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Beyond buzzwords: TQM at Mack Trucks.

WITH NEWER MODELS OF PERFORMANCE IMPROVEMENT MAKING INROADS IN CORPORATE AMERICA, IS TOTAL QUALITY MANAGEMENT OUTDATED? AFTER YEARS IN THE RED, A NEWLY PROFITABLE MACK TRUCKS IS MANAGING PROGRESS AS WELL AS PROCESS, WITH TQM AS AN UMBRELLA FOR OTHER PERFORMANCE INITIATIVES.

Proponents of Total Quality Management spawned an overwhelming number of buzzwords and platitudes: empowerment, customer focus, continuous improvement, and so on. They are words no one can argue with--and their repetition at companies that have no real commitment to total quality represents a serious threat to TQM's credibility. Companies that use all the right words, without seeing results, tend to ask themselves TQM is outdated. Treating TQM as if it were a "program," they abandon it in favor of another "program": agility, value engineering, re-engineering, teamwork--or some other initiative of the moment.

This all reminds me of something G.K. Chesterton once said about Christianity: It hasn't been tried and found wanting; it's been found difficult, and left untried. In cases where TQM truly has been tried, it has not been found wanting--but it has always been found difficult. Why? TQM is neither a program nor a model that can be bought off-the-shelf. It is an entire management system that includes a philosophy, principles, methods, and tools. If a company tries to use the methods without understanding and embracing the philosophy, or the tools without the principles, it will fail. The system cannot be "cherry-picked"; it is either entered into completely, or not at all.

Proponents of total quality also excel at generating and promoting standards. Whether awards, registrations, or guidelines, these standards take on an aura so great as to become ends in themselves. But while some can be useful tools, TQM is not about being in agreement with standards or norms. Rather, it is about being in agreement with the market, with the customer. And the customer has nothing to do with norms: He or she is diverse, volatile, and unpredictable, influenced by an ever-changing environment--the opposition of norms and standards.

There are few companies that have demonstrated the danger of losing customer focus as dramatically as Mack Trucks, founded in 1900. Since World War I, Mack's trucks have enjoyed an almost mythical reputation for durability and power. (Just think of the expression, "built like a Mack truck.") Through its history, Mack gave customers the value they wanted in a product, and it paid of in a company that as recently as 1980 held more than 21 percent of the North American heavy-duty truck market and employed 17,000 people.

But by the late 1980s, the slogans were beginning to ring hollow. Mack decided somewhere along the way that it knew better than its customers what they really wanted. Quality had suffered, but we weren't sure how much because, frankly, we weren't measuring it. Our employees weren't involved in decision making at any level, and as a result, our relationship with our employees and their union was at an all-time low. Our customers noticed, of course. Ultimately, our market penetration dipped to 10 percent, and employment sunk to 5,400. In 1989, the company lost $185 million, the first of five years in the red. By 1991, Mack was hovering near bankruptcy; and as a Wall Street Journal article of the era put it, the company's problems were "mostly homegrown." Unless something was done quickly, it soon would be over.

In 1990, Mack was acquired by Renault V.I., the commercial vehicle division of France's Renault Group. Five years before, Renault had faced a similar crisis, and used TQM to turn the situation around. By sharing practical TQM tools--and quantifiable success stories--Renault brought new credibility and increased commitment to a Mack TQM initiative that was in its infancy. The first changes made were somewhat symbolic, such as ending the restricted access to the executive floor and selling the private executive aircraft. But more substantive steps followed, including the appointment of an entirely new management team, unified by an effort to restore our products to their legendary quality; to improve our productivity; and to make our employees players in this process through TQM.

Our initial efforts aimed to increase communication, to share more information with our employees and their union so they fully appreciated the urgency of our financial and market positions. But communication was not enough. We had to involve the entire organization in turning Mack around, which we did primarily through training, and developing dedicated teams. The average number of training hours per employee has gone from an unmeasured and negligible number in the late 1980s, to more than 25 hours last year. Since 1991, more than 400 employee teams have been formed to study and improve everything, from the layout of our workstations to our order cycles.

We all acknowledge that the work is far from over. But TQM has brought some significant achievements thus far. For instance, in 1990, we began using Demerit Action Groups--cross-functional employee teams--to systematically audit a vehicle's quality as it come off the line, track down the cause of any "demerit," and implement solutions. As of the end of last year, these teams had reduced the average number of demerits by 81 percent.

Since 1992, we've subjected several of our competitors' vehicles to the same scrutiny each month, and base on our findings, we believe no one is building a higher-quality truck today than Mack.

Just as our Demerit Action Groups track down the cause of deficiencies before a truck reaches a customer, our Quality Action Groups use warranty claims to locate the source of problems that appear after delivery, and implement solutions. The data support this team-based approach: Since 1990, warranty claims received after the first year of on-the-road service are down 66 percent, despite more-demanding, less-tolerant customers.

And these higher-quality vehicles are being produced more efficiently than ever. Working with the United Auto Workers, Mack reviewed each step of our manufacturing and assembly process, redesigning workstations, analyzing material flow, determining the optimum sequence of value-adding operational elements, and setting standards. Individual employees were key to this process: Their input on such matters as how material should be delivered to the workstation, where it should be placed, and how it should be packaged has been invaluable. And the payoff has been impressive: In 1990, we built 16,384 vehicles with an average employment of about 7,247. Last year, we built 11,000 more vehicles with 1,500 fewer people.

The market is taking notice of the improvements. Mack closed 1995 with 12 percent of the U.S. retail truck market--certainly nowhere near the 20 percent of the late 1970s, but the third straight year we've improved our share, after four consecutive years of decline. We've also restored the company to profitability after five years in the red. It's not a large profit, but a solid one, born of wide-ranging process improvements, waste elimination, leaner production systems, faster flows and productivity.

