Examination Paper of Quality Management
7
IIBM Institute of Business Management
IIBM Institute of Business Management
Examination Paper MM.100
Quality Control
Section A: Objective Type & Short Questions (30 marks)
•?This section consists of Multiple Choice Type & Short Notes type questions.
•?Answer all the questions.
•?Part One carries 1 mark each & Part Two carries 5 marks each.
Part One:
Multiple Choices:
1. A curve that shows the amount inspected by both the consumer and the producer for different
percent nonconforming values.
a. ASN curve
b. ATI curve
c. AOQ curve
d. None of the above
2. The producer?s risk is represented by the symbols
a. Alpha
b. Beta
c. Gamma
d. None of the above
3. The International Committee of Weights and Measures revised the metric system in
a. 1970
b. 1960
c. 1950
d. 1999
4. ASRS stands for___________
5. A recent survey of retail customers by the___________
6. A cause-and-effect diagram was developed by____________
7. Variables that exhibit gaps are called_______________
8. How many techniques used to discard data.
a. One
b. Two
c. Three
d. None of the above
9. Deviation charts are also called_________
Examination Paper of Quality Management
8
IIBM Institute of Business Management
a. Difference chart
b. Nominal chart
c. Target chart
d. (a), (b), & (c)
10. Dodge-Romig Tables developed by
a. H.F. Dodge
b. H.G. Romig
c. H.K. Fleming
d. Both (a) & (b)
Part Two:
1. Write short note on “Group Chart”.
2. What is “Measures of Dispersion”.
3. What is “Collection of Data”.
4. Write short note on “Binomial Probability Distribution”.
END OF SECTION A
Section B: Caselets (40 marks)
•?This section consists of Caselets.
•?Answer all the questions.
•?Each caselet carries 20 marks.
•?Detailed information should form the part of your answer (Word limit 200 to 250 words).
Caselet 1
It is 7:00 a.m. and the siren sounds high at Kandivli (a suburb of North Mumbai) plant of Mahindra &
Mahindra?s (M&M) Tractor division, signaling the starting time of the morning shift. Hardly any
workers have turned up. Reporting late on duty is a norm for the workers here. Seldom does the
morning shift start before 7:30 a.m. During the day shift, it was an ominous scene to find workers
stretching out under the trees and relaxing during the working hours. The union leaders hung around the
factory without doing any work at all. A few days back, the workers in the night shift had beaten up a
milkman for creating a lot of noise in the week hours of the morning and thus, disturbing their sleep
during their working hours. Things were worse at the other plant of M&M in Nagpur. But this was all
in the 1980s. M&M has come a long way since then – it has won the most coveted Deming prize for
quality, and started a farming equipment assembling plant in the U.S.A. After the huge success there,
the company opened a second assembly plant and a distribution centre in Georgia. Now, the company is
in the process of establishing assembling units in Canada to locally produce and market a range of low
horsepower cab tractors with features such as AC heater (keeping in view the cold weather conditions
for the farmers there), personal stereo, and even a sun roof. It has also acquired Jiangling Tractors in
China, which it would use to develop low cost products suited to plough deeper into the US farm
equipment market. Now, the fourth largest tractor company in the world, M&M, has four tractor plants
in India (Mumbai, Nagpur, Rudrapur in Uttranchal, and Jaipur). It has been maintaining its market
leadership for the past two decades. During the late 1980s, the company tried to apply TQM concepts
Examination Paper of Quality Management
9
IIBM Institute of Business Management
such as quality circles without getting any success. M&M was the market leader in the tractors segment
at that time, but in view of the looming multinational threat in the near future, its internal situation was
very fragile. During 1990-94, the company started the use of the statistical process control and tried to
perform business process reengineering. Its journey towards the Deeming prize was initiated in 1994,
with the appointment of Prof. Yasutoshi Washio, a Japanese expert, in the implementation of the
Deeming guidelines. The same year, the company was rechristened M&M Farm Equipment Sector
(FES).
