Apparel Quality Management

Case Study
&
Quality Guru: William E. Deming

SUBMITTED BY-
AMRITA (BFT/16/1610)
RISHI RAJ (BFT/16/118)
BANG & OLUFSEN (A CASE STUDY)

COMPANY PROFILE

• Bang and Olufsen is a Danish Consumer electronics company that designs and
manufactures audio products, television sets, and telephones.

• Company was founded by Peter Bang and Svend Olufsen in 1925.

• First product was Radio which worked on alternating current at a time when most were
run on batteries.

• Products are sold mainly by an extensive, independent retail network in more than 100
countries.

• Company has worldwide reputation for idea based products of high quality and artistic
design.

• Company has delivered the largest and most consistent design among the world’s
industrial companies portfolio.

• Company says “Brands are not made by marketing people but by consistent delivery of a
certain condition for many years”.

• Gained reputation during 2nd World War as a premium audio device maker.

Object of Analysis

Going forward the most important issue was an obsolete work culture at B&O, which resulted
in conflict between work cultures of older designers, against new market adaptions guidelines
established in thy era of Sorensen. Despite implementing strategies to maintain the innovative
culture and adapt and exceed market requirements, performance was just not a reality in the
given time.

COMPETITION: Asian Market

• Competition from Asian manufacturers forced many Danish players to close.

 • Fake products were being manufactured in China.

• B&O survived by allying with architects and designers.

• Focusing on its idea, design behind its product, and by emphasizing high quality.

• Competition together brought weak product demand.

• Near Death experience- bought back 25% stakes from Phillips.

• Company laid of one quarter of its employees and launched a new distribution
strategy.

• Company to sell products through B&O retail outfits.

PROBLEM IDENTIFICATION

Impact of IPod:

• IPod extended market to a virtual space, where great design meant great software and
network based interaction.

• Change in the technology in electronic market lead to new demands.

• Different from B&O’s traditional expertise.

• Company formed “idealab”, a way of injecting new ideas from outside traditional
process.

• Deciding right amount of change was difficult.

• In 2008 company suffers a catastrophic loss of $126M or 37% year-on-year sales drop.

• Subsequent drop of share value by $52 to $8.50

Quality Improvement Methods used

 PASTEL Theory
PESTEL stands for:
P – Political Factors
E – Economic Factors
S – Social Factors
T – Technological Factors
E – Environmental Factors
L – Legal Factors
  PDCA Cycle
 Quality Circle

Restructuring at B&O

• “Sorensen” was hired as the CEO to specifically handle this situation

• Rejected “Idea lab” concept.

• New CEO Karl Kristian Hvidt Nilesen.

• Keeping Consumer interest.

• Analysed Problem

• Organized restructuring.

Methodology of Restructuring

• Business Model Change

- Value proposition: B&O competencies changed to quality, sound, picture, design and
elegance with prominent stronghold in acoustics, software and mechanics.

- Supply Chain: Sells in more than 60 countries through 11 National Sales Companies, all of
which are 100% owned by B&O. It was decided that the product would be sold in exclusive B&O
outlets where dedicated trained sales people could provide the best shopping experiences.

- Target Customers: Emphasis moved on premium customer segments and art professionals.

• Technological Model Change

- Product & Service offering: Cutting edge , never seen before designs.

- Process Technology: Process standardization, radical design.

- Enabling Technology: Software networking solution.

7 rules of innovations

 Leadership on innovation strategy and portfolio decisions.

 Integrating innovation in organisational culture.
 Aligning the amount and type of innovation.
 Managing the tension between creativity and value capture.
 Neutralization of organisational antibodies.
  Establishing a network between external and internal environment.
 Creating the right matrices and rewarding people for innovations.

Value Proposition

• Idea Lab was created in the early 2004.

• Fusion of mechanical inventions with new digital technologies.

• New graphical user interfaces, new ways of interacting in cyberspace.

• Finding concepts in untapped and uncontested markets.

• Making things more convenient and personal.

• Integrate Idea Lab innovations to the traditional process.

RESTURUCTURING MAKING B&O PRODUCTS

• Designers not affected by other parts of organisation.

• Free to explore unconditioned ways.

• Divergent ideas and emerging new designers.

• Relied on a culturally evolved collaboration between designers, concept developers,

engineers and technicians.

MANUFACTURING RESTRUCTURING

• Products were made to orders, based on specific customer.

• Common variants kept in stock in the U.S.

• Non stock items were delivered in about four weeks.

• Set daily production objective for each manufacturing line.

• The line between R&D and manufacturing was less sharp at B&O than at mass-
producing companies.

• Production layouts were tailored to each product.

• Workers met with line managers every morning to discuss previous day results and
solutions to improve.

THE NEW OUTLOOK

 • The acceptance of Idea lab took longer than anticipated.

• Better networking and communicating.

• New software solutions and implementations.

• More explicit and enabling process.

• Differentiation from the competitors and peers.

• Input from people who understand the virtual world considered.

Key points

 The quality of planning before venturing in to development phase.

 Continuous commercial assessment of NPD process during all stages of development.
 Orienting the NPD process to the need of market.
 Clearly distinguishing between customer integration and orientation in NPD.
 Establishing the right organisational structure, design and climate.
 Timing product launches.
 Employing a multistage , disciplined New Product Process.

