Application of Total Quality Management at SCECO-EAST
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Saudi Consolidated Electrical Company is located in the Eastern province (SCECO-EAST), and it is one of the largest electrical utility companies in Saudi Arabia. This company has the potential of generation of 7200MW of electric energy, and it has 6600 employees.
The electric industry is currently going through significant changes in its environment, compared to the historical period when this company enjoyed monopoly in the supply of its electric energy. Previously the company did not have a lot of competition and the cost of production was decreasing due to improvement in technology and modes of production of electricity. The utilities of the company were experiencing massive growth, and the capital budget of the company worked ahead of the demands of the company. Due to the good performance of the business, little pressure applied for the control of operating and maintenance costs of the company. Since the electric utility industry in Saudi Arabia is still a monopoly, these utilities have to compete with each other to attain effective and efficient services provision for customer satisfaction. This is because the customers have the choice of relocating their factories and business to other areas with better services. Another factor of competition is that it results in the reduction of the cost per customer, which could be achieved through the reduction in the operating costs of the electrification of the new and existing distribution networks. For this reason, SCECO_EAST has introduced total quality management concepts with the aim of improving customer services and satisfaction through a quick response to the needs at a minimum cost. To achieve this, Deming Principle is applicable and conceptualized with the major aim of decreasing the cost of production and the increase in the level of productivity of the company.
With high quality and lower costs leads and increase in the market share, which can be realized through allowing the firm to stay in business and provide more jobs. The TQM is used to improve the quality of production, which is a measure of fitness for meeting the customers’ demands for both the formal and the informal requirements. Therefore, this article presents the SCECO-EAST experience in the implementation of the TQM to the distribution substation and maintenance. Manufacturing companies easily adopt quality programs and it can be measured since the product is tangible and can be controlled easily through the prescription of clear specifications and standards. The paper gives an overview of the tools, techniques and approaches to be followed in making of the improvements for the achievement of external customer satisfaction through satisfying of the internal needs of the customers. Finally, following the presentation of the tools and techniques, the results of savings and recommendations are presented.
Critically Analyze the Methodology Adapted in This Article in the Implementation of TQM at SCECO-EAST
The TQM methodology adopted by the SCECO-EAST company is relevant for the objectives set by the company. The main objectives of setting up TQM are to be able to improve the quality of services disseminated to the customer both internal and external in the effort to reduce the process cycle time and the cost incurred. Furthermore, the TQM is the best strategy, which could be adopted by the company in the efforts of creating an environment, which fosters continuous improvement. Through TQM methodology, there is the opportunity of optimization of value added activities to employees and the consumers, which will create an environment with customer satisfaction and high moral values. The methodology provides strategies for involving the employees in continuous company process in the process of improving process based performance of the employees.
The SCECO-EAST TQM was prepared in three phases, which was particularly ideal to ensure that the process runs smoothly to achieve the objectives of the company. Phase 1 of the project involved pilot implementation in operating business lines for a single year. This will give the company the opportunity to analyze the relevance of the TQM. It is also beneficial for monitoring the quality of improvement of the employees and the formation of the improvement teams. The second phase involves the expansion throughout the SCECO departments, where after assessing the success of the pilot phase; the company can introduce a minimum of two teams in each of the departments. Phase II is a two year program with close monitoring. In phase III, it is the most critical stage of the process of implementing and re-engineering the methodology assessed in Phase I and Phase II towards the improvement of the SCECO’s principal business processes. At this stage, it is critical for the quality improvement teams in all departments to choose a wider process, which covers different departments.
The program implementation involves a straightforward methodology known as the Peoples achieving corporate excellence (PACE) program, designed to improve the small processes with limited a limited scope. Pace is an acronym for the words pick, analyze, create and enact which are the key stages for the process of project improvement. The pick process is crucial for defining the work process, establishment of the customer requirements and gaining of the management approval for different processes. The Analyzing of the opportunities involves the collection and processing of the data and the determination of the cause of the rising opportunities. The creation of the improvements is one of the words of the acronym PACE, and it refers to the brainstorming of the improvement strategies, and development of the cost benefit analysis, which is essential during the creation of the implementation plan to gain management approval. The enacting plan is necessary for the identification of the positive and the negative forces and development of the contingency plan in case of the failure of implementation of the improvement. The process involves the use of the preventive maintenance, which uses a medium distribution voltage in the substations and it an activity in any of the leading electrical utility. This is the practice of conduction of routine inspection services, tests, and servicing of the substation distribution equipments. This is because as soon as any new equipment is installed in any company the process of deterioration begins which could be elevated by factors such as the hostile environments and heavier workloads. The incorporation of the preventive maintenance programs recognizes these factors and provides the necessary measures of effectively coping with them.
Which other tools/ techniques studied by you in this course could be utilized by this company while implementing TQM
The other technique, which could be utilized by this company in the implementation of the quality control, is using statistical quality control. Statistical quality control lies majorly in the control of the production quality and control of the purchased materials because statistical quality control can be easily imposed on the vendors through signing of a contract. In this method, it is required that the quality standards are set through the establishment of the measurements of a particular product and, therefore, defining quality. The measurements in this case are dependent on the line of production, which in this case it is the production, and distribution of the electric energy. The acceptable and divergence band measurements can be studied for their up and down fluctuations to establish the level of divergence form the base measurements carried out.
Quality control begins during the production of the process itself, the samples are taken continuously and measured, and measurements are recorded. For instance for this company the samples on the quality and the life of the products are taken at a random and the recording are evaluated to determine of the process has to be continued or discontinued depending on the divergence found and the costs incurred for the correction of the same. This method could be more effective if the quality standards are first set before measurements for particular items. Since a TQM is perceived as the method used for the de emphasizing of the status distinctions and emphasizing the employees empowerment, it generally preaches the horizontal coordination of the company’s activities, to have process rather than internal efficiency. Each of the employees needs to consider the importance of the services offered by other employees within the company. They need to learn to work together to achieving the common goals of the institution.