Initially, Prof. Washio was skeptical about the Indian companies and workers. He felt that the
Indian companies are more like the American companies, which feel that results are important. On the
other hand, for the Japanese, the process is more important. Moreover, he had serious doubts about the
attitude of the Indian workers with respect to teamwork – a Deeming prerequisite – as he felt that Indian
were individualistic. He has proved wrong by the M&M workers. In his own words, „The Indians can
be good team workers, much better than the young in Japan today and, in that sense, perhaps, Deeming
is better suited to Indian companies?. In the initial few years of interaction with the management of
FES, Washio found himself isolated due to disagreements on various fronts. Washio had major
difficulties in making most of the Indian companies understand the importance of implementation over
creating a perfect framework. In his own words, „Indians are very good with framework and the big
picture, but are poor with implementation. The kaizen is weak.? Kaizen means gradual, orderly, and
continuous improvement in work processes. It took a while for Washio to make the FES personnel
understand that good kaizen hinges on implementation, so there is no need to spend too much time
creating a perfect framework. Once you start implementing these, the rest will happen automatically.
The FES created a team to implement the team to implementing the Deeming guidelines. The team
identified eleven key areas to be fulfilled:
1. Top management leadership and involvement
2. Creating and maintaining TQM frameworks
3. Quality assurance
4. Management system
5. Human resource development
6. Effective utilization of resources
7. Understanding TQM concepts and value
8. Use of scientific method
9. Organizational power
10. Relationship with stakeholders
11. Enabling the unique TQM activities
In addition, there is another Deming must-do: eliminate dependence on inspection to achieve quality by
building quality into the product in the first place. The system at FES earlier was that at the end of the
assembly process or at the customer?s place, there used to be a final inspection. If a product showed
serious flaws then, it was sent again to the shop floor. This wasted a lot of time and effort, and it did not
add to the improvement in the quality of the manufactured product. In order to change this system,
computers were installed on the shop floor for showing the standard operating procedure (SOP) of a
particular process to make the workers understand the various steps in a process. This reduces the
chances of human error and acts as a natural check. At the end of every complete process, a check is
performed by a trained worker, who also follows an SOP. Employee involvement is the first step in
ensuring the success of any quality initiative. At FES, the workers would dictate terms to the shift
supervisor by saying that they would not do different tasks on many machines. The management took
time to conceive them by giving them examples such as: if your wife can do multiple tasks of cleaning
the house, feeding the children, and washing the cloths, why can?t you do the same? The workers were
explained the multinational threats looming large. They were told that, if they did not mend their ways,
the company might shut down the factory, or even worse, a multinational may take it over and would
Examination Paper of Quality Management
10
IIBM Institute of Business Management
invariably lay off all the problem creating workers. Examples of companies shut down in Mumbai due
to the changed scenario were given. The entire programme was termed „Ashwamedh? and analogies
were drawn from mythology and the current competitive situation. This brought a complete
transformation in the workforce that was now willing to perform multiple tasks, double their
productivity, and maintain shift discipline by reporting on time. The workers were informed by the
management about every difficulty faced by the company in beating the competition in the market
place. Some of the workers were sent with the marketing staff to meet the farmers using the company?s
product and facing problems. This was called „Operation Hamla?. The workers came back chastised and
sobered when they realized that a small mistake on the shop floor could cost a farmer his season?s crop.
The company even sent some of the union leaders for short training courses in the USA and UK.
This sustained effort on part of the company has paid rich dividends. Costs are down by 15% and
the market share has risen by one percent to 27.3% (10% higher than its closest competitor), despite an
overall decline in the tractor demands. The break-even point for a new model of a tractor has decreased
to 30,000 -32,000 from the 54,000 tractors three years ago. The worker productivity levels have
increased by 100%. Tractor exports from the company have increased 100% over the past 10 years,
with 70% to the USA alone. The quality of tractors has improved drastically with the number of
complaints per 1000 tractors dropping from 228 to 90. The rejection rate for components bought from
vendors, rejection and rework in machining, and rejection at final testing have all been brought down to
near zero levels. FES has introduced 15 new models in accordance with the requirements in the
international markets. The journey to world-class quality is not over yet. The company now aims at
matching the world benchmarks in productivity and quality to establish a cost leadership in the Indian
industry.
1. If you were a part of the top management at M&M FES, how would you have involved the workers
in the Deming programme?
2. Do you think that M&M FES has a strategic quality management system in place?
Caselet 2
In 1965, a Yale University undergraduate student Frederick W. Smith wrote a term paper about the
passenger route systems used by most airfreight shippers, which he viewed as economically inadequate.
