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8/8/2019 Quality - McK Core Beliefs
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McKinsey core beliefs on howquality journeys
CONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of McKinsey & Company is strictly prohibited
Discussion document
October 2010
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In our experience, achieving best-in class quality requires a holisticapproach covering 4 major areas
SOURCE: McKinsey Quality Service Line
Qualityorgani-zation &gover-nance
Develop-ment &productengineer-ing quality
Manufac-turing &ProcessEngineer-ing quality
Supplierquality
Salesand aftersalesquality
Quality organization, decision making
Mind-setandcapa-bilities
Qualitymindset
& capa-bilities
Quality
strategy& KPIs
1
Func-tionalqualitypro-cesses
Quality strategy Set aspiration level based on
Voice of the customer
Quality KPIs Define KPIs Set targets Break down to functions
2
3
4Manu-facturingquality
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Good isolated
solutions in
some functional
areas exist Focus of quality
processes is on
technical
departments
(R&D,
production,
procurement) Focus on
warranty and
goodwill costs
A quality transformation is a multi-year journey typically leads through 3stages and takes the quality system from reactive to preventative mode
Ad-hoc fire-fighting
Little
transparency
No
standardized
processes
Reactive
quality
management
Single, stableQ-processes
Good isolated
solutions in
some functional
areas exist Focus of quality
processes is on
technical
departments
(R&D,
production,
procurement) Focus on
warranty and
goodwill costs
Integrated quality
system
Excellence inquality
Continuousimprovement of
quality
established in all
processes
Consistent
implementation of
capable andmanageable
quality processes
Quality and
production are
considered as a
connected, joint
theme Quality is rooted
in decision
making
processes
Continuousimprovement of
quality
established in all
processes
Consistent
implementation of
capable andmanageable
quality processes
Quality and
production are
considered as a
connected, joint
theme Quality is rooted
in decision
making
processes
I
II
III
IV
Quality is
anchored in all
functions
Quality targets
and KPIs are
definedholistically
Qualitycontributes
significantly to
business
performance
SOURCE: McKinsey Quality Service Line
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Set-up of new field failure
resolution process
Example of a quality transformation roadmap:1-year-program with 16 initiatives for holistic improvement
StabilizationQuick fixes to stop the bleeding Towards excellence
Phase 1: Jan - Mar Phase 2: Apr - Jun Phase 3: Jul - Dec
Field quality
Productdevelopment
Focused end-of line inspection
Supplierquality
Set-up of new quality loopsystematic in plants
Production Management shop-floor audits
Qualityfunction
Failure resolution taskforce
(tackle top 100)
C
A
B H
SOURCE: Quality Service Line; team analysis
AUTOMOTIVECLIENT EXAMPLE
G
Transformationstarts with reactiveactivities and seeksto build a preventivesystem
Establish lessons learned
database
N
Crash program for supplierrecovery of warranty cost
Focused incoming parts inspection
E
D Resident engineers sentto 10 most critical suppliers
I Active supplier developmentprogram (wave 1)
O
Overhaul of maturity grademanagement systematic
J
Q-function veto establishedK
New approach to conceptquality
P
Q-communication initiative
Organizational resetEmployee Q-survey
M
F L
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We have covered many different quality related topics
100% = 606 client engagements
Engagements, 2005 - 09 December
NOT EXHAUSTIVE
Engagements by function and regionExamples of studies
Diagnosing quality issues across the
entire value chain starting from fieldcomplaints and internal Quality losses
Identifying gaps and designing
the quality system to be deployedin manufacturing facilities
Developing a strategy for improving clinicalquality and closely linking the quality strategy tothe overall institutional strategy for a hospital
Supporting the end-to-end implementation ofclient's quality system including design of a newcustomer care approach and installer strategy
Defining the real Cost-of-non-Quality, inclu-ding indirect effects like market share impact
Supporting a client in driving performance improve-ment of their Quality and Customer Care organization
Optimizing quality improvement
tools/processes and enhancingcapability training programs
Supporting a Quality Systemtransformation focusing onQuality function structure andsize, performance management,and capability building
Supporting a client to develop froma cost leader to a quality player
1 Professional Services, Public Sector, Social Sector, and Private Equity