Which analysis used in the case is most convincing for you – Cost-benefit, Field Force or contingency diagram? Give the reasoning.
Cost benefit analysis is the most convincing as it is used to aid the team in the identification of the costs, the savings and the intangible benefits of each improvement idea. This helps in gaining of the idea for the implementation of the program. This is more valuable unlike the force field analysis used for the visualization of the forces influencing the improvement. This gives the negative forces, which could influence and prevent the change and the positive changes involving the program. Furthermore, the cost benefit analysis gives the benefits of the company in terms of the labor person-hours, the operation person-hours, the material cost of production and the KWH consumption of electricity and other costs such as the cost incurred during the interruption of the electricity. This helps in the effective monitoring of the program to suit the needs of the company. Each of the suggested improvement in the cost analysis program has its initial cost incurred during the implementation. The decision implement any of the programs is directly dependent on the analysis of the cost and the final returns and benefits of the company. It is recommended that, before the implementation of any of the program, such as the maintenance and servicing of the equipment, it is extremely essential that the benefits of the process, both tangible and intangible, have to exceed the cost of implementation.
The benefits from the program can be realized aver a stipulated time. It is vital to realize that at the end, the cost incurred for running and implementation have to be less than the benefits from the company. For example for this company, reduction of the cycle times of the sub process in terms of the time reduces the time of production and the labor involved. Calculation of the cost benefits of TQM program is beneficial in the reduction of the manufacturing costs, scraps and the reduction in the overhead costs. The process of the reduction in the manufacturing costs involves the calculation of the manufacturing cost savings based on the figures drawn from the management systems of the company. The information system provided in this case is inclusive of the TQM driven and engineering changes, calculated as the functionality of the fraction of the total improvements after the installation of the engineering process. Furthermore, they also include reductions in cash flows achieved through attrition and reduction in the number of temporary employees and the opportunity costs not considering the tangible benefits.
The reduction in the overhead costs is also one of the cost analysis benefits as the company has the opportunity to quantify the reductions in the overhead costs of production. This one of the utmost TQM strategies used for the attainment of a continuous improvement on the production floor to place both responsibility and authority for an activity close to its source as possible. This will ultimately reduce the extra cost incurred for the infrastructure and the distribution of electricity. One of the benefits of reduction in the overhead cost is the integration of the quality control functions in the product lines. The product and the production line have to be made the responsibility of each other and have to be carried out as an in process efforts rather than as separate quality control function. The quality control group can be given the tasks of auditing of the production lines for their compliance with the procedures set in place. This result is a reduction in need of quality personnel, which the company could have otherwise accommodated. Generally, these quality control processes have a significant role in the reduction of the production overheads through cutting down of the direct labor costs and the employees benefits. This reduction in the overhead costs presents real savings to the company's cash expenditure. Although most of the companies go for the tangible benefits from their services, they forget to determine and appreciate the intangible benefits.
One of the biggest intangible benefits of the company is the changes in attitude, which has paramount effects on the way people carry out their day-to-day activities in the company. Because the employers receive trainings on TQM, they become better placed and aware of the skills levels within the organization and; therefore, they have the chance of capitalizing on the opportunities of improvement. In addition, it also makes the employees to be a better in solving of problems in the most effective and efficient manner. In the event of an occurrence of a problem, it is easier for them to formulate a plan problem for the solution to the problem. Because the employees will be powered by the QTM philosophies, they will have a higher self-esteem as they will feel recognized and more valued. In addition, the other intangible benefits include the customer satisfaction with the products and services. The spirit developed during the implementation of these processes eradicates all the barriers within the organization, and employees of the company look at themselves as the customers of the company and, therefore, contribute even higher to the fulfillment of the company’s goals.
Lessons from this Case Study
One of the major lessons from this case study is that the QTM is exceedingly essential in, all the companies, and its implementation is necessary for the maximum output in production. Currently, the electrical market is becoming over flooded and increasing competitive. Improvements in cost reduction and the response in quality services have a competitive advantage. The maintenance of the substations processes has a paramount impact in all the factors determining the competitive advantage of the company. In addition, without upper management commitment and involvement, the TQM program in an organization can fail to succeed. From this paper, it is clear that the improvement in any process needs a systematic methodology to be adopted by teams of the consultants receiving the final output of the processes through the satisfaction of their needs.
The improvement needs to start from the customers receiving the final output of products to satisfy their daily needs and requirements. The teams to be used in the implementation of the TQM should be employees form the various parts of the company who work hand in hand to improve the processes of the organization. If the organization has to succeed, it should always focus on the satisfaction of the customers and an error free performance from the employees. Furthermore, it is constantly exceedingly essential to measure and evaluate the factors that truly affect the performance of the company and creation of the relevant channels of communication of lessons resulting from the improvement of the performance. It is also crucial to train employees on the effective ways in which they could reallocate their energies to studying the processes in teams and searching for the causes of the problems within their team. There is a need for setting our of the quality improvement teams to ensure that there is continuous improvement in the quality systems of the organization. In the effort to maintain the functionality of the QTM, it is necessary for the company to integrate the suppliers into the QTM processes, which stipulates that the suppliers relation need to progress in the direction of the formation of partnerships with both parities benefiting from the relationship. In developing a total quality culture, in creation, one decisive step is to develop a building team of a principal contractor and subcontractors who would entrust to the quality process and development of a true quality attitude. Through the application of QTM concepts, the substations have the chance of reducing the process cycles by a 40% margin, which saves the labor, vehicles and the materials.
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