Challenges of quality management. edited by Tadeusz Sikora and Paweł Nowicki

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1 Challenges of quality management edited by Tadeusz Sikora and Paweł Nowicki Cracow 2012

2 Cracow University of Economics The Departament of Quality Management Challenges of quality management edited by Tadeusz Sikora and Paweł Nowicki Cracow 2012

3 Reviewers: prof. dr hab. Wacław Adamczyk prof. dr hab. Tadeusz Sikora prof. dr hab. Tadeusz Trziszka prof. dr hab. Tadeusz Wawak Copyright by Uniwersytet Ekonomiczny w Krakowie Cracow 2012 PTTŻ Publishing House Balicka 122, Cracow ISBN Digital Printing KSERKOP, Cracow 2

4 This book is issued on the occasion of 40th anniversary of the Department of Quality Management of Cracow University of Economics

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6 Contents PREFACE...9 Slavko Arsovski, Zora Arsovski MANAGEMENT'S CHALLENGE FOR QUALITY IMPROVEMENT...11 Tomasz Hermaniuk LEVEL OF QUALITY OF EDUCATION SERVICES ON EXAMPLE OF UNIVERSITIES FROM RZESZOW...31 Martin Mizla SELECTED IMPACTS OF QUALITY COSTS DURING THE ECONOMIC CRISIS...49 Tomasz Nitkiewicz THE DETERMINANTS OF ENVIRONMENTAL MANAGEMENT SYSTEM IMPLEMENTATION IN POLISH COMPANIES...56 Paweł Nowicki, Tadeusz Sikora HACCP SYSTEM DOCUMENTAION PROCESS ACCORDING TO THE OPINION OF THE EMPLYEES OF BISTRO BARS...77 Rodica Pamfilie, Elena Roxana Stan MANAGING QUALITY COSTS A MUST FOR GROWING ORGANIZATIONAL PERFORMANCE (A CASE STUDY ON ROMANIAN BUSINESS HOTELS)...90 Jan Rewilak, Tomasz Tokaj RISKS OF MAKING NON-OPTIMAL DECISIONS RELATED TO QUALITY IMPROVEMENT BASED ON PARETO ANALYSIS Beata Starzyńska THE SELECTION OF QUALITY TOOLS FOR IMPROVING MANUFACTURING PROCESSES IN PRODUCTION COMPANIES Miladin Stefanović, Slavko Arsovski, Zora Arsovski THE KEY ISSUES IN QUALITY ASSURANCE OF ENGINEERING EDUCATION AND PREPARATION FOR INTERNATIONAL ACCREDITATION...141

7 6 Amalia Venera Todorut THE IMPORTANCE OF ORGANIZATIONAL CULTURE TOWARDS QUALITY IN THE SOCIETY BASED ON KNOWLEDGE Ada Mirela Tomescu STUDY REGARDING THE CULTURE OF QUALITY IN BIHOR COUNTY FIRMS Grzegorz Wróbel INTEGRATING OF SIMULATION MODELING METHOD WITH THE CONCEPT OF LOW- COST PROCESS IMPROVEMENT Bożydar Ziółkowski THE ASPECTS OF QUALITY IN ECO-MANAGEMENT AND AUDIT SCHEMES OF GREAT BRITAIN Radmila Živković, Milena Ilić, Jelena Miljković, Zoran D. Živković QUALITY MANAGEMENT OF PUBLIC SERVICES IN THE CITY OF BELGRADE - ASPECT OF CUSTOMER SATISFACTION

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10 PREFACE In a constantly increasing competition on the market, companies are looking for niches, which could attract new customers and make a profit, while diversifying activities. In order to build competitive advantage and satisfy customer demands more effectively, the increasing number of organizations implement quality management system. It allows them to gain customer trust and a better market position. The companies who decide to implement quality management system compliant with the standards, consider it as a guideline to build efficientlty and effectively functioning organization. The implemented quality management system in the organization requires continuous improvement, which is a big challenge for both top management and all employees. Skillful management of the enterprise as well as intuition and creative approach to quality, simplifies running a business. This book is dedicated to all the people who are interested in different aspects of quality. One of the main objectives of this book is to outline the directions of the research and entrepreneurship development in the area of quality. We would like to express our gratitude to all the Reviewers, who prepared the reviews and contributed to the final shape of the book. We also thank to the Authors of the chapters, for their valuable contribution to the research and practice of quality management. Paweł Nowicki Tadeusz Sikora Cracow, June 2012 r.

