SCECO-EAST Company’s Total Quality Management

Abstract

In the service sector, an organization’s operations depend on the need to provide high customer value. The business ensures that it only adds value to services, which boost the significance of the client in terms of lowering costs and/or enhancing consumer satisfaction. Such dual concerns made SCECO-EAST, which is an electric utility facility in Saudi Arabia, implement TQM as a mechanism for increasing its performance. The paper summarizes the change that the business wants to make. Specifically, it analyzes it critically in an effort to propose alternative tools for TQM implementation. It also proposes a cost-benefit analysis as the most preferred approach for analyzing TQM. Besides, it discusses the key lessons that can be derived from SCECO-EAST’s experience with TQM implementation.

Summary

In the service sector, quality is an important aspect of determining the level of customer satisfaction based on the services that are offered by any business. In the electric utility industry, the number of outages and the time in which they last are important determinants of service quality. Operating in this industry, SCECO-EAST, which is a monopoly within its region of operation, values TQM as an important strategy for ensuring both internal and external customer service satisfaction. The advantage of being a monopoly within the eastern region does not make the company secure since customers can easily relocate their industries to other regions with better service delivery in terms of reliability and availability of power supply. Customers are also interested in seeking electricity supply services from utilities that offer low cost, but high-quality power (Al-Saggaf, 1997). In an attempt to address these dual concerns that can help SCECO-EAST achieve a competitive advantage compared to other regional electricity utility suppliers, the business introduced total quality management (TQM).

SCECO-EAST sought to implement TQM to achieve objectives that are centered on customer satisfaction, the involvement of employees in quality management, fostering continuous improvement for its process performance levels, and reducing the cost of its operations. This mission was accomplished through a TQM program that was organized in three phases (Al-Saggaf, 1997). Phase 1 involved the formation of 24 teams for quality improvement, which implemented pilot quality programs within SCECO-EAST’s business operation areas for a period of one year. In phase 2 that took two years, TQM was extended to all company’s departments through the formation of at least two teams for every department (Al-Saggaf, 1997). Phase 3 involved re-engineering of TQM methodology to improve the company’s main business processes. The teams for quality improvement had the obligation of selecting processes that meet the needs of different departments.

SCECO-EAST utilized the PACE (pick, analyze, create, enact) approach in improving its small processes. It focused its “TQM initiative on PM (preventive maintenance) for S/S (Distribution Substations) as it constitutes the main activity in the electrical utility supplies” (Al-Saggaf, 1997, p.42). The main goal of the PM at SCECO-EAST involves reducing incidences of outages due to malfunctioning and/or failure of equipment, ensuring scheduled power outages in an effort to increase reliability, and assuring that any equipment operates to meet its expected lifespan in a bid to guarantee their reasonable utilization (Al-Saggaf, 1997).

Through the PM, the company reduced inconveniences to its final customers due to emergency shutdowns and reduced maintenance costs by lowering the cost of material, fueling vehicles, and labor. The PM process was broken down using mapping techniques into three sub-processes. The effort was put to minimize non-value adding activities in a bid to reduce operational costs. Through the TQM, SCECO-EAST expected savings in labor that amounted to SR 1,300,000 together with tools and material that were worth SR 150, 000. It also expected to reduce the cycle time for sub-process one by 50% and its activities from 12 to 5. In the case of sub-process 2, activities reduced from 14 to 12 (Al-Saggaf, 1997). Most importantly, TQM was expected to increase its capacity to address customer wants and needs.

Critical Analysis of SCECO-EAST’s TQM Implementation Methodology

Quality comprises an important aspect of determining the performance of the entire organization. Thus, all departments, including the quality department, have the responsibility of ensuring compliance to present quality standards. Hence, an effective TQM implementation methodology must include the participation of all organizational stakeholders in its implementation.

The TQM process that was implemented by SCECO-EAST is mainly customer-centric. It is concerned with process improvement. The methodology fails in terms of incorporating sufficient perspectives on employee empowerment. This observation is perhaps an important drawback upon considering that TQM involves a change that is implemented through people who must be motivated to participate in it. Motivation is important to reduce reluctance and/or embrace change, especially by noting that people normally resist a change in an attempt to maintain their status quo (Zhihai, 2007). Nevertheless, emphasis on work teams during the first phase of implementation of the TQM serves as an indication of the need to engage employees in organizational change through TQM at SCECO-EAST. However, total employee engagement in the change process is inexistent.

Zhihai (2007) states, “Total employee commitment can only be obtained after fear has been driven from the workplace when empowerment has occurred, and management has provided the proper environment” (p.56). The total engagement of employees in the change process ensures that high-performance systems of work within an organization integrate accurately with efforts that are in place to ensure continuous improvement.

Any effort to improve the performance of organizations through TQM methodology needs to focus on process improvement. Process thinking encompasses a fundamental element of TQM. A process involves the route that is followed by the internal and/or internal suppliers to transform services or products and then delivering outputs to the internal or external customers (Zhihai, 2007). The goal of TQM is to reduce time and cost in these processes. TQM’s methodology that is adopted by SCECO-EAST complies with this concern. The organization applied various tools for process analysis with the objective of reducing cycle times and simplifying work (Al-Saggaf, 1997).