Smith wrote of the need for shippers to have a system designed specifically for airfreight that could
accommodate time sensitive shipments such as medicines, computer parts, and electronics. In August
1971, following a stint in the military, Smith bought controlling interest in Arkansas. While operating
his new firm, Smith identified the tremendous difficulty in getting packages and other airfreight
delivered with in 1 – 2 days. This dilemma motivated him to do the necessary research for resolving the
inefficient distribution system. Thus, the idea for Federal Express was born – a company that
revolutionized global business practices and now defines speed and reliability. Federal Express was so
named due to the patriotic meaning associated with the word „federal?, which suggested an interest in
nationwide economic activity. At that time, Smith hoped to obtain a contract with the Federal Reserve
Bank and, although the proposal was denied, he believed the name was a particularly good one for
attracting public attention and maintaining name recognition.
Company Growth
Though the company did not show a profit until July 1975, it soon became the premier carrier of highpriority
goods in the marketplace and the standard setter for the industry it established. In the mid-
1970s, Federal Express took a leading role in lobbying for air cargo deregulation that finally came in
1977. These changes allowed Federal Express to use larger aircraft (such as Boeing 727s and
Examination Paper of Quality Management
11
IIBM Institute of Business Management
McDonnell-Douglas DC-10s) and spurred the company?s rapid growth. Today FedEx express has the
world?s largest all-cargo air fleet, including McDonnell-Douglas MD-11s and Airbus A-300s and A-
310s. The planes have a total daily lift capacity of more than 26.5 million pounds. In a 24-hour period,
the fleet travels nearly 500,000 miles while its couriers log 2.5 million miles a day- the equivalent of
100 trips around the earth. The company entered its maturing phase in the first half of the 1980s.
Federal Express was well established. Competitors were trying to catch up with a company whose
growth rate was compounding at about 40% annually. In the fiscal year 1983, Federal Express reported
$1 billion in revenues, making American business history as the first company to reach that financial
hallmark inside 10 years of start-up without mergers or acquisitions.
Overseas Expansion
Following the first several international acquisitions, intercontinental operations began in 1984 with
service to Europe and Asia. The following year, FedEx marked its first regularly scheduled flight to
Europe. In 1988, the company initiated direct-scheduled cargo service to Japan. The acquisition of
Tiger International, Inc. occurred in February 1989. With the integration of the Flying Tigers network
on 7 August 1989, the company became the world?s largest full-service, All-cargo Airline, Included in
the acquisition were route to 21 countries, a fleet of Boeing 747 and 727 aircraft, facilities throughout
the world, and Tigers? expertise in international airfreight. Federal Express obtained authority to serve
China through a 1995 acquisition from evergreen International Airlines. Under this authority, Federal
Express became the sole US-based, All-cargo carrier with aviation rights to the world?s most populous
nation. Since then, the company?s global reach has continued to expand, resulting in an unsurpassed
worldwide network. FedEx Express today delivers to customers in more than 210 countries.
Evolving Identify
The first evolution of the company?s corporate identify came in 1994 when Federal Express officially
adopted „FedEx? as its primary brand, talking a cue from its customers, who frequently referred to the
company by the shortened name. By that time, customers used the term as a verb, meaning, „to send an
overnight shipment?. It did not take long for the meaning to catch on, and today it is common
terminology to „FedEx? a package. The second evolution came in 2000 when the company was renamed
„FedEx Express? to reflect its position in the overall FedEx Corporation portfolio of services. This also
signified the expanding breadth of FedEx Express – specific service offerings as well as a FedEx that
was no longer just overnight delivery.
FedEx Firsts
Throughout its existence, FedEx has amassed an impressive list of „firsts?, most notably for leading the
industry in introducing new services for customers. Federal Express originated the Overnight Letter and
was
•?the first transportation company dedicated to overnight package delivery,
•?the first to offer next-day delivery by 10:30 a.m.,
•?the first to offer Saturday delivery,
•?the first express company to offer time define service for freight, and
•?the first in the industry with money-back guarantees and free proof of performance – services that
now extend to its worldwide network.
Being a „first? company resulted in many firsts for awards and honors, too. In 1990, Federal Express
became the first company to win the Malcolm Baldrige National Quality Award in the service
Examination Paper of Quality Management
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IIBM Institute of Business Management
category. It also received ISO 9001 registration for all of its worldwide operations in 1994, making in
the first global express transportation company to receive simultaneous system-wide certification.
