to zero and, preferably, the first time.
11.2 Andon
Andon (Jap.: アンドン or あんどん or 行灯) is a lean manufacturing tool referring

to a system to notify management, maintenance, and other workers of a quality or
process problem. The centerpiece is a device incorporating signal lights to indicate
which workstation has the problem. The alert can be activated manually by a worker
using a pull cord or button, or may be activated automatically by the production
equipment itself. The system may include a means to stop production so the issue
11.3 Poka-Yoke 131
Fig. 11.4 Andon. (Source: Author’s source)
can be corrected. Some modern alert systems incorporate audio alarms, text, or
other displays. An Andon system is one of the principal elements of the Jidoka
method pioneered by Toyota as part of the TPS and therefore now part of the lean
concept. It gives the worker the ability, and moreover the empowerment, to stop
production when a defect is found and immediately calls for assistance. Common
reasons for manual activation of the Andon are part shortage, defect created or
found, tool malfunction, or the existence of a safety problem. Work is stopped until
a solution has been found. The alerts may be logged to a database so that they can
be studied as part of a continuous improvement program. The system typically indi-
cates where the alert was generated and may also provide a description of the trou-
ble. Modern Andon systems can include text, graphics, or audio elements. Audio
alerts may be done with coded tones, music with different tunes corresponding to
the various alerts, or prerecorded verbal messages. Usage of the word originated
within Japanese manufacturing companies and, in English, is a loanword from a
Japanese word for a paper lantern (Imai, 1986). Figure 11.4 shows an Andon exam-
ple at Alstom in China. The red light means the disruption of production in the
respective production operation.
11.3 Poka-Yoke
Poka-yoke (ポカヨケ) is a Japanese term that means “mistake-proofing.” A poka-

yoke is any mechanism in a lean concept a process that helps an equipment operator
avoid (yokeru) mistakes (poka). Its purpose is to eliminate product defects by
preventing, correcting, or drawing attention to human or other errors as they occur.

The concept was formalized, and the term adopted, by Shigeo Shingo as part of the
TPS. It was originally described as baka-yoke, but as this means “foolproofing” (or
“idiot-proofing”), the name was changed to the milder poka-yoke.
11.4 Gemba and Shop Floor Management
Gemba (現場) is also a Japanese term meaning the real or right place. A production
environment considers the shop floor as the most important place and the employees
in the operation and support functions as the most important human capital for add-
ing value (Pascual, 2013).
11.5 Shadow Boards
Shadow (Fig. 11.5) boards are specific boards for parts, tools, equipment in opera-
tions, manufacturing, or service areas to reduce waste and waiting time. The aim of
the shadow board is to achieve an organized workplace where tools, supplies, and
equipment are stored in appropriate locations close to the work area or worksta-
tions. It provides the basis for standardization in the workplace. They are a simple
and inexpensive tool which provides tangible efficiencies and cost savings as well
as intangible benefits. Figure 11.5 shows a shadow board for screws in Mitsubishi
Fig. 11.5 Shadow board. (Source: Helmold. Shadow board. Mitsubishi Shinkanzen Production
in Osaka)
11.6 Health, Safety, Environment (HSE) 133
Japan. The appropriate storage, allocation, and preparation of screws avoid waiting
time and the possibility of errors. The advantages of using shadow boards include
avoiding waste, such as time looking for the appropriate tool or even having to buy
a new one, wasted time in looking for supplies, and interchanging tools between
tasks. Shadow boards also provide the ability to quickly gauge the location of tools
and equipment or if they are missing. Shadow boards are used in the sort and set in
order stages of the implementation and operation of a 5S system in a workplace and
kaizen initiatives. Shadow boards can be different sizes and located in many differ-
ent areas of a process or plant. The key is that they are appropriately located and
hold all the necessary tools for the area or workstation.
11.6 Health, Safety, Environment (HSE)
Health, safety, and environment (HSE) (in Fig. 11.6) is the concept and paradigm
that implements and secures practical aspects of environmental protection and
safety at work. From a health and safety standpoint, it involves creating organized
efforts and procedures for identifying workplace hazards and reducing accidents
and exposure to harmful situations and substances. It also includes training of per-
sonnel in accident prevention, accident response, emergency preparedness, and use
of protective clothing and equipment. From an environmental standpoint, it involves
creating a systematic approach to complying with environmental regulations, such
as managing waste or air emissions all the way to helping operations’ departments
reduce the company’s carbon footprint. Successful HSE programs also include
measures to address ergonomics, air quality, and other aspects of workplace safety
that could affect the health and well-being of employees and the overall community.
Figure 11.6 displays HSE requirements in a Chinese operations environment.
Fig. 11.6 Health, safety, and environment. (Source: Author’s source)

11.7 Overall Equipment Effectiveness (OEE)
Manufacturing a product is a complex process. Without metrics and guidelines, it is

very easy to lose control and have your business managed by your production. OEE
is a tool that combines multiple manufacturing issues and data points to provide
information about the process. By analyzing and calculating data, it also functions
as a framework for root cause analysis. Through a documented process of combin-
ing the underlying data, OEE provides specific process information. All members of
the manufacturing team, from assembly technicians to financial personnel, can use
the data to understand the current state of the manufacturing process. By having a
predetermined framework of the impact of machine availability, performance, and
quality, OEE provides a framework to track underlying issues and root causes. OEE
also provides a framework for improvements in the manufacturing process. By
using key OEE concepts such as the Six Big Losses, waste exposed by tracking
OEE can be understood and efficiencies can be improved. The components of this
framework are as follows:
• Availability
• Performance
• Quality
OEE is a very simple metric to immediately indicate the current status of a manu-
facturing process and also a complex tool allowing you to understand the effect of
the various issues in the manufacturing process and how they affect the entire pro-
cess (OEE = availability x performance x quality). Availability refers to the machine
or cell being available for production when scheduled. At the most basic level, when
a process is running, it is creating value for the end user. When a process is stopped,
it is creating a cost with no associated value. Whether it is due to mechanical failure,
raw materials, or operator issues, the cell or machine is either producing or not pro-
ducing. By comparing scheduled run time to actual run time, the availability com-
ponent of OEE allows for a determination of lost production due to downtime.
Performance is determined by how much waste is created through running at less
than optimal speed. By comparing the actual cycle times against ideal cycle times,
OEE allows for a determination of how much production was lost by cycles that did
not meet the ideal cycle time. Quality focuses on identifying time that was wasted
by producing a product that does not meet quality standards. By comparing the
quantity of good to reject parts, the percent of time actually adding value by produc-
ing good product is exposed. By itself, OEE only provides data about your manu-
facturing process. Companies that use OEE as a metric have found success when
combining it with general lean manufacturing programs and also as part of TQM
systems. When using OEE with these systems, the benefits become significant:
Fig. 11.7 shows an example of the OEE. High-performing companies can achieve
an OEE higher than 85% (Helmold & Samara, 2019). In the calculation, the OEE
11.9 Supermarkets 135
OEE (Overall Equipment Ef fect iveness)

OEE = Availability x Performance x Quality
73.5% = 83.3% x 90.0% x 98.0%
800 Minutes Machine Operat ing Time

Availability:
960 Minutes Plant Operating Time
180 Average Speed qpm (quantity per minute)

Performance:
200 Average Speed qpm (quant ity per minute)
24,974 Good Parts

Quality:
25,484 Total Parts
Fig. 11.7 OEE calculation. (Source: Author’s source)
has the elements availability (83.3%), performance (90.0%), and quality (98%).
Based on the actual figures, it is now possible to optimize each at the inefficient
categories. The availability ratio is below 90% and needs special actions for
improvements.
11.8 Kanban
Kanban (看板) is a visual system for managing work as it moves through a process.
It is a concept related to lean and just-in-time (JIT) production, where it is used as a
scheduling system that tells you what to produce, when to produce it, and how much
to produce. Initially, it arose as a scheduling system for lean manufacturing, origi-
nating from the Toyota Production System (TPS).
11.9 Supermarkets
Supermarkets ordinarily are located near the supplying process to help that process
see customer usage and requirements. Each item in a supermarket has a specific
location from which a material handler withdraws products in the precise amounts
Fig. 11.8 Shisa kanko
needed by a downstream process. As an item is removed, a signal to make more

(such as a kanban card or an empty bin) is taken by the material handler to the sup-
plying process. Toyota installed its first supermarket in 1953 in the machine shop of
its main plant in Toyota City. Toyota executive Taiichi Ohno took the idea for the
supermarket from photos of American supermarkets showing goods arrayed on
shelves by specific location for withdrawal by customers.
11.10 Shisa Kanko
Pointing and calling is a method in occupational safety for avoiding mistakes by

pointing at important indicators and verbally calling out their status. It is particu-
larly common on Japanese railways or transportation, where it is referred to as shisa
kanko (指差喚呼), shisa kakunin kanko (指差確認喚呼) or yubisashi koshō (指差
呼称). Gesturing at and verbalizing these indicators helps with focus on work safety
and concentration. The method was first used by train drivers and is now commonly
used in the Japanese industry as part of the lean management philosophy. Figure 11.8
depicts a train driver who is pointing at the direction going before starting the train.
References
Belekoukias, I., Garza-Reyes, J. A., & Kumar, V. (2014). The impact of lean methods and tools
on the operational performance of manufacturing organisations. International Journal of
Production Research, 52(18), 5346–5366.
Bertagnolli, F. (2020). Lean Management: Einführung und Vertiefung in die japanische
Management-Philosophie. Springer.
References 137
Helmold, M., & Samara, W. (2019). Progress in performance management (Industry insights and
case studies on principles, application tools, and practice). Springer.
Imai, M. (1986). Kaizen. Der Schlüssel zum Erfolg der Japaner im Wettbewerb. Ullstein.
Pascual, M. D. (2013). Toyota: Understanding the key to success: Principles and strengths of a
business model. Pluma Publishing.
Quality Management on the Supply Side
12
12.1 Supply Side
The term supply management as key value-adding function replaces old definitions
of procurement or purchasing. This definition is in line with Porter’s description of
value chains. A value chain is a set of activities that a firm operating in a specific
industry performs in order to deliver a valuable product or service for the market.
The concept comes from business management and was first described and popu-
larized by Michael E. Porter in his 1985 best-seller, Competitive Advantage:
Creating and Sustaining Superior Performance in the upstream supply manage-
ment or the supply side. Figure 12.1 displays the operations, the upstream supply
side (supply management) and the downstream supply side (customer or demand
side side). In Porter’s value chain framework (see Fig. 12.2), inbound logistics,
operations, outbound logistics, marketing and sales, and service are categorized as
primary activities. Secondary activities include procurement, human resource
management, technological development, and infrastructure. As many companies
have external value chains (purchase of goods, services) of more than 80%, supply
management has here the most significant role in any enterprise. In many enter-
prises, functions are still working independently from each other, leading to a large
amount of waste and inefficiencies. Many industries are currently faced by fierce
competition. This is forcing manufacturing companies to concentrate on core com-
petencies and to transfer the production of components, goods, and services to
external suppliers. The number of value-adding activities has decreased constantly
and now lies between 10% and 30% in this industry (Dyer, 1996). The company
Apple has no production and decided to outsource the manufacturing of iPads or
iPhones to the company FoxConn. Such a development has had a great influence
on the structure of supply chains and supplier relationships. Supply chains (the
terms “supply chains” and “supply networks” are used synonymously in the litera-
ture) have become more complex and international, as pointed out by several
What gets measured gets improved. (Peter Drucker)

Switzerland AG 2023
140 12 Quality Management on the Supply Side
Tier 3 Tier 2 Tier 1 Tier 1 Tier 2
Supplier
Supplier Supplier
Supplier Customer
Customer
Supplier
Supplier Supplier Customer
Operations Customer
Supplier
Supplier Customer
Supplier Customer
Supplier
Supplier Customer
Supplier
Supplier
Supplier
Upstream Supply Chain Management Downstream Supply Chain Management

Supply Side (Supply Networks) Demand or Customer Side
Fig. 12.1 Resilience in the upstream supply chain. (Source: Author’s source, adapted from
Helmold et al. (2019))
Research and Development

Secondary
Functions
Finance and Controlling
Human Resources
Margin
Primary Function: Supply Management
Operations Management
Functions
Primary
Inbound Marketing & Outbound After

Assembly
Logistics Sales Logistics Sales
Enterprise Functions
Fig. 12.2 Porter’s value chain. (Source: Author’s source, adapted from Helmold et al. (2020))
authors Christopher and Peck see the level of complexity increasing in the upstream
supply chain management of manufacturing companies in many industries, a trend
which is characterized by the growing transfer of activities to suppliers and sup-
plier networks, high numbers of supply chain layers (tiers), and the ongoing glo-
balization of supply chains (Christopher & Peck, 2004). As a consequence,
vulnerability and risk exposure have risen significantly. The rapid increase in sup-
plier activities therefore directly affects supply management, as emphasized by
12.1 Supply Side 141
Emmett and Crocker (2009). In recent years, many companies have reduced their
value-adding activities and implemented efficiency-oriented cost reductions, e.g.,
outsourcing, single sourcing, low-cost country sourcing, platform concepts, lean
management, design-to-cost approaches (Gürtler & Spinler, 2010). Supply man-
agement has become more important in core and peripheral business areas and is
aimed at building resilient supply chains. Resilience is based on being able to
anticipate, manage, and prevent supply chain disruptions at an early stage
(Christopher & Peck, 2004). On the other hand, supply risks have risen due to
increased dependency on supplier networks. Figure 12.1 depicts the supply chain
including the supply management phases. Resilience means the optimum levels of
quality, cost, delivery, and alpha objectives.
In their research “An Empirical Analysis of the Effect of Supply Chain Disruptions
on Long-Run Stock Price,” Hendricks and Singhal (2005) found that enterprises
without operational slack and redundancies in their supply chains experience nega-
tive stock effects. The authors revealed the tremendous impact of supply chain dis-
ruptions on stock price performance and shareholder value. Supply disruptions can
easily lead to high recovery cost, waste, and sharp decreases in sales. External cus-
tomers become dissatisfied and internal core functions (e.g., assembly) are dis-
turbed. In most cases, supply disruptions have negative impacts on brand image,
sales figures, and the company’s own financial situation as stressed by many authors
writing about supply disruptions and resilient supply chains (Trkman & McCormack,
2009). Recent incidents in the media about disruptions caused by upstream supply
management inefficiencies from China show that the supply management excel-
lence approach needs to tackle these issues in a proactive and sustainable way.
Supply management risks have mainly been investigated at the direct level of tier-
one relationships, but consideration has not been fully extended to sub-suppliers,
i.e., tiers one, two, three, and beyond. The new concept of supply management
therefore seeks to address these concerns by investigating how disruptions can be
anticipated, prevented, and managed over the entire value chain including all tiers
on the supply and demand side as shown in the figure by Slack et al. (1995). Recent
supply disruptions show that current supply management organizations, supply
management tools, and concepts are not smart and resilient enough to avoid these
supply chain discrepancies. Recent articles, for example, in the magazine
“Automotive News,” show that all car producers are facing severe problems due to
suppliers’ problems. Not only the automotive industry but also many other indus-
tries face these issues. The lean supply management concept was developed by
Taichi Ohno (1990), who worked for Toyota Motors. It derived from a bundle of
instruments which come from sophisticated production methods or supporting
functions such as logistics. The ideal interplay and optimal combination of all
instruments are essential for success. The vision of lean production is based on the
just-in-time (JIT) philosophy and the Toyota Production System (TPS: Japanese = ト
ヨタ生産システム) and focuses on the elimination of waste and the minimization
of stock.
12.2 QM Objectives in Supply
Supply side objectives are important. The seven rights (7R), which are the major
objectives according to the lean supply management philosophy, can be defined as
follows:
1. Right products.
2. Right quality.
3. Right time.
4. Right quantity.
5. Right location.
6. Right people.
7. Right cost.
The right product refers to the right specification and requirements by the
demanding customer. The products must have the required dimensions, layout,
material, color, etc. The right quality means the clarification of all requirements in
terms of quality and improvement measures to have the optimum quality levels.
Quality is normally measured by hard factors such as nonconformities, field rejects,
or defects at receipt (0-km defects). The right quantity is the placing of a specific
order quantity triggered by internal and customer demands. Supply management
has to transfer the customer and company demands to the supply networks. The
right time means that products ordered have to be at the buyer’s place in time, nei-
ther too early nor too late. Supply management has to recognize suppliers’ lead
times. The lead time for any product starts from the order until the physical receipt
of goods at the ordering party. The right location can be defined as the place where
the products are required. Shipment of products from China to Europe take more
than 8 weeks, so that the right location is closely linked to the lead time of products.
The meaning of right people extends the current definition of the five rights (Emmett
& Crocker, 2009) in line with the modern and lean philosophy of the new paradigm
of supply management. Suppliers in global markets need to have the right sales
people, project managers, and operators to meet the requested criteria. Project man-
agers must have sufficient language skills and as well operators must be trained to
produce good-quality parts. People are becoming in a changing and global trade
situation more and more important. Any product needs to have the right cost level;
otherwise, it will not be demanded and bought.
12.3 Managing the Supply Side
12.3.1 Supply Management Process
Industries or companies which have outsourced a large scope of their products to

global supply networks would especially benefit from such research in supply man-
agement, supplier relationship management, and supply networks. In conclusion, it
12.3 Managing the Supply Side 143
Supply Management Phases
Definition of Strategies Performance Management

Digitization
Strategic Suppliers
Make or Buy
Supplier Supplier Supplier Supplier Supplier Supplier

Strategy Selection Evaluation Development Inegration Controlling
Quality
Integration of all Functions Performance Concentration on Value-added
Processes
Marketing Cost and Finance Performance
Primary Functions Supply Operations
& Sales
Delivery Performance
Secondary Functions
Other Performance
Objectives
Fig. 12.3 Supply management process. (Source: Author’s source)
is evident that proactive supply management requires a subset of principles (see