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12 Slavko Arsovski Zora Arsovski University of Kragujevac, Serbia MANAGEMENT'S CHALLENGE FOR QUALITY IMPROVEMENT Key words: quality, management, quality improvement, quality of management ABSTRACT In the new globalisation era, a management is changing because new needs, preasures for higher quality, agility, efficiency, effectiveness, resilience, etc. In this way classical management approach is not sufficient. Quality as new paradigm has a lot of requests for management. This circumstance could be challenge for management in view introduction new concepts, relation to other paradigm and using opportunities for higher efficiency. There are given results of investigation of quality request on management as challenge for quality improvement in this paper. INTRODUCTION A view on quality is changing, from period before year 1980 to today. Quality management is changing, too. This is related to management, as process. Question is how much management reacts on changes of quality requests and needs of stakeholders. That could be assessed as quality of management. Between quality management according quality paradigm 1,2,3,4,5,6 and quality of management is very complex relation 7,8. Sometimes in organisations exists high 1 Aikens H., Quality Inspired Management: The Key to Sustainability, Prentice Hall, 2011., 2 Arsovski S., Menadžment ekonomikom kvaliteta, Centar za kvalitet, Mašinski fakultet, Kragujevac, 2002, ISBN: , 3 Arsovski S., Menadžment procesima, Centar za kvalitet, Mašinski fakultet, Kragujevac, 2006, ISBN: , 4 Bahtijarević Šiber F., Management ljudskih potencijala, Golden marketing, Zagreb, 1999, ISBN: , 5 Chaffey D., E-Business and E-Commerce Management, FT-Prentice Hall, 2007., 6 De Witt B., Meyer R., Strategy: Process, Content, Context, 3nd Edition, Thompson, London, 2004, ISBN: , 7 Foster T., Managing Quality: An Integrative Approach, Pearson & Prentice Hall, 2004, ISBN: , 8 Foster T., Managing Quality: Integrating the supply chain, Prentice Hall, 2010, ISBN:

13 level performance of management and low level performance of quality management, and vice versa. On the other side, in many organisations have high level performance of quality management and low level of management. In first case organizations have good product portfolio, management by objectives and mission 9,10,11, performance management 12,13, strategic management 14,15,16, and management view quality is only one of business performance. In second case, specially in small and medium enterprise, quality management is developed and established according quality principle, but business performances are not sufficient 17,18,19,20. Management's quality and quality management is not always on the opposite sides. Using the new approaches as Total Quality Management (TQM), Business Excellence (BE), Six sigma (SS), Lean Production (LP), Kaizen, Just In - Time (JIT) at many other, this dillema is resolving and we have possibility to implement management's challenges as driver for quality management. In the new globalisation era a management is changing because new needs, preasures for higher quality, agility, efficiency, effectiveness, resilience etc. In this way classical management approach is not sufficient. Quality as new paradigm has a lot of request for management. This circumstance could be challenge for 9 Goetch D., Davis S., Introduction to Total Quality, Prentice Hall, Upper Saddle River, New Jersey, 1997, 10 Hur M., The influence of total quality management practices on the transformation of how organizations works, Total Quality Management and Business Intelligence, Vol. 20, Numbers 7-8, p ,, ISSN: , 11 Jacka M., Keller P., Business Process Mapping: Improving Customer Satisfaction, John Wiley & Sons, Hoboken, NY, 2008, ISBN: , 12 Juran J., Managerial Breakthrough, Mc Grow Hill, New York, 1995, 13 Kaplan R., Norten D., Strategy Maps: Converting intangible assets into tangible outcomes, Harvard Business School Press, Boston, 2004, ISBN: , 14 Krkač K., Uvod u poslovnu etiku i korporacijsku društvenu odgovornost, Mate, Zagreb, 2007, 15 Merna T., Al-Thani F., Corporate Risk Management, 2nd Edition, John Wiley & Sons, Hoboken, NY, 2008, ISBN: , 16 Modrinić Z., Menadžerska kompetentnost, BMD MEGA, Beograd, 2006, ISBN: , 17 Nast Dž., Mapiranje ideje, Sezam Book, Zrenjanin Rao et all., Total Quality Management: A Cross Functional Perspective, John Willey & Sons, New York, Stefanović N., Stefanović Ž., Liderstvo i kvalitet, Centar za kvalitet, Mašinski fakultet, Kragujevac, 2007, ISBN: X, 20 Stefanović Ž., Menadžment, Ekonomski fakultet, Kragujevac, 2003, ISBN: , 12