Today, FedEx Express is the largest operating company in the FedEx family, handling about 3.2 million
packages and documents every business day.
People-Service-Profit
Federal Express?s „people-service-profit? philosophy guides management policies and actions. The
company has a well-developed and thoroughly deployed management evaluation system called SFA
(survey/feedback/action), which involves a survey of employees, analysis of each work group?s results
by the work group?s manager, and a discussion between the manager and the work group to develop
written action plans for the manager to improve and become more effective. Data from the SFA process
are aggregated at all levels of the organization for use in policymaking. Training of front-line personnel
is a responsibility of managers and „recurrency training? is a widely used instrument for improvement.
Teams regularly assess training needs and a worldwide staff of training professionals devices programs
to address those needs. To aid these efforts, Federal Express has developed an interactive video system
for employee instruction.
An internal television network, accessible throughout the company, also serves as an important avenue
for employee education. Consistently included in listings of the best US companies to work for, Federal
Express has a „no lay-off? philosophy, and its „guaranteed fair treatment procedure? for handling
employee grievances is used as a model by firms in many industries. Employees can participate in a
program to qualify front-line workers for management positions. In addition, Federal Express has a
well-developed recognition program for team and individual contributions to company performance.
Over the last five years, at least 91% of the employees responded that they were „proud to work for
Federal Express?.
Service Quality Indicators
To spur progress toward its ultimate target of 100% customer satisfaction, Federal Express recently
replaced its old measure of quality performance-percent of on-time deliveries – with a 12 component
index that comprehensively describes how customers view its performance. Each item in the service
quality indicator (SQI) is weighted to reflect how significantly it affects the overall customer
satisfaction. Performance data are gathered with the company?s advanced computer and tracking
systems, including the SuperTracker, a hand-held computer used for scanning a shipment?s bar code
every time a package changes hands between pick-up and delivery. Rapid analysis of data from the
firm?s far-flung operations yields daily SQI reports transmitted to workers at all Federal Express sites.
The management meets daily to discuss the previous day?s performance and tracks weekly, monthly,
and annual trends. Analysis of data contained in the company?s more than 30 major database assist the
quality action teams (QATs) in locating the root causes of problems that surface in SQI reviews.
Extensive customer and internal data are used by cross-functional teams involved in the company?s new
product introduction process. To reach its aggressive quality goals, the company has set up one crossfunctional
team for each service component in the SQI. A senior executive heads each team and assures
the involvement of front line employees, support personnel, and managers from all parts of the
corporation when needed. Two of these corporate-wide teams have a network of over 1,000 employees
working on improvements. The SQI measurements are directly linked to the corporate planning
process, which begins with the CEO and the COO and an executive planning committee. Service
quality indicators from the basis on which corporative executives are evaluated. Individual performance
objectives are established and monitored. Executives bonuses rest upon the performance of the whole
corporation in meeting performance improvement goals. In the annual employee survey, if employees
do not rate management leadership at least as high as they rated them the year before, no executive
receives a year-end bonus. Employees are encouraged to be innovative and to make decisions that
Examination Paper of Quality Management
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IIBM Institute of Business Management
advance quality goals. Federal Express provides employees with the information and technology they
need to continuously improve their performance. An example is the digitally assisted dispatch system
(DADS), which communicates to some 30,000 couriers through screens in their vans. The system
enables quick response to pick-up and delivery dispatches and allows couriers to manage their time and
routes with high efficiency. Since 1987, overall customer satisfaction with Federal Express?'73 domestic
service has averaged better than 95%, and its international service has rated a satisfaction score of about
94%. In an independently conducted survey of air-express industry customers, 53% gave Federal
Express a perfect score, as compared with 39% for the next-best competitor. The company has received
195 of nearly 600 businesses and organizations have visited its facilities.
1. What lessons can Indian companies take from FedEx?
2. What are the factors that have gone against India and why did FedEx not start its operations here?
END OF SECTION B
Section C: (30 marks)
•?This section consists Long Questions.
•?Answer all the questions.
•?Each question carries 15 marks.