Conclusion

• In order to sustain in this competitive World every organization have to focus on every
aspect of organizational structure and their products as well as current scenario of
market and socio-economical trends.

• Main reason behind B&O sales decline is they were lacking on virtual technological front
and advancement.

• After restructuring B&O starts making profit in the year 2010.

REFERENCES

• http://www.bang-Olufsen.com/en

• http://www.largestcompanies.com/company/Bang--Olufsen-Operations-AS-153685

• http://www.thecasesolutions.com/bang-olufsen-design-driven-innovation-8336

• http://www.scribd.com
 WILLIAM E. DEMING
Edwards Deming was a prominent consultant, teacher, and author on the subject of Quality.
Deming has published more than 200 works, including well-known books Quality, Productivity
and Competitive Position and Out of the Crisis. Deming developed 14 points for managing.

The Deming Cycle - PDCA

PDCA (plan–do–check–act) is an iterative four-step management method used in business for
the control and continuous improvement of processes and products. It is also known as the
Deming circle/cycle/wheel, Shewhart cycle. A variation of this is plan–do–study–act (PDSA)
cycle.

 Plan

Plan the action. Assess the current state, and the future state, and plan how to close the gap.
Identify alternate solutions.

 Do

Try out or test the solutions (sometimes at a pilot level).

 Check

Check to see if the tested solutions accomplished the objective.

 Act

Request corrective actions on significant differences between actual and planned results.
Analyse the differences to determine their root causes.

 Repeat the cycle

The Deming System of Profound Knowledge

The System of Profound Knowledge, or management by positive co-operation, is described in
its four interrelated elements.

 Appreciation for a System

The need for managers to understand the relationships between functions and activities, and
that the long-term aim is for everyone to win – employees, shareholders, customers, suppliers
and the environment.
  Knowledge of Variation

Knowledge and understanding of variation, process capability, control charts, interactions and
the loss function.

 Theory of Knowledge

As all plans require prediction based on historical information, the theory must be understood
before it can successfully be copied.

 Knowledge of Psychology

The understanding of human interactions, how people are motivated and what disillusions
them.

The 14 points of managing

Deming’s fourteen points of managing include:

1. Create constancy of purpose

Create constancy of purpose toward improvement of product and service, with the aim to
become competitive and to stay in business, and to provide jobs.

2. Adopt the new philosophy

Adopt the new philosophy. We are in a new economic age. Western management must awaken
to the challenge, must learn their responsibilities, and take on leadership for change.

3. Cease dependence on inspection

Cease dependence on inspection to achieve quality. Eliminate the need for inspection on a
mass basis by building quality into the product in the first place.

4. End the practice of awarding business on the basis of price tag

End the practice of awarding business on the basis of price tag. Instead, minimize total cost.
Move toward a single supplier for any one item, on a long-term relationship of loyalty and trust.

5. Improve constantly

Improve constantly and forever the system of production and service, to improve quality and
productivity, and thus constantly decrease costs.

6. Institute training
Institute training on the job.

7. Institute leadership

Institute leadership (see Point 12). The aim of supervision should be to help people and
machines and gadgets to do a better job. Supervision of management is in need of an overhaul,
as well as supervision of production workers.

8. Drive out fear

Drive out fear, so that everyone may work effectively for the company.

9. Break down barriers

Break down barriers between departments. People in research, design, sales, and production
must work as a team, to foresee problems of production and in use that may be encountered
with the product or service.

10. Eliminate slogans, exhortations, and targets

• Eliminate work standards (quotas) on the factory floor. Substitute leadership.

• Eliminate management by objective. Eliminate management by numbers, numerical goals.
Substitute leadership.

11. Pride of workmanship

Remove barriers that rob the hourly worker of his right to pride of workmanship. The
responsibility of supervisors must be changed from sheer numbers to quality.

12. Abolishment of the annual or merit rating

Remove barriers that rob people in management and engineering of their right to pride of
workmanship. This means, among other things, abolishment of the annual or merit rating and
of management by objective.

13. Education and self-improvement

Institute a vigorous program of education and self-improvement.

14. Transformation

Put everybody in the company to work to accomplish the transformation. The transformation is
everybody’s job.
Seven Deadly Diseases
The "Seven Deadly Diseases" include:

1. Lack of constancy of purpose

2. Emphasis on short-term profits

3. Evaluation by performance, merit rating, or annual review of performance

4. Mobility of management

5. Running a company on visible figures alone

6. Excessive medical costs

7. Excessive costs of warranty, fuelled by lawyers who work for contingency fees

"A Lesser Category of Obstacles" includes:

1. Neglecting long-range planning

2. Relying on technology to solve problems

3. Seeking examples to follow rather than developing solutions

4. Excuses, such as "our problems are different"

5. The mistaken belief that management skills can be taught in classes

6. Reliance on quality control departments rather than management, supervisors,

managers of purchasing, and production workers

7. Placing blame on workforces who are only responsible for 15% of mistakes where the
system designed by management is responsible for 85% of the unintended
consequences

8. Relying on quality inspection rather than improving product quality

References:

 https://www.bl.uk/people/w-edwards-deming
 https://deming.org/
 https://asq.org/about-asq/honorary-members/deming