Ibm - Rochester

IBM Rochester

3605 Highway 52 North, Rochester, MN, USA 55901 Introduction  life after Baldrige

IBM Rochester won its Baldrige award in 1990, at a time when the parent corporation was in some trouble. Early critics of the value of the Baldrige award frequently (and of course, prematurely) cited this apparently bizarre outcome as yet another nail in the award’s coffin. For IBM’s view of this period, see the exhibit IBM’s corporate history, a summary of material from IBM’s corporate web site. For a contemporary view, see IBM today IBM today is not the organization that it was in the late 80's. IBM Rochester is no exception and is a much changed organization, having built on its solid foundation of total quality management employed in the late 80's to become the dominant, world class, global supplier of mid-range commercial computer solutions. IBM Rochester’s story is interesting in the context of the Baldrigeplus case study collection because of the eight, it represents the oldest award − ten years have passed since a 17-person IBM team put together the 1990 winning application. It’s also interesting because it still reads well − it could be a 1999 application (although not at the national Malcolm Baldrige level, where standards are now much higher − maybe for a state award?). That’s an important observation to me (read through the material and see if you agree) because as an enthusiast, I argue that Baldrige is not just another passing management fad, not just another tool du jour, but rather is a continually adjusted, ‘at the validated leading edge’ (Harry Hertz, personal communication, 1999) approach to management excellence. The case study begins with a run through the 1990 application material, represented by, extracted and edited from, the 1991 second edition of the 20 page Baldrige application summary and the two-page fact sheet that NIST publishes. For a rounded picture check the IBM Rochester exhibits which deal with specific issues; the quality dashboard; customer feedback and, customer satisfaction and market share exhibits. Malcolm Macpherson

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Introduction to IBM Rochester

The IBM site in Rochester, MN is a 1 mile long facility consisting of 32 interconnected buildings covering 32 acres, with 7,000 employees. It is the ‘home of IBM's AS/400 commercial mid-range computer,’ where both development and manufacturing are performed. It is also the location of manufacture for the RS/6000, IBM's mid-range commercial UNIX-based computer system. The AS/400 and RS/6000 products span the range from desktop PC's to mainframes. There’s also some disk substrate manufacturing at this site. Most of the Rochester site staff are engineers, programmers and professionals. At the time of writing (early 1999) one AS/400 was shipped every 12 minutes, and the AS/400 business was worth about 15% of IBM’s total revenue. The AS/400 is the world’s most popular multi-user business computing system, with: • a broad range of customers • 600,000 systems installed in 150 countries • 97% of FORTUNE 100 industrials are users • 28,000 commercial applications in use (more than any competitor) written by IBM’s business partners and customers, in 40 national languages • Y2K certified The RS/6000, ‘a powerful, tailorable, UNIX-based system,’ has: • an installed base of 800,000 in 150 countries • 15,000 software applications • 12,000 plus solution developers • Y2K ready • Guaranteed open • 82% of all Internet servers • the F50 Internet Powersolution won Info World 1997/98 product of the year • aka ‘Deep Blue’ (the chess playing computer) • the Mars Lunar Module, and the US Department of Energy are high-profile users. Both systems are developed and manufactured world-wide, and both products and their manufacturing sites are world-wide ISO 9001 and 14001 registered. IBM Rochester in 1990 (From NIST’s Baldrige fact sheet) Caution Some information from the 1991 Baldrige fact sheet utilised in this case study may not reflect current processes or practices employed by IBM Rochester. In 1990 the concept of quality at IBM Rochester was linked directly to the customer. Detailed features were crafted by analyzing the needs and expectations of existing and potential owners of the firm’s computer hardware and. At every step, customers were directly involved in product from design to delivery − through advisory councils, global information systems, trials of prototypes, and numerous other feedback mechanisms. The IBM Rochester quality culture had been transformed from reliance on technologydriven processes delivering products to market-driven processes directly involving suppliers, business partners, and customers delivering solutions. A 30% improvement in productivity occurred between 1986 and 1989. Product-development time for new mid-range compute systems had been reduced by more than half, while the manufacturing cycle had been trimmed 60% since 1983. Customers benefited from a 3-fold increase in product reliability; an increase from 3 to 12 months in the product warranty period; and a cost of ownership that was among the lowest in the industry. IBM’s share of the world market for intermediate computers increased in both 1988 and 1989. 2