1. What do you mean by Quality? Discuss the importance of Quality with 14 point of Deming.
2. Describe the Benchmarking? How would you explain the process, types and benefits of Benchmarking?
END OF SECTION C
S-2-300813
7
IIBM Institute of Business Management
IIBM Institute of Business Management
Examination Paper MM.100
Quality Control
Section A: Objective Type & Short Questions (30 marks)
•?This section consists of Multiple Choice Type & Short Notes type questions.
•?Answer all the questions.
•?Part One carries 1 mark each & Part Two carries 5 marks each.
Part One:
Multiple Choices:
1. A curve that shows the amount inspected by both the consumer and the producer for different
percent nonconforming values.
a. ASN curve
b. ATI curve
c. AOQ curve
d. None of the above
2. The producer?s risk is represented by the symbols
a. Alpha
b. Beta
c. Gamma
d. None of the above
3. The International Committee of Weights and Measures revised the metric system in
a. 1970
b. 1960
c. 1950
d. 1999
4. ASRS stands for___________
5. A recent survey of retail customers by the___________
6. A cause-and-effect diagram was developed by____________
7. Variables that exhibit gaps are called_______________
8. How many techniques used to discard data.
a. One
b. Two
c. Three
d. None of the above
9. Deviation charts are also called_________
Examination Paper of Quality Management
8
IIBM Institute of Business Management
a. Difference chart
b. Nominal chart
c. Target chart
d. (a), (b), & (c)
10. Dodge-Romig Tables developed by
a. H.F. Dodge
b. H.G. Romig
c. H.K. Fleming
d. Both (a) & (b)
Part Two:
1. Write short note on “Group Chart”.
2. What is “Measures of Dispersion”.
3. What is “Collection of Data”.
4. Write short note on “Binomial Probability Distribution”.
END OF SECTION A
Section B: Caselets (40 marks)
•?This section consists of Caselets.
•?Answer all the questions.
•?Each caselet carries 20 marks.
•?Detailed information should form the part of your answer (Word limit 200 to 250 words).
Caselet 1
It is 7:00 a.m. and the siren sounds high at Kandivli (a suburb of North Mumbai) plant of Mahindra &
Mahindra?s (M&M) Tractor division, signaling the starting time of the morning shift. Hardly any
workers have turned up. Reporting late on duty is a norm for the workers here. Seldom does the
morning shift start before 7:30 a.m. During the day shift, it was an ominous scene to find workers
stretching out under the trees and relaxing during the working hours. The union leaders hung around the
factory without doing any work at all. A few days back, the workers in the night shift had beaten up a
milkman for creating a lot of noise in the week hours of the morning and thus, disturbing their sleep
during their working hours. Things were worse at the other plant of M&M in Nagpur. But this was all
in the 1980s. M&M has come a long way since then – it has won the most coveted Deming prize for
quality, and started a farming equipment assembling plant in the U.S.A. After the huge success there,
the company opened a second assembly plant and a distribution centre in Georgia. Now, the company is
in the process of establishing assembling units in Canada to locally produce and market a range of low
horsepower cab tractors with features such as AC heater (keeping in view the cold weather conditions
for the farmers there), personal stereo, and even a sun roof. It has also acquired Jiangling Tractors in
China, which it would use to develop low cost products suited to plough deeper into the US farm
equipment market. Now, the fourth largest tractor company in the world, M&M, has four tractor plants
in India (Mumbai, Nagpur, Rudrapur in Uttranchal, and Jaipur). It has been maintaining its market
leadership for the past two decades. During the late 1980s, the company tried to apply TQM concepts
Examination Paper of Quality Management
9
IIBM Institute of Business Management
such as quality circles without getting any success. M&M was the market leader in the tractors segment
at that time, but in view of the looming multinational threat in the near future, its internal situation was
very fragile. During 1990-94, the company started the use of the statistical process control and tried to
perform business process reengineering. Its journey towards the Deeming prize was initiated in 1994,
with the appointment of Prof. Yasutoshi Washio, a Japanese expert, in the implementation of the
Deeming guidelines. The same year, the company was rechristened M&M Farm Equipment Sector
(FES).