14 management in view introduction new concepts, relation to other paradigm and using opportunities for higher efficiency. 1. NEEDS FOR QUALITY IMPROVEMENT Quality concept has its history, presence and future. In order to observe the future of the quality in a better way, it is necessary to analyze the previous period, starting from the 20th century. There are three periods: before 1980, from 1980 until today, and the presence of quality. The first period is characterized by the stress on micro-aspects of quality, mostly in the field of measurement, administration and detection with products and services, especially services for quality control and internally focused programmes of quality improvement. Solutions to the problems referred to the technical sphere, without connection-making with interested parties. By the work of Shewhart in the 30 s of 20th century begins the application of statistical methods, and later with Deming work in the 50 s in Japan, this process enriched the management with principles, firstly for the analysis of production systems, and then for the statistical monitoring and improvement. Deming s mantra was that the workers are not responsible for the mistakes of the superiors, which resulted in his famous system of 14 points of quality management 21. In USA, in 1949., Wareman published first paper in journal Fortune about the principles of quality, language that all managers at operational level understand. Parallely with these activities that were initiated by Deming, Juran has, in the 50 s in USA and especially in Japan, strengthened the impact of quality development through the trilogy: planning, management, improvement and attitude that it should be acted in the direction of management on the spot, better training of employees and constant improvements. Quality development was strongly influenced by Feigenbaum, with the book Quality Controls: Principles, Practice, and Administration (1951) in which he set the foundations of total quality, shaped later on through the published book Total Quality Control (1991). His papers have become a basis for the development of TQM concept. When he was asked what refers to the word Total, he replied both with Quality and Management. 21 Aikens H., Quality Inspired Management: The Key to Sustainability, Prentice Hall, 2011., 13 13

15 Later on, Crosby also joined the movement for quality with the concepts Cost of Quality (CoQ) and Zero Defect (ZD), which have become the basis for later concept of Six Sigma (SS). Quality Assurance (QA) programmes developed starting with these theoretical assumptions of the quality guru, in the 70 s, in contrast with the quality control programmes. That partially facilitated the prevalence of the first oil crisis in Japan in the end of 70 s. The second period (after 1980) characterizes the recognition of quality significance as universal mantra. Quality was increasingly becoming the cure to all diseases. Particularly significant progress in the creation of quality represented the connection of quality-business performance, through the concept of highperforming work organizations. In this period, the need for quality standards grows, usually in strong swing of ISO quality standards primarily, development of national and other rewards for quality and business excellence, research in the field of quality. A new dimension to this period gives the development of TQM concept, with the integration of SPC-Statistical Process Control concept, leadership, significance and role of stakeholders, Six Sigma, Leon Production, Kaizen (Imai Masaaki), Company-Wide Quality Control (Ishikawa), Just-In-Time etc. All of this has led up to the strong swing in organizations in the aspect of quality improvement. Third period (presence) in the evolution of quality is characterized by understanding the quality as strategic driver of management in entire organization. That requires re-examination of business strategies, especially the ones of stakeholders and shareholders with the aim to achieve business excellence and competitiveness and sustainable development. Quality becomes the connective issue between the entities of organization, starting from the phase of defining the strategy and operational plans, to monitoring and improvement of all business processes. For this, the application of appropriate information and communication technologies (ICT) is unavoidable 22. Future(s) of the quality can be obtained by extrapolation of trends (figure 1) of the level of knowledge about the quality. 22 Arsovski S., Menadžment ekonomikom kvaliteta, Centar za kvalitet, Mašinski fakultet, Kragujevac, 2002, ISBN: , 14