A subtle strategy for improving the quality of the process involves eliminating all non-value adding activities. Consumers do not pay willingly for the costs associated with the processes. To this extent, the 4W and One H approach to the evaluation of the value of all activities that form the processes was adopted to ensure better service delivery to consumers. Through the process improvement, under the guidance of TQM concepts, SCECO-EAST reduced cycle times. Its main PM processes include setting up (sub-process 1), attending allotment substation repairs (sub-process 2), and data access accompanied by exposure (sub-process 3) (Al-Saggaf, 1997).

As revealed before, TQM in the service sector focuses on enhancing customer satisfaction and reducing costs. In electricity utilities, satisfaction may be expressed in terms of reliability and availability of power supply. Through process improvement, SCECO-EAST reduced cycle time for sub-process one by 50 percent (from 23 hours before the execution of TQM to 12.5 hours after implementing it) (Al-Saggaf, 1997). The facility also simplified work for sub-process two by cutting down the number of steps in the process from 12 to 5 (Al-Saggaf, 1997, p.47). Cycle timesaving was also realized.

TQM must deliver benefits to the organization and the target customers. Change approaches need to be easy to implement, pose less resistance from both employees and management, and have a low cost of implementation (Zhihai, 2007). The TQM methodology that was adopted by SCECO-EAST complies with these concerns. A strategy for measuring or evaluating the extent of achievement of the desired change through TQM is also important. For this reason, incorporation of cost-benefits analysis approaches, force field analysis, and contingency diagrams were imperative at SCECO-EAST.

Alternative Tools for implementing TQM at SCECO-EAST

SCECO-EAST can utilize alternative tools such as JIT and lean techniques such as Lean Six-Sigma to execute TQM. The focus of the JIT (Just-in-Time) strategy entails controlling costs through the minimization of inventory. Al-Saggaf (1997) identifies a reduction in cost per electricity utility customer as an important factor in shaping competition in the electricity industry in Saudi Arabia. Reducing the inventory of labor to take charge of emergency and preventive maintenance, SCECO-EAST can reduce its operational costs by deploying the concept of JIT.

Although JIT mainly reduces costs in the manufacturing industry, it may find application in the service sector through availing personnel only when they are required to do maintenance work. In the case of the electric utility industry, such as the case of SCECO-EAST, customer satisfaction through a reduction of outages and the provision of power at low costs can be enhanced through hiring people to do work when required, rather than holding such staff permanently within the facility. This plan requires a reduction of incidences of emergency repairs due to emergency outages. Hence, zero inventories of labor are impossible to maintain at the SCECO-EAST.

Some employees are required to carry out emergency repairs. However, JIT helps in ensuring the hiring of multi-skilled personnel who can be allocated different sections of the sub-processes to minimize inventories in labor at any particular time. Apart from saving on wages and salaries, a reduction of labor inventories can help in the reduction of the total space that is required by the employees.

The Lean Six-Sigma methodology constitutes another important tool for implementing TQM. SCECO-EAST can implement this tool in five phases, namely-the defining, gauging, scrutinizing, advancing, and controlling stages (Gerry, Kevan & Whittington, 2005). The definition phase involves the establishment of opportunities together with significant implications of the opportunities in terms of customer service satisfaction in terms of quality. Any opportunity embraces an activity, which may enhance the performance of SCECO-EAST.

In the second phase, the measurement of every activity becomes necessary to determine how well it can be executed. The analysis phase includes introspection of opportunities in an effort to determine what can go wrong in the process of their implementation. Where issues of concern are identified in the analysis phase, the next phase, improvement, entails fixing of the aspects of concern, which may lead to defects and/or accumulation of wastes such as unattended outages. Control performance is important in ensuring the stabilization of production in the sub-processes, which act as inputs to other sub-processes.

After the identification of vital steps in the development of a Lean Six-Sigma methodology, the next task involves setting the Lean Six-Sigma processes. SCECO-EAST can take a model for supplier- consumer relationships and break it down in an effort to define various opportunities for value creation. The breakdown involves the establishment of various processes that are required while scheduling and attending electricity utility failures during the process of preventive maintenance for distribution substations. This way, it becomes possible to identify various wastes and/or track the sources of wastes in each sub-process before proceeding to apply the Lean Six-Sigma formulas for waste reduction (Gerry, Kevan & Whittington, 2005).

After every process or sub-process, controlling mitigates the likelihood of transferring challenges in one sub-process to the next one. SCECO-EAST can accomplish this goal by ensuring the organization of all units of work within a sub-process with respect to the anticipated outcomes and goals of each sub-process. However, changing people’s work culture to ensure strict compliance with the efforts of the reduction of wastes and suboptimal performance in various work units may constitute a mega obstacle. Thus, while implementing TQM through Lean Six-Sigma, implementation of strategies for enhancing worker motivation is of paramount importance.