Initially, Prof. Washio was skeptical about the Indian companies and workers. He felt that the
Indian companies are more like the American companies, which feel that results are important. On the
other hand, for the Japanese, the process is more important. Moreover, he had serious doubts about the
attitude of the Indian workers with respect to teamwork – a Deeming prerequisite – as he felt that Indian
were individualistic. He has proved wrong by the M&M workers. In his own words, „The Indians can
be good team workers, much better than the young in Japan today and, in that sense, perhaps, Deeming
is better suited to Indian companies?. In the initial few years of interaction with the management of
FES, Washio found himself isolated due to disagreements on various fronts. Washio had major
difficulties in making most of the Indian companies understand the importance of implementation over
creating a perfect framework. In his own words, „Indians are very good with framework and the big
picture, but are poor with implementation. The kaizen is weak.? Kaizen means gradual, orderly, and
continuous improvement in work processes. It took a while for Washio to make the FES personnel
understand that good kaizen hinges on implementation, so there is no need to spend too much time
creating a perfect framework. Once you start implementing these, the rest will happen automatically.
The FES created a team to implement the team to implementing the Deeming guidelines. The team
identified eleven key areas to be fulfilled:
1. Top management leadership and involvement
2. Creating and maintaining TQM frameworks
3. Quality assurance
4. Management system
5. Human resource development
6. Effective utilization of resources
7. Understanding TQM concepts and value
8. Use of scientific method
9. Organizational power
10. Relationship with stakeholders
11. Enabling the unique TQM activities
In addition, there is another Deming must-do: eliminate dependence on inspection to achieve quality by
building quality into the product in the first place. The system at FES earlier was that at the end of the
assembly process or at the customer?s place, there used to be a final inspection. If a product showed
serious flaws then, it was sent again to the shop floor. This wasted a lot of time and effort, and it did not
add to the improvement in the quality of the manufactured product. In order to change this system,
computers were installed on the shop floor for showing the standard operating procedure (SOP) of a
particular process to make the workers understand the various steps in a process. This reduces the
chances of human error and acts as a natural check. At the end of every complete process, a check is
performed by a trained worker, who also follows an SOP. Employee involvement is the first step in
ensuring the success of any quality initiative. At FES, the workers would dictate terms to the shift
supervisor by saying that they would not do different tasks on many machines. The management took
time to conceive them by giving them examples such as: if your wife can do multiple tasks of cleaning
the house, feeding the children, and washing the cloths, why can?t you do the same? The workers were
explained the multinational threats looming large. They were told that, if they did not mend their ways,
the company might shut down the factory, or even worse, a multinational may take it over and would
Examination Paper of Quality Management
10
IIBM Institute of Business Management
invariably lay off all the problem creating workers. Examples of companies shut down in Mumbai due
to the changed scenario were given. The entire programme was termed „Ashwamedh? and analogies
were drawn from mythology and the current competitive situation. This brought a complete
transformation in the workforce that was now willing to perform multiple tasks, double their
productivity, and maintain shift discipline by reporting on time. The workers were informed by the
management about every difficulty faced by the company in beating the competition in the market
place. Some of the workers were sent with the marketing staff to meet the farmers using the company?s
product and facing problems. This was called „Operation Hamla?. The workers came back chastised and
sobered when they realized that a small mistake on the shop floor could cost a farmer his season?s crop.
The company even sent some of the union leaders for short training courses in the USA and UK.
This sustained effort on part of the company has paid rich dividends. Costs are down by 15% and
the market share has risen by one percent to 27.3% (10% higher than its closest competitor), despite an
overall decline in the tractor demands. The break-even point for a new model of a tractor has decreased
to 30,000 -32,000 from the 54,000 tractors three years ago. The worker productivity levels have
increased by 100%. Tractor exports from the company have increased 100% over the past 10 years,
with 70% to the USA alone. The quality of tractors has improved drastically with the number of
complaints per 1000 tractors dropping from 228 to 90. The rejection rate for components bought from
vendors, rejection and rework in machining, and rejection at final testing have all been brought down to
near zero levels. FES has introduced 15 new models in accordance with the requirements in the
international markets. The journey to world-class quality is not over yet. The company now aims at
matching the world benchmarks in productivity and quality to establish a cost leadership in the Indian
industry.
1. If you were a part of the top management at M&M FES, how would you have involved the workers
in the Deming programme?
2. Do you think that M&M FES has a strategic quality management system in place?
Caselet 2
In 1965, a Yale University undergraduate student Frederick W. Smith wrote a term paper about the
passenger route systems used by most airfreight shippers, which he viewed as economically inadequate.