IBM Rochester at a glance  in 1990 Rochester manufactures intermediate computer systems − currently the AS/Entry Systems and the Application System/400 (AS/400). More than 400,000 IBM Rochester systems had been installed worldwide by 1990. The Rochester location also made hard disk drives, sales of which accounted for about a fifth of IBM Rochester's revenues in 1989. IBM Rochester provided employment to more than 8,100 people and was responsible for product development and US manufacturing. In addition, its processes were implemented in plants in Japan, Mexico, the UK and Italy. Rochester excellence  customer satisfaction IBM Rochester had recently strengthened its strategic quality initiatives by formulating improvement plans based on six critical success factors; improved product and service requirements definition, an enhanced product strategy, a six-sigma defect elimination strategy, further cycle time reductions, improved education, and increased employee involvement and ownership. Each senior manager “owned” one of the six factors and assumed responsibility for plans and implementation. Progress toward achieving improvement goals was closely monitored. Support processes were a part of this network. Continuous improvement of support processes at IBM Rochester rested on aggressive world-wide benchmarking, a process that analyses products and services to determine the best of the breed in all industries. Over 350 teams were in place. Scores of benchmarking studies had been completed. Quality goals were established in five-year business plans and annual operations plans. Strategic targets were derived from comprehensive benchmarking processes. With the aid of financial planning models and mathematical decision-making tools, quality priorities were set, and the resources human and capital necessary to carry out these priorities were determined. Most plans for achieving quality objectives originated with employees, and crossfunctional teams identified needs for equipment, staffing, education, and process development. Each quality improvement plan had an owner, a managerial or nonmanagerial employee who headed the project team. With employee input, objectives and requirements were established for each employee, and a measurement system for monitoring progress was developed in advance of the project. Close coordination and efficient communication were ensured through regular planning meetings, in which key suppliers and customers participates. IBM Rochester invested heavily in education and training, the equivalent of 5% of its payroll. Employees, supported by IBM's tradition of full employment, were encouraged to develop the skills and expertise for a variety of jobs. In 1989, about a third of the work force moved into new positions, and 13% were promoted. IBM Rochester was implementing a Management System for Education, which offered skill planning, needs assessment, individual education plans, and educational road maps on-line. Job flexibility and security, ample opportunity for advancement, and a welldeveloped recognition process were among factors contributing to rates of absenteeism and turnover well below national averages. Employee contributions to quality improvement were recognised in a variety of ways, including luncheons, receptions, and monetary and non-monetary awards. 3

Morale was high, as determined in IBM annual surveys, and by an independently conducted survey that compared levels of worker satisfaction at 34 US companies. Equipping workers with the tools and information they need to accomplish quality and customer satisfaction objectives was also a priority. Over 11,000 on-line terminals provided employees with world-wide access to extensive communication capabilities, databases, and design and analysis tools. For example, since 1966, IBM had invested more than $300m in improving its processes and information systems. Such investments, many of them designed to improve problem-solving capabilities ensuring that defects are prevented rather than detected after they occur; paid for themselves. Capital spending on equipment for defect detection declined 75% during the 1980s, and write-offs as a proportion of manufacturing output dropped 55%. At the start of the product planning process suppliers were included as partners to ensure that new hardware and software achieved IBM’s goals for manufacturability, serviceability, reliability, performance, and cost. Accounting for about 30% of production output, IBM Rochester's approximately 700 production suppliers were expected to provide defect-free shipments- and to keep pace with progress in improving quality and reducing development and manufacturing cycles. Suppliers were trained, audited, and certified, and required to submit quality plans. IBM Rochester shared its own state-of-the-art technology with suppliers and, in turn, suppliers provide valuable expertise to IBM. Since 1984, IBM Rochester employees had instructed more than 1,909 supplier employees on continuous flow manufacturing, statistical process control, and design of experiments. The Rochester quality process was a continuous loop that began, ended, and began again with the customer. Of the approximately 40 data sources analysed to guide improvement efforts, most either provided information on customers' product and service requirements or guide steps to refine these expectations into detailed specifications for new IBM offerings. Customers were also active participants. For example, customers and business partners- representing over 4,500 businesses worldwide participated on customer advisory councils throughout the development of the AS/400. To strengthen its competitive quality position, IBM Rochester was aiming for a tenfold improvement in key quality areas by I 991, a hundredfold improvement by 1993, and a six sigma level of defects by 1994.

IBM Rochester in 1990  from the Baldrige Application Summary

In its 1990 Malcolm Baldrige National Quality Award application summary, IBM’s application team described their part of the IBM organisation as “a leader in marketdriven quality planning and implementation within the IBM Corporation.” The Rochester site at that time reported to two of the seven lines of business in the IBM Corporation  the Application Business Systems (ABS) line of business for its AS/4000 family of products, and to the Enterprise Systems (ES) line of business for its hard disk drive family of products. Inside the US sales and service support was provided by the US Marketing and Service line of business, and outside the US this line of business was supported by the World Trade Organisations. Corporate quality guidance to all lines of business was the responsibility of the ‘Market-Driven Quality Organisation.’