2 Telecommunications, and Media and Entertainment3 Africa, Central America, Australia and New Zealand, and Caribbean
3
11
33
50 Europe
Rest of world3South America
2Asia/Middle East
NorthAmerica
77
7
8
8
106
25
21
Healthcare
FinancialInstitutionsGroupConsumer
Industry Group
High Tech
TIME2
TravelInfrastructureLogistics
Global Energyand Materials Automotive & Assembly
Other1
Integrating two companies tofocus on quality supply chainand introducing performancemeasurement approach
Supporting a quality transformationof a shipyard in Western Europe
Reducing warranty and goodwill costsand improving quality in launch phase
Redesigning the quality system including strat-
egy, core processes, and quality organization
SOURCE: McKinsey Quality Service Line, FPIS
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Objectives
To become No.1 in CS in the Japanese
market by 2015
To commit reliable quality to customers
To gain trust from customers
To build up a sustainable process of CSimprovement activities
Background and objectives of No. 1 in Japan
Background
To increase market share and sustain
good profit, reflecting the Voice OfCustomer into the entire xxxorganization is critical
Based on JD Power survey, xxx has
constantly been lagging behind itscompetitors, xxx, xxx and xxx in CSIscores
xxx needs to understand what it takesto gain customer satisfaction and tackle
this issue leveraging cross-functionalcapabilities
JAPANESE EXAMPLE
SOURCE: McKinsey
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Operational KPIs developed from multiple input factorsand designated workshops
Example design requirements
KPI design requirements(examples)
Quality governance should be
performed using a small set oftop-level KPIs (e.g., JD PowerHeavy-Duty CSI)
JD Power scores should becascaded to responsibledepartments (e.g., enginedesign should be accountable
for engine reliability score)
Lead indicators are needed forsuccessful governance (e.g.,engine performance indurability test is a suitable leadindicator of JD Power score)
Support functions cannot begoverned by impact KPIs, butwill be governed by processKPIs instead
Input factors
Current quality andperformancemanagement
Best practice elements
for KPI systems Benchmarks for
performance management
Analysis of availableexternal KPIs
Facilitator
Head of
unit (e.g.,plantmgr.)
Controllingrepresentative
Financerepresen-tative
Qualitymanage-ment repr.
KPI cascading workshop
Filter potential design requirements
Examine potential designrequirements for consistencywith KPI best practices, e.g.,cascadeability and existenceof matching lead indicators
JAPANESE EXAMPLE
SOURCE: McKinsey
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Bridging customer insights and cross-functional operations
CS#1in Japan
CS KPIsConceptProduct
(production,suppliers)
SalesAfter sales
Operational KPIsR&D
ProcurementQuality Management
ProductSalesAfter sales
Examples of customer-relevant attributes
R&DProduct characteristicsTCO (e.g., fuel efficiency)Available options vs. competitors
Ease of maintenance (design-for-repair
Supply On-time delivery of parts for new vehicles and
for service/repairSpare parts cost
QM Problem resolution speed incl. campaigns/recallsQuality of supplier parts
ProductionOn-time delivery of new vehicle
Initial quality (first 0-3 months)Rework
SalesProximity of dealersSales skills (e.g., technical knowledge, waiting time,
knowledge of financial options, understanding ofcustomer business friendliness)
After salesService availability incl. proximity and opening
hoursRepair time incl. diagnosis and spare partsOn-time delivery of repaired vehicle
52
Positive experience is driven by delivering on factors that matter most tocustomers to create the perception of a service commitment to them
Resolve problems quickly
Knowledgeable about mybusiness
Competent, well-trainedemployees
Superior cost
Call center excellence
Convenience
Courteous and professionalatmosphere
One-on-one personalrelationship
Drivers of perception ofservicecommitment
Importantfactors
Factors thatmatter less
Relativeimportance
1
2
4
5
6
13
18
59
Providing a positiveexperience is creatingthe perception of theservice commitment,driven byconsistentlydelivering atmoments of truth
Moments of truth arethose interactions
during whichcustomers investsignificant energy(sometimesemotional)in theoutcome
There will always beproblems its really howwell they resolve it and
whether I haveconfidence they will
resolve it in the future
I will forget about themistakes banks make as long
as the customer service is niceabout it and fixes it
The most important thing is tobe treated with respect,
because it is your money
If someone is really going totreat me well, you can charge
me more per month for theservice
What are thepriorities for thecustomers?What are the statedneeds vs. trueneeds?