Smith wrote of the need for shippers to have a system designed specifically for airfreight that could
accommodate time sensitive shipments such as medicines, computer parts, and electronics. In August
1971, following a stint in the military, Smith bought controlling interest in Arkansas. While operating
his new firm, Smith identified the tremendous difficulty in getting packages and other airfreight
delivered with in 1 – 2 days. This dilemma motivated him to do the necessary research for resolving the
inefficient distribution system. Thus, the idea for Federal Express was born – a company that
revolutionized global business practices and now defines speed and reliability. Federal Express was so
named due to the patriotic meaning associated with the word „federal?, which suggested an interest in
nationwide economic activity. At that time, Smith hoped to obtain a contract with the Federal Reserve
Bank and, although the proposal was denied, he believed the name was a particularly good one for
attracting public attention and maintaining name recognition.
Company Growth
Though the company did not show a profit until July 1975, it soon became the premier carrier of highpriority
goods in the marketplace and the standard setter for the industry it established. In the mid-
1970s, Federal Express took a leading role in lobbying for air cargo deregulation that finally came in
1977. These changes allowed Federal Express to use larger aircraft (such as Boeing 727s and
Examination Paper of Quality Management
11
IIBM Institute of Business Management
McDonnell-Douglas DC-10s) and spurred the company?s rapid growth. Today FedEx express has the
world?s largest all-cargo air fleet, including McDonnell-Douglas MD-11s and Airbus A-300s and A-
310s. The planes have a total daily lift capacity of more than 26.5 million pounds. In a 24-hour period,
the fleet travels nearly 500,000 miles while its couriers log 2.5 million miles a day- the equivalent of
100 trips around the earth. The company entered its maturing phase in the first half of the 1980s.
Federal Express was well established. Competitors were trying to catch up with a company whose
growth rate was compounding at about 40% annually. In the fiscal year 1983, Federal Express reported
$1 billion in revenues, making American business history as the first company to reach that financial
hallmark inside 10 years of start-up without mergers or acquisitions.
Overseas Expansion
Following the first several international acquisitions, intercontinental operations began in 1984 with
service to Europe and Asia. The following year, FedEx marked its first regularly scheduled flight to
Europe. In 1988, the company initiated direct-scheduled cargo service to Japan. The acquisition of
Tiger International, Inc. occurred in February 1989. With the integration of the Flying Tigers network
on 7 August 1989, the company became the world?s largest full-service, All-cargo Airline, Included in
the acquisition were route to 21 countries, a fleet of Boeing 747 and 727 aircraft, facilities throughout
the world, and Tigers? expertise in international airfreight. Federal Express obtained authority to serve
China through a 1995 acquisition from evergreen International Airlines. Under this authority, Federal
Express became the sole US-based, All-cargo carrier with aviation rights to the world?s most populous
nation. Since then, the company?s global reach has continued to expand, resulting in an unsurpassed
worldwide network. FedEx Express today delivers to customers in more than 210 countries.
Evolving Identify
The first evolution of the company?s corporate identify came in 1994 when Federal Express officially
adopted „FedEx? as its primary brand, talking a cue from its customers, who frequently referred to the
company by the shortened name. By that time, customers used the term as a verb, meaning, „to send an
overnight shipment?. It did not take long for the meaning to catch on, and today it is common
terminology to „FedEx? a package. The second evolution came in 2000 when the company was renamed
„FedEx Express? to reflect its position in the overall FedEx Corporation portfolio of services. This also
signified the expanding breadth of FedEx Express – specific service offerings as well as a FedEx that
was no longer just overnight delivery.
FedEx Firsts
Throughout its existence, FedEx has amassed an impressive list of „firsts?, most notably for leading the
industry in introducing new services for customers. Federal Express originated the Overnight Letter and
was
•?the first transportation company dedicated to overnight package delivery,
•?the first to offer next-day delivery by 10:30 a.m.,
•?the first to offer Saturday delivery,
•?the first express company to offer time define service for freight, and
•?the first in the industry with money-back guarantees and free proof of performance – services that
now extend to its worldwide network.
Being a „first? company resulted in many firsts for awards and honors, too. In 1990, Federal Express
became the first company to win the Malcolm Baldrige National Quality Award in the service
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category. It also received ISO 9001 registration for all of its worldwide operations in 1994, making in
the first global express transportation company to receive simultaneous system-wide certification.