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The IBM organisation, March 1991 IBM corporation management committee

IBM World Trade Europe, Middle East, Africa

IBM United Sates

IBM Market-driven quality

Asia-Pacific Group Canada/Latin America

Application business systems line of business

Enterprise systems line of business

Other lines of business, marketing and service Personal systems Technology products Comms systems

IBM Rochester

Programming systems

IBM San Jose IBM Poughkeepsie IBM Endicott Other IBM sites

Source IBM Rochester’s Malcolm Baldrige National Quality Award summary publication, second edition, IBM, Rochester, March 1991

IBM Rochester had worldwide development and US manufacturing responsibility for the AS/400 computer system and hard disk storage devices, with sister manufacturing facilities in Guadalajara, Mexico; Sumare, Brazil; Havant, England; Santa Palomba, Italy; and Fujisawa, Japan. IBM Rochester, as well as over 20 other IBM locations, provided programming development and support for the AS/400 system. At that time more than 400,000 AS/400 and predecessor systems (System/38 and System/36) have been installed worldwide. The AS/400 system software had been translated into 28 national language versions to support the over 60% of AS/400 systems installed outside the US. The AS/400 system was sold directly by IBM as well as by over 7,000 independent business partners worldwide. A 6,000-member independent user's group called COMMON provided valuable input to IBM Rochester for future product needs and requirements. The storage devices produced in 1990 at Rochester included hard disk drives for the AS/400 and RS/6000 systems, and the PS/2 computer. Rochester also provided hard disk drives to other computer equipment manufacturers. These hard disk drives were considered leaders in their class in reliability, performance and diagnostic capabilities. The Rochester site housed electronic hardware and software systems development, hard disk drive development and manufacturing, as well as prototype facilities for machining, plastic molding, heat treating, plating and integrated circuit processing. IBM Rochester also had its own tool and model makers who built test and process equipment. 5

Sixty-six percent of IBM Rochester's then 8,100-person workforce was comprised of engineers, programmers and other professionals, who continuously recorded very high morale − the highest among IBM sites − as measured by annual opinion surveys. The site’s safety record was 60% better than the industry average, and its turnover rate was significantly below the industry average. Quality deployment The cornerstones of the IBM culture, said the 1990 application summary, were IBM’s basic beliefs, respect for the individual, the best customer service, and pursuit of excellence − fundamental cornerstones of the business that had remained unchanged for 75 years. Corporate Policy Letters and Corporate Instructions (CIs) provided guidance for implementing these basic beliefs. For example, CI 101 required that all business processes, product and non-product, improve continually to make them more efficient, effective, and adaptable. CI 105 stated that each new product must be superior in quality to previous products (both IBM's and competitors'). Before announcing a product, each IBM development lab had to demonstrate to the corporate quality organization and other line executives that it was complying with CI 105. Goals and market-driven quality principles were developed from the Corporate Policy Letters and Instructions. IBM's Market-Driven Quality Principles were: • make the customer the final arbiter • understand our markets • commit to leadership in the markets we choose to serve, • deliver excellence in execution across our enterprise. IBM Rochester had a quality policy, a vision, and a set of quality goals that are deployed throughout the site to individual departments. This policy was supported by the site vision: • Customer − the final arbiter • Products and services − first with the best • Quality − excellence in execution • People − enabled, empowered, excited, and rewarded. Quality objectives were integrated into employee performance plans and agreed upon by both the manager and the employee. This process fostered employee participation and empowerment. Each element of quality improvement built a solid foundation for achieving Rochester's business objectives. The illustration below (next page) is the 1999 version of Rochester’s quality journey. In 1990 the staircase ended at 1990-1994, and the mid-decade goal was “undisputed leadership in customer satisfaction. IBM Rochester is now strategically positioned to implement an expanded set of initiatives that build upon prior successes. “The new initiatives consisted of six critical success factors and proactive customer satisfaction processes that integrate all elements of development, manufacturing, marketing and service. The goal of IBM Rochester is to be the undisputed leader in customer satisfaction.”