16 Figure 1: Future of the quality Some of the concepts, such as SPC, JIT, Kanban will be developed rather slowly (1), others such as Lean Production, ZD somewhat faster (2), third ones even more faster such as SS (Six Sigma), Kaizen, CWQC (3), and the fourth more faster (e.g. Hoshrin in combination with ZD, Lean Production, TQM), which is represented by line 4 in Figure 1. It remains to identify the elements of the future of quality 23. That is based on three views: quality must also include the environment of organization, quality must also be a tool in case of business disorder and the quality must integrate the requirements of all interested parties. The first view is based on the requirements of standard in the aspect of environmental management, analysis of risk from the environment etc. In conditions of the limitations of natural resources, the quality needs to provide sustainable development of organization, which means that the aspects of stable input need to be included, as well as the aspects of input prices increase, input risk increase, process development risk increase (e.g. due to water supply, electricity 23 Arsovski S., Menadžment procesima, Centar za kvalitet, Mašinski fakultet, Kragujevac, 2006, ISBN: , 15 15

17 supply, etc.). Quality standards will be extended with standards related to risk, vulnerability, resilience, etc. The second view refers to the situation of organization that is in crisis, both financial and programme. That is the future of all organizations operating in terms of constant and less expected disorders, i.e. crisis, becomes a synonym for business. Quality is expected to increase the capacity of organization and society for rapid resilience, which is already expressed through American national standard ASIS SPC and ISO 22399:2007 (Societal Security Guidelines for incident preparedness and operational continuity management), BS :2006 (Business Continuity Management). In specific fields, specific knowledge and techniques will be created for acting in case of great disorders and strengthening of the ability of organization and society to confront it (adaptive capacity). The third view refers to integration of the requirements of all stakeholders and practically the development of integrated management systems, based on standardized systems, such as the systems that are based on ISO 9000, ISO 14000, ISO etc. Even today, there are organizations, for e.g. from the field of telecommunications with 9 integrated standardized management systems. Integration is performed through the processes and/or PAS 99 or other recommendations. What is new here? Those are primarily new requirements of the existing or new stakeholders, such as the requirements of future standards, especially branch standards, requirements of supply chains, virtual organizations and companies etc. satisfaction of the requirements of all stakeholders should provide a higher level of life quality (Fig. 2). Figure 2: Connection between quality of life and organization quality, process and products 16

18 In this model, quality of life is in the centre, while concepts and practice of quality are inputs and outputs of the quality of life (QoL). In that way, the quality becomes roof term for every paradigm of management that is holistically supported by every stakeholder, contributing to the increase of human values and achievement of excellence. Such a view comes from Aikensa (Quality: A Corporate Force), on whose basis, according to 24, the concepts of Quality Inspired Management (QIM) and meta management (Foley, Kevin in the book Meta Management: A Stakeholder/Quality Management Approach to Whole of Enterprise Management) are developed. The quality becomes value attitude and perception of the quality becomes more significant than the reality. The quality becomes transparent and a matter of confidence. Mapping of the future becomes reality 25. Future is a puzzle. In their egocentric world, the people will still have their expectations and needs. Quality as a level of satisfying the same will depend on the achievement of various positive and negative scenarios: positive scenarios (P): increase of the share of renewable energy sources, growth and integration of knowledge, conquest of life in cosmos, conquest of life in seas and oceans, restriction of demographic growth, etc. negative scenarios (N): faster exploitation of world resources reserves, political instability and wars, natural and artificial disasters, further alienation of man, etc. Which scenarios, or the combination of scenarios will dominate in the following period? This cannot be foreseen by anybody, but there are some specific positive and negative scenarios that can be expected for the next 10 years: P1 increase of the share of renewable energy sources, P2 growth of knowledge, primarily in the field of genetic engineering, artificial intelligence, matter structure, etc. 24 Arsovski S., Menadžment procesima, Centar za kvalitet, Mašinski fakultet, Kragujevac, 2006, ISBN: , 25 Bahtijarević Šiber F., Management ljudskih potencijala, Golden marketing, Zagreb, 1999, ISBN: , 17 17

