Quality Strategies for Business Autumn Seminar 2014

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French Railway System - a case of going nowhere fast

As a quality professional I champion the value of customer satisfaction and listening to the voice of the customer… but is the customer always right?

Earlier in my career as a lab technician in the manufacturing sector I was trained to adopt the concept of the “Next operation as customer” (NOAC) principle that highlighted external customer satisfaction as being unachievable unless internal customers are engaged in the decision making and operational processes of productive activity.

The unfortunate scenario that emerged this year in France where the rail infrastructure company RFF provided the rail operator SNCF with incorrect specifications for the purchase of 2000 trains at a cost of $20 billion (£12.1 billion). The specifications were derived from measurements taken from train platforms built within the last 30 years. The result being the new trains are too wide to fit train platforms that were built 50 years earlier requiring  the unnecessary refit of over 1000 of the 8700 platforms mostly located in regional areas of which initial early repairs were reported to cost $40 million.

SNCF has accused the French government of not investing in its conventional rail network which is finally being upgraded after years of neglect. The strategic focus being rather on the development of a high speed network despite a 50% rise in passenger numbers within Paris and a 40% increase in regional travel within the past decade.

This separation of the network company from the rail operators, a management structure that is instantly recognisable to British readers is a contributing factor to the mistake – business critical decisions being made by social actors not directly affected or intimately concerned with the consequences or outcomes of the activity, as evident by the company statement "It's a bit like buying a Ferrari that you want to fit into your garage, but then realizing your garage isn't quite Ferrari-sized, because up until now you didn't own a Ferrari," an ill-fitting analogy that suggests quality and corporate social responsibility are for Renault owners, ordinary taxpayers and commuters.

In a nutshell decisions were not made as close to the source. Project schedules and cost may have been given priority over quality. Therefore the risk i.e. the likelihood or consequence of the train not being able to fit each platform was unaccounted or became unconsciously acceptable to senior management.  

The consequences of poor quality, an astronomical engineering refit cost which is estimated at $110 billion, 2000 trains going nowhere fast and reputational damage to one of Europe’s fastest train networks.
“The customer is always right”… 66 million Frenchmen can't be wrong - one size does not fit all even though your garage can fit a Ferrari.

To learn more about quality, safety and environmental management view our website www.sustainabilitycsr.com 

Here is the cover of my new book Sustainability Footprints in SMEs available in bookstores and online soon!

National Air Traffic Control Service - the need to pursue "Absolute Zero"

The National Air Traffic Control Service (NATS) traces its history back to the early days of commercial aviation in the United Kingdom in its pioneering role utilising a rudimentary form of air traffic control based on flag signals. Modern commercial aviation however demands both the use of complex information management systems and highly skilled human labour with the NATS employing just over 2000 air traffic controllers handling 2.2 million flights annually.  To meet this challenge the organisation is “committed to delivering exemplary service performance and, through consultation with our customers, identifying and implementing new standards in service quality”.

National Air Traffic Control Service £623M Swanwick site which serves as the nerve centre for the management of UK airspace has seen its share of teething problems at its inception and software issues during the summer but the 7^th December 2013 witnessed a catastrophic failure of its management systems which Eurocontrol, Europe’s air traffic control monitor, reported "Around 130,000 minutes of delay are currently expected with approximately 1,300 flights (almost 8% of the European traffic today) being severely delayed".

An investigation into the incident revealed that there was a breakdown in the IT systems with "more than a million lines of software" compromised significantly affecting the internal phone network that not only supports interaction between air traffic controllers within the same room but also with regional air traffic control authorities on the European continent. This seemingly straight forward technical issue was blamed on the "difficulty switching from night time to daytime operation" thereby making it impossible to reconfigure voice communication systems which is organised into sectors to cope with the demands of daytime UK airspace traffic.

The inability of NATS to meet its service plan objectives contributed to poor service performance levels with 20% of departures at Gatwick Airport hit by delays and 50% of flights at London City Airport faced disruption.

A cursory review of NATS 10 year business plan reveals a limited emphasis on contingency planning with quality issues shrouded by terms such as efficiency and innovation despite having a quality management system. Unfortunately there has not been a balanced strategic approach to the management of non-financial risk with effort being expounded on safety and emissions reduction to the detriment of the reliability of mission critical information management systems. This was compounded by a failure to test contingency measures or effectively mobilise contingency plans in the event of catastrophic failure.

Increasingly in our technological age firms and nation states are exposed to information risk either through limited access to information, loss of information and inaccurate information that affects not only competiveness but also safety and security. In essence sustainability is now a four legged stool consisting of the economic, ecological, social and information.  Sustainable organisations must combine the goals of "zero errors” and “zero emissions” into the pursuit of the strategic goal of "Absolute Zero" the point at which no more adverse risk can be removed from a system which is a benchmark upon which sustained customer satisfaction can be achieved.