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1988 Self assessment

1989 Application/site visit

- the value of ‘writing it down’ - transforming data into information

- taking an enterprise-wide view - lack of trend data identified

1990 Malcolm Baldrige National Quality Award winner

1991 AS/400 MDQ Gold Award - tying management/measurement system to goals - constancy of purpose

- value of teams recognised - necessity of committment to leadership

1992 ISO 9001 site registration

1993 Worldwide AS/400 MDQ Gold Award

- continuous improvement process with category champions in place

- value of worldwide view - alignment of business through the AS/400 quality process

1995 Self assessment

1994 Improvement

- value of disciplined decision making - teaming beyod AS/.400 - improved customer focus

- continuous improvement process with senior executive ownership of five key opportunities

1996 Self assessment

1997 Self assessment - reenergise focus on customer care - expedite skill building in the marketplace - balanced scorecard of measurements - ISO 14001 registration

- improved key business and customer measurements - strong customer focus

A twenty year journey IBM Rochester’s excellence timelines

1998 Assessment integration - continual assessments via internal business processes

20 00

n Visio

Reforming

Strategic

19 80

Process Product

Zero defects

Manufacturing cycle time

Product introduction cycle time

Market-driven quality, Benchmarking Customer relationship management

Enterprise integration Global business Empowerment Baldrige assessment

Process and product simplification ISO 9001 and 14001 Process reengineering Business and customerfocussed measurements

Leadership

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According to the 1990 summary, Rochester's quality journey began in 1981 with the People Responsibly Involved in Developing Excellence (PRIDE) initiative, which focused on improving product reliability. In 1984 the quality journey was expanded to include process efficiency and effectiveness, and manufacturing cycle time improvements. In 1986 the quality journey continued with planning and development cycle process improvements and integrating suppliers and customers into development and production processes. In 1989 Rochester's quality journey led to embracing market-driven customer satisfaction goals, focusing on total cycle time to the market, and extending customer involvement even further. Market-driven quality cycle The market-driven quality cycle of 1990 integrated the six critical success factors into a closed-loop process..

Strategy Support customer success Meet customer needs Expand the market

Establish accurate product and service specifications

Gain satisfied customers

Cycle time reduction

Key measurements

Create faster solutions and increase competitive advantages

Employee involvement

Requirements

Six sigma

Prevent development, manufacturing and service rework

Improve productivity and cost

Employee education

Source IBM Rochester’s Malcolm Baldrige National Quality Award summary publication, second edition, IBM, Rochester, March 1991

Working toward ‘Six-Sigma quality goals,’ IBM Rochester had reduced development, manufacturing, and service rework by ensuring that processes produced correct results the first time. Improving education and employee involvement had increased productivity and reduced cycle times, enabling faster market response and competitive advantage. Key measurements verified that processes were definable, repeatable, and predictable. As this cycle continued, Rochester's strategy was to ‘delight its customers by providing solutions that helped them achieve success in their business.’ Rochester’s six ‘Critical Success Factors,’ to “ensure continuous improvement toward Rochester's customer satisfaction goal” were: 1. Enhance total product strategy and plans 2. Improve the requirements definition process 3. Implement Six-Sigma defect-level quality strategy 4. Create and deploy an Excellence in Education plan 5. Enhance and enable employee involvement 6. Develop and implement reductions in total cycle time 8

Market analysis and segmentation

Corporate goals policy, and instruction

Competition and industry

IBM US goals Business and quality

Technology

ABS goals Business and quality

Interrelationships between company policy, business goals, business and functional strategies and operating plans IBM world trade

Strategy Customer strategies

Executive review and approval (RMC)

Supplier strategies

Benchmarks

Five year strategy - Rochester Business strategy

Operating plan with two-year horizon Rochester Functional strategy

Product; application solution; distribution channels; support structure Revenue goals Market participation goals

Commit operating plan

Manufacturing Development Market, service and support Human resources Capital resources Expenses

Quality priorities

Two year targets from strategy - Revenue - Market participation - Profit - Return on assets

- Expand customer partnerships - Improve product and service reliability - Reduce total cycle time - Deploy quality ownership

Department, team and employee assessment of requirements to identify - Quality improvement - Resource needs - Training needs - Tools - Benchmarks - Supplier improvement

Profit goals Return on asset goals

Market-driven quality, the customer view Market-driven quality was defined in 1990 to begin with an understanding of what was important to customers, considering all aspects of their relationship with IBM and its business partners, from products to support and after-sale service. Satisfying customers required the ability to provide superior and reliable solutions; administrative excellence; marketing and sales support; and delivery, maintenance, and service performance. Throughout its total enterprise − marketing, product development, manufacturing, and service − IBM's objective was to provide total customer solutions, demonstrating a knowledge of the customer's business and all other elements important to customer satisfaction. Elements important to customer satisfaction

Administration - terms and conditions (no hidden costs) - order accuracy - billing accuracy - late bilings - complaint management - telephone support

Market and sales offerings

Technical solutions

- expectations defined and set - wants and needs understood - solutions and applications provided - solution affordable - products announced on time - trial period permitted - channel management - sales and volumes increased - customer education - gain and loss management

Marketing branch office

- low price and high performance - quality and reliability - low cost of ownership - solutions available - incorporate wants and needs into accurate specifications - easy to use - reduced cycle time (rapid product introduction) - rich in functions - easily migratable - connectivity with vendors - easy to use documentation