Fig. 12.3). The principles can be described as follows:
1. Supply management is a function which is managing the entire value chain;

therefore, supply management must be incorporated into the mission, values,
and strategies of every organization.
2. Supply management best practices are focused on a multilayer approach,
involving not only tier one, but also tier two and three levels; proactive supply
management can only be introduced and executed if the corporate objectives
are communicated and cascaded throughout the organization; the setup must be
centralized as a single point of contact to suppliers.
3. Advanced and innovative supply management has standardized tools and
processes.
4. Supply management best practice companies have sophisticated B2B plat-
forms/supplier portals in terms of quality, cost, and delivery and other suit-
able KPI.
5. Supply management and mitigation action activities have to be preventive, pro-
active, and sustainable; activities have to be oriented in the long term.
6. Supply management requires a collaborative approach, including strategic alli-
ances with suppliers. Such activities should be organized centrally.
7. Proactive supply management can be performed with a key account manager in
terms of being a single point of contact for the supplier (customer).
8. Performance indicators have to be mutually agreed upon and may comprise
both hard and soft factors. The assessment process should consist of quality,
cost, delivery, and technological criteria.
9. The learning organization should, among other things, be characterized by the
capability and competencies of coaching suppliers.
10. All the abovementioned principles should be combined with a philosophy of

continuous improvement (Japanese: kaizen) and reflection (Japanese: hansei) to
achieve a best practice model in supply management.
Companies that want to distance themselves from their competitors through

best-in-class supply management must implement the ten principles and adopt a
collaborative approach in dealing with their supply base. Appropriate management
of one’s supply base can lead to competitive advantage. The strategic objective of
supply management is the establishment, design, and management of supplier net-
works and the successful collaboration within these networks as the figure shows.
The network consists of internal and external suppliers. The collaboration between
supply partners and the management of the interactions are a key responsibility of
the supply management function. A sophisticated information system is a prerequi-
site for proper interactions.
12.3.2 Supply Management Strategy
Strategic supplier and commodity strategies are a suitable tool in supply manage-
ment to secure the supply of standard, leverage, shortage, and strategic materials
(Hofbauer et al., 2012).
• Strategic suppliers/materials.
• Leverage suppliers/materials.
• Shortage suppliers/materials.
• Standard suppliers/materials.
Strategic Materials/Components
Strategic materials can be defined as special materials which are important and key
to the own production of an enterprise. Siemens and Alstom (formerly Bombardier)
Transportation produce car bodies by themselves; however, aluminum and stainless
steel or steel profiles and extrusions are strategic for the production and quality of
the end product.
Leverage Materials/Components
Leverage materials can be defined where the supply side is characterized by many
companies which offer the materials. The automotive industry is characterized by
more than 10–20 different suppliers, which deliver entertainment products (poli-
polistic market).
Shortage Materials/Components
Shortage materials can be defined as materials that are scarce on the market. Scarcity
represents a problem to any supply management organization and needs the right
establishment of strategies.
Standard or Catalogue Materials/Components

Standard materials are materials that can be bought on the market. Often standard
goods are catalogue products like screws, C-parts, etc.
12.3.3 Supply Management Selection and Evaluation
Supplier evaluation is the systematic assessment of existing or new suppliers on the

basis of certain categories (Fig. 12.4). A supplier evaluation must be:
• A preventive and proactive system.

• A KPI-based methodology.
• An anticipating (sensoric) model.
• A holistic and cross-functional assessment.
• A standardized process.
• An integrated supply base approach.
These categories can be performance of the delivery, price evolution, production

capacity, quality of management, technical capabilities, and service. Once there is a
mechanism in place to periodically collect performance data from suppliers, the
next step is to review the performance data. Ideally, the format that the data is in
should lend itself to comparison and analysis. The data should also be in a format
that can be quantified and scored. Many companies use a supplier evaluation or
scorecard for this. Moreover, data from different types of assessments such as inter-
nal surveys, external surveys, and site visits should be incorporated into the analy-
sis. Since most large organizations have many strategic suppliers and lots of data, it
Supply Management
Mission, Vision and Values
Information available Information available

outside / inside the outside / inside the
company company
Supplier Evaluation
Quality Cost
e.g. Defects Preventive Reactive e.g. Workshops
Delivery Alpha-Criteria
e.g. On-Time-Delivery e,.g. Qualification, CSR
Financial Strength
Supplier Risk Management
Other Criteria
Insolvency Risk
Fig. 12.4 Supplier evaluation. (Source: Author)

is almost impossible to obtain, organize, and review data from assessments effec-
tively on a large scale without automation or software. When evaluating supplier
performance data, the two things to look for (besides the obvious) are large changes
in the performance metrics and overall trends. By identifying trends, a company can
make projections about where the performance data will be in the future and can
take action accordingly. Downward trends and deterioration in performance can
signal a problem. Moreover, an abrupt change in performance metrics might signal
an imminent problem. However, there could be another explanation. In this case it
makes sense to obtain more data from the supplier and to dig deeper to find the
source of the problem. It may be a one-time anomaly or it could be something more.
Monitoring supplier performance proactively can ensure that exceptions to policies
are tracked and personnel and resources are assigned to address the problem quickly.
Alerts and notifications can provide up to the minute information to company per-
sonnel letting them know of changes in supplier performance.
Having a system that can take the assessment/scorecard data and can output it in
a report or other format is helpful because members of the team can all access and
review the information quickly and easily. The performance evaluation of Daimler
shown in Fig. 12.4 is an example of a supplier evaluation. For part C the perfor-
mance is very bad, so that immediate actions have to be taken. Once there is sudden
drop in supplier performance or a downward trend, it is important to take action
quickly. Quick action can reduce the risk of disaster significant loss and gives the
company the ability to take steps to prevent bad outcomes. Some actions that can be
instigated include communicating with the supplier, conducting further evaluations,
developing an improvement plan, or finding an alternative supplier. The actions
taken may depend on many factors. These include the supplier’s past performance,
level of current performance, strategic importance, possible damages, and overall
risk. One of the first things to do is to contact the supplier and find out what went
wrong and why. The results of the performance assessment should be provided to
the supplier and can create a basis for discussions.
The poor performance could have been the result of something outside of the
supplier’s control. It could have been a problem with process, personnel, a supplier,
or something else. By communicating with the supplier, personnel can determine
the cause of the problem and try to work with the supplier to make changes to bring
the supplier performance back into compliance with the contract or with company
policies. If the vendor does not have a good explanation or understanding of why the
problem occurred, this may be a sign of trouble. Once the causes of a problem or set
of problems have been identified, the next step is to devise a supplier improvement
plan. The plan should be specific to the problem, should involve both company per-
sonnel and supplier personnel, and should involve a timeline for addressing the
problem or bringing the performance into compliance. This process should also be
a collaborative process and should be aimed at improving the overall supply chain.
Even if a supplier’s performance is acceptable, the company may wish to invest time
and resources in developing suppliers and improving supplier performance. If the
problem is too severe, cannot be fixed in a timely manner, or poses too great of a
risk, the company may wish to stop doing business altogether with the supplier. This
means that the company should carefully find an alternative source of supply and, if
possible, reduce its reliance on the supplier in question. Emmett and Crocker (2009)
and Dust et al. (2010) also propose using such criteria for evaluating the perfor-
mance of suppliers. Interestingly, the interviews revealed that many companies have
created subcriteria of Q-C-D-SF according to their own needs. Regarding the ques-
tion of how often manufacturing companies in the European transportation industry
measure supplier performance, what they do internally with the data, and how they
communicate the results to suppliers, several different answers were given. In the
best case, data was updated on a weekly basis and made available to suppliers
through a web-based tool. Concerning the evaluation of supplier performance, all
interviewees outlined three to four categories, like traffic lights:
• Category one (green): acceptable with minor deviations and without conditions.
• Category two (yellow): acceptable with conditions.
• Category three (red): not acceptable.
In category one (green), the evaluation is approved and accepted with minor
deviations. In category two (yellow), the evaluation is accepted with conditions.
Conditional acceptance means that any subsequent action plan has to be approved
by the supply management department. If a supplier shows severe deficiencies and
is categorized three (red), the evaluation is not accepted. This can mean that a new
supplier is not allowed to supply parts. In cases where category three is measured
during serial production, specific supply management actions (e.g., management
escalation, supplier audits, dual-sourcing) might be the consequence. Some of the
challenges associated with supplier evaluation may be mitigated by the use of
appropriate tools. For simple projects, a spreadsheet can be used. But as evaluations
become more complex or more frequent, data management and data integrity issues
become significant. Web electronic RFP/tendering systems are often used for initial
selection projects. Some products provide functionality for combining both initial
selection and ongoing evaluation and benchmarking. Without few exceptions, there
is no evaluation model which considers the maturity and level of relationship with
suppliers. The doctoral thesis “Establishing a best practice model of supplier rela-
tionship management (SRM) for multinational manufacturing companies in the
European transportation industry” makes suggestions for this aspect. There is also
an MBA thesis available, which includes the assessment of the Guanxi for supply
management in China. Wider, within established supply management evaluation
methodologies, the Carter 10Cs model is an internationally recognized approach
(Emmett & Crocker, 2009). This model looks at aspects which should be evaluated
before contracting and as part of the ongoing supplier performance appraisal. The
ten categories can be summarized as the following:
• Capacity (does the organization have the capacity and capability to deliver
the order).
• Competency (is the organization, its people, or its process competent).
• Consistency (does the organization produce a consistent output).
• Control of process (can the organization control its process and offer
flexibility).
• Commitment to quality (does the organization effectively monitor and manage
quality).
• Cash (has the organization got a strong enough financial base).
• Cost (is the product or service offered at a competitive price).
• Culture (are the supplier and buyer cultures compatible).
• Clean (is the organization ethical, funded legitimately, does not engage in
child labor).
• Communication efficiency (does the organization have support technology of
information integration) to support collaboration and coordination in the sup-
ply chain.
12.3.4 Control Via Supplier Dashboard or Cockpit
A supply or supplier dashboard (or cockpit) provides management with an at-a-

glance awareness of the status of certain performance indicators such as inventory
and supply operations (see Fig. 12.5). Thus, it is possible to respond to challenges
before any incident is happening. The supplier dashboard is showing key opera-
tional indicators and trends like NCG, OTD, outgoing quality, and sub-supplier per-
formance. Indicators can vary from case to case.
Fig. 12.5 Supplier dashboard. (Source: Helmold and Terry (2016))

A supplier dashboard or supplier cockpit is a one-page summary of the supplier’s

critical performance indicators as shown in the example above. The dashboard is
supposed to give managers a quick overview of deteriorations and status on quality,
delivery, or other critical issues. It enables the supply manager to take immediate
actions based on a graph or a color.
12.3.5 Supply Risks
Supply disruptions are defined as “unplanned and unanticipated events that disrupt
the normal flow of goods and materials within the supply chain.” They distinguish
between coordination risks and disruption risks. Supply chain complexity is
described by Adenso-Diaz et al. (2012) as “the sum of the total number of nodes and
the total number of forward, backward and within-tier material flows” in the
upstream supply chain network. Such complexity has a huge impact on supply
chain reliability and supply chain stability. The overall recommendation made in
several papers is to reduce the number of suppliers, since supply chain complexity
increases the risk of disruption. Adenso-Diaz et al. (2012) highlighted the defini-
tions of various authors, using a variety of criteria: (1) function, (2) type of risk, (3)
drivers of risks, and (4) likelihood of occurrence. While the literature on supply
management and risk management is growing, there is no organized structure
regarding the sources of causal factors for supply chain risks and supply disrup-
tions. Several papers show that supply disruptions can lead to high monetary recov-
ery cost, waste, and sharp decreases in sales as pointed out in one of the previous
sections by Jing, (2011). As well as findings in literature other sources such as field
research, internal reports, and interviews display that supply disruptions have severe
impacts on companies in the analyzed European transportation industry. Supply
disruptions and their associated risks have been classified in the literature using a
variety of criteria, e.g., function (Christopher & Peck, 2004), type of risk, and driv-
ers of risk. Hendricks and Singhal (2005) pointed out that enterprises without opera-
tional slack and redundancies in their supply chains experience negative stock
effects. They also revealed the tremendous impacts of supply chain disruptions on
stock price performance and shareholder value. Causal factors for supply disrup-
tions are automatically associated with risks in the supply network, as stated by
Zsidisin (2003). Several authors outline incidents in which supply disruptions
caused production standstill or temporary stops in manufacturing companies in the
European industry. Other authors refer to capacity management in terms of supply
disruptions as being a crucial risk factor for supply chain discrepancies. Due to such
risks, specific measures are necessary in terms of overcoming potential supply dis-
ruptions caused by supplier capacity shortages (Hittle & Leonard, 2011). Mitigations
and preventive measures can take the form of diverse capacity management, backup
equipment, or alternative manufacturing locations, as recommended by Hittle and
Leonard (2011).
It is useful to compare the supply chain strategies of companies and their result-
ing ability to cope with some of the abovementioned disruptions. Zsidisin (2003)
created models which can be used by managers to measure and assess the
vulnerability of their company and supply chain in relation to the associated risks.
Typology may also provide avenues for future research and thus guide practitioners
in the management of their supply chain risk portfolio. Such a classification is a
useful tool for supply chain managers in differentiating between independent and
dependent variables and the mutual relationships which would help them to focus
on those key variables that are most important for effective risk minimization in a
supply chain. Zsidisin typologized causal factors for supply disruptions into differ-
ent categories—high, medium, and low risk—based on managerial perception
(Zsidisin, 2003). Other authors besides Zsidian have built on this typology and out-
lined causal factors for supply disruptions as follows, which comprise the following:
• Capacity shortages.
• New product launches.
• Disaster issues (e.g., earthquake, flood).
• Lack of supply chain transparency.
• Labor-related issues (e.g., strike).
• Constraints on market capacity.
• Pricing instabilities.
• Quality discrepancies.
• Transport issues.
• Product transfers to sites or plants.
• Inflexible production capacities.
12.3.6 Method of Evaluation
Once a company has decided what it is going to evaluate, the next step is to establish
how it will evaluate the performance of the supplier. There are many ways to do this
and some are more costly, time-consuming, and resource intensive than others. By
quantifying the level of risk and the projected benefit of a method of evaluation,
company personnel can determine the most appropriate method or combination of
methods that should be used. Some methods that companies commonly use to eval-
uate and measure supplier performance include (Figs. 12.6 and 12.7):
• Site visits by cross-functional teams.

• Supplier audits (process, special process, or product audits).
• Paper supplier questionnaires.
• Web-based supplier questionnaires.
• Organizing existing data.
• Internal questionnaires.
• Requiring external certifications.
• Developing own certifications.
• Third party reviews.
• Phone call with a supplier.
• Independent ratings.
• Contacts with other supplier customers.
High
Outsourcing Own Operations

Buy Make
Strategic Relevance of
(Partnerships) (Conzentration)
Commodity
Make oder
Buy
Outsourcing Own operations

Buy Make
(Using Market Potential) (Partial Outsourcing)
Low
Low Own Capabilities and Abilities High
Fig. 12.6 Make or buy strategy. (Source: Author’s source)
Fig. 12.7 Advantages and disadvantages of make and buy strategies

• More than 75 percent

external value creation
• Suppliers are supplying
components and system
• Subassemblies are
produced in four different
countries
• Subassemblies are
delivered from different
national sites to the final
assembly lines
• OEMs and Suppliers are
using one ERP-System
Platform
• Integrated Systems enable
Lean Processes over the
Value Chain
References 153
From individual supply chain portals ...
Fragmentation
Portal Portal Portal Portal Portal Portal
Suppliers Suppliers Suppliers Suppliers
… to a unique aerospace and defense supply chain platform
Process
Integration
+
AirSupply
Lean
Suppliers
Integration
References
Adenso-Diaz, B., Mena, C. H., Garcia, S., & Liechty, M. (2012). Supply chain management: The
impact of supply network characteristics on reliability. An International Journal, 17(3), 1–36.
Christopher, M., & Peck, H. (2004). Building the resilient chain. International Journal of Logistics
Dyer, J. H. (1996). Specialized supplier networks as a source of competitive advantage: Evidence
from the auto industry. Strategic Management Journal, 17(4), 271–291.
Dust, R., Gleiser, M. & Gürtler, B. (2010). Total supplier risk monitoring. Lieferfähigkeit präventiv
absichern. MQ, Magazine for Quality and Management, 1–2, 27–29.
Emmett, St. & Crocker, B. (2009). Excellence in Supplier Management. How to better manage
contracts with suppliers and add value. Best practices in Supplier Relationship and Supplier
Development. Cambridge: Cambridge Academic.
Gürtler, B., & Spinler, S. (2010). A network-oriented investigation of supply risk and implications
to supply risk monitoring. International Journal of Production, 12, 1–27.
Helmold, M., Dathe, T., & Hummel, F. (2019). Erfolgreiche Verhandlungen – Best-in-Class
Empfehlungen für den Verhandlungsdurchbruch. Springer.
Helmold, M., Dathe, T., Hummel, F., Terry, B., & Pieper, J. (2020). Successful international nego-
tiations. A practical guide for managing transactions and deals (Management for profession-
als). Springer.
Hendricks, K. B., & Singhal, V. R. (2005). An empirical analysis of the effect of supply chain
disruptions on long-run stock price performance and equity risk of the firm. Production
Operations Management, 21(5), 501–522.
Hittle, B., & Leonard, K. M. (2011). Decision making in advance of a supply chain crisis.
Management Decision, 49(7), 1182–1193.
Hofbauer, G., et al. (2012). Lieferantenmanagement. Die wertorientierte Gestaltung der
Lieferbeziehung (2nd ed.). Oldenbourg Verlag.
Ohno, T. (1990). The Toyota production system. Beyond Large Scale Production. CNC Press.
New York.
Slack, N. et al. (1995). Operations management. London: Pitman Publishing.
Trkman, P., & McCormack, K. (2009). Supply chain risks in turbulent environments – A concep-
tual model for supply chain network risk. International Journal of Production Economics,
119(2), 247–258.
Zsidisin, G. A. (2003). Managerial perceptions of supply risk. Journal of Supply Chain
Quality Management on the Demand
Side 13
13.1 QM on the Demand Side
13.1.1 Introduction to Quality Management on the Demand Side
Quality means providing value to the customer, that is, offering conditions of prod-
uct use or service that meet or exceed customer’s expectations, yet are still afford-
able. Quality also takes into account the reduction of waste that a product may cause
to the environment or human society, yet still allowing the manufacturing company
to maintain customer satisfaction. Another interesting element within the concept of
quality is the “wow” effect. Quality delivers to the customer not only what he wants,
but also what he never imagined he wanted—and that once he has it, he realizes that
this product was exactly what he always had wanted. However, this is still a very
subjective judgment. In today’s world, companies are still struggling to be consis-
tent in meeting basic customer needs. Quality is the degree to which an object or
entity (e.g., process, product, or service) satisfies a specified set of attributes or
requirements. The quality of something can be determined by comparing a set of
inherent characteristics with a set of requirements. If those inherent characteristics
meet all requirements, high or excellent quality is achieved. If those characteristics
do not meet all requirements, a low or poor level of quality is achieved. Quality is
the degree to which a set of inherent characteristics fulfils requirements, a subjective
term for which each person or sector has its own definition. In technical usage, qual-
ity can have two meanings: In the end, quality is an outcome, a characteristic of a
good or service provided to a customer, and the hallmark of an organization which
has satisfied all of its stakeholders. Customer requirements are the core ideal behind
all quality definitions. Other factors related to quality are exact and desired amount
Progress is impossible without the ability to admit mistakes. Kaizen means ongoing improvement
involving everybody, without spending much money. You can't do kaizen just once or twice and
expect immediate results. You have to be in it for the long haul. (Masaaki Imai)