Eurocopter - When Puma's fly

The tragic loss of life arising from the recent crash of a Eurocopter Super Puma AS332 L2 on the 23 August 2013 brings into sharp focus the dangers of North Sea Oil and Gas. This tragedy is personally poignant to me as I served in a Royal Navy search and rescue (SAR) unit based in Scotland that was resourced with ageing but superbly maintained Sea King helicopters.

Herein lies the case for quality – Ageing Design: the original design of the Super Puma came into production in 1981 with a series of product extensions in areas such as avionics, engine and gearbox power to meet the demands of the expanding commercial market. A focus on incremental improvement not continual improvement, to compete Eurocopter must invest an estimated €500m into research and development of a helicopter for civilian transport and search and rescue operations. This ageing theme extends to the Eurocopter helicopter product portfolio with new versions stymied by delays and cost overruns for potential replacements for the Super Puma in the form of the NH90 and Tiger military version helicopters.

Design issues aside the Eurocopter Super Puma and its variants have been involved in five accidents in the North Sea since 2009.

Specifically the Eurocopter Super Puma AS332 L2 has accounted for 20 fatalities in the North Sea over the past five years the worst being an accident occurring in waters off the coast of Peterhead, Scotland in April 2009 resulting in 16 fatalities. The investigation into the accident conducted by the UK Air Accidents Investigation Branch (AAIB) concluded gearbox failure that may have been diagnosed if the “metallic particle discovered on the epicyclic chip detector during maintenance on 25 March 2009, some 36 flying hours as an indication of second stage planet gear” failure.

As a result the UK Air Accidents Investigation Branch (AAIB) recommended that “Eurocopter, with the European Aviation Safety Agency (EASA), develop and implement an inspection of the internal components of the main rotor gearbox epicyclic module for all AS332 L2 and EC225LP helicopters as a matter of urgency to ensure the continued airworthiness of the main rotor gearbox”.

This recommendation contributed to the introduction of safety Directives by the European Aviation Safety Agency (EASA) and new pertinent maintenance guidance by Eurocopter. Surprisingly AAIB investigators highlighted parallels with an earlier accident in 1980 involving a SA330J Puma helicopter indicating a clear absence of a factual approach to decision making – an organisational failure to learn from past events that unfortunately led to deadly consequences. Subsequent two forced landings of albeit variants of the Super Puma led to a UK ban on sea flights which was only lifted in July 2013

Eurocopter the world’s largest commercial helicopter manufacturer saddled with excess inventory, poor cash position and under pressure from agile competitors such as Bell Helicopters, Augusta Westland who are keen to acquire a piece of its market share as energy operators opt for transport firms that use alternative helicopter supplier, may yet face Darwinian extinction if it does not evolve and focus on quality.

Findus - Strategy that lacks beef

Living in the UK I have always ridiculed my North American relatives for living in countries with a perceived "less than stringent" food supply chain. I guess now the "chickens have come home to roost" more aptly put "the horses have bolted out of the stable".

Its no laughing matter for Findus a company that in 2012 was rescued by a £60m purchase of its junior debt by  its shareholder Lion Capital as well as later debt restructuring of £220m that injected £20m in cash on the balance sheet and provided a cushion of a £70m overdraft facility. Analysts speculate that Findus is a victim of the markets with high raw material prices, demands buy its customers for lower prices and evil Eastern European criminal gangs trading in Romanian horse meat all conspiring against its success.

The facts reveal a different story - Findus was purchased by Lion Capital a private equity firm in 2008 for £1.1bn from its rival CapVest with the long term goal to divest at a premium after expanding the business which is currently second in Europe to Birds Eye Iglo. In 2011 under the watch of CEO Chris Britton a former Diageo Group Marketing Director the firm and its shareholder Lion Capital requested that the restrictive covenants preventing the firm's ability to raise capital be relaxed. The financial markets acquiesced, this enabled Findus to raise 1.1bn from lenders which was used to go on an acquisition spree acquiring continental food brands such as Frudesa and Salto a  from the french firm Bonduelle. Yet Chris Britton also aimed to focus the company on its core competencies.

Quality is a competency that has been overlooked in the company's pursuit of growth. In documents disclosed to their supermarket customers the firm admits since August 2012 horse meat may have been used in the production of its frozen Beef Lasagne product. Eagerly blaming suppliers like Comigel for product non conformance. Findus failed to accept its responsibility as a corporate entity to build mutually beneficial supplier arrangements within its supply chain. Also by its own admission the company had not been conducting inspection and testing of incoming products which is indicative of overall poor process management. As a result customer confidence is lost and with it potential market share, saddled by a burden of debt Findus may yet face the lash of fines from UK regulators which will be less severe than the backlash of angry consumers.