Product development

Maintenance and service support

Delivery - complete shipments - shipped on time - order-to-invoice time shortened Upgrade - reduced complexity - reduced time - flexible policy Instability - short time - not complex - free of defects

Marketing

- single person to contact - problem source identified quickly - knowledgeable customer engineer and systems engineer - excellent hardware and software service - parts available free of defects sufficient quality near customer’s location

Service

Customer solution Source IBM Rochester’s Malcolm Baldrige National Quality Award summary publication, second edition, IBM, Rochester, March 1991

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The illustration above (previous page) is redrafted from the 1990 application. Below is the 1999 version, from an IBM Rochester view graph. Customer view model after revalidation in 1993 Customer satisfaction measurements Overall Loyalty Recommend

Common attributes

Ease-of-doing-business-with Partnership Responsive Knowledge of customer’s business Customer driven

Technical solutions

Maintenance and service support

- quality - reliability - availability - pricing - ease of use - documentation - openess - growth - new technology - installation/ upgrade - warranty - disaster recovery - process

- single point of contact - flexible - available - accessible - empowered - product knowledge - consistent

Product development Source IBM Rochester

Marketing sales offerings - information - solutions - central point of contact - education - empowered - product knowledge - competent - ethical

Service

Administration - purchasing procedure - billing procedure - T and Cs - warranty expiration notification - financial alternatives

Marketing branch office

Delivery

Image

- on time - without defects - to specification - accurate - post delivery process

- corporate citizen - community interests - social concerns - environmental conciousness - technology leeder - financial stability - executive image - empathy

Manufacturing

Executives leadership

Customer solution Customer view of quality service characteristics

Strategic planning In 1990 an annually written strategic plan looked forward five years, using information from market analysis, competitive and industry data, and evolving technology, in the context of long-term business and quality goals set by IBM Corporate HQ. • Customers provided product direction • suppliers assisted in product sourcing • teams of employees developed a business strategy that included product and business goals • manufacturing, development, marketing, service, and support teams developed functional strategies that contained the quality improvement plans required to achieve the strategy. Functional strategies described the resources, capital, and expenses required to achieve the quality priorities and the business strategy. Resources and associated expenses were compared to the revenue and profit goals in order to balance the strategic plan. Once this strategic plan was approved, an annual operating plan (a detailed description of how to implement the strategy) was developed with a two-year horizon. The Rochester Management Committee, a cross-functional executive team, reviewed and approved the strategy and operating plans. 10

IBM Rochester’s product processes in 1990 Planning

Development

Market analysis Segmentation

High-, lowlevel design

Position

Build hardware test units Engineering, verification, manufacturing, certification 1,2

product,service, objectives Customer validation

Service planning

Customer validation

Customer order

Supplier manufacturing

Software, hardware, component, unit integration Sub-system, system test

Marketing Service Branch office

Component manufacturing

Simulation

Customer requirements

Component specification

Manufacturing

Order validation

Sub-assembly manufacturing

Installation planning

System manufacturing

Installation Shipping Failure analysis

Maintenance service and support

Design verification, test, System verify, test, manufacturing, certification 3 Manufacturing, verification, test, Manufacturing, certification 4

Customer Information flow

Major transition

Rochester product processes In 1990 Rochester's production processes were organized into four phases: planning, development, manufacturing and marketing and service, “tightly linked to each other and to the customer.” Cross-functional teams jointly shaped process strategies and planning, identifying customer needs and converting them into specifications. The development process took the specifications through a rigorous series of design stages and verification activities involving both manufacturing and customer evaluations. The manufacturing process engaged suppliers and the product development team through joint decision making activities early in the cycle. The marketing and service process tailored solutions to customer’s needs and represented the voice of the customer in defining new requirements. Rochester’s global market analysis and segmentation process gathered data from sources in all geographic markets − consultant reports, government demographics, economic forecasts, university studies, and user group feedback − each segmented into small, medium, and large enterprises and establishments and then into industry, sub-industry, and application opportunity market segments. For example, the distribution industry could be segmented into wholesale, specialty, and retail; retail into drug stores, auto parts, and hard-goods segments (next page).