Switzerland AG 2023
156 13 Quality Management on the Demand Side
Demand Side
Customers
Providing Value to
Demand Side and Customers
Quality Cost
Input Transformaon Output
Delivery
+ alpha
Fig. 13.1 Customers expect value to be delivered. (Source: Author’s source)
of the product to be manufactured and offered, pace of product distribution, speed

of customer service, appropriate pricing in line with supply and demand pressures,
degree of accuracy with which a product is manufactured concerning its design,
ease of use and safety, reliability, impact the product has on the society and the
environment, etc. Figure 13.1 depicts that quality is related to value, which custom-
ers expect to be delivered from a company as part of the input-transformation-output
model. Quality elements are demanded and expected in line with the optimal cost
and on-time delivery. Additionally, customers have additional expectations (alpha)
in terms of friendliness, competencies of personnel, or sustainability.
13.1.2 Quality by Using Efficient Consumer Response (ECR)
ECR (efficient consumer response) is a strategy to increase the level of quality and
service to consumers through close cooperation among retailers, wholesalers, and
manufacturers. By aiming to improve the efficiency of a supply chain as a whole
beyond the wall of retailers, wholesalers, and manufacturers, they can consequently
gain larger profits than each of them pursuing their own business goals. Companies
who compose the supply chain can reduce the opportunity loss, inventory level, and
entire cost, as well as increase monetary profitability by sharing the purpose of
“customer satisfaction.” “ECR” is a strategic concept compiled by a consulting firm
“Kurt Simon Associates” at the request of organizations concerning the US pro-
cessed food distribution industry, aiming to recover the competitive strength for
surviving the turbulent time of the industry when discounters emerged in the United
States. For “ECR,” reengineering such as eliminating or adding business operations
is performed by checking all business operations of a supply chain of companies by
a criterion of whether they contribute to providing higher values to consumers. This
aims to provide better convenience, better products, better quality, and better selec-
tion of goods and build a “win-win” relationship among companies concerned (i.e.,
every company of a supply chain wins and gains profits). The first target of ECR is
13.1 QM on the Demand Side 157
to reengineer business processes. To realize the reengineering, information technol-

ogy such as EDI (electronic data interchange) that is used for accurate and timely
exchange of information between companies is necessary. Characteristics of ECR
are that reengineering is performed considering final results given to consumers
from unified business processes and that can be realized by information technology.
13.1.3 Vendor-Managed Inventory (VMI)
Vendor-managed inventory (VMI) is a concept and business model in which the

customer of a product range discloses information in terms of production planning,
forecasts, and demands to the suppliers (vendor) of those products in order to enable
the supplier to take full responsibility for maintaining an agreed inventory quantity
of the material, usually at the buyer’s warehouse. In many industries, the VMI is
managed for a number of suppliers. VMI will thus help suppliers to optimize mate-
rial and production in line with customer tact and to deliver material in sequence to
the assembly line on request.
13.1.4 Enterprise Resource Planning Integration (ERP)
Enterprise resource planning (ERP) is defined as the ability to deliver an integrated

suite of business applications. ERP tools share a common process and data model,
covering broad and deep operational end-to-end processes, such as those found in
finance, HR, distribution, manufacturing, service, and the supply chain.
13.1.5 Quick Response (QR)
Quick response manufacturing (QRM) is an approach to manufacturing which

emphasizes the beneficial effect of reducing internal and external lead times. Quick
response manufacturing (QRM) idea aims at permanent restructuring of manufac-
turing processes and continuous adjustment of actions to interior and exterior
changes. The quick response manufacturing concept is, in a way, a modification of
previous systems. Moreover, QRM is apparently directed to compress time in all the
action spheres and delivery chains of a company. Its implementation ensures not
only effective time management inside a company but also strengthens cooperation
between suppliers and recipients. Besides, it also ensures a flexible reaction to mar-
ket signals and improves competitiveness of a company in the long term. During the
last few years, many of the US companies have implemented the QRM strategy,
which has given astounding results (Suri & Krishnamurthy, 2003). The typical
results were shortening the lead time (80–95% both in the stages of production and
planning/administration), lowering product costs (15–50%), quality improvement
of delivery realization (40–98%), and better exploitation of materials and a decreased
number of corrections (80%). QRM has achieved these results owing to detailed
158 13 Quality Management on the Demand Side
management rules, production methods, analysis techniques, and tools. Additionally,

QRM takes an extra effort to shorten the time of launching the product into
the market.
13.2 Incoterms 2020
The International Chamber of Commerce (ICC) in Paris has been issuing

“International Rules for the Interpretation of Commercial Contract Formulas”
known as Incoterms (International Commercial Terms) since 1923. The Incoterms
rules have become an essential part of the daily language of international trade.
They have been incorporated in contracts for the sale of goods worldwide and pro-
vide rules and guidance to importers, exporters, lawyers, transporters, insurers, and
students of international trade. After the ICC’s creation in 1919, one of its first ini-
tiatives was to facilitate international trade activities. In the early 1920s, the world
business organization set out to understand the commercial trade terms used by
merchants. This was done through a study that was limited to six commonly used
terms in just 13 countries. The findings were published in 1923, highlighting dis-
parities in interpretation. To examine the discrepancies identified in the initial sur-
vey, a second study was carried out. This time, the scope was expanded to the
interpretation of trade terms used in more than 30 countries in 1928. Based on the
findings of the studies, the first version of the Incoterms rules was published as a
global standard. The terms included FAS, FOB, C&F, CIF, ex ship, and ex quay.
Due to World War II, supplementary revisions of the Incoterms rules were sus-
pended and did not resume again until the 1950s. The first revision of the Incoterms
rules was then issued in 1953. It debuted three new trade terms for non-maritime
transport. The new rules comprised DCP (delivered costs paid), FOR (free on rail),
and FOT (free on truck). The ICC launched the third revision of the Incoterms rules,
which dealt with misinterpretations of the previous version. Two trade terms were
added to address delivery at frontier (DAF) and delivery at destination (DDP). The
increased use of air transportation gave cause for another version of the popular
trade terms. This edition included the new term FOB airport (free on board airport).
This rule aimed to allay confusion around the term FOB (free on board) by signify-
ing the exact “vessel” used. With the expansion of carriage of goods in containers
and new documentation processes came the need for another revision. This edition
introduced the trade term FRC (free carrier named at point), which provided for
goods not actually received by the ship’s side but at a reception point on shore, such
as a container yard. The fifth revision simplified the free carrier term by deleting
rules for specific modes of transport (i.e., FOR, free on rail; FOT, free on truck; and
FOB airport, free on board airport). It was considered sufficient to use the general
term FCA (free carrier at named point) instead. Other provisions accounted for
increased use of electronic messages. The “License, Authorizations and Formalities”
section of FAS and DEQ Incoterms rules were modified to comply with the way
most customs authorities address the issues of exporter and importer of record. The
Incoterms 2020 is the most current edition of the rules to date. This version
Reference 159
Table 13.1 Incoterms 2020 Incoterm 2020 Description English/German

EXW Ex works/Ab Werk
FCA Free carrier/Frei Frachtführer
FAS Free alongside ship/Frei Längsseite
Schiff
FOB Free on board/Frei an Bord
CFR Cost and freight/Kosten und Fracht
CIF Cost, insurance, and freight/Kosten,
Versicherung und Fracht
CPT Carriage paid to/Frachtfrei
CIP Carriage, insurance paid to/Frachtfrei
versichert
DAP Delivered at place/Geliefert benannter
Ort
DAT Delivered at terminal/Geliefert
Terminal
DDP Delivered duty paid/Geliefert verzollt
Source: Author’s own table, adapted from Helmold and
Terry (2016)
consolidated the D-family of rules, removing DAF (delivered at frontier), DES

(delivered ex ship), DEQ (delivered ex quay), and DDU (delivered duty unpaid) and
adding DAT (delivered at terminal) and DAP (delivered at place). Other modifica-
tions included an increased obligation for buyer and seller to cooperate on informa-
tion sharing and changes to accommodate “string sales.” To keep pace with the
ever-evolving global trade landscape, the latest update to the trade terms is currently
in progress and is set to be unveiled in 2020. The Incoterms 2020 Drafting Group
includes lawyers, traders, and company representatives from around the world. The
overall process will take 2 years as practical input on what works and what could
possibly be improved will be collected from a range of Incoterms rules users world-
wide and studied (Table 13.1).
Reference
Suri R., & Krishnamurthy A. (2003). How to plan and implement POLCA: A material control
system for high-variety or custom-engineered products. Technical report. Center for the Quick
Response Manufacturing.
Leadership in Quality Management
14
The Toyota style is not to create results by working hard. It is a

system that says there is no limit to people’s creativity. People
don’t go to Toyota to “work” they go there to “think.”
(Taiichi Ohno (1912–1990))
14.1 Leadership in QM
Leadership is defined as the way of motivating and directing a group of people to

jointly work toward achieving common goals and objectives (Helmold & Samara,
2019; Fatma, 2015). The leader is the person in the group that possesses the combi-
nation of personality and leadership skills that makes others want to follow his or
her direction. Leadership implies formal and informal power distribution. The
Tannenbaum-Schmidt leadership continuum is a model showing the relationship
between the level of authority you use as a leader and the freedom this allows your
team (Tannenbaum & Schmidt, 2009). At one end of the continuum are managers
who simply tell their employees what to do. At the other end of the continuum are
managers who are completely hands off. As you move from one end of the contin-
uum to the other, the level of freedom you give your team will increase and your use
of authority will decrease. Most managers and leaders will lie somewhere in the
middle between these two extremes (Fig. 14.1). The leadership continuum was
developed by Robert Tannenbaum and Warren Schmidt in their 1958 Harvard
Business Revie (HBR) article: “How to Choose a Leadership Pattern.” Tannenbaum
was an organizational psychologist and professor at the UCLA Anderson School of
Management. Schmidt was also a psychologist who taught at the UCLA Anderson
School of Management. Most leadership models ring-fence a leadership style and
analyze it in isolation from other leadership styles. However, in practice, a single

Switzerland AG 2023
162 14 Leadership in Quality Management
Being Can NOT be demanded

passionate Employee Motivation
and Commitment
Using
Creativity
Taking Self-Initiative
Applying Intellect Can be demanded
Can be demanded
Working hard and dilligently
Listening and being obedient Can be demanded
Fig. 14.1 Leadership in lean management focuses on employee motivation and commitment.
leadership style is not appropriate for all situations. Sometimes you might want to
borrow elements of another leadership style to use with an individual within your
team. Other times you might completely change your style if the situation requires
it. Tannenbaum and Schmidt argued that there are certain questions to be considered
when selecting a leadership style (Fig. 14.2):
• What is your preferred style?

• What are your values?
• What is your relationship with your team?
• Are they ready and enthusiastic to take responsibility?
• How important is the work being undertaken?
• How important or tight are deadlines?
• What is the organizational culture?
Modern QM is targeting to have passionate and creative employees as part of the

quality management system (Helmold & Terry, 2021). This must be triggered by a
leadership styles, which motivates employees to take self-initiative. Empowerment
is a key element in QM.
14.1.1 Tells
The leader that tells is an authoritarian leader. They tell their team what to do and
expect them to do the work and job. This style is useful when you urgently need to
turn around a department or business and also in situations where deadlines are
14.1 Leadership in QM 163
Continuum of Leadership Styles

Leader centred Group centred
Leader group
Leader presents defines
collects problem, problem,
Tells Sells Decides Consults ideas and group group
decision desicion decision decides decides decides decides
QM
Leadership Principles
Fig. 14.2 Leadership styles. (Source: Author’s source (adapted from Tannenbaum &
Schmidt, 2009))
critical. However, this extreme style can be frustrating for experienced subordinates
as it takes no account of team members welfare. Because of this, make sure you
only use this style when the situation calls for it.
14.1.2 Sells
The leader that sells makes their decision and then explains the logic behind the
decision to their team. The leader is not looking for team input, but they are looking
to ensure the team understands the rationale behind the decision. A key aspect of
this approach is for the leader to explain how the decision will benefit the team. In
this way, the team will see the manager as recognizing their importance. Selling as
leader is not very motivational.
14.1.3 Suggests
The leader that suggests makes their decision, explains the logic behind the deci-
sion, and then asks team members if they have any questions. Through asking ques-
tions, the team can more fully understand the rationale behind the decision than the
previous approaches. The leader is not going to change their decision but they do
want the team to fully understand the rationale behind it.
14.1.4 Consults
The leader that consults presents their provisional decision to their team and invites
comments, suggestions, and opinions. This is the first point on the continuum where
the team’s opinion can influence or even change the decision. The leader is still in
control and the ultimate decision-maker, but open to any good ideas the team may
have. With this style, the team feels they can influence the decision-making process.
Once the leader has finished consulting with their team, their decision is finalized.
14.1.5 Joins
The leader who joins presents the problem to their team and then works with the
team in a collaborative manner to make the decision as to how the problem is going
to be solved. This point on the continuum differs from the previous four, as it is the
first point the leader is not presenting their decision. Instead, they are simply pre-
senting the problem to be solved. This obviously will require plenty of input from
the team, making this approach suitable when the team is very experienced or has
specialist knowledge. Because this style involves greater input and influence from
the team, it can lead to enhanced feelings of motivation and freedom. This is a step
toward empowerment and will lead to a higher motivation compared to the
other styles.
14.1.6 Delegates
The leader that delegates asks their team to make the decision, within limits that the
leader sets.
Although the team makes the decision, it is still the leader that is accountable for
the outcome of the decision. It might seem very risky to let your team make a deci-
sion even though you will be held accountable for the outcome. However, you can
limit the risk by specifying constraints.
You should use this style only with very experienced teams. This leadership tar-
gets the empowerment of team members and will lead to a higher motivation.
14.1.7 Abdicates
The leader who abdicates lets the team decide what problems to solve and how to
solve them.
14.2 Empowerment and Jidoka in Modern QM 165
Abdication is the total opposite of telling the team what to do using an autocratic
style. In this leadership style employees are empowered. The team leader acts as a
coach. Here the team must shape and identify the problem, as well as analyze all the
options available, before making a decision as to how to proceed. They will then
implement the course of action without necessarily even running it by the leader.
This style can be the most motivating but can be disastrous if it goes wrong. Because
of this, you should only use this approach with very experienced and senior people.
This style is often the way the executive boards of companies will run. Under the
CEO, each of the division heads will have complete autonomy as to how they choose
to execute the company’s strategy.
14.2 Empowerment and Jidoka in Modern QM
Modern QM is characterized by an open leadership style and empowerment of the

team members. A team is defined as a group of people with common goals. A work
or project team is a group of persons who are grouped according to process and/or
geographical location who support each other. In the lean concept it is important to
empower teams as shown in Fig. 14.3. Whereas the conventional approach focuses
on top-down decisions, the empowerment-focused approach utilizes the creativity
and inputs from the team. Ideas are generated and collected from the team members,
which independently decide which options to implement. The basis of this concept
is that empowerment will promote ideas, creativity, and innovations from all team
Conventional approach A partnership based approach of implementing an improvement

is the suitable long-term solution
Develop Decide
internally internally Announce Defend
Empowerment focused approach
Development based
Collect Decide Implement
on teamwork
Fig. 14.3 Empowerment-focused versus conventional approach. (Source: Author’s source)

or project members. Employee empowerment creates organizational and cultural

changes starting with a top management who is willing to trust employees with
decisions regarding their work. When it comes to production, many modern compa-
nies still operate as they did in the early twentieth century, where the production
employees are merely the workers.
Modern leadership concepts of empowerment and stopping production to fix a
problem found in production are called “jidoka,” which means “getting it right the
first time” rather than passing it on to the customer (next workstation). Jidoka is a
prime example of the lean philosophy of “quality at the source” which emphasizes
that every production worker (and supplier) is responsible and empowered for pro-
viding quality material to their customer.
14.3 Autonomous Work Groups
Similar to an individual with autonomy at work, an autonomous work group is a

team of employees granted autonomy or independence over the work they do within
an organization.
14.4 Job Rotation
Job rotation is a management approach where employees are shifted between two or
more assignments or jobs at regular intervals of time in order to expose them to all
verticals of an organization. The process serves the purpose of both the management
and the employees. Advantages and disadvantages of job rotation are as follows:
Advantages of job rotation

• Reduces the monotony of work
• Broadens one’s knowledge and skills
• Helps the management to explore the hidden talent of an individual
• Helps an individual to realize his or her own interest
• Helps in creating the right employee job fit
• Developing a wider range of experience
Disadvantages of job rotation

• Reduces uniformity of work
• Fear of performing another task effectively
• Frequent interruptions in the work
• Misunderstanding between the team members or union
• Difficulty in coping with other team members
• Fear of getting more tedious or a hectic work
References 167
More tasks which

give increased
responsibility,
autonomy and Job
decision-making; Enrichment
qualitative increase
Job
Original Tasks
Enlargement
More tasks of same

type; quantitative
increase
Fig. 14.4 Job enlargement and job enrichment. (Source: Author’s source)
The job rotation is beneficial for both the employer and the employee. The
employer can identify the vertical where the employee is giving his or her best and
can also place him or her in the position of a person who has left because of the
retirement, transfer, termination, or any other reason.
14.5 Job Enlargement and Job Enrichment
Job enlargement (Fig. 14.4) is an increase in job tasks and responsibilities to make
a position more challenging. It is a horizontal expansion, which means that the tasks
added are at the same level as those in the current position. The job enrichment is
the job design technique used to increase the satisfaction among the employees by
delegating higher authority and responsibility to them and thereby enabling them to
use their abilities to the fullest. Job enrichment will affect more the motivation, as
the quality of work will be enriched to the employee.
References
Fatma, P. (2015). The effect of organizational culture on implementing and sustaining lean pro-
cesses. Journal of Manufacturing Technology Management, 26(5), 725–743.
Helmold, M., & Samara, W. (2019). Progress in performance management. Industry insights and
case studies on principles, application tools, and practice (Management for professionals).
Springer.
Tannenbaum, R., & Schmidt, W. H. (2009). How to choose a leadership pattern (Harvard business
review classics). Harvard Business Press.
Transformation and Change
Management in QM 15
The measure of intelligence is the ability to change.