19 N1 a growing problem of providing drinking water, energy and some materials. N2 impact of natural disasters on business (e.g. hurricanes, earthquakes) N3 impact of unintentional damages and diversions. Model of the quality of future has to take these possible situations into account (Fig. 3). Each of the relations in this general model has the intensity that is evaluated (pessimistic, medium, optimistic). Optimistic scenario is to keep or increase positive impacts on quality of life. The situation with negative scenario is reverse. Figure 3: Basic model of the quality of future Depending on the intensity of impact within basic model of the quality of life and connections between Ai and Bi, different levels of the quality of life, as a measure of the quality of the future, are obtained (Fig. 4). 18

20 Figure 4: Quality of life in the future quality of the future In variant 1, positive impacts prevails and we can expect bright future ; while in variant 2, after the initial positive trend, there are increasingly expressed negative impacts and the quality of future becomes uncertain. Variant 3 refers to the strategy of keeping the quality in future, and in variant 4, negative impacts are dominant. In variant 5, after the initial negative impacts through the growth of knowledge, the growth of the level of quality of life can be expected. Each of the scenarios mentioned is uncertain. View that the future has already begun is connected with the increase of awareness of the danger with all stakeholders, necessary for the increase of the capacity for changes. 2. MANAGEMENT'S CHALLENGES IN THE NEW ERA According the Theory of Systems on enterprise (organization) is viewed as an open system in continuos-communication with its business invironment. The components of the open system business model are: boundaries (with interfaces to organisation: carefully managed, and redesigned), purpose (mission), vision, policy, and goals, inputs and outputs (or outcomes), with managing its, the value stream [Competitive Advantage, Porter], as the system's transformation process, with the tasks, skills, and knowledge required 19 19

21 to convert a system's inputs into desirable outputs (Fig. 5). Individual attributes are related to the skills and humantraits that contribute to making each member of workforce unique, and include education, expirience, phisical capabilities, preferences, intelligence etc. Figure 5: Value stream Core processes is related to creation of the new value. Group Work represents the employee's ability to work together, i.e. cooperate, coordinate, and delegate: enviroment, as everthing out of boundaries, feedback, as possibility to provide information on outputs before continnuing previos steps. In management, viewed as process, a strategic planning process becommes a key role, as business process management, organisation structures, and knowledge management. Impact of the management on quality wasn t recognized before the 90 s of the 20 th century, which resulted in the standard ISO 9000:2000, in which the responsibility of management and management resources are defined. In the version 20