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Market analysis and segmentation

Geographies Industries Mfg

Sub-industries Wholesale

etc … Distribution

Health Process

large enterprises

Retail Specialty

Finance

small medium large establishments small enterprises

Drug stores Auto parts Hard goods …

Application opportunity segments

medium enterprises Source - adopted from IBM Rochester’s Malcolm Baldrige National Quality Award summary publication, second edition, IBM, Rochester, March 1991

Selecting target markets Segment attractiveness

Segment fit

-

- product fit - distribution channels - service and support - application programmes

opportunity growth competition executive vision - business goals

Analytical hierarchy Target markets

To select target markets, Rochester evaluated market segments for their attractiveness and for product and service fit. Attractiveness and fit comparisons were analyzed using the analytical hierarchy process, comparing the relative strengths of each market segment with the ability to deliver solutions to it. From this analysis, target markets were selected and pursued. Identifying product quality and service features Plan adjustment

Quality features and requirements Product -A -E -F Applications -B Service -C -G Channels -D

Evaluation weighed against resources (skills and money) needed to achieve these requirements

Long term plan Items -E -F -G Short term plan Items -A -B -C -D

Validation sources Customer councils Satisfaction surveys Consultants - Business partners - Cross comparisons - Industries - Field feedback

IBM Rochester performed detailed analyses of targeted markets to identify customer quality features and requirements. Tools like Conjoint Analysis were used to evaluate items within four strategic categories: product, applications, service, and channels, each ranked for its importance within each category. 12

Product quality features and requirements were weighed against the resources (both people and expenses) needed to achieve those requirements. To balance the plan, the items were prioritized into short-term (2 year) and long-term (5 year) projects. This plan was validated through customer councils and marketplace feedback and adjusted as required. Defect prevention Process improvement

Cost of defect correction

Test

Future development cycle

Defect removal modelling

Customer 92x installation

Design x

Testing 13x

20 Defects/k lines of code

Design

Hours taken to remove defect

Defects removed

Preventing design defects shortens cycle time

Ensures superior product quality is delivered to schedule Model

15

Actual

General availability

Early support programme

10 5

0 Time

Inspection

Verification

Design time

Test time

ESP GA

1988 development cycle 1985 development cycle

Cycle times improvement was achieved by removing defects early and by continuously improving design tools and techniques. Quality was improved and cycle time shortened by eliminating manual operations and errors in interpreting specifications. Historical data were used in the software development process to build a defect removal profile. With this profile, a model was established to track development and accurately predict the number of defects to be removed at each step in the process. Before manufacturing began, products were subjected to a series of verification tests to confirm product characteristics and the integrity of the development process. These verification tests served as development checkpoints and were coordinated with the design of the manufacturing processes. An independent assurance organization certified readiness at each checkpoint and verified adherence to government regulations, industry standards, and corporate instructions. Process management approach One major reason for IBM Rochester's quality results at the 1990 stage of their quality journey, and the key activity identified at that time for future success was process management. Process owners defined their processes and identified their customers and suppliers, aiming to continuously improve quality and reduce cycle times. Managing processes effectively had resulted in significant cycle time improvements for computer systems and hard disk development and manufacturing. The serial processes for producing the System/36 and the System/38 had been transformed to a parallel, continuous flow system for producing the AS/400 system. Simulation, Early Manufacturing Involvement (EMI), software component development, and parallel system tests contributed to a 40% reduction in development cycle time.

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Cycle time benefits realised through hardware simulation and a new software development process System/36 and System/38 sequential development Hardware pass 1 Hardware pass 2 Hardware test Software development System test Ship

AS/400 synchronised/parallel development EVE simulation Hardware development with EMI Hardware test 10 months saved

Software prototyping Software development

Customer review System test Ship

16 months saved

Using an ‘Early Verification Engine (EVE)’ to simulate the system design resulted in 80% improvements in the time required to debug hardware from the initial design, eliminating a need for multiple design iterations. Early Manufacturing Involvement teams worked out details of product introduction, software installation, and distribution logistics, beginning in early design stages to improve the manufacturing processes, enabling rapid, high-volume production capability. Manufacturing teams build the machines used throughout the development cycle. Suppliers also participated on EMI teams. Customers played a major role in clarifying requirements and ensuring that products met their wants and needs. An iterative software development process was used to involve customers. Customers were asked to validate the development decisions. Required changes were made in subsequent iterations. Continuing customer involvement To ensure that market and customer needs were accounted for, customers and business partners were involved throughout the product cycle, from planning through support and feedback.