(Albert Einstein)
15.1 Transformation and Change Management
The permanent change and transformation of organizations is an important element

in order to adapt to the environment. Change management can be defined as the sum
of tasks, measures, and activities that are intended to bring about a comprehensive,
cross-departmental, and far-reaching change in an enterprise or organization.
Change management includes the implementation of new a mission, vision, strate-
gies, structures, systems, processes, and behaviors in an organization. The ultimate
goal of change is to obtain a long-term favorable position in the market and to gain
a sustainable competitive advantage (Helmold, 2021). Synonyms for change man-
agement found in literature are business process reengineering, turnaround manage-
ment, transformation management, lean management, innovation management, or
total quality management (Vahs, 2019). Change is increasingly determining the
everyday businesses and activities of companies. In order to manage change in the
most optimal way, special change management techniques are required, which can
be summarized under the term change management (Lauer, 2019, 2020). The human
factor is at the forefront of all considerations, because the implementation of change
depends on the active support of employees. Since everyone has their own needs,
ideas, and experiences, some of which do not conform to the official company orga-
nization, there can be no simple recipe for how to successfully manage change.
Rather, it is a complex process that has to start at three points: the organization and

Switzerland AG 2023
170 15 Transformation and Change Management in QM
Strategy Culture
Mission, Vision, Corporate and Values, Behaviour,
Divisional Objectives Communication, Collaboration
Change
Management
Triggers in QM
Organisation Technology
Leadership, Structures, Systems, Methods, Routines,
Processes Instruments
Fig. 15.1 Elements of change management. (Source: Author’s source)
individuals concerned, the corporate structures, and the corporate culture (Lauer,
2019). Another important element in the context is the technological factor includ-
ing systems, routines, methods, and instruments (Helmold, 2021). Figure 15.1 sum-
marizes the elements of change management (Helmold & Terry, 2021).
15.2 Internal and External Reasons for Change Management
The need for corporate change can be caused both externally and internally.
Externally, companies face an increasingly dynamic environment that requires con-
stant adjustment of their own structures if they want to be successful in sales and
also in the preceding procurement markets. The external change is caused by the
market environment, politics, technology, ecology, the overall economy or institu-
tions, and the markets themselves, for example, by increasing competition. To
explain internal change, the metaphor of human development is used, which—like
corporate development—is characterized by a succession of growth, crisis, and
higher maturity. There are so-called life cycle models for entrepreneurial change
that exemplify the typical development phases. Change is often necessary, however,
because companies are successful in exaggerating the offensive spirit of their efforts.
Here too, the connection to the human psyche is established and this phenomenon
is analogously referred to as “burnout.” Figure 15.2 outlines triggers for change
from outside (exogenous triggers) and inside of the organization (endogenous trig-
gers). Exogenous triggers can be described as governmental requirements, new
laws, regulations, economic impacts, competitive reasons, market developments,
innovations, or the advice from consultants. Endogenous triggers are caused by
internal stakeholders, such as managers, employees, shareholders, banks, investors,
or customers.
15.3 Kotter’s Change Management Model 171
Fig. 15.2 Triggers for

Exogeneous Triggers for Endogeneous Triggers
change. (Source: Author’s Change in QM for Change in QM
source)
• Governmental Reasons • Management
• Laws and Regulations • Employees
• Economic Impacts • Banks and Investors
• Competition • Suppliers
• Market Developments • Customers
• Innovations • Other Stakeholders
• Trends • Production and Service
• Consultants Requirements
15.3 Kotter’s Change Management Model
Kotter analyzed that 70% of all change projects fail, most of them in the initial
phase. This is the research result of John P. Kotter, an expert in the field of change
management. Two factors are responsible for the low success rate: Not the technol-
ogy, but the human being is the greatest obstacle to change. Based on this knowl-
edge, Kotter developed the 8-step model in 1996. The theory shows eight phases of
change management and gives managers tips on how to successfully drive change.
The focus of the model is communication from person to person (Helmold &
Samara, 2019). The 8-step model by John P. Kotter is a further development of the
popular 3-phase model by Kurt Lewin. According to the theory, changes in compa-
nies can only be successful if they go through all eight stages of change and are
intensively accompanied by managers (Kotter, 2012). The eight steps are outlined in
Fig. 15.3.
1. Show Urgency
Raise awareness of the urgency of change among both managers and employees.
For example, develop scenarios that could occur if there is no change. Discuss with
your managers and employees and make strong arguments.
2. Build Leadership Coalition
Build a good leadership team by getting trendsetting people for your idea and
bringing them together under the flag of change. Make sure you have a good mix of
people from different departments and with different skills.
3. Develop Mission, Vision, and Strategy
Wrap up a strong vision and concrete strategies with which you want to achieve
the goal. Communicate this in a well-prepared and strong speech. An overarching
goal for the company helps to implement change.
1. Feeling and Situation of Urgency
2. Transformational Leadership Coalition
22. Mission, Vision and Strategic Objectives
4. Communication of Mission, Vision and Goals
5. Clearing of Obstacles and Roadblocks
6. Establishment of short-term Objectives and Success
7. Consolidation of short- & long-term Objectives
8. Integration of Change into Corporate Culture
Fig. 15.3 Change management model by Kotter. (Author’s source)
4. Communicate the Mission, Vision, and Strategies
Constant drip hollows the stone: Do not be afraid to communicate the vision to
the managers and employees again and again. This creates trust and increases
motivation.
5. Clear Obstacles
Are there structures in your company that slow down change? Take a close look
at the status quo and get rid of unfavorable organizational structures, work pro-
cesses, and routines.
6. Make Short-Term Successes Visible
Do not set goals that are too time-consuming and costly to begin with, but also
define intermediate goals that can be reached quickly. Employees who achieve these
goals should be rewarded.
7. Continue Driving Change
After each goal is achieved, analyze what went well and what could have gone
better. Always develop new ideas and goals and bring new employees to your man-
agement team.
15.4 ADKAR Change Management 173
8. Anchoring Changes in the Corporate Culture
Anchor the achieved goals firmly in your corporate culture. Only after this has
been achieved can Kotter speak of a successful change management process
(Helmold & Terry, 2016).
Since Kotter’s 8-phase model gives specific instructions for successful change
management, it can serve you well in practice. Critics complain that Kotter’s model
does not explain how to act in the event of setbacks and that initiatives by employees
or so-called “bottom-up” perspectives are ignored. However, like no other change
management model, it shows the importance of good communication for sustain-
able change (Kotter, 2012).
15.4 ADKAR Change Management
The ADKAR change management model was created by Jeffery Hiatt in 1996. The
change management concept is a bottom-up method which focuses on the individu-
als behind the change. It is less of a sequential method and more of a set of goals to
reach, with each goal making up a letter of the acronym. By focusing on achieving
the following five goals, the ADKAR model can be used to effectively plan out
change on both an individual and organizational level:
• Awareness (of the need to change)

• Desire (to participate and support the change)
• Knowledge (on how to change)
• Ability (to implement required skills and behaviors)
• Reinforcement (to sustain the change)
Hiatt sees the change of the individual as the basis for sustainable corporate suc-
cess. The transformation of an entire company can only succeed through individual
changes. Thus, the transformation can be understood as the sum of many small
changes. A change is only successful when employees adopt new tools, techniques,
and processes, fully implement them, and maintain them in the long term. Then the
ROI, the “return on investment,” can also be clearly displayed. When enterprises
and its managers drive individual changes, the organization will also master organi-
zational changes.
There is no need for complex, time-consuming methods, which are actually a
science in themselves! As a change manager and change agent, companies need an
easy-to-understand, simple, and comprehensive tool or method with which they can
quickly identify gaps and barriers in the change process of the respective employee.
Only then management will be able to lead and guide the employees through the
change in a targeted manner.
Strategy
Skills Structure
Subordinate
Goals
Shared
Values
Style Systems
Staff
References
Helmold, M., & Samara, W. (2019). Progress in performance management. In Industry insights
and case studies on principles, application tools, and practice. Springer.
Helmold, M., & Terry, B. (2016). Global sourcing and supply management excellence in China
(Procurement guide for supply experts). Springer.
Kotter, J.P. (2012). Leading change. Harvard Business Review: Harvard.
Lauer, T. (2019). Change management: Grundlagen und erfolgsfaktoren. Springer Wiesbaden.
Lauer, T. (2020). Change management: Fundamentals and success factors (English Edition).
Springer Cham.
Vahs, D. (2019). Organisation: Ein Lehr- und Managementbuch. Schaeffer Poeschel München.
Environmental, Social, and (Corporate)
Governance (ESG) as Part of Quality 16
Management
I believe social responsibility begins with a strong, competitive

company. Only a healthy enterprise can improve and enrich the
lives of people and their communities.
(Jack Welch)
16.1 Definition of ESG
With this understanding for climate change and carbon-free industry needs, green
thinking, ESG is becoming a mainstream corporate initiative to save and maintain
our resources. ESG is the abbreviation of environmental social governance and is
seen as part of a further wording and familiar description of corporate social respon-
sibility to evaluate one’s company’s social responsibility (Euramco, 2021). It is seen
as voluntary efforts of corporate companies and not driven by country’s law or
global regulations. Further, it is a part of the CSR setup for sustainability and eco-
logical behaviors in connection with corporate values, etiquettes, and investment
decisions (Euramco, 2021). An important baseline of the overall ESG discussion is
the kind of products, what the respected company is offering to their customers, and
how those products are manufactured in regard to climate and environmental pro-
tection; especially the carbon footprint is more and more a critical element in cor-
porate evaluations. Many corporate companies and nonprofit organizations are
targeting CO2-neutral operations in the next decade or even until 2030 with the
reduction of plastic components; green efficient electricity like wind, water, or solar
energy supply; and sol heating. Also, e-mobility like electric cars, using shared pub-
lic transportation and avoiding petrol-based cars and kerosine-based planes, are part

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176 16 Environmental, Social, and (Corporate) Governance (ESG) as Part of Quality…
of this development of demonstrating ESG. Further items are to be considered are

as follows:
• Environment management with renewable energy

• Environment regulation for manufacturing and services
• Criteria for human capital
• Product regulation and responsibility
• Equal payment and tariff payment
• Antidiscrimination efforts
• Diversity and inclusion
• Managing fluctuation of employees (Euramco, 2021)
Those aspects shall provide an understanding of the quality of corporate social

responsibility of the companies and how those companies are executing and living
its voluntary standards (Euramco, 2021). To underline this, the United Nations
Principles for Responsible Investing standard was established, to be signed by com-
panies to enforce their commitment of working against corruption, bribery, and
money laundering (Euramco, 2021).
16.2 UN Initiative: Who Cares Wins
The storyline of environmental social governance (ESG) was initiated by former

UN Secretary Kofi Annan who started the reform of the United Nation in 2003 and
wrote a letter at the beginning of the year 2004 to more than 50 executives to join
forces to enhance the ESG topic and raise an understanding for protecting our planet
by incorporating corporate financials. As a first result of Kofi Annan’s initiative, a
paper entitled “Who Cares Wins” by Ivo Knoepfel was published.
The report “Who Cares Wins” is connecting markets especially financial markets
to a changing world, environment behaviors, and committed recommendation by
the corporate financial industry like banks, investment trusts, and insurance compa-
nies. The overall frame is the recommendation for the specific integration of envi-
ronmental, social, and governance aspects in asset management strategies and
brokerage investments.
Therefore, ESG is also today mainly driven by investment companies like
Blackrock, MSCI, and Standard and Poor’s and less by regulators and single states,
governments, or political organizations. Moreover, CEOs and board of directors see
ESG standards and ratings as a crucial item to satisfy investor and maintain the
stock price of its company. Therefore, more and more companies are driving to
reshape their business to environmentally friendlier outcomes to satisfy customers
and stakeholders also driven by social media pressure and finally its shareholder.
However, the main goal is to be a preferred investment by ETF and indices like Dow
Jones, MSCI, DAX 50 ESG, etc. with ESG are becoming more and more prominent
as a soft standard in the future in comparison to looking only on market share and
market capitalization.
16.2 UN Initiative: Who Cares Wins 177
The commitment for “Who Cares Wins” was given by the following companies:
• ABN Amro
• Aviva
• AXA Group
• Banco do Brasil
• Bank Sarasin
• BNP Paribas
• Calvert Group
• CNP Assurances
• Credit Suisse Group
• Deutsche Bank
• Goldman Sachs
• Henderson Global Investors
• HSBC
• IFC
• Innovest
• ISIS Asset Management
• KLP Insurance
• Mitsui Sumitomo Insurance
• Morgan Stanley
• RCM (a member of Allianz Dresdner Asset Management)
• UBS
• Westpac
• World Bank Group
The list of committed companies indicates a rich diversity of different regions

who intend to drive ESG forward as a new standard.
The initiative is supported by 20 monetary companies from nine different coun-
tries with total assets of US$ 6 trillion under their responsibility. A look closer,
Swiss banks like UBS and Credit Swiss are part as well as the US-based Morgan
Stanley and Goldman Sachs. A special aspect is that Lehman Brothers and Merrill
Lynch as well as Bear Stearns, all known as the investment banks who were mas-
sively struggling in the financial crisis in 2008, have not signed and worked on those
initiative to invent ESG as such. As we all know Lehmann Brother filed for bank-
ruptcy, Merrill Lynch was acquired by the Bank of America, and Bear Sterns was
bailed out by the US Federal Reserve FED and sold to JPMorgan Chase. Therefore,
it is interesting that those three financial long-term and up to the 2008 financial
crisis well-financed institutions were not considered be part of Kofi Annan’s initia-
tive of environmental social governance (ESG) and failed in the end to manage their
company’s overall quality approach to be successful in line with the risk manage-
ment of their investments. It is unclear and not investigated, if the three companies
would have joined the ESG discussion at the beginning to allow them to think about
new and enhancing ESG and risk standards and not betting against the American
Housing market, American homeowners, and finally the American economy as

described in the book and movie “The Big Short”.
In retrospect, today ESG is popular for new and old investment companies like
Blackrock and Vanguard which are dominating the exchange-traded fund invest-
ments but also did not sign the UN initiative from 2004. Nowadays, they are offer-
ing a range of ESG financial investments in this area as well as MSCI and Standard
& Poor’s and using ESG as a positive channel to support worldwide green initiatives
in combination with their share-selecting strategy. Blackrock uses its new ESG
strategy more and more actively and did not discharge around 53 supervisory boards
and supervisory board members in 2020 of many international companies, e.g.:
• Daimler
• Lufthansa
• Uniper
• Heidelberger Zement
• Exxon
• Volvo
This is part of Blackrock CEO Larry Fink’s strategy announcement in January

2020 to consider environment, social, and good governance aspects more frequently
and understand it as a risk mitigation tool since the understanding is that climate
risk is also an investment risk in the form of less divided payments or less share
price increasing with no or limited ESG consideration by the public-traded compa-
nies. This was also the intention of the 20 companies who initiated the ESG together
with the UN to reduce investment risks and enhance shareholder value in focusing
on risk mitigation, e.g., brand reputation, supporting regulations, and driving market
access in new areas and technologies within their overall ESG investment strategies.
The understanding of big money in brand reputation is one of the key success fac-
tors along the value chain in a globalized and Internet-connected world, especially
today with fast on-demand social media updates via Twitter, Facebook, and YouTube
where negative publicity like shitstorm is more frequent, faster, and intensive in
brand damaging and destroying customer loyalty (see Fig. 16.1).
In the end, the 2004 ESG proposal consists of nine elements for more superior
investment decision and sustainability in terms of society questions:
• Analysts
Employees are requested to think more often about environmental social gover-
nance chances, influence, and trends and to incorporate the learnings in their
daily operational work. Next, there should be passion to gain knowledge and
develop working models for ESG to further strengthen the algorithm of invest-
ment decisions. For the assets’ class of emerging markets, for which it is more
difficult to develop ESG, figures shall be part of the research to support invest-
ment decision on the entire global supply chain. Subsequently, usually manufac-
turing is part of the journey of developing countries coming from a developed
country which is seen in the history of the industrialization in Europe and in new
Environment
Social Companies´s ESG