Are we a "total quality company"? I'm not sure. Are we going to win a Baldrige Award sometime soon? Absolutely not. No one at Mack disputes the fact that we have a very long way to go. But we can see also how far we've come, and it's convicted us that TQM is not just another program.

Quality and TQM, I've noticed since coming to the U.S., are words quite often used interchangeably. The arguments to be that, because product quality now a given in the marketplace, TQM is outdated. But TQM is concerned more than the quality of a product or service. It is concerned with the cost that went into producing it, selling it, distributing it, and managing it. The time it took to bring it to market, the time to react, the time to act. In effect, the time it takes to do everything. TQM has to do with the people and the processes involved in every step along the way with the resources spent, the investments, and asset management. Most of all, it is concerned with having a real-time understanding of exactly what the customer values in that product or service, and eliminating anything--any motion, square foot of space, process, piece of equipment, information or specification, time and money, any sweat--that doesn't contribute to that value.

Mack's first TQM efforts were heavily focused on our manufacturing facilities to improve product quality. While it wasn't easy, the processes in plants are mostly tangible and concrete, and the waste is easily seen. Our challenge now is to focus beyond the assembly line, and use total quality to eliminate hidden waste within the company. Large-scale reorganization into cross-functional teams, centered on key processes and product lines, began in earnest last year, and already is showing results. Our Customer Order Fulfillment Group--made up of personnel formerly in sales and marketing, engineering, and manufacturing--has cut our delivery times in half over the last two years.

Sound like re-engineering, rather than TQM? We don't see them as mutually exclusive. As I've said, TQM is an entire system of management that allows us to focus on what the customer values, and eliminate anything (waste) that he or she does not. Other performance-based initiatives such as re-engineering, just-in-time, activity-based management, and so forth are tools for eliminating waste. Under the umbrella of TQM, we will use any and all of these tools wherever they make sense. And TQM will ensure that the advances we make in-each area complement each other. Just as it is the system we use to manage customer value, to manage our processes, and our people, it will ultimately be the system we use to manage our progress.

Mack, for some time now, has been compromising its performance to where it used to be in the "bad old days" of the late '80s and early '90s. That was necessary, because we needed to recognize how far we've come. But our competition has been improving as well, and the North American truck market has begun its next down cycle. We've started looking ahead, focusing on our desired future. We created what is known as the Mack Vision: to be a worldwide, competitive, and growing total quality company. We've translated the Vision into a concrete operating income goal for the next business cycle, and challenged our people to meet that goal by identifying where they can (1) increase our return on assets; (2) cut waste; and (3) grow our business. Using Hoshin Kanri--a TQM strategic tool that calls upon people within the organization to generate ideas, prioritize the most worthwhile initiatives, and track those initiatives--our people have generated a list of 75 initiatives that, if realized, will meet our goal. The initiatives range in scope from developing new international markets to reducing the amount of paper we use.

While our focus on Total Quality Management of customer value, processes, and people continues, our effort to move into what I call progress management has begun. We expect mistakes along the way. But we're trying to instill the importance of the "PDCA cycle"--that is, Plan, Do, Check, Act. It's a process that never ends, and our challenge is to maintain the sense of urgency that existed when we were clearly in trouble. Will we succeed in taking Mack's TQM system to the next level? It's too early to say. But the credibility TQM has built up along the way--through quantifiable improvements in quality, reliability, productivity, market share and profitability--are well-known to Mack employees, who have heard the buzzwords, and are now seeing the results.

The Quality Movement

Arthur R. Taylor, president and CEO of Muhlenberg College, former president of CBS, and founder of the Deming Symposium, says the quality movement is definitely not dead. Rather, it is being updated by forward-thinking companies that want to create an elite cadre of employees who are viewed as strategic assets.

CE: With other performance-improvement initiatives gaining favor, are W. Edwards Deming's principles of total quality outdated?

ARTHUR TAYLOR: Deming said that unless you can make something that the customer wants, and at a quality that pleases the customer, you're better off not making it. Today, there's no quarrel about quality: Nobody says, "I'm going to make money, and not going to make quality." But it has mutated, because we know that if you're going to have ongoing quality, you have to spend big bucks on training--and it's not only job training, but attitude--how you look at both the product and the company.

CE: Which companies have got it right?

AT: Motorola and General Motors.

CE: What's the next step for total quality?

AT: Valuing employees. It may sound like a contradiction given how corporations are downsizing, but consider this: The employees who stay become an elite cadre--and the chief executive's job now includes keeping that elite group happy and productive. So smart companies are learning that employees are the most valuable assets they have.

CE: What would Deming say about the current trend toward downsizing?

AT: He was sort of a curmudgeon. I'm almost certain he would say that downsizing is the result of poor management and the responsibility of those people who made the bad decisions. He'd say, "Don't pay them $8 million a year--don't pay them anything." Ed Deming always blamed rotten management for bad workmanship and bad quality.

Pierre Jocou is chairman, president, and chief executive of Allentown, PA-based Mack Trucks, a maker of heavy-duty trucks and major product components. Mack is a wholly owned subsidiary of Renault V.I., the commercial vehicle division of France's Renault Group.
COPYRIGHT 1996 Chief Executive Publishing
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1996, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:includes interview with Muhlenberg College Pres. and CEO Arthur R. Taylor; total quality management
Author:Nuelle, Frances
Publication:Chief Executive (U.S.)
Date:Sep 1, 1996
Words:2248
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