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IBM Rochester Customers are involved throughout the product cycle Customer and business partner councils

Planning

User groups COMMON

Requirements

Software partner laboratories

Customer usability testing

Analysis Development and design

Early availability programme

Build and test

Customer partnership calls and surveys

Support and feedback

Measurement and validation

Innovative techniques established by IBM Rochester integrated customers into the development process. For example, customer and business partner councils brought worldwide customers together to review future product plans at an executive briefing center at IBM Rochester. An independent user group, COMMON, comprised of over 6,000 customers worldwide, met regularly. A Software Partner Lab provided an opportunity for customers and business partners to jointly develop solutions for future product releases. Customers validated that their requirements were being met, verified that their application programs would operate effectively on newly designed systems. Customers participated regularly in the usability testing center to verify that Rochester's products met their operational requirements. An early availability program provided AS/400 systems to select customers before they were available to the general public. These systems were monitored closely to ensure that customers were satisfied with the latest development-level products, services, and order and delivery systems. Customer support procedures were also evaluated during this program. Contacted by IBM 90 days after receiving an AS/400 system, customers were thanked for their business and asked about their satisfaction with their new system. See the __ item for detail of how this process works in 1999. Information and analysis IBM Rochester had comprehensive, world-class, worldwide information and analysis systems available, as needed, to all employees in 1990. Information systems supported communication among employees and with customers throughout the entire product cycle. Online tools An ‘electronic office system’ linked employees worldwide, allowing ‘real-time communication.’ Online systems ensured that accurate and consistent data was available for quality improvement and root cause analysis. Rapid communication with sales representatives, systems engineers and field engineers aided in problem solving and in communicating opportunities for improvement. Manufacturing process The process of moving a product from development to manufacturing was highly automated. Design data was translated into online manufacturing controls to improve the quality of manufactured parts. The central control point of the manufacturing processes was the Manufacturing Control System. Customer orders were automatically transmitted from the branch office to the Manufacturing Control System and fed directly to the assembly line. 15

Production was controlled by the customer order, with design data automatically translated into manufacturing process control information. Assembly and subassembly areas provided process information to manufacturing control, and data were analysed and reviewed by cross-functional teams for future improvements. Online systems provided timely and consistent design information to world-wide manufacturing locations. The automatic translation of information eliminated opportunities for errors and reduced process steps and time.

Process management Root cause analysis Confirm

Recreate problem Repeat failure Restate process deficiency Complete process review Visit supplier or customer location

Probe

Examine with electron microscope Examine checkpoints, dumps, and traces Examine vital product data Find last point before failure

Analyse

Determine frequency of occurrence (using a Pareto diagram) Review trend data (trend diagram) Review statistical process control charts Decide how exhibited and how found Evaluate single supplier vs multiple supplier Analyse execution path, system state, and environment

Correlate

Correlate supplier data, in-house data and customer data Find indications of problems in other measures Identify recent process changes Determine batch, job lot, time stamp and release level

Isolate

Isolate possible causes (using a fishbone diagram) Rank by probability Perform additional testing Perform experiment at suspected point of origin Test for stress (heat, voltage, strength, life etc) Test boundary conditions

Online systems provided the data used in root cause analysis − based on an ability to trace information back to its source. For example, information from manufacturing control was analyzed to assess changes in new designs or to track problems back to source. IBM Rochester followed a disciplined approach to track down the causes of process ‘upsets,’ consisting of the steps in the illustration above. “This method uncovers the root cause of a problem, identifies required improvements for products or processes, and expands existing knowledge of the complex interrelationships involved in satisfying customer needs," the 1990 summary concluded. Rochester improvement teams Process improvement teams were used extensively to simplify processes, create new defect prevention methods, and reduce cycle times in product and non-product processes. For example, the transformation of the engineering change process from traditional printed copy to an online environment was successfully completed by a quality improvement team. The process owner, a line manager, was also a member of the team. Working closely with its internal customers, the team began by modeling the process, using root cause analysis to determine what caused process upsets. 16

The process was restructured and unnecessary steps were removed. To implement the new process, education and support were provided to customers across the site. Business gains were realized in product cycle time, efficiency, and communication. Statistical process control Statistical Process Control (SPC) was used in critical operations throughout the Rochester site and its supplier’s sites. EMI teams worked with development engineers to identify critical parts, parameters, or process steps that require continuous control through statistical monitoring techniques. Continuous flow manufacturing IBM Rochester had a process called continuous flow manufacturing integrating all elements of its production and non-production support processes to achieve: • reduced cycle time • reduced cost • continuous focus on defect prevention Continuous Flow Manufacturing begins with an examination of the total process, from a customer order to raw material gathering through manufacturing and customer installation. Order sizes, improvements in tooling and changes in process flow are some of the factors affecting CFM cycle time.

