Quality Improvement Program

CASE FACTS

1971: Incorporated by Frederick W. Smith Jr. National hub-and-spoke airfreight network. Memphis – Central Hub. Dassault Falcons, French-built executive jets. Early advertising slogan – “When it absolutely, positively

has to be there overnight”. 1985: “Why fool around with anybody else?” Later: “It’s not just a package, it’s your business”. –

emphasizing itself as a tool for JIT.

LINE HAUL OPERATIONS

Inside the FedEx Memphis Super Hub

The scope of operations

1990: One of world’s largest airlines – 350 aircrafts. 119 countries. 1530 staffed facilities worldwide. 86,000 employees. 20,000 vans and 2000 large trucks in US and 6300

vehicles in international market. Transaction of 1.25 million packages daily. December 1988: Acquired Tiger International Inc for a

sum of $895 million.

Information Technology

COSMOS (Customer, Operations, Service, Master-On-Line System): Customer Service System.

CSA – Customer Service Agents. Special Automatic pick up number. ‘Hello Federal’.

quality initiatives

“Q = P” (Quality is equal to Productivity). 1975: Constantly set goals of improving reliability,

productivity, and financial performance to promote the corporate imperative of People-Service-Profits.

1985: Survey Feedback Action (SFA) – 26 statements in all. First 10 related to employees views of their managers. Other on pay, working conditions, views on senior management,

and feelings about company.

Quality Trainings

1985: First unsuccessful attempt with a consultant to conduct an offsite meeting with top management.

Mid 1987: Organizational Dynamics, Inc. (ODI) and international

consulting firm headquartered in Burlington, Massachusetts.

ODI paid little attention to statistical techniques but a lot more to the thought processes and involvement of people within company in developing quality programs.

Meaning of quality

Customer focus – a commitment to meeting customer needs;

Total involvement – ‘improving quality is everyone’s job’; Measurement – where and when to take action;

documenting progress; Systematic support – applying strategic planning,

budgeting, and performance management to quality improvement efforts;

Continuous improvement – always reaching for new and better ways to perform one’s job.

Q 1) Does the SFA leadership index (survey feedback action) represent an appropriate way to measure people management capabilities?

How does high performance on this index relate to higher profits and better service to customers?

SFA leadership index

Federal Express has a corporate philosophy of People-Service-Profits. FX believes that – the way in which the people are managed will influence the service quality and profits

FX measures corporate performance on all three P-S-P dimensions.

SFA for people SQI for service Net operating margin for profits

Leaders play a significant role in managing people. So it is important to measure the capability of leader.

SFA leadership index is just one approach to evaluate a manager

Advantages of SFA

It is reliable since other companies also use it FX has 5 year baseline data to show trends It is confidential since it is reported by workgroup and not

individuals Show top management cares Forces leaders to get involved It is statistical It is comparative

Disadvantages

Managers could manipulate index ratings for bonuses It is likely to measure the feeling of employee at a particular

point in time Does not take into consideration if a manager is doing a

good job for FX. Scaling system is very vague.

SFA index relationship to better customer service

SFA is a part of broader process; leaders are part of successful team building, and team are important to success of a complex service business in which both front stage and back stage teams work together.

Q2).  Evaluate the Service Quality index created by FedEx.

Is this an appropriate measure of quality?

Based on findings of extensive customer research In order to find out root cause not to blame others

GAP

Fed Ex developed the 12 item statistical SQI. The SQI consists of 12 components and their weights. To be more “ comprehensive, pro-active, customer-oriented ,ensure of customer

satisfaction and service quality’. Measure and Manage Customer Satisfaction and Service Quality Aim for Customer Quality and Satisfaction in Every Service Encounter Plan for Effective Service Recovery Facilitate Adaptability and Flexibility Encourage Spontaneity Help Employees cope with Problem Customers Manage the Dimensions of Quality at Encounter Level Manage the Physical Evidence to Reinforce Perceptions This report is disseminated weekly to everyone in the company. On receipt of the report, root cause of the service failures are investigated. Bonuses are tied to performance on the SQI. The Company drives continuously towards its goal of 100% satisfaction in every

transaction.

Expected Service

Perceived Service

Q3). What lessons can be learned from Federal's quality improvement efforts? What do you think of ODI's approach to quality training at Fedx?

There needs to be commitment from top management to implement Quality related improvements.

Quality improvement should not only be based on statistical techniques.

More focus on involvement of people within the company to develop quality programs.

ODI started with top level and conducted workshops to educate about quality.

Series of action plans taught to all managers first and then to all employees to solve critical problems.

Different versions of program for managers and employees.

Quality Advantage Program Meaning of Quality

• Five pillars on which a quality organization must be built – Customer focus, Total involvement, Measurement, Systematic Support, Continuous improvement

Cost of Quality Costs of Not doing quality work• Rework, waste, overtime, job dissatisfaction

You and Your Customer• Customer supplier chain • How each and everyone in FedEx was a supplier and a customer

Continuous Improvement Module • Everyone’s responsibility to fix problems

Making Quality Happen• For managers, Supervisors and professionals – Leadership role in Quality

Quality Action Teams focused on how to implement quality improvement Problem Solving Process

• Focusing on particular problem or opportunity• Analyzing data• Developing solutions and action plans• Executing plans - 20 problem solving tools were taught to all

Problem of cross divisional cooperation due to multiplicity of different goals. Individually these goals improved performance but collectively were deteriorating.

SFA leadership index – Goal of 72 from 71 the previous year ODI recommended quality from the standpoint of zero failures

against using percentage as targets. Examine how failures happen, the number and why they

happen to improve quality Calculating the Service Quality Index on an daily average.

Complete management bonus was based on company reaching SQI targets. Incentives associated with company’s quality performance.

Bottom up approach and recognition of quality improvement measures - Sharing success stories

Problems

Initially successful – Difficult to sustain over long term. Budget constraints need to be overcome for implementation

and sustenance. Difficult to track quality related events in the operating

levels. Difficult to measure ROI of these quality improvements. The organization needs to be financially very strong and

should be oriented department wise.

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