22 of the same standard from 2008, within the clause 5 (managers responsibility), the requirements in the aspect of obligations and activities are defined (5.1), focus on the user (5.2), policies of quality (5.3), planning (5.4), responsibility, authority and communication (5.5) and review from the part of the management (5.6). The requirements of standard clauses to narrowed approach is directly related to the establishment of quality management system (QMS). In "classical" literature in this field, the views of Juran, the one guru of quality, are rather significant; he observed quality management and the quality of management process more broadly, from the aspect of TQM 26, 27, 28, 29, 30, 31, 32, 33, starting from the goals and policy, strategy, organization for quality assurance, as well as the control at the operational, tactical and strategic level. In contemporary literature in the field of quality management, the processes of management are mostly described and analyzed from the aspect of the requirements of various standards. Quality of these processes is treated from different aspects in different studies 34, 35, 36, 37, which does not provide a complex observation of the quality of management process. The third group of information sources is the literature in the field of management, organization, strategy. In this literature, especially more 38, 39, 40, 41, recent 26 Foster T., Managing Quality: An Integrative Approach, Pearson & Prentice Hall, 2004, ISBN: , 27 Krkač K., Uvod u poslovnu etiku i korporacijsku društvenu odgovornost, Mate, Zagreb, 2007, 28 Merna T., Al-Thani F., Corporate Risk Management, 2nd Edition, John Wiley & Sons, Hoboken, NY, 2008, ISBN: , 29 Rao et all., Total Quality Management: A Cross Functional Perspective, John Willey & Sons, New York, Stefanović N., Stefanović Ž., Liderstvo i kvalitet, Centar za kvalitet, Mašinski fakultet, Kragujevac, 2007, ISBN: X, 31 Stefanović Ž., Menadžment, Ekonomski fakultet, Kragujevac, 2003, ISBN: , 32 Summers D., Quality Management: Creating and Sustaining Organizational Effectiveness, Pearson International Edition, 2009., 33 Thompson A., Strickland A., Strategic Management: Concepts and Cases, Mc Grow Hill, Boston, 2003, ISBN: , 34 Juran J., Managerial Breakthrough, Mc Grow Hill, New York, Kaplan R., Norten D., Strategy Maps: Converting intangible assets into tangible outcomes, Harvard Business School Press, Boston, 2004, ISBN: , 36 Modrinić Z., Menadžerska kompetentnost, BMD MEGA, Beograd, 2006, ISBN: , 37 Nast Dž., Mapiranje ideje, Sezam Book, Zrenjanin Chaffey D., E-Business and E-Commerce Management, FT-Prentice Hall, 2007., 39 De Witt B., Meyer R., Strategy: Process, Content, Context, 3nd Edition, Thompson, London, 2004, ISBN: , 21 21

23 42, 43, management is treated as a process, but the approach of the quality of this process is missing. The fourth source is author s practice in more than 150 organizations, where he spent the last 20 years facing different solutions and practice of management, and some of them were his own creation. Having in mind the breadth of the process of management, it is necessary to define the scope of research. Author has decided to start with the broadest model of management, to define its structure and to test the same model on one characteristic model that is closely related with QMS. In this study, we started with the following hypotheses: H1: Management process significantly affects the achievement of quality goals. H2: Strategic aspect in management process in Serbia is not significantly used. H3: Competence of managers in Serbia has no significant impact on the competitiveness of organization. In order to confirm these hypotheses, the author analyzed the responses obtained through a questionnaire, on a sample of 90 organizations of various sizes and sectors in Serbia (approximately to their structure). Methodological approach is based on strategic approach of Kaplan and Norton 44, adapted approach to process management 45, 46, and all of that for the purpose to determine the performances of management process 47, 48, and thus evaluate the quality of management processes. 40 Foster T., Managing Quality: Integrating the supply chain, Prentice Hall, 2010, ISBN: Goetch D., Davis S., Introduction to Total Quality, Prentice Hall, Upper Saddle River, New Jersey, 1997, 42 Hur M., The influence of total quality management practices on the transformation of how organizations works, Total Quality Management and Business Intelligence, Vol. 20, Numbers 7-8, p ,, ISSN: , 43 Jacka M., Keller P., Business Process Mapping: Improving Customer Satisfaction, John Wiley & Sons, Hoboken, NY, 2008, ISBN: , 44 Goetch D., Davis S., Introduction to Total Quality, Prentice Hall, Upper Saddle River, New Jersey, 1997, 45 Kaplan R., Norten D., Strategy Maps: Converting intangible assets into tangible outcomes, Harvard Business School Press, Boston, 2004, ISBN: , 46 Modrinić Z., Menadžerska kompetentnost, BMD MEGA, Beograd, 2006, ISBN: Foster T., Managing Quality: Integrating the supply chain, Prentice Hall, 2010, ISBN:

24 More than 100 years ago, Fayol laid the foundations of management and pointed to four main groups of roles in management. More recent papers in the second half of the 20 th century 49, 50, 51 have laid the foundation of the management science in which, regardless of differences, the structure of macro-process of management can be determined: Planning processes, Organization processes, Processes of management (leadership) and Control processes. These processes are interconnected. The arrows indicate the direction of relations within the first (context) level. Studies are needed to determine the strength of these relations, their reliability and risk in appropriate conditions of the development of management process and other processes. Each of the processes mentioned has the structure and relations between component sub-processes. Process P1 can be decomposed into sub-processes: P.1.1 objectives planning, P.1.2 drafting strategic map, P.1.3 development of strategic plans, P.1.4 strategy implementation. The second group of processes refers to the processes of organization. According to De Witt and Meyer 52, these processes are a part of business and organizational system. For the needs of research in this paper, author used the definition of business system in form of a description how the organization creates money, and organizational system was defined in the form how is the organization organized, where three components of organizational system are particularly stressed, i.e. three sub-processes that refer to: P.2.1: organizational structure, 48 Jacka M., Keller P., Business Process Mapping: Improving Customer Satisfaction, John Wiley & Sons, Hoboken, NY, 2008, ISBN: , 49 Goetch D., Davis S., Introduction to Total Quality, Prentice Hall, Upper Saddle River, New Jersey, 1997, 50 Hur M., The influence of total quality management practices on the transformation of how organizations works, Total Quality Management and Business Intelligence, Vol. 20, Numbers 7-8, p ,, ISSN: , 51 Juran J., Managerial Breakthrough, Mc Grow Hill, New York, 1995, 52 Foster T., Managing Quality: Integrating the supply chain, Prentice Hall, 2010, ISBN:

25 P.2.2: organizational processes and P.2.3: organizational culture. Organizational processes refer to regulating, procedures and paths that are used for management and coordination of the work of people and organizational units. Some of them refer to the entire organization, some are limited, wider or narrower part of organization. The third group of processes are the processes of management (leadership). Within these processes, the following sub-processes are emphasized: P.3.1: participation in decision-making, P.3.2: management, P.3.3: motivation, P.3.4: decision-making, P.3.5: improvement of personal skills, P.3.6: encouragement of teamwork. Control, as a part of management process consists of four coupled subprocesses: P4.1: setting the standards for control, P4.2: measurement of achieved results and comparisons, P4.3: identification of measures and procedures for the elimination of irregularities, P4.4: creation of revised plans. Subject of this paper is the process P1: Process of strategic management QUALITY IMPROVEMENT AS CHALENGE FOR MANAGEMENT A sistematic approach to continuos quality improvement is provided by four generic steps: record data, use data, analyse data, nad act based on results. In this approach very frequently is used some basic tools and techniques, as: check sheets, histograms, scatter diagrams,

26 stratification, Pareto analysis, cause and effect diagram analysis (CEDA) or analiysis with addition of cards (CEDAC), nominal group tecnniques (NGT), control charts, statistical process control (SPC), additional tecnniques for process design and improvement, Taguchi method. Six sigma, the "Drive" framework for continuous improvement, Lean, World Class Production, Hochrin concept, CMMI, etc. Model of quality of the strategic management process includes the upper part of strategic map. Having in mind that macro-process of management is decomposed into four processes, model of quality includes each of these processes, which are in relation with other processes (Fig. 6). In the model of quality of management process in this paper, the process P1: process of strategic management was separately analyzed. Basis for the development of this process is the perspective of growth and learning. Determination of the level was defined through questionnaire (the first ten questions in questionnaire). Competence of managers 53 is expressed through: Mental competence and Educational competence. Mental component of managers competence includes: Ability to solve problems, Readiness for business risk, Competitive orientation, Self-confidence in business activities, Adaptability to business changes, Communicative, 53 De Witt B., Meyer R., Strategy: Process, Content, Context, 3nd Edition, Thompson, London, 2004, ISBN: , 25 25

27 Being realistic in evaluation of phenomena, Orientation towards the future, Ability to recognize business opportunity, Tendency towards business cooperation, Resistance to stresses. Figure 6: Strategic map Educational component of managers competence includes the knowledge from the field of: Economic legislation, Functioning of economic system, Market effect, Competitiveness of participants in the market, 26

28 Marketing analyses, Business economies, Applied technologies, Service stations, Organization of business, Business informatics, Business administration, Quality, Risk and capacity for the recovery of organization. Processes of strategic management are within the framework of internal perspective. Evaluation of the quality level of these processes, as well as the evaluation of the strength of relations