How CS KPIs arelinked to operationalKPIs?How can we come toa cross-functional
agreement?
KPI pyramid
JAPANESE EXAMPLE
SOURCE: McKinsey
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One key driver of customer satisfaction is effectiveand fast field failure resolution best practice example
Time limit (workingdays, not cumulative)
X
Escalation
process
COO/CEO
Cross-functionalescalation committee
30
Cross-functional defect elimination team
Prioritization
Done by centralcoordinative department
Quality measurements
E.g.,
W&G ratesProduction failuresDealer feedback
Internal
E.g.,
JD PowerNCBS
External
2
HQ How to speed up the process
Observe online data from the field (W&G rates, diagnosis data, etc.)and from the production line automatically
ThresholdMaximum gradient
Shorten time limits/speed up process
Documentation oflessonslearned
Long-termdefect elimination
Short-termmeasures
Defectanalysis
730147
Number ofdefects
Time
Forward-lookingestimates
Defect elimination process
JAPANESE EXAMPLE
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Transparency on factors affecting CS and required cross-functionalactivities
JD Power CSI factor
LDT 2009, Percent
100%
After-sales
experience
Purchasingexperience
Quality
Lifecycle cost
56
21
10
13
Examples of relevant factors Examples of improvement activities Related line functions
Fuel efficiencyVehicle priceMaintenance cost (service, parts)
Improvement of fuel efficiency of engine andtransmissionVariable cost reduction
Productivity of mechanicParts pricing
Development, designProductionProcurement
After-sales
Product specQuality of parts and production
processDurability
Product design optimizationIncrease in supplier quality
Increase in production qualityIncrease in maintenance and service quality
Development, designProduction
ProcurementAfter-sales
Explanation capability of sales repsPurchasing process
Delivery process
Education and motivation of sales repsProduct description (brochure)
Delivery by deadline
SalesProduction
Distribution
Delivery time and reliability of serviceStable supply of partsRelationship with sales reps
Fast field defect elimination
Maintenance friendly specsService schedulingSpeed-up of service
Inventory managementCross-functional elimination
After-salesDevelopment, designDistribution
JAPANESE EXAMPLE
SOURCE: Team analysis
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Projectleadership
Quality planning
Quality monitor
Platform leader
Functionsmanager
Timing
Approvetargets
Analyze andpriori-tize KPIdata
Define KPItargets
Conducthearing withplat-formandfunctionalmanagers
Verify operational targets
with managers
Breakdown tar-getsinto opera-tional KPIlevel
Collect KPI data anddistribute reports
Assign KPIresponsibility
Assess plan vs.actual
Assess plan vs.actual
Push organization todefine countermeasures
Report progress ofmeasures
Executecountermeasures
Reviewactivityprogress
Initiate counter measuredefinition
Annually Monthlyreporting
Ad hoc (as problem identified)
Monitoring
Counter measure definition Counter measure executionTarget setting
Instructsupport
Coordinatecross-
functionalactivities
Define andinstructmeasures
Reportprogress
review
Feedback loop withDB inputs
Establish clear link toeradication teams
Monthly report
Reflect onevaluation
Example of mechanism to sustain impact JAPANESE EXAMPLE