This scenario was avoidable if Findus had pursued its a strategy of quality and continuous improvement as own its corporate website states  "you’ll find the most consistent Findus ingredient is quality. A strong commitment to quality has long underpinned the continuing success of the Group and its brands in both the retail and foodservice sectors".
 Its time for Findus and the Food Sector to find the virtue of quality a key ingredient for strategic success...

To learn more about quality, safety and environmental management visit www.sustainabilitycsr.com 

BP's Deepwater Horizon - A Quality issue or a Safety issue?

Its been more that two years since the tragedy of the Deepwater Horizon incident costing the lives of some of its crew,  damage to the environment besides the strain on the lives and livelihoods of individuals living in US states along the Gulf coast.
There appears to be a return to business as usual oil production has improved in the Gulf of Mexico. BP the defendants in this case have moved from "beyond petroleum" to above suspicion recently rewarded by the financial markets with a share price increase for negotiating £4.9 million in damages with victims. Policymakers and the industry have opted for more compliance focused on safety and environmental dimensions of performance which will necessitate the need for more audits and auditors. An uneasy hush has fallen as the incident slowly fades from the headlines and the collective memory of the public. A scenario that seems oddly familiar....

Background

Dr. Tony Hayward was appointed CEO of BP after the less than savory departure of Lord Browne his mentor and predecessor. As CEO he promised to focus on safety "like a laser" knowing full well as a BP insider the spate of safety incidents that occurred prior to his appointment at their Texas city refinery in 2004 - 2005, the near sinking of the Thunder-horse platform in the Gulf of Mexico, oil spill in Alaska in 2006 and US Labor Department  fines for safety violations at its Toledo refinery in 2006.
Tony Hayward a geologist by profession also adopted a strategy of doing more with less by immediately cutting over 5000 jobs  early in his now fateful tenure. This decision to cut jobs may have made an accident like Deepwater Horizon predestined. To his credit he instituted risk management training for executives at BP's "Operations Academy" at MIT and established the company's Operations Management System (OMS) which although innovative now seem painful inadequate.


Quality Failure

The Chartered Quality Institute defines quality management as "an organisation-wide approach to understanding precisely what customers need and consistently delivering accurate solutions within budget, on time and with the minimum loss to society". This inclusive understanding of quality especially minimizing loss to society was not understood by Tony Hayward and BP's senior management. The company cautioned employees against having  uncovered cups of hot beverages but no procedure for the "negative pressure test" critical in terminating drilling operations.
The question may be asked... was the Deepwater Horizon fit for purpose?
 As a drilling platform the Deepwater Horizon was state of the art; built by Hyundai at a cost of $365 million, it was a unique combination of ship and drilling package. Operated by a crew of 160 it was kept relatively motionless when at sea by four metal pontoon legs and GPS positioning systems. At the time of construction its 28000 tonne drilling package set a world record for the heaviest object ever lifted.

Despite state of the art equipment the Deepwater Horizon as with other platforms had an Achilles heel it was the absence of a quality culture within the oil and gas sector which traditionally has been dominated by a risk taking attitude necessary for oil  and gas exploration.

This absence of a quality culture gave rise to the following quality failures leading to the explosion aboard the Deepwater Horizon:

1. Incorrect parts - centralizers key equipment used in drilling operations were received from supplier not to specification
2. Breach of existing well design - to little centralizers used in operations 6 instead of 21 -  a casualty of the misdirected focus on reducing cost not reducing the cost of quality
3. No Product verification -  incoming inspection tests were not conducted on the cement foam upon receipt from the supplier Haliburton
4. Poor Supplier Management - cement supplied by Haliburton failed in-house tests. The need to develop mutually beneficial supplier relationships is a corner stone of total quality management and quality management standards such as the ISO 9001. BP's relationship with their supply chain Transocean and Haliburton as events has revealed can be described as combative at best.
5. Poor Process Management - "Negative Pressure Test" was not on the platforms work plan. There was no procedure for conducting the "Negative Pressure Test"
6. No Management of Change Procedure - Negative Pressure Test added to the work plan at the "eleventh hour". This confusion led to the acceptance of one positive test result despite three failed negative pressure tests a decision that sealed the fate of the crew of the Deepwater Horizon.

These 6 quality failures resulted in catastrophic loss of life and environmental disaster- the safety consequence - a cost we can only estimate.

The cost to BP for the absence of a quality culture has been a $91 billion loss of market value between April - June 2010, over 350 lawsuits from the general public, damage to its brand image, loss of support from environmental groups with the US Audubon Society "largest uncontrolled science experiment in our country", shareholder dissatisfaction and loss of industry leadership.

Safety is not the issue it is a lack of an understanding of quality and its impact on the triple bottom-line economic, social and environmental. Its time for BP, the oil and gas industry and regulators to adopt an industry-wide approach that embraces continuous improvement that goes "beyond quality"