Policy
Customer Satisfaction and
Brand Awareness
Governance
Fig. 16.1 ESG and brand reputation connection
developing countries today as well: Environmental focus and social aspects like
labor security and green energy are to be considered and developed right from
the beginning. To develop the ESG benchmark, also academic linkage is to be
enhanced as well as the connection between industrial and academic research.
For investment analysts, the portfolio theory for investment classes is an essen-
tial part of their daily operational work in compilation of a risk-based approach
to ensure the right decision-making at the right time. Those fields are now being
supported by ESG.
• Companies
In corporate organizations, ESG shall be driven by information. To build, to
research, to understand, to process, and to distribute information about environ-
mental social corporate governance are the key responsibilities of companies.
Especially in quarterly reports, annual reports, and shareholder or stakeholder
communication, progress but also areas of improvement need to be communi-
cated to establish the critical thinking and critical mass for ESG. Those commu-
nication needs to be simple and standardized to have an opportunity to see
differences in the ESG implementation and progress in the different firms for
investors.
• Consultants and independent financial adviser
To be focused on answering question related to ESG and providing industry
feedback from an outside view related supporting the global ESG initiative.
Further, to act as a change agent to navigate and more often moderate the change
in corporate organization to help executive to receive the overall company ESG
goals. The big four consulting companies might be a starting point nowadays,
e.g., PwC, Deloitte, Ernst & Young, and KPMG, whereby those companies are
more known as the Big 4 accounting firms but also offering support for consult-
ing, as financial advisers particular for M&A are seen in banks like Goldman and
JP Morgan, which have signed Kofi Annan’s ESG ideas.
• Financial institutions
Institutions are committed to invest in structures and talents to support environ-
mental social corporate governance pioneering in investment and research
aspects. Further, building up the capacity of the people and department is a cru-
cial step into a change management process today and in the future. As an essen-
tial factor, it is seen that executives, senior management, and board of directors
are committing to the ESG launch and driving it with their leadership skills for-
ward. Finally, learning as an organization is one of the elements of this cultural
and social change.
• Investors
To invest in ESG key performance indicators (KPIs) and key quality indicators
(KQIs) to measure success, failure, and trends of the respected ESG strategy by
the invested companies is the task of brokers and asset managers to support the
overall environmental and social change in the investment branch. It is important
to recognize well-positioned companies which are role models for ESG. The
ESG KPI as a working model based on academic and industry research is to be
customized to provide service to investors and help them to execute and defend
their investment decision.
• Nonprofit organization (NGO)
As all other market participants, also NGOs are invited to accelerate and promote
the ESG model, which is from today’s experiences well-managed and visible in
the ecosystem of most of the stock-listed companies. They are focusing on CSR
or ESG aspects and monitoring progress within its own company, by analyzing
competitors and within its branch.
• Pension funds and pension trusts
Being a trustee means to ensure and establish decision-making models and risk-
based approaches regarding its own common tasks and to the commitment to its
clients and customers to invest their money safely. In this asset class, the ESG
criteria need to be established to support environmental and social investment
standards in the role as fiduciary.
• Regulators
Global governments and related institutions, e.g., Central Banks like the US
Federal Reserve or the European Central Bank or the Bank of England, regulate
the financial system and are requested to support the voluntary ESG approach
which are driven by banks, corporate financial institution, analysts, and brokers.
As a voluntary approach, regulators look initially into the approach and come up
with a draft guideline or regulation later. With ESG, it is intended to be voluntary,
but a minimum environment and social insight are also welcomed by the regula-
tors for this UN proposal.
• Stock exchanges
Stock exchanges are places to trade stocks, e.g., New York Stock Exchange
(NYSE), Nasdaq, and Euronext. Further, those institutions create more well-
known indices, for example, Wall Street icon Dow Jones and S&P 500or German
DAX or Shanghai composite and others. In the ESG aspect, the companies are
invited to issue ESG indices like DAX 50 ESG. The start was of course by
actively communicating ESG behaviors of their listed company and work with
rating agencies like Standard & Poor’s, Moddy’s, and Fitch which are also well
known as the Big Three in the rating world to include not just financial figures
Fig. 16.2 Nine proposed

elements of collaboration ESG
making ESG successful
Consultants & Financial
Companies
Analysts Advisers
Financial
Investors NGOs
Institutions
Pension Funds Stock

Regulators
and trust Exchange
but more often also ESG aspects into their rating KPIs. MSCI is also playing an
important role with its MSCI indices, e.g., MSCI World or ESG derivates
nowadays.
The nine elements are the key aspects of the “Who Cares Wins” report (Fig. 16.2).
To sum up, the voluntary initiative is well recognized in the world and more and
more companies use ESG as a standard to convince investors on an investment in
their own company. However, the drive comes after the 2008 financial crisis since
social aspects are coming more imported at least on the short term and long term
due to more and more influence of ETF index funds. Those ESG aspects were from
a traditional point of view not part of the investment decision-making process.
Nowadays, the focus is on the following:
• Climate change management

• Company culture policy
• Diversity and inclusion
• Labor work condition
• Health management
• Innovation performance
• Safety and security management
• Supply chain management
• Water management
In 2008, the ESG investment is estimated with US$ 20 trillion in the world and
is further increasing since pressure by banks and investment firms is enhancing. In
retrospect, share price evolution was higher with strong ESG focus instead of low
ESG engagement by the stock exchange-listed companies. Companies on the short-
list with negative ESG terms are as follows:
• Alcohol
• Firearms
• Tobacco firms
In addition, coal-mining companies, nuclear energy firms, long-haul and point-

to-point airline carriers, and traditional car makers might be considered with a nega-
tive ESG rating for investments. Well, the point is that in developed countries, ESG
standards can be easily adapted. However, the old pollution-based industry is fur-
ther part of our global supply chain and a certain level of manufacturing processes
is always needed. The alternative to outsource everything or using only recycled
materials cannot be the only way of our solution for the moment. The question is
how fast can the worldwide production process be adapted to a clean manufacturing
process and which technologies are needed? Moreover, developing countries need
to have access to ESG as well like low-cost manufacturing countries; otherwise, it
is just greenwashing of the developed countries’ stock-listed companies and not a
change of our blue planet.
With the new ESG rating standards, additional new jobs are arriving and gener-
ated like ESG analysts or ESG training specialists. Such ESG talents are highly
requested as well as ESG certificates or masterclasses.
16.3 Standards and Regulations in ESG
In Europe and the United States, the regulation is increasing on the topic of CSR
and ESG. The EU has intensified its ESG Non-Financial Reporting Directive
(Directive 2014/95/EU), and the US Securities and Exchange Commission (SEC) is
thinking of enhancing its ESG aspects on financial reporting soon (Gupta,
Understanding and Adopting ESG – An Overview [Part II: ESG Reporting as a
Genesis of Fiduciary & Other Legal Obligations], 2021).
The International Organization for Standardization (ISO) based in Geneva issued
several ISO standards regarding ESG (ISO, 2021; Connexis, 2018):
• ISO 14001:2015 Environmental management systems: Requirements with guid-

ance for use
• ISO 50001:2018 Energy management systems: Requirements with guid-
ance for use
• ISO 45001:2018 Occupational health and safety management systems:
Requirements with guidance for use
• ISO 26000:2010 Guidance on social responsibility
• ISO 22000:2018 Food safety management systems: Requirements for any orga-
nization in the food chain
• ISO 37001:2016 Anti-bribery management systems: Requirements with guid-
ance for use
• ISO 9001:2015 Quality management systems: Requirements
• ISO 19600:2014 Compliance management systems: Guidelines
• ISO/IEC 27001:2013 Information technology–Security techniques–Information
security management systems: Requirements
• ISO 56002:2019 Innovation management–Innovation management system:
Guidance
16.3 Standards and Regulations in ESG 183
• ISO/TC 322 Sustainable finance

• ISO 14007:2019 Environmental management: Guidelines for determining envi-
ronmental costs and benefits
• ISO 14008:2019 Monetary valuation of environmental impacts and related envi-
ronmental aspects
• ISO 14030-1 Environmental performance evaluation: Green debt instruments—
Part 1, Process for green bonds
Part 2, Process for green loans
Part 4, Verification program requirements
• ISO 14097:2021 Greenhouse gas management and related activities: Framework
including principles and requirements for assessing and reporting investments
and financing activities related to climate change
• ISO 37000 Governance of organizations: Guidance
• ISO 45000 Family Occupational Health and Safety (ISO, 2021, Connexis, 2018)
With the increasing number of ISO standards for ESG activities, the numbers of
different non-ISO certificates might be increasing as well. Therefore, to establish an
overall ISO certification for ESG in the future like ISO 9001:2015 for quality man-
agement systems or ISO 13485:2016 for quality management systems regarding
medical devices, where a certification by a notified body is being issued, would be
beneficial for the entire industry to follow the same approach as the other ISO cer-
tificates examples have proven. A notified body, e.g., BSI or TÜV Süd or TÜV
Rhineland, is needed for such a certification as a partner of choice for the manufac-
turing and service industry as well as for EU regulators.
On the other side for the US regulators, such concept is supported but is not part
of their quality management system. Thus, a common US solution, a dual approach,
or a global-like solution like Basel III is a way that global banking regulations were
endorsed by G20 countries and is proven as a useful approach.
With many different ISO standards listed, there is a better granularity for each
single ESG aspect possible to underline the different environmental, social, and
governance functions (see Proposed linkage to ESG ISO standards for each single
item: Social, Environmental and Governance, *in grouped as social item (ISO,
2021; Connexis, 2018) (Fig. 16.3).
The grouping of the different ISO standards was conducted after an initial assess-
ment and needs to be understood as a proposal and contribution to the ongoing
discussion in corporate and scientific communities about ESG standardization and
potential certifications (Dathe et al., 2022; Helmold et al. 2020).
ISO as a global organization started to discuss a new standard ISO/TC 322 on
sustainable finance to connect environmental and social aspects together for the
corporate financial market in 2020 (ISO, 2021). The aim is to understand the local
national regulations and develop one standard for the whole market. Further, the
overall UN ESG initiative is supported and is a reaction of the 2019 World Economic
Fig. 16.3 Norms and regulations in ESG. Proposed linkage to ESG ISO standards for each single
item: social, environmental, and governance (ISO, 2021)
Forum Sustainable Development Impact Summit in New York to foster a higher

implementation pace of a more sustainable finance world (ISO, 2021).
The elements are as follows (ISO, 2021):
• Develop global sustainable ESG terminologies, principles, and standards for the
financial markets including banks, investors, and insurance companies.
• Reduce confusion and unnecessary efforts of market participants on ESG aspects
as well as preventing greenwashing or sustainability washing.
• Facilitate role for developing innovation regarding ESG sustainable products
within the financial market.
• Support standards for third-party evaluation for sustainable financial products
and global supply chain.
• Define standard KPIs for ESG performance to be measurable by market partici-
pants on financial products (ISO, 2021).
The overall approach of ISO/TC 322 is supporting the initial idea of the United
Nations to roll out the ESG benchmarking from the stock exchanges to the listed
companies’ included investors and bank and finally convince all companies to be
part of the ESG journey to supporting sustainable product and services for us and
planet earth.
References 185
The need of guidelines from independent organizations was seen in the DWS
case—the investment arm of the Deutsche Bank—with its former employee Desiree
Fixler and discussed in the Wallstreet Journal (Frühhauf, 2021; Finanzen.net, 2021;
Die Zeit, 2021). The case was a discussion about ESG approaches and ESG invest-
ment figures in DWS financial documentation ((Frühhauf, 2021; Finanzen.net,
2021; Die Zeit, 2021). The discussion also proved the ongoing uncertainty and the
need of reliable KPI figures for ESG investments. Especially the reputation of such
investment companies can be damaged like the 14% drop of DWS shares price at
the end of August 2021 (Frühhauf, 2021; Finanzen.net, 2021; Die Zeit, 2021).
Therefore, ESG is being understood as a risk management tool to support the
value of a company and its performance, but currently, ESG is still a risk itself since
the standards from regulations are not clear enough. However, on a long-term goal
and strategy, ESG-focused companies will be more successful (Cini & Ricci, 2018).
References
Cini, A. C., & Ricci, C. (2018). CSR as a driver where ESG performance will ultimately matter,
Symphonya. Emerging Issues in Management (symphonya.unimib.it), pp. 1, 68–75.
Connexis. (2018). ISO: ESG standards & development. Swiss. Retrieved from http://www.con-
nexis.ch/files/product_sheet_iso_esg_standards.pdf
Dathe, T., et al. (2022). Corporate social responsibility (CSR), sustainability and environmental
social governance (ESG) (Approaches to ethical management). Springer.
Die Zeit. (2021). US-Börsenaufsicht ermittelt wegen Greenwashings gegen DWS. Retrieved from
https://www.zeit.de/wirtschaft/unternehmen/2021-08/deutsche-bank-tocher-dws-url-dws-
fondsanbieter-deutsche-bank-tochter-us-boersenaufsicht-ermittlungen-nachhaltigkeitsa
Euramco. (2021). Euramco asset management glossar / wissensdatenbank. Retrieved from https://
www.euramco-asset.de/glossar/environmental-social-governance-esg/
Finanzen.net. (2021). DWS-Aktie mit Kursrutsch: US-Börsenaufsicht untersucht wohl
Nachhaltigkeitsangaben der Deutsche Bank-Tochter. Retrieved from https://www.finanzen.
net/nachricht/aktien/beschoenigte-angaben-dws-aktie-mit-kursrutsch-us-boersenaufsicht-
untersucht-wohl
Frühhauf, M. (2021). DWS weist Vorwürfe entschieden zurück. Frankfurter Allgemeine Zeitung.
Retrieved from https://www.faz.net/aktuell/finanzen/dws-weist-vorwuerfe-entschieden-
zurueck-17505019.html
Helmold, M., Dathe, R., Dathe, T., Groß, D.-P., & Hummel, F. (2020). Corporate Social
Responsibility im internationalen Kontext: Wettbewerbsvorteile durch nachhaltige
Wertschöpfung. Springer Gabler.
ISO. (2021). International Organization for Standardization. International Standards. Retrieved
from https://www.iso.org/home.html
Negotiations in QM
17
Simplicity is the ultimate Sophistication.

(Leonardo da Vinci)
17.1 Negotiations in QM
17.1.1 Negotiation Competencies and Skills in QM
QM activities involve negotiations with several stakeholders across the value chain.
QM responsible employees face negotiations with internal colleagues, customers, sup-
pliers, or stakeholders in the value chain (Helmold & Terry, 2020). Therefore, it is
necessary that employees receive negotiation training as part of the required compe-
tency profile. Negotiations in QM consist of negotiations and agreements of quality
plans, quality criteria, control plans, deadlines, and many other aspects. There are many
negotiation concepts on the market, whereby the sequence of negotiations is identical.
Successful negotiations must start with a profound and detailed preparation and will
always terminate with the agreement and contractual terms (Helmold et al., 2020).
17.1.2 The A-6 Negotiation Concept for Successful Negotiations
A suitable and ideal negotiation concept is the A-6 negotiation concept. This con-
cept is novel, intercultural, innovative, and logical and has already been success-
fully implemented in various projects (Helmold & Samara, 2019). The practical and
easy-to-use concept comprises six phases from A-1 to A-6, which must be taken
into account in each transaction in order to achieve optimal success (Helmold et al.,
2019). The A-6 concept is a structural concept and contains of six steps. Figure 17.1

Switzerland AG 2023
188 17 Negotiations in QM
Negotiations in QM
QM Control Plans QM Agreements QM Deadlines
A-6 Negotiation Concept

A-1: Analysis of Negotiation Scope and Negotiation Partners
A-2: Alignment of Negotiation Strategies and Tactics
A-3: Aggregation and Affirmation of Arguments
A-4: Accomplishment and Amplification of Negotiations
A-5: Ascertation of Resistance and attacking Counterarguments
A-6: Administration of Contracts and Agreements
Fig. 17.1 A-6 negotiation concept in QM. (Source: Author’s source)
Table 17.1 A-6 concept: German and English

Steps in the A-6 negotiation concept by Dr. Helmold
Steps English German
A-1 Analysis of negotiation scope and Analyse der Verhandlungspartner und
negotiation partners Determinierung der Ausgangsposition
A-2 Alignment of negotiation strategies Auswahl geeigneter Strategien und Taktiken für
and tactics die Verhandlungen
A-3 Aggregation and affirmation of Aufbau und argumentation der Verhandlungen
arguments
A-4 Accomplishment and amplification Ausführung der Verhandlungen
of negotiations (Verhandlungsführung)
A-5 Ascertation of resistance and Abwehr von Gegenargumenten und Bekämpfen
attacking counterarguments von Widerständen
A-6 Administration of contracts and Ausgestaltung der Verhandlungsergebnisse und
agreements Achtung der Vereinbarungen
shows the sequence, which begins with a proper analysis of negotiation partners,
scopes, motives, and objectives. In the following phases (A-2, A-3), it is important
to define strategies, tactics, and the argumentation. The fourth phase is negotiation
execution (A-4), and in the fifth phase (A-5), it is important to break resistance by
sophisticated negotiation tools. In the last phase (A-6), it is important to define
agreements and to keep them (Table 17.1).
17.2 Negotiation Manuscript in QM as Key Success Factor 189
In addition to practical relevance, intercultural issues are also described in inter-

national transactions in countries such as the United States, China, France, India, or
others. Although the model is aimed at business negotiations, other negotiations,
e.g., political negotiations, negotiations among private individuals, negotiations on
alimony, etc., should be carried out. Lastly, the A-6 concept is a self-contained con-
struct built sequentially in six steps (Helmold, 2020). This means that after the first
step is done, you can go to the second and third up to the sixth and last step (A-6).
17.2 Negotiation Manuscript in QM as Key Success Factor
The key success factor and foundation of the A-6 negotiation concept is the script or
manuscript (Fig. 17.2), which is described in the context of this chapter. The strate-
gies and tactics determine the reasoning and the structure of the negotiations. The
preparation of negotiations with the definition of objectives, analysis of the negotia-
tion opponents, and selection of suitable strategies and tactics is a central point in
numerous negotiation concepts (Helmold, 2020, 2022). However, the preparations
1. Negotiation Theme:
__________________________________________
Scope (Q-C-D + alpha)
2. Scope Quality: Cost:
Delivery: Technology: Alpha (others):
Personalities
3. Analysis of negotiation opponents:
Roles & responsibilities (alpha, beta, gamma, omega, delta and
kappa):
___________________________________________ Strategies & Tactics
______________________________________
4. Strategies and Tactics:
Potential strategies and tactics:
___________________________________________
___ Objectives
___________________________________________
___
5. Objectives We: They:
Motives
6. Motives We: They:
Argumentaon: Negoaon opponent: My reacon:
4. Minimum- und Maximumziele:

___________________________________________
7.
___ Intercultural aspects
Intercultural
aspects
Fig. 17.2 A-6 negotiation manuscript in QM. (Source: Author’s source)

differ from concept to concept. The majority of negotiation experts use a structured
template designed to facilitate professional negotiations (Obrien, 2016). Concepts
also often represent the boundaries and the framework that should not be crossed in
negotiations (Schranner, 2009). The art of successful negotiation often consists of
implementing your own negotiation goals and wishes in conversation with the nego-
tiating opponent as far as possible using suitable strategies, tactics, and tools
(Knapp, 2019). Companies are therefore usually looking for assertive managers and
negotiators (Schmitz et al., 2006). The negotiation manuscript by Dr. Helmold was
developed from the background in 2015 that practical templates for business nego-
tiations were missing. In addition, the A-6 negotiation manuscript has been supple-
mented with central points in international negotiations such as cultural
characteristics. As a systematic and logical concept, the W-questions (what, why,
who, how, etc.) help to ideally structure and implement negotiation processes. The
A-6 negotiation manuscript is continuously improved to enable negotiators to con-
duct negotiations professionally (Helmold & Samara, 2019).
17.3 Personalities and Roles in Negotiations
Negotiations are carried out by humans and contain certain personalities and roles
as shown in Fig. 17.3. The analysis of personalities and roles of the negotiation
participants is a crucial activity in phase A-1 and consists of the identification of
decision-maker (alpha), influencers (beta), co-workers (gamma), guardians (delta),
and potential critics (omega). This step can also serve to identify useful and helpful
people that provide suitable information and support (kappa). Negotiations must
always concentrate on the decision-maker (alpha) and his/her influencers (beta).
Personalities Role in Greek How to approach…

and Roles in Negotiation Letter
Negotiations
Alpha Decision Maker α Respect as decicision maker!
Beta Influencer Influence her on quality and

䃑 price!
Gamma Low Influencer
䃒 Involve in discussion and figure
out if influencer or not?
Kappa V-Mann
Κ Try to get information – must be
winner.
Delta Guardian
䃓 Convince with facts and benefits.
Omega Critic Observe, try to get Mr. O on our

䃈 side?
Fig. 17.3 Personalities and roles in negotiations. (Source: Author’s source)

17.4 Summarizing the Success Factors for Negotiations in QM 191
17.4 Summarizing the Success Factors

for Negotiations in QM
Dr. Marc Helmold and the co-authors of this book have been working in various
management roles in the automotive and railway industries since the late 1990s. In
these positions, Dr. Helmold negotiated with national and international customers
and suppliers about complex projects in many countries in Europe, the Americas
and Asia-Pacific, Japan, and China. Projects worth billions of euros were won as
manufacturers of trams, commuter trains, regional trains, and express trains. These
projects also always involved difficult and intercultural negotiations. Since 2016,
Dr. Helmold is professor of Business Administration, Strategic Management, and
Supply Chain Management (SCM) in Berlin. In this position he teaches negotia-
tions in the international context on master levels. In parallel he is conducting
research in this area of intercultural conflict management. In addition to teaching
and research, he advises companies on international and intercultural business and
complex negotiations. Within this function and due to the deficits and weaknesses
of existing negotiation concepts in an intercultural context, he developed the A-6
negotiation concept (Helmold et al., 2019). The success criteria for negotiations and
application of the A-6 negotiation concept are outlined in Table 17.2.
Table 17.2 Recommenda Recommendations for the A-6 negotiation

tions for the A-6 concept concept by Dr. Helmold
Recommendation
Regular training and acquisition of key
competencies through workshops and training
Systematic and structured analysis of core
elements and critical success factors
Assessment of scope, personalities, strategies,
motives, objectives, and intercultural elements
Consideration of intercultural aspects as key
aspects for negotiations
Quantification and prioritization of objectives
Determination of scope with minimum and
maximum objectives (Q-C-D-T plus alpha)
Usage of nonverbal analytical tools and tactics
(e.g., mirroring)
Definition of suitable strategies and tactics (e.g.,
setting time deadline)
Argumentation and sequential proceeding in line
with the A-6 structure
References
Helmold, M. (2020). Lean management and kaizen. Fundamentals from cases and examples in
operations and supply chain management. Springer.
Helmold, M. (2022). Leadership. Agile, virtuelle und globale Führungskonzepte in Zeiten von
neuen Megatrends. Springer Wiesbaden.
case studies on principles, application tools, and practice. Springer.
Helmold, M., & Terry, T. (2020). Operations and supply management 4.0. Industry insights, case
Helmold, M., Dathe, T., & Hummel, F. (2019). Erfolgreiche Verhandlungen. Best-in-Class
Empfehlungen für den Verhandlungsdurchbruch. Springer.
Helmold, M., Dathe, T., & Hummel, F. (2020). Successful international negotiations. A practical
guide for managing transactions and deals. Springer.
Knapp, P. (2019). Verhandlungs-Tools: Effiziente Verhandlungstechniken im Business-Alltag.
ManagerSeminare Verlags GmbH Bonn.
Obrien, J. (2016). Negotiations for procurement professionals. 2nd Edition. Kogan Page Croyden.
Schmitz, R. et al. (2006). Strategische Verhandlungsvorbereitung: Ein Leitfaden mit Arbeitshilfen
Wie Sie Ihre Ziele in 5 Schritten sicher erreichen. Springer Wiesbaden.
Schranner, M. (2009). Verhandeln im Grenzbereich. Strategien und Taktiken für schwierige Fälle.
8. Auflage. Econ München.
Problem-Solving, Process, and Idea
Creation Tools 18
18.1 Problem-Solving Tools
Problem-solving consists of using generic or ad hoc methods in an orderly manner

to find solutions to problems. Some of the problem-solving techniques developed
and used in philosophy, artificial intelligence, computer science, engineering, math-
ematics, medicine, and societies in general are related to mental problem-solving
techniques studied in psychology and cognitive sciences (Helmold, 2021). The term
problem-solving has a slightly different meaning depending on the discipline. For
instance, it is a mental process in psychology and a computerized process in com-
puter science. There are two different types of problems—ill-defined and well-
defined—and different approaches are used for each. Well-defined problems have
specific end goals and clearly expected solutions, while ill-defined problems do not.
Well-defined problems allow for more initial planning than ill-defined problems.
Solving problems sometimes involves dealing with pragmatics, the way that context
contributes to meaning, and semantics, the interpretation of the problem. The ability
to understand what the end goal of the problem is and what rules could be applied
represents the key to solving the problem. Sometimes the problem requires abstract
thinking or coming up with a creative solution.
18.2 A3 Method
The A3 process allows groups of people to actively collaborate on the purpose,

goals, and strategy of a project. It encourages in-depth problem-solving throughout
the process and adjusting as needed to ensure that the project most accurately meets
its intended goal (see Fig. 18.1). The A3 process is a problem-solving tool Toyota
The quality, not the longevity, of one’s life is what is important. (Martin Luther King)

Switzerland AG 2023
194 18 Problem-Solving, Process, and Idea Creation Tools
Title: Owner: Date:
1. Problem Analysis and Problem 5. Proposed Counter Measures
2. Current Condition 6. Plan
3. Goals and Target Condition

7. Follow Up and review
4. Root Cause Analysis
Fig. 18.1 A3 method. (Source: Author’s source)
developed to foster learning, collaboration, and personal growth in employees. The

term “A3” is derived from the particular size of paper used to outline ideas, plans,
and goals throughout the A3 process (A3 paper is also known as 11″ × 17″ or B-sized
paper). Toyota uses A3 reports for several common types of work:
• Solving problems
• Reporting project status
• Proposing policy changes (policy meaning rules agreed upon and enforced by
the group)
In most organizations, on most teams, we are not collaborating as strategically as

we could be. We leave meetings with ideas half-baked. We often move hastily to
begin working on implementing a solution, without aligning around important
details. Projects move slowly due to rework and duplicate effort, two symptoms of
a lack of alignment.
The A3 process allows groups of people to actively collaborate on the purpose,
goals, and strategy of a project. It encourages in-depth problem-solving throughout
the process and adjusting as needed to ensure that the project most accurately meets
its intended goal.
The A3 process prescribes to the famed quote by Abraham Lincoln: “Give me six
hours to chop down a tree and I will spend the first four sharpening the axe.” The A3
process helps an organization sharpen its proverbial axes by fostering effective col-
laboration, bringing out the best problem-solving in teams.
Collaboration between talented people is critical for innovation and speed. Using
the A3 process to foster collaboration can help organizations and teams invest their
time, money, and momentum most effectively.
18.2 A3 Method 195
Steps of the A3 Process

There are nine (well, ten) steps in the A3 process.
0. Identify the problem

Since the purpose of the A3 process is to solve problems or address needs, the
first, somewhat unwritten, step is that you need to identify a problem or need.
1. Capture the current state of the situation
Once you align around the problem or need you would like to address, then it
is time to capture and analyze the current state of the situation. Toyota suggests
that problem-solvers:
Observe the work processes firsthand and document your observations.
Gather around a whiteboard and walk through each step in your process. You
can use fancy process charting tools to do this, but stick figures and arrows will
do the job just as well.
If possible, quantify the size of the problem (e.g., percent of tickets with long
cycle times, number of customer deliveries that are late, number of errors
reported per quarter). Graph your data if possible; visualizations are really
helpful.
2. Conduct a root cause analysis
Now that you see your process, try to figure out the root cause of the efficien-
cies. You can ask questions like:
Where do we suffer from communication breakdowns?
Where do we see long delays without activity?
What information are we needing to collaborate more effectively/smoothly?
Document these pain points, and then dig deeper. The 5 whys is a helpful tool
for conducting a thorough root cause analysis. The basic idea is that you begin
with a problem statement, and then you ask “Why?” until you discover the real
reason for the problem. You may or may not have to ask why exactly five times—
this is simply an estimate.
3. Devise countermeasures to address root causes
Countermeasures are your ideas for tackling the situation; the changes to be
made to your processes that will move the organization closer to ideal by address-
ing root causes. Countermeasures should aim to:
Specify the intended outcome and the plan for achieving it
Create clear, direct connections between people responsible for steps in
the process
Reduce or eliminate loops, workarounds, and delays.
4. Define your target state
Once you have selected your countermeasures, you are able to clearly define
your target state. In the A3 process, you communicate our target state through a
process map. Be sure to note where the changes in the process are occurring so
they can be observed.
5. Develop a plan for implementation

Now that you have defined your target state, you can develop a plan for how
to achieve it. Implementation plans should include:
A task list to get the countermeasures in place
Who is responsible for what
Due dates for any time-sensitive work items
Most teams choose to document their implementation plan in their A3.
6. Develop a follow-up plan with predicted outcomes
A follow-up plan allows lean teams to check their work; it allows them to
verify whether they actually understood the current condition well enough to
improve it. A follow-up plan is a critical step in process improvement because it
can help teams make sure the:
Implementation plan was executed
Target condition was realized
Expected results were achieved
These first six steps are captured in the A3 report. Most teams use a template
for their A3.
7. Get everyone on board
The goal for any systemic improvement is that it improves every part of the
system. This is why it is vital to include everyone who might be affected by the
implementation or the target state in the conversation before changes are made.
Building consensus throughout the process is usually the most effective
approach, which is why many teams choose to include this at each critical turn-
ing point in the A3 process. Depending on the scope of the work, it might also be
important to inform executives and other stakeholders who might be impacted
by the work.
8. Implement!
Now it is time for implementation. Follow the implementation as discussed,
observing opportunities for improvement along the way.
9. Evaluate results
In far too many situations, the A3 process ends with implementation. It is
critical to measure the actual results and compare them to your predictions in
order to learn.
If your actual results vary greatly from what was expected, do research to
figure out why. Alter the process as necessary, and repeat implementation and
follow-up until the goal is met.
18.3 8D Method
Eight disciplines of problem-solving (8Ds) is a method developed at Ford Motor

Company used to approach and to resolve problems, typically employed by engi-
neers or other professionals. Focused on product and process improvement, its pur-
pose is to identify, correct, and eliminate recurring problems. It establishes a
18.4 Kepner–Tregoe 197
permanent corrective action based on the statistical analysis of the problem and on
the origin of the problem by determining the root causes. Although it originally
comprised eight stages, or disciplines, it was later augmented by an initial planning
stage. 8D follows the logic of the PDCA cycle. The disciplines are as follows:
• D0: Preparation and emergency response actions. Plan for solving the problem
and determine the prerequisites. Provide emergency response actions.
• D1: Use a team. Establish a team of people with product/process knowledge.
Teammates provide new perspectives and different ideas when it comes to
problem-solving.
• D2: Describe the problem. Specify the problem by identifying in quantifiable
terms the who, what, where, when, why, how, and how many (5W2H) for the
problem.
• D3: Develop interim containment plan. Define and implement containment
actions to isolate the problem from any customer.
• D4: Determine and verify root causes and escape points. Identify all applicable
causes that could explain why the problem has occurred. Also identify why the
problem was not noticed at the time it occurred. All causes shall be verified or
proved. One can use five whys or Ishikawa diagrams to map causes against the
effect or problem identified.
• D5: Verify permanent corrections (PCs) for the problem that will resolve the
problem for the customer. Using preproduction programs, quantitatively confirm
that the selected correction will resolve the problem. (Verify that the correction
will actually solve the problem.)
• D6: Define and implement corrective actions. Define and implement the best
corrective actions. Also, validate corrective actions with empirical evidence of
improvement.
• D7: Prevent recurrence/system problems. Modify the management systems,
operation systems, practices, and procedures to prevent recurrence of this and
similar problems.
• D8: Congratulate the main contributors to your team. Recognize the collective
efforts of the team. The team needs to be formally thanked by the organization.
8Ds have become a standard in the automotive, assembly, and other industries
that require a thorough structured problem-solving process using a team approach
(Fig. 18.2).
18.4 Kepner–Tregoe
Kepner–Tregoe (also sometimes called KT analysis) is a company that specializes

in problem-solving (also sometimes known as problem-solving method). Kepner–
Tregoe was founded in 1958 by Charles Kepner and Benjamin Tregoe. The two
company founders are considered pioneers of rational working methods and have
researched and visualized the basic solution thought patterns of people
Team Formation and Set Up

D1
Problem Discription
D2
Immediate Containment Actions

D3
Root Cause Analysis

D4
Selection of corrective Actions
D5
Implementation and Validation

D6
Preventive Actions
D7
Closure of the Issue (Final Meeting)
D8
Fig. 18.2 8D process. (Source: Author’s source)
(Kepner-Tregoe, 2020). In the area of these thought processes, problem analysis,

decision analysis, rational project management, analysis of potential problems, situ-
ation analysis, strategy formulation and implementation. And as fundamental meth-
ods to permanently establish thought processes. Under the term “Kepner–Tregoe,”
there are several methods to solve different “tasks.” Basically, the term “problem” is
differentiated from “decision.” Different tasks that people face require fundamen-
tally different approaches. The processing of these tasks sometimes requires differ-
ent processes. Exactly this difference becomes clear through the situation analysis.
Furthermore, the classified tasks can be solved through various processes. Problem
analysis is now regarded as “best practice” in the field of operational and service
excellence. It enables the identification of unknown causes in order to subsequently
eliminate them. Decision analysis provides the rational claim for the best available
solution that is to be implemented. Situation analysis determines all necessary tasks;
clarifies and prioritizes them; presents them in a special to-do list, the so-called
action item list (AIL); and prepares the solution with the right tools. The analysis of
potential problems is a process to avoid future problems and to be prepared for the
damage reduction in an emergency.
18.5 TRIZ 199
18.5 TRIZ
TRIZ is the Russian acronym for Teoria reschenija isobretatjelskich sadatsch

(Russian: теория решения изобретательских задач), which translates as the the-
ory of inventive problem-solving. RIZ was founded on the assumption that by sift-
ing through a large number of patents, then selecting, and valuing those describing
technical breakthroughs, one would discover generally applicable innovative prin-
ciples and even laws of invention. Figure 18.1 shows the concept of TRIZ, in which
specific problems can be resolved with generic problem solutions. The method was
initiated by Genrich Saulowitsch Altschuller and Rafael Borissowitsch Shapiro
under the influence of Dmitri Dmitrijevitsch Kabanov around 1954–1956.
G. Altschuller and R. Shapiro, who did further research and improvements, recog-
nized three essential principles as early as 1956:
• A large number of inventions are based on a comparatively small number of

general solution principles.
• Only overcoming contradictions makes innovative developments possible.
• The evolution of technical systems follows certain patterns and laws.
With the help of this method, inventors try to systematize their activities in order
to find new solutions to problems faster and more efficiently. The TRIZ method has
meanwhile spread around the world and is “rapidly developing” (Zobel). In the
Anglo-Saxon language area, the term TIPS (theory of inventive problem-solving) is
also common. The TRIZ contains a number of methodical tools that make it easier
to define and analyze a specific technical problem based on a target description in
order to break it down to its abstract components and to find a solution in the abstract
space. The abstract solution is then creatively translated into possible specific solu-
tions. A solution is selected from this amount. This prevents the problem from being
prematurely deduced to a solution. Instead, TRIZ uses a stock of already existing
solution processes. The methods of classic TRIZ are as follows:
• Innovation principles and contradiction table