IBM Rochester AS/400 order process Expert system configuration

Customer

Order entry and validation order

Branch office and marketing

Plant and manufacturing control system Build order and assembly sequence control

Distribution

On-line ordering was in use at Rochester in 1990, linking customers to the AS/400 production process. Orders, configured with the assistance of sales representatives and validated when entered into the system, were routed directly to manufacturing control, where build order and assembly sequence information was generated and sent to the plant floor. Human resources Achieving market-driven quality goals depended on enabled, empowered, excited and rewarded employees, the 1990 application summary said.. IBM Rochester’s HR strategy attempted to bring about a cultural shift from a product-driven focus to a market and customer-driven quality focus, and consisted of three initiatives: 1. formal education 2. on-the-job customer contact 3. participation. Morale, buy-in, participation and productivity were measured to establish baselines and drive continuous improvement

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Integrating people into quality and business plans Education and communication IBM Rochester is continually training employees and developing their skills - spending on education is five times the national average. Individual discussions between employees and managers is the most common and important communication channel. Other avenues include:

Basic belief: respect for the individual

Education partnership - faculty loans cooperative education programmes - tech interchanges with universities - Greater Rochester University Centre

Site goal Business plans

People vision - enable - empower - excite - reward

Management development - quality training - management college - shadow programme - mentor programme - tech assisitance assignments - cross-functiona; assignments

Communications - employee-manager discussions - regular department meetings - functional meetings - IBM TV network - bulletin board notices

Customer contact

Human resource strategy Paradigm shift to market-driven culture

All employees from senior managers to production staff are given opportunities to have regular contact with customers

Awareness understanding attitude behaviour People initiatives

On the job market-driven experience - advocates - telemarketing assignments - customer partnership call assignments - executive assistance to marketing - key account owner - installation assessment team

- on-the-job customer contact - participation

Measures of effectiveness - morale - productivity - buy-in - paticipation

Participation initiatives - IBM Rochester continually increases participation in technical vitality initiatives, measured here by employee participation in catagories such as writing articles in professional journals, patent applications and inventions.

Education and training - quality education - manufacturing skills integration - voluntary education - technical vitality - graduate work study - supplier education

Participation IBM Rochester fosters staff participation and empowerment. Compensation and recognition programmes ensure that people are rewarded for improvement and innovation 1,200 800 400 0

1986 1987 1988 1989

Decision-making

Job flexibility

Recognition

Compensation

- opinion survey - ‘Speak Up’ process - open door programme - Suggestion plan - roundtable discussions - skip-level interviews - development plans - performance plans - manunfacturing skills integration

- full employment - volunteer temp assignments - flextime scgedules - internal transfer - retraining

- performance evaluation - vebal thanks - promotion - ABS Quality Awards - management excellence awards management appreciation awards - author recognition - inventor recognition - site-wide publicity

- merit pay - IBM benefits plan - voluntary tax-deferred savings plan - vountary stock-purchase option - employee assistance programme - ‘Plan for Life’ - Elder care referral - child care referral - IBM club - Watson Scholarship

Customer satisfaction processes Customer partnership call - To say thanks for purchasing - To ask about likes and dislikes - to seek comments

Database record-keeping - data - detailed comments - analysis of responses

Customer satisfied?

No

Yes

Satisfied customer

Customer

Summarises call information

Establishes marketing team contact record

Analyses for trends and improvements

Contacts local branch manager

Monthly summary report for improvements given to manufacturing development, marketing and service

Makes customer contact

Tracks dissatisfaction plans to closure

30 day closure process

Action plan to resolve dissatisfaction within 30 days

The Customer Partnership Call process thanked customers for purchasing an AS/400. The call was (and still is, see the Customer calling at IBM Rochester exhibit) made 90 days after shipment from Rochester, seeking the customer's likes and dislikes, as well as any comments they may have. These comments were placed in a database, analyzed, and distributed regularly to engineering, programming, marketing, manufacturing, and service teams for evaluation. 18

Dissatisfied customers or customers with concerns were contacted by marketing to understand their concerns in more detail. The Customer Satisfaction Project Office received notification of the results of the customer contact. Thirty days later, the same customers were called back to ensure they were satisfied. Other methods to ensure leadership in customer satisfaction included customer satisfaction surveys, independent consultant reviews, and industry-accepted reports.

Complaint management processes at IBM Rochester Customer complaint

Corporate/LOB

Area/branch Investigator assigned the same day Close complaint within 2 weeks

Customer feedback programmes Customer satisfaction management team - sends feedback complaints to branch office - records complaints - analyses complaints

Analysis of results presented to: - customer satisfaction council - customer satisfaction process council - LOB general manager

Product, service, and process improvement

Measure and validate Source - IBM Rochester 1991

To achieve its goal of undisputed leader in customer satisfaction, IBM Rochester established a complaint management process that tightly linked marketing and service teams to development and manufacturing teams. Complaints were managed by a Customer Satisfaction Management Team working with the branch office closest to that customer. An investigator was assigned to investigate and understand the specific details of the complaint, which had to be resolved within two weeks. Feedback from the complaint is sent to the Customer Satisfaction Management Team where it is recorded, assimilated with other information, and correlated for use in reports to the Customer Satisfaction Council, resulting in product and service quality improvements.

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