Today, FedEx Express is the largest operating company in the FedEx family, handling about 3.2 million
packages and documents every business day.
People-Service-Profit
Federal Express?s „people-service-profit? philosophy guides management policies and actions. The
company has a well-developed and thoroughly deployed management evaluation system called SFA
(survey/feedback/action), which involves a survey of employees, analysis of each work group?s results
by the work group?s manager, and a discussion between the manager and the work group to develop
written action plans for the manager to improve and become more effective. Data from the SFA process
are aggregated at all levels of the organization for use in policymaking. Training of front-line personnel
is a responsibility of managers and „recurrency training? is a widely used instrument for improvement.
Teams regularly assess training needs and a worldwide staff of training professionals devices programs
to address those needs. To aid these efforts, Federal Express has developed an interactive video system
for employee instruction.
An internal television network, accessible throughout the company, also serves as an important avenue
for employee education. Consistently included in listings of the best US companies to work for, Federal
Express has a „no lay-off? philosophy, and its „guaranteed fair treatment procedure? for handling
employee grievances is used as a model by firms in many industries. Employees can participate in a
program to qualify front-line workers for management positions. In addition, Federal Express has a
well-developed recognition program for team and individual contributions to company performance.
Over the last five years, at least 91% of the employees responded that they were „proud to work for
Federal Express?.
Service Quality Indicators
To spur progress toward its ultimate target of 100% customer satisfaction, Federal Express recently
replaced its old measure of quality performance-percent of on-time deliveries – with a 12 component
index that comprehensively describes how customers view its performance. Each item in the service
quality indicator (SQI) is weighted to reflect how significantly it affects the overall customer
satisfaction. Performance data are gathered with the company?s advanced computer and tracking
systems, including the SuperTracker, a hand-held computer used for scanning a shipment?s bar code
every time a package changes hands between pick-up and delivery. Rapid analysis of data from the
firm?s far-flung operations yields daily SQI reports transmitted to workers at all Federal Express sites.
The management meets daily to discuss the previous day?s performance and tracks weekly, monthly,
and annual trends. Analysis of data contained in the company?s more than 30 major database assist the
quality action teams (QATs) in locating the root causes of problems that surface in SQI reviews.
Extensive customer and internal data are used by cross-functional teams involved in the company?s new
product introduction process. To reach its aggressive quality goals, the company has set up one crossfunctional
team for each service component in the SQI. A senior executive heads each team and assures
the involvement of front line employees, support personnel, and managers from all parts of the
corporation when needed. Two of these corporate-wide teams have a network of over 1,000 employees
working on improvements. The SQI measurements are directly linked to the corporate planning
process, which begins with the CEO and the COO and an executive planning committee. Service
quality indicators from the basis on which corporative executives are evaluated. Individual performance
objectives are established and monitored. Executives bonuses rest upon the performance of the whole
corporation in meeting performance improvement goals. In the annual employee survey, if employees
do not rate management leadership at least as high as they rated them the year before, no executive
receives a year-end bonus. Employees are encouraged to be innovative and to make decisions that
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advance quality goals. Federal Express provides employees with the information and technology they
need to continuously improve their performance. An example is the digitally assisted dispatch system
(DADS), which communicates to some 30,000 couriers through screens in their vans. The system
enables quick response to pick-up and delivery dispatches and allows couriers to manage their time and
routes with high efficiency. Since 1987, overall customer satisfaction with Federal Express?'73 domestic
service has averaged better than 95%, and its international service has rated a satisfaction score of about
94%. In an independently conducted survey of air-express industry customers, 53% gave Federal
Express a perfect score, as compared with 39% for the next-best competitor. The company has received
195 of nearly 600 businesses and organizations have visited its facilities.
1. What lessons can Indian companies take from FedEx?
2. What are the factors that have gone against India and why did FedEx not start its operations here?
END OF SECTION B
Section C: (30 marks)
•?This section consists Long Questions.
•?Answer all the questions.
•?Each question carries 15 marks.
1. What do you mean by Quality? Discuss the importance of Quality with 14 point of Deming.
2. Describe the Benchmarking? How would you explain the process, types and benefits of Benchmarking?
END OF SECTION C
S-2-300813
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