• Separation principles for solving physical contradictions
• Algorithm or step method for solving invention problems (ARIZ)
• System of 76 standard solutions and substance–field analysis (SFA, formerly
also called WEPOL analysis)
• S-curves and laws of the development of systems (evolution laws of technical
development, laws of technical evolution)
• Principle (law) of ideality
• Modeling of technical systems with the help of “little men” (dwarf models)
Further methods that are assigned to TRIZ, but which are not included in the
classic teaching, but were developed by Altschuller’s students, are:
• Innovation checklist (Innovation Situation Questionnaire)

• Functional structure according to TRIZ (a kind of cause-and-effect diagram,

which however does not correspond to Ishikawa Kaoru’s cause-and-effect dia-
gram, is also called problem formulation)
• SAO functional model (subject–action–object, an extended functional model
based on Miles’ basic work on “value analysis”)
• Process analysis
• GZK operator (size–time–cost)
• Anticipatory error detection
• Resource checklists
In most cases, TRIZ does not mean the abovementioned collection of methods
and tools, but only refers to the contradiction table and the 40 innovative principles
as “the TRIZ.” However, these are controversial in the professional world in terms
of handling and mode of operation.
The TRIZ contains 40 principles or “40 rules of innovation” (sometimes also 40
innovative principles, 40 IGP—40 innovative basic principles called). One of these
rules is the “principle of the nesting doll (matryoshka)” (also called “integration”):
You transfer an object into the inside of another. These abstract rules are in detail:
1. Dismantling
2. Separation
3. Local quality
4. Asymmetry
5. Coupling
6. Universality
7. Integration (plug-in doll, matryoshka)
8. Counterweight
9. Previous counteraction (early counteraction)
10. Previous effect (earlier effect)
11. Principle of the “previously placed pillow” (prevention)
12. Equipotentiality
13. Function reversal (inversion)
14. Similarity to spheres (spheroidality)
15. Dynamization
16. Partial or excessive effect
17. Transition to other dimensions (transition to higher dimension)
18. Use of mechanical vibrations
19. Periodic effect
20. Continuity of useful effect (continuity of active processes)
21. Principle of rushing through (skipping)
22. Conversion of harmful into useful
23. Feedback
24. Principle of the “mediator”
25. Self-service
26. Copy
27. Cheap short life instead of expensive long life
18.6 PDCA 201
28. Replacement of the mechanical system (replacement of mechanical operating

principles)
29. Use of pneumo- and hydrosystems
30. Use of flexible sleeves and thin foils
31. Use of porous materials
32. Color change
33. Similarity (homogeneity)
34. Elimination and regeneration of the parts
35. Change in physical and chemical properties (change in physical state)
36. Application of phase transitions
37. Application of thermal expansion
38. Use of strong oxidizing agents
39. Use of an inert medium (use of an inert medium)
40. Use of composite materials (use of composite materials)
These rules are mostly used in connection with a so-called contradiction matrix
or contradiction table. This matrix has different technical parameters in the first row
and in the first column (in an identical order). In the individual fields of the matrix,
the individual parameters are thus opposed to each other (similar to a season game
table in soccer). The diagonal of the matrix remains empty, because here one and the
same parameter is facing each other (which could be solved with the physical con-
tradictions). As far as the other fields are concerned, it is assumed that the assigned
parameter in the column is supposed to improve, while the parameter in the corre-
sponding row deteriorates as a result. Herein lies the contradiction. The field in
which row and column cross each other uses individual numbers to name the inno-
vative basic rules of TRIZ that can help to overcome this contradiction. A developer
who works with the contradiction matrix must therefore first be clear about which
parameters of the system he is developing should be improved. He then has to deter-
mine which other parameters would usually worsen as a result of these improve-
ments. Finally, the developer abstracts these parameters so that he can assign them
to parameters of the first row and column of the contradiction matrix. Ultimately,
this brings him to the abstract rules of TRIZ, which are suitable to help overcome
the contradictions that arise in the course of development. On the basis of examples
and the concretization of the rules for the development object, thoughts are stimu-
lated how the existing development contradictions can be overcome (Fig. 18.3).
18.6 PDCA
Deming defined the PDCA sequence for optimizing concepts, processes, and proce-
dures in terms of an incessantly repeating cycle as follows:
• Planning (plan)
• Application (do)
• Verification of the results (check)
• Optimization with standardization (act)
TRIZ General TRIZ General

Problem Solution
TRIZ
Specific Specific Evaluation and

Problem Analysis Problem Solution Selection
Fig. 18.3 TRIZ model. (Source: Marc Helmold)
• Implement • Analysis
• Implement • Develop
new Standrad Concept
Act Plan
Check Do
• Test • Optimize
• Define new • Check new
Standard Standard
Fig. 18.4 PDCA cycle. (Source: Author’s source)
The PDCA cycle is (see Fig. 18.4.) used as a problem-solving strategy. First, the
problem is precisely defined and specified so that it can be analyzed more clearly
and effectively. Then the real cause of the problem is eliminated and the effective-
ness of the improvement is checked. If one comes to the result that the improvement
was successful, standardization prevents falling back in times before the
improvement.
18.7 Six Sigma 203
18.7 Six Sigma
Six Sigma (6σ) is a management system for process improvement and statistical
quality target and at the same time a method of quality management. Its core element
is the description, measurement, analysis, improvement, and monitoring of business
processes with statistical means. It is a method with a comprehensive set of tools for
the systematic improvement or redesign of processes. The work breakdown structure
for process improvement projects follows the procedure define–measure–analyze–
improve–control (DMAIC). DMAIC (define–measure–analyze–improve–control, in
spoken language: di-meɪk, to German define–measure–analyze–improve–control)
stands for the phases of a process management process. DMAIC is the core process
of the Six Sigma quality management approach and is used to design processes in
such a way that they stably maintain a specified Six Sigma performance level.
DMAIC is used to improve existing products.
Within the individual phases of a DMAIC or DMADV project, Six Sigma uti-
lizes many established quality management tools that are also used outside Six
Sigma. The following table shows an overview of the main methods used.
• Whys
• Statistical and fitting tools
• Analysis of variance
• General linear model
• ANOVA gauge R&R
• Regression analysis
• Correlation
• Scatter diagram
• Chi-squared test
• Axiomatic design
• Business process mapping/check sheet
• Cause-and-effect diagram (also known as fishbone or Ishikawa diagram)
• Control chart/control plan (also known as a swimlane map)/run charts
• Cost–benefit analysis
• CTQ tree
• Design of experiments/stratification
• Histograms/Pareto analysis/Pareto chart
• Pick chart/process capability/rolled throughput yield
• Quality function deployment (QFD)
• Quantitative marketing research through use of enterprise feedback management
(EFM) systems
• Root cause analysis
• SIPOC analysis (suppliers, inputs, process, outputs, customers)
• COPIS analysis (customer-centric version/perspective of SIPOC)
• Taguchi methods/Taguchi loss function
• Value stream mapping
18.8 Value Stream Mapping
The value stream analysis is a business management method for improving process
management in production and services. It is also referred to as the value stream
recording of an actual state, value stream mapping (VSM). This first process step of
the so-called value stream management provides a model of the material and infor-
mation flows of the individual value streams. The non-value-adding processes are
identified in the analysis. In the following design approach, an improved value
stream is designed in the context of a value stream design, in which the non-value-
adding activities and unnecessary idle times are eliminated. The transition from the
actual to the target value stream is planned using the value stream planning. The
comparable approach in service management does not minimize idle times, but the
individual waiting times between activities.
18.9 RPR Method
RPR deals with failures, incorrect output, and performance issues, and its particular
strengths are in the diagnosis of ongoing and recurring gray problems. The method
comprises:
• Core process
• Supporting techniques
The core process defines a step-by-step approach to problem diagnosis and has
three phases:
• Discover
• Gather and review existing information
• Reach an agreed understanding
• Investigate
• Create and execute a diagnostic data capture plan
• Analyze the results and iterate if necessary
• Identify root cause
• Fix
• Translate diagnostic data
• Determine and implement fix
• Confirm root cause addressed
The supporting techniques detail how the objectives of the core process steps are
achieved, and cite examples using tools and techniques that are available in every
business.
Creativity Tools in QM
19
19.1 Brainstorming
Brainstorming is an idea generation method developed by Alex F. Osborn in 1939

and modified by Charles Hutchison Clark, the purpose of which is to encourage the
generation of new, unusual ideas in a group of people. He named it after the idea
behind this method, namely, using the brain to storm a problem (literally: using the
brain to storm a problem). In brainstorming, ideas and suggestions on a topic are
freely expressed and collected. It does not matter how mature and high quality an
idea is, but first of all that as many ideas as possible are collected. It is important that
all participants collect and publish ideas.
19.2 Mind Mapping
A mind map is a diagram used to visually organize information into a hierarchy,

showing relationships among pieces of the whole. It is often created around a single
concept, drawn as an image in the center of a blank page, to which associated rep-
resentations of ideas such as images, words, and parts of words are added. Mind
mapping is a powerful note-taking method. Mind maps not only highlight important
facts, but also show the overall structure of a subject and the relative importance of
individual parts of it. They are great when you need to think creatively and can help
you to make new connections between ideas.
19.3 Design Thinking
19.3.1 The Concept of Design Thinking
Design thinking (in Fig. 19.1) is a customer-centered and iterative method for solv-
ing complex problems and developing new ideas. With the design thinking method,
you succeed in developing a solution that is superior from the customer’s point of
Quality is never an accident. It is always the result of intelligent effort. (John Ruskin)

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206 19 Creativity Tools in QM
Empathise Define Idea Prototype Text Implement
Fig. 19.1 Design thinking process. Source: Author’s source
view, taking into consideration economic efficiency, feasibility, and desirability.

Design thinking is based on the assumption that problems can be solved better if
people from different disciplines work together in an environment that promotes
creativity, develop a question together, take into account the needs and motivations
of people, and then develop concepts that are repeatedly checked. The process is
based on the work of designers, which is understood as a combination of under-
standing, observation, definition of standpoints, brainstorming, prototype develop-
ment, and testing. At the same time, the word thinking stands for the fact that, as in
a research project, the feasibility and profitability of the innovations are systemati-
cally examined. According to another understanding, design thinking means “any
process that applies the methods of industrial designers to problems beyond how a
product should look” (“any process that applies the methods of industrial designers
to problems that go beyond the appearance of a product”). Design thinking thus
combines three fundamental core aspects: benefit, feasibility, and marketability.
Accordingly, the benefits for people, the technological feasibility, and the economic
marketability are brought into harmony in order to create a perfect innovation and
to solve the problem flawlessly. All points should be weighted equally. The six
named and basic steps of design thinking can be described as follows:
1. Understanding and empathizing

2. Defining
3. Finding idea
4. Prototyping
5. Testing
6. Implementing
19.3.2 Understanding and Empathizing
The problem at the beginning is at best defined with a team of several people. It is
important to create a general understanding and to bring everyone involved on the
same page. Specific questions can be, for example: What should be newly devel-
oped? For whom should the development be relevant? Which essential (current or
future) framework conditions have to be taken into account? Which final state
should the solution achieve? Observing in this stage is about being able to empa-
thize with the customer. An analysis of the customer’s will is possible, for example,
through an interview or role-play. It is important to let the customer do the talking.
Good listening is the most important part of the job; otherwise, misunderstandings
can arise. The wishes of the customer are always in the foreground.
19.3 Design Thinking 207
19.3.3 Defining a Point of View
The results of the first two steps are combined. Techniques such as personas or point
of view are used to define the point of view both visually and in writing.
19.3.4 Finding Ideas
At the beginning of the brainstorming process, there is a general brainstorming ses-

sion in which all ideas, no matter how crazy or utopian, are brought together. The
results are structured and sorted according to priorities. Questions about the effi-
ciency, the feasibility, or the economic viability of the individual ideas are impor-
tant. A look at the competition is also not uncommon.
19.3.5 Prototyping
A prototype is created for illustrative purposes. Perfection and completion are insig-
nificant. More important is: the simpler, the better. Creativity is given free rein.
Techniques that are used in prototyping include wireframes, Post-its, role-playing
games, storyboards, or models. The prototype is tailored to the needs of the cus-
tomer. It is important that the customer can imagine the solution to his problem
based on the prototype.
19.3.6 Testing
Finally, what has been developed must be tested. Feedback plays an important role
in this. Flexibility is also required. If an idea does not work, it can also be discarded.
Customers are closely observed during tests with the prototypes. Based on their
reaction, further ideas and improvements develop. Design thinkers are also open to
new suggestions at this step. If a defect is found during a test, it is eliminated and
the steps are repeated with the improved or new prototype. It is quite common for
new products to have multiple test phases until the customer is satisfied and the
product can be approved.
19.3.7 Implementing
After successfully testing the prototype, the idea can be implemented.

208 19 Creativity Tools in QM
19.4 Scribble
Scribble is a simple creative technique and suitable for spontaneous brainstorming

and problem-solving. Scribble comes from the English “to scribble = to scribble”
and does not mean hasty writing, but spontaneous visualization. The aim is not to
create a beautiful drawing, but a doodle that comes spontaneously from the wrist.
Without claiming to be perfect, it should be very short and direct, and ideas should
flow into the scribble completely unfiltered. A prominent representative of scribbles
is Leonardo da Vinci, who left thousands of scribbles. He was very good at drawing;
many of his sketches are “remembrance drawings” (Brunner, 2008). The method is
very effective because you start the feedback process. First, the idea is there, and
then the picture is created. One notices that it is not yet perfect and makes a new
drawing. The dynamic lies in thinking-drawing-looking-thinking-drawing-looking.
This process is repeated several times.
19.5 Pecha Kucha
Pecha Kucha (Japanese: ぺちゃくちゃ) is a presentation technique in which

images (slides) suitable for an oral presentation are projected onto a wall. The for-
mat is strictly specified: 20 images (slides), each of which is displayed for 20 s. The
total time of 6:40 min is therefore also the maximum speaking time and ends there.
Pecha Kucha is a registered word mark in Japan, Germany, and other countries.
Pecha Kucha was used for the first time in February 2003 by the two architects
Astrid Klein and Mark Dytham as part of a design event in Tokyo and is now widely
used in business and at universities. The format is now also used for communication
in museums, for example, in the Stadtmuseum Berlin since 2012. The topics are
mainly in the areas of design, art, fashion, culture, and architecture. However, this
style of presentation has also been transferred to other areas. The main goal of
Pecha Kucha is to avoid wasting the audience’s time. The advantages of this tech-
nology lie in the short, concise presentation with rigid time specifications, which
make long presentations and the associated listener fatigue (“death by PowerPoint”
syndrome) impossible from the outset.
19.6 Action Learning
Action learning (also action-oriented learning) is a method of experiential learning

(“learning by doing”) of individuals, small or larger groups in companies, or other
organizations, which goes back to Reginald Revans (Hauser, 2008). In action learn-
ing, a team works on a project that is specific and relevant to an organization while
reflecting on the learning process. Action learning is based on the belief that people
in an organization learn best from a real challenge. The application of action learn-
ing creates a double benefit: On the one hand, a need of the organization is satisfied,
and on the other hand, individuals and groups are further developed. The sinking of
References 209
the Titanic was a key experience for Revans. Revans’ father was part of the commis-
sion charged with finding out why a ship built by a large number of the best engi-
neers in England and thought to be completely unsinkable had foundered on her
maiden voyage. The result of the commission was astonishing: Many of the engi-
neers stated that they occasionally had serious doubts about the design (Revans,
2011). But since the responsible authorities saw things differently, they changed
their perception and finally believed in the unsinkability of the ship. But now, after
the catastrophe, they remembered their original doubts, which had cruelly come
true. The phenomenon that individuals adapt to the group opinion and the group
makes such fatal decisions is called groupthink. Action learning wants to counteract
this by having people from different areas work together in a team and ask critical
questions from their different perspectives (Pedler, 2011).
References
Brunner, A. (2008). Kreativer denken, Methoden von A bis Z. Oldenbourg Verlag.
Hauser, B. (2008). Action learning in management development. In Eine vergleichende Analyse
von Action-Learning-Programmen zur Entwicklung von Führungskräften in drei verschie-
denen Unternehmen. 2. aktualisierte Auflage. Hampp.
Pedler, M. (2011). Action learning in practice (4th ed.). Gower Publishing, Ltd.
Revans, R. (2011). ABC of action learning. Neuauflage. Gower Farnham.
IT-Based QM
20
Now the playbook is we build AI tools to go find these fake accounts, find coordi-
nated networks of inauthentic activity, and take them down; we make it much harder
for anyone to advertise in ways that they shouldn’t be. (Marc Zuckerberg)
20.1 Industry 4.0 in QM
Production systems are not like they used to be. The twenty-first century will con-
front enterprises and manufacturing companies with completely novel generations
of technologies, services, and products based on computer technologies. In order to
meet competition on global markets and to ensure long-term success, the companies
need to adapt to shorter delivery times, increasing product variability and high mar-
ket volatility, by which enterprises are able to sensitively and timely react to con-
tinuous and unexpected changes. One of the major cornerstones to meet these
challenges is the implementation of digital information and communication tech-
nologies into production systems, processes, and technologies, which allow novel
developments by combining the physical world and fast data access and data pro-
cessing via the Internet (Industry 4.0) (see Fig. 20.1). Industry 4.0 is a name given
to the current trend of automation and data exchange in manufacturing technolo-
gies. It includes cyber-physical systems, the Internet of Things, cloud computing,
and cognitive computing. Industry 4.0 is commonly referred to as the fourth indus-
trial revolution. Industry 4.0 fosters what has been called a “smart factory.” Within
modular structured smart factories, cyber-physical systems monitor physical pro-
cesses, create a virtual copy of the physical world, and make decentralized deci-
sions. Over the Internet of Things, cyber-physical systems communicate and
cooperate with each other and with humans in real time both internally and across
organizational services offered and used by participants of the value chain. There