Cost-benefit, Force Field, and Contingency Diagram Approaches for TQM

Upon identifying the necessary improvement areas, SCECO-EAST considered cost-benefit analysis, force field, and logical contingency approaches to weighing the expected changes. The cost-benefit analysis helped in the identification of costs, savings, and intangible benefits that could be achieved through every improvement idea. The focus was on ensuring that the improvement ideas received acceptance by management if benefits outweighed the costs (Al-Saggaf, 1997). SCECO-EAST recognized any forces that support and/or oppose the impacts of change during TQM implementation. Hence, the company also found a force field analysis important.

Al-Saggaf (1997) asserts that SCECO-EAST used this investigative approach to provide visibility of forces that influence the improvement of its processes. Contingency diagrams availed effective mechanisms for planning any advanced implementation. While the three approaches had significant roles to play in influencing the success of change through TQM, cost-benefit analysis is a more convincing approach for analysis of the desired change.

Any change that is implemented within an organization needs to produce positive effects on its performance. For electricity utility facilities such as SCECO-EAST, the need to increase customer satisfaction rests on the platform of increasing productivity, which is often expressed in terms of profitability so that more returns on investment become feasible. Higher benefits compared to costs imply that people with stakes in the performance of the facility, such as the government, management, internal, and external consumers, cannot oppose the change that results in decreased costs. To the management, higher benefits translate into a better reputation for effective management. Applying economic concepts of the impacts of costs of production and selling price of products and services, customers benefit through reduced costs of service production. Thus, the cost-benefit analysis addresses largely the likely forces that oppose the adoption of various change elements.

Through the force field analysis approach, an organization that is in the process of implementing change develops the ability to identify opportunities for improvement. In the case of SCECO-EAST, these opportunities are mainly the positive forces, which Al-Saggaf (1997) identifies as reducing customer power interruptions, reducing incidences of utilizing redundant systems such as mobile generators, and saving on maintenance man-hours among others. Perhaps, these factors have positive effects on reducing costs while increasing benefits from either the customer side of the utility facility side. For instance, reducing incidences of outages implies lower risks of unplanned labor on the customer side due to emergency outages. Consequently, customers can notify employees about the possible outages so that they (customers) do not have to pay for idle labor.

Effective PM reduces the chances of using a backup power source such as a mobile generator at the customers’ facilities. Therefore, all positive forces have an associated higher benefit compared to costs. Thus, cost-benefit analysis is satisfactory. Force field approach does not give any indication of the expected gain from TQM in monetary terms, yet changes must produce positive impacts on the productivity of an organization. Indeed, customer satisfaction should also translate into increased organizational profitability.

Contingency diagrams involve the generation and brainstorming of ideas that relate to different issues that capitalize on various negative thoughts. The construction of the diagrams begins with the generation of ideas in different ways through which a particular problem may become worse before generating plans to counter the barriers of success. In developing the criterion for determining the degree of worseness of a given idea, a measure of the impact of the problem on an organization is important. Perhaps, this measure may be explicitly expressed in terms of the anticipated cost of the problem to the organization and the impacts of the cost on the profitability of the organization, in this case, the SCECO-EAST.

Key Learning from the Case Study

SCECO-EAST successfully deployed TQM to reduce costs while at the same time lowering the time required in responding to utility outages. The strategy translated into increased customer satisfaction. Since cost is an important factor for determining the competitive advantage for an organization, one of the key lessons from this case study is that TQM is an essential tool for enhancing the competitive advantage of utility facilities such as SCECO-EAST.

Secondly, organizational change requires consideration of all stakeholders in the change processes, although SCECO-EAST change through TQM principally focused on organizational and customer concerns with its current practices. The electric utility facility had processes that had many non-value adding activities, thus implying higher response times and operational costs. Another organizational issue in the implementation of change, which may hinder a change, is the management’s commitment to the change process.

Through the case study, it is clear that the determination of management’s support or objection of suggested improvement plans is important for the success of any program for enhancing organizational change. However, change implementation teams need to be keen on the impacts of change on people who comprise customers, employees, and suppliers. Through customer surveys, the case study provides important key learning that customers are most likely to be satisfied with activities that enhance reliability and availability of service from an electric utility facility or any other company that offers similar services (Zhihai, 2007).

Availability means that the service is accessible in good quality whenever a customer wants to use it. The case study evidence that strategies that seek to reduce wastes in processes such as TQM are effective in eliminating unnecessary costs in the service sector. TQM acts as a strategy for increasing performance. Thus, SCECO-EAST measures its organizational performance in terms of outputs and profitability without necessarily focusing on the inputs. In the 1980s, the concept of TQM acquired the immense application in manufacturing organizations to enhance performance, although the main issue was in outputs while neglecting inputs and processes (Zhihai, 2007). The case study provides evidence that TQM methodology can be adapted to improve organizational processes.

Reference List

Al-Saggaf, H. (1997). Application of TQM at SCECO-EAST: case study. Journal of Quality in Maintenance Engineering, 3(1), 40-54. Web.

Gerry, J., Kevan, S., & Whittington, R. (2005). Exploring corporate strategy: text and cases. London: Prentice Hall. Web.

Zhihai, Z. (2007). Developing a TQM, Quality Management Method Model. Engineering Management Journal, 9(2), 55-58. Web.