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Fig. 20.1 Industry 4.0 evolution. (Source: Author’s source)
are four design principles in Industry 4.0. These principles support companies in
identifying and implementing Industry 4.0 scenarios (Helmold & Terry, 2021):
• Interconnection: The ability of machines, devices, sensors, and people to connect

and communicate with each other via the Internet of Things (IoT) or the Internet
of People (IoP).
• Information transparency: The transparency afforded by Industry 4.0 technology
provides operators with vast amounts of useful information needed to make
appropriate decisions. Interconnectivity allows operators to collect immense
amounts of data and information from all points in the manufacturing process,
thus aiding functionality and identifying key areas that can benefit from innova-
tion and improvement.
• Technical assistance: First, the ability of assistance systems to support humans
by aggregating and visualizing information comprehensively for making
informed decisions and solving urgent problems on short notice. Second, the
ability of cyber-physical systems to physically support humans by conducting a
range of tasks that are unpleasant, too exhausting, or unsafe for their human
co-workers.
• Decentralized decisions: The ability of cyber-physical systems to make decisions
on their own and to perform their tasks as autonomously as possible. Only in the
case of exceptions, interferences, or conflicting goals, are tasks delegated to a
higher level.
20.2 Artificial Intelligence (AI) in QM 213
20.2 Artificial Intelligence (AI) in QM
20.2.1 AI Tools in QM
In the field of computer science, artificial intelligence (AI), sometimes called

machine intelligence, is intelligence demonstrated by machines, in contrast to the
natural intelligence displayed by humans and other animals (Helmold, 2021).
Figure 20.2 depicts nine lean elements of artificial intelligence which can lead to a
competitive advantage across the value chain (Helmold & Samara, 2019).
20.2.2 Autonomous Robots
An autonomous robot is a robot that performs behaviors or tasks with a high degree
of autonomy (without external influence). Autonomous robotics is usually consid-
ered to be a subfield of artificial intelligence, robotics, and information engineering.
Autonomous
Robots
Virtual Production
Big Data and Supply
Chains
Virtual, Mixed and

Augumented
Artifical Simulations
Reality Intelligence Tools
in QM
Additive Systems
Manufacturing Integration
Cloud Computing Internet of Things
Cybersecurity
Fig. 20.2 Artificial intelligence tools. (Source: Author’s source)

214 20 IT-Based QM
20.2.3 Virtual Production and Supply Chains
Virtual production tends to be used to help visualize complex scenes or scenes that
simply cannot be filmed for real. In general, though, virtual production can really
refer to any techniques that allow filmmakers to plan, imagine, or complete some
kind of filmic element, typically with the aid of digital tools.
20.2.4 Lean Simulations
Lean simulations include a set of hands-on experiments to teach employees about

systems and process improvement in all areas of the value chain. Lean simulations
can focus on design, manufacturing, capacity planning, or supply chain design. The
purpose of simulations is to understand the implications of input variables and alter-
nations of the value chain elements.
20.2.5 System Integration
Lean integration is a continuous improvement methodology for bringing disparate

data and software systems together. The goal is to maximize customer value. Lean
integration is a management system that emphasizes eliminating waste as a sustain-
able data integration and system integration practice.
20.2.6 Internet of Things
The Internet of Things (IoT) is a system of interrelated computing devices, mechan-

ical and digital machines, objects, animals, or people that are provided with unique
identifiers (UIDs) and the ability to transfer data over a network without requiring
human-to-human or human-to-computer interaction.
20.2.7 Cybersecurity
Cybersecurity is the protection of Internet-connected systems, including hardware,

software, and data, from cyberattacks. In a computing context, security comprises
cybersecurity and physical security—both are used by enterprises to protect against
unauthorized access to data centers and other computerized systems.
20.2.8 Cloud Computing
Cloud computing is a type of computing that relies on shared computing resources

rather than having local servers or personal devices to handle applications. In its
References 215
most simple description, cloud computing is taking services (“cloud services”) and
moving them outside an organization’s IT system and environment.
20.2.9 Additive Manufacturing
Additive manufacturing (AM) is the industrial production name for 3D printing, a

computer-controlled process that creates three-dimensional objects by depositing
materials, usually in layers. The official industry standard term is the ASTM F2792
for all applications of the 3D technology. It is defined as the process of joining mate-
rials to make objects from 3D model data, usually layer upon layer, as opposed to
subtractive manufacturing methodologies.
20.2.10 Extended, Mixed, and Augmented Reality
Extended (XR), mixed (MR), and augmented reality (AR) will be used in future
quality control and application methods. AR is an interactive experience of a real-
world environment where the objects that reside in the real world are enhanced by
computer-generated perceptual information, sometimes across multiple sensory
modalities, including visual, auditory, haptic, somatosensory, and olfactory.
20.2.11 Big Data
Big Data is a phrase used to mean a massive volume of both structured and unstruc-
tured data that is so large it is difficult to process using traditional database and
software techniques. In most enterprise scenarios, the volume of data is too big or it
moves too fast or it exceeds current processing capacity.
References
Helmold, M. and Samara, W. (2019). Progress in performance management. Industry insights and
case studies on principles, application tools, and practice. Springer .
Future Outlook and Trends in QM
21
The Quality of Thinking will determine the Quality of

our Future.
(Edward de Bono).
21.1 Agility and Adaptability in QM
In the future, the QM function will become more agile and adaptable in the VUCA
world. VUCA is an acronym that stands for volatility, uncertainty, complexity, and
ambiguity—qualities that make a situation or condition difficult to analyze, respond
to, or plan for. Understanding how to mitigate these qualities can greatly improve
the strategic abilities of a leader and lead to better outcomes (Helmold et al., 2023).
Global trends, the ongoing globalization, and the COVID-19 pandemic have taught
us that businesses need to be prepared for the unexpected (Veeva, 2021). When a
crisis could be around the corner, the most effective strategy is adaptability based on
thorough risk analysis. Businesses stand a better chance of maintaining their quality
management obligations through a crisis when they have contingencies in place
(Pfeifer 2001).
21.2 Focus on Efficiency in QM
The economic downturn caused by the pandemic has highlighted the need for cost-
effective quality assurance processes. Dealing with nonconformance is a headache
that most businesses can ill afford right now. A watertight quality management sys-
tem will save your business time and money by avoiding nonconformance in the
first place.

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21.3 Centralized Data Management in QM
Having a quality management system with centralized, cloud-based software will

give your business access to real-time data anywhere in the world. This data will
prove crucial for effective quality management, compliance, and audits. Without
centralized and accessible data, noncompliance is more likely due to knowledge
gaps and miscommunication.
21.4 QM Backed by Lean Management and Six Sigma
Although Six Sigma is a newer quality management concept than QM, it was never
meant to replace it. Rather, the two strategies are complementary. Whereas QM
focuses on internal departments and customer satisfaction, the key goal of Six
Sigma is to reduce the number of defects.
Forward-thinking businesses are starting to implement both concepts into their
quality management approaches. Specifically, Six Sigma strategies can be used to
help businesses meet the “continuous improvement” goal of QM (Helmold & Terry,
2016, 2021).
21.5 Focus on Sustainability, ESG, and CSR in QM
As environmental health continues to become a global concern, ISO has developed

new standards designed to help organizations manage their environmental responsi-
bilities. For instance, ISO 14001 specifies the requirements for an environmental
management system that an organization can use to enhance its environmental per-
formance. The intended outcomes of this environmental management system
include:
• Enhancement of environmental performance.

• Fulfilment of compliance obligations.
• Achievement of environmental objectives.
Future revisions of ISO standards are expected to further emphasize the impor-
tance of environmental sustainability within the scope of QM. Other examples are
the ISO standards 26,000 or ISO 27001 for sustainability or IT aspects, which will
have a significant contribution to companies and organizations (Helmold et al., 2023).
21.6 Use of Sophisticated QM Software, AR, VR, and XR
Intuitive and accessible quality management software is a crucial aspect of a thor-

ough and effective quality management system. Implementing a QMS will help any
business meet its quality assurance obligations smoothly and with optimal
21.8 Accountability of QM as Driver of Customer Satisfaction in the Value Chain 219
interdepartmental cooperation (Deloitte, 2021). QMM software solutions offer

modular, cloud-based quality management software that is accessible via subscrip-
tion, so you only pay for what you need. Each module can stand alone or be inte-
grated with other operations and quality modules. Digital quality management is
one, straightforward way for small to medium manufacturing businesses to start
realizing value from Industry 4.0. Quality management software modules and plat-
forms include:
• Document management software.

• Audit management software.
• Complaints management software.
• Risk management software.
• Corrective action software.
• Nonconformance management software.
• Training software.
In this context, QM and other functions will make use of extended, virtual, or
augmented reality (XR, VR, AR) applications to simplify quality activities.
21.7 Expanding Boundaries of QM
In the early years, QM was only applied to manufacturing operations. Today, it is

implemented in a wide variety of nonmanufacturing organizations, and this number
is only expected to grow in the coming years and decades. From finance to health-
care to education, processes founded upon quality management concepts are start-
ing to become the rule rather than the exception (Capgemini, 2021). Why? There is
a rapidly growing customer demand for top-quality services, products, and interac-
tions across all industries. As for those organizations who do not implement QM
principles into their processes and systems, it is likely that over time, they will lose
their competitive edge to those who do (Helmold & Samara, 2019).
21.8 Accountability of QM as Driver of Customer Satisfaction

in the Value Chain
QM will have to take responsibilities across the value chain in the future. QM was
in the past often seen as control function and quality gate driver. This will change to
a coordinating and moderating function as a central point in the enterprise and value
chain activities (Helmold et al., 2023). One of the vital components of QM is the
idea that every employee must be actively engaged in the effort to improve quality.
As new tools and technologies for tracking employee performance become avail-
able, accountability will become an increasingly important part of QM. Every
employee must have a clear idea of their requirements and expectations, in addition
to the standards that will be used to access their performance. This shift will, of
220 21 Future Outlook and Trends in QM
course, expand to management as well. Organizational leaders will need to demon-

strate what they are doing to help their bottom line reach their quality improvement
goals, as well as the effectiveness of their strategies. Tired approaches like occa-
sional seminars led by upper management will need to be replaced by updated strat-
egies that lead to a genuine improvement in performance. Assessment and
performance benchmarks will help to create this sense of accountability across all
levels of the organization.
21.9 Virtual Quality Management (VQM)
Virtual quality planning and execution will be an upcoming trend in the future of
QM. Virtual quality management (VQM) is defined as “coordinated approaches to
the efficient modelling, adaptation, utilization and analysis of simulation studies for
generating resilient knowledge and dimensioning quality techniques for products
and processes during the planning stage.” The concept of VQM (virtual quality
management), in addition to this, takes into account also the environmental issues
and any other factors that can influence the final product (i.e., quality knowledge
and process knowledge), and with the help of “design of virtual experiments” and
“quality-oriented process models,” through modelling and simulation, the so-called
quality parameters and process parameters are obtained. The latter ones can be fur-
ther processed in the sense that they can be optimized, this way obtaining the best
possible solution, which can be implemented and used in real-life scenarios
(Bookjans & Weckenmann, 2010). The purpose of the VQM concept is to generate
resilient knowledge either for product or processes by deploying tools and instru-
ments used in the virtual environment. The end scope is to develop the necessary
information for those products/processes that will enable implementation into pro-
duction with an increased performance and with a higher degree of predictability.
The concept of VQM was slightly adapted for the product development process,
thus obtaining a new framework that relies on customer requirements throughout
the entire process and it offers optimized data for the component characteristics of
the products’ constitutive elements. By deploying instruments that are simple to use
(e.g., VOCT, AHP, and cascaded QFD) and more advanced ones (e.g., genetic algo-
rithms) in the structure described within the framework, product optimization can
be achieved without compromising or neglecting the initial customer requirements
(Helmold, 2021).
References
Bookjans, M., & Weckenmann, A. (2010). Virtual quality management – A new approach for the
simulation-based optimization of quality control loops. In: Abrudan, I. (Hrsg.) Review of man-
agement and economic engineering. Cluj-Napoca.
Capgemini. (2021). World Quality Report 2021: Agile macht Qualitätssicherung zum inte-
gralen Bestandteil der Softwareentwicklung . https://www.capgemini.com/de-de/news/
world-quality-report-2021/
References 221
Deloitte. (2021). Perspectives 4 Quality Engineering Trends Report. Market dynamics shaping
the future of quality engineering . https://www2.deloitte.com/us/en/pages/consulting/articles/
quality-engineering-and-testing-trends.html
Helmold, M. (2021). Kaizen, lean management und Digitalisierung. Mit den japanischen
case studies on principles, application tools, and practice. Springer.
Helmold, M., et al. (2023). Qualität neu denken. Innovative, virtuelle und agile Ansätze entlang
der Wertschöpfungskette. Springer.
Pfeifer, T. (2001). Qualitätsmanagement – Strategien, Methoden, Techniken. Carl Hanser Verlag.
Veeva. (2021). Industries. Trends in Quality management 2021. https://www.industries.veeva.com/
quality-management-trends-report-2021

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Management for Professionals

Virtual and Innovative

ISSN 2192-8096 ISSN 2192-810X (electronic)

Berlin, Germany Marc Helmold

1 Quality Management (QM)�������������������������������������������������������������������� 1

4.3.1 Principle 1: Holistic Approach���������������������������������������������� 30

6.3 Strategic Triangle������������������������������������������������������������������������������ 59

8 Quality Excellence Models���������������������������������������������������������������������� 87

9.7.2 Discrepancy Documentation������������������������������������������������ 108

12.3.2 Supply Management Strategy ������������������������������������������ 144

17 Negotiations in QM���������������������������������������������������������������������������������� 187

20.2.7 Cybersecurity�������������������������������������������������������������������� 214

IU Intern. Hochschule, Berlin, Germany

1.1 Scope and Definition of QM

1.1.1 What Is Quality?

© The Author(s), under exclusive license to Springer Nature 1

1.1.2 Quality Definition by Deming

Quality is the designation of a perceptible state of systems and their characteristics,

An important element and tool in quality management is the PDCA cycle in

Quality Management: Deming Cycle (PDCA)

Fig. 1.1 PDCA cycle. (Source: Author’s source)

improvements (Helmold, 2022). In this way, a constant improvement of processes

1. The transcendent understanding of quality: Refers to the colloquial view of qual-

1.1.3 Q-C-D Plus Alpha

Fig. 1.2 QCD plus alpha.

1.2 Fit, Form, and Function

1.3 Quality Definition According to the ISO 9001:2015

• “Degree” implies quality is a variable.

Table 1.1 Fit, form, and function

Fig. 1.3 Fit, form, and

Fig. 1.4 ISO 9001:2015. (Source: Author’s source)

The ISO 9001:2015 consist of 10 clauses as shown in Fig. 1.4.

Clause 0–3—Introduction and scope of the standard.

1.4 Quality Across the Supply Chain Management (SCM)

1.4.1 Scope and Definition of SCM

Supply Chain Management (SCM)

Tier 3 Tier 2 Tier 1 Tier 1 Tier 2

Upstream Supply Chain Management Downstream Supply Chain Management

Quality Management (QM)

1.4.2 Supply Risk Prevention and Mitigation

Strategic Preventive Reactive

Supply Chain Risk

Other authors refer to capacity management in terms of supply disruptions as being

–– Product transfers to sites or plants.

1.4.3 Methods of SCM Risk Evaluation

–– Site visits by cross functional teams.

1.4.4 Sustainability in the SCM

1.4.5 Fair Trade in the Supply Chain

2.1 Scope of IMS

Organizational complexity has increased dramatically in recent years. The result is

–– Reduced use of resources and improved results.

© The Author(s), under exclusive license to Springer Nature 15

Management system standards are developed by international experts with expe-

–– ISO 9001: Quality Management Systems.

–– Sector-specific management system standards: management system standards

The specific context of an organization defines the complexity of a management

2.2 Advantages and Disadvantages when Using an IMS

2.2.1 Advantages of IMS

An IMS combines all aspects of an organization’s systems, processes, and standards

Berlin, Germany Marc Helmold

1 Quality Management (QM)�� 1

4.3.1 Principle 1: Holistic Approach�� 30

6.3 Strategic Triangle�� 59

8 Quality Excellence Models�� 87

9.7.2 Discrepancy Documentation�� 108

12.3.2 Supply Management Strategy �� 144

17 Negotiations in QM�� 187

20.2.7 Cybersecurity�� 214

1.1 Scope and Definition of QM

1.1.1 What Is Quality?

1.1.2 Quality Definition by Deming

1.1.3 Q-C-D Plus Alpha

1.2 Fit, Form, and Function

1.3 Quality Definition According to the ISO 9001:2015

1.4 Quality Across the Supply Chain Management (SCM)

1.4.1 Scope and Definition of SCM

1.4.2 Supply Risk Prevention and Mitigation

1.4.3 Methods of SCM Risk Evaluation

1.4.4 Sustainability in the SCM

1.4.5 Fair Trade in the Supply Chain

2.1 Scope of IMS

2.2 Advantages and Disadvantages when Using an IMS

2.2.1 Advantages of IMS

2.2.2 Disadvantages of IMS

2.3 Realization of IMS

3.1 Definition of Extended Reality (XR)

3.3 Augmented Reality (AR)

3.4 Mixed Reality (MR)

3.5 Virtual Reality (VR)

4.1 Introduction to TQM

4.2 TQM Strategy

4.3 TQM Principles

4.3.1 Principle 1: Holistic Approach

4.3.2 Principle 2: Team Activity Approach

4.3.3 Principle 3: Contribution of Employees

4.3.4 Principle 4: Execution of Risk Analysis

4.3.5 Principle 5: Data Visualization

4.4 TQM Success Factors

4.4.1 Introduction to TQM Success Factors

4.4.2 Customer-Driven and Customer-Centric Focus

4.4.3 Full Employee Involvement and Communication

4.4.4 100% Commitment of Leadership and Communication

4.4.5 Cross-Functional Improvement Teams

4.4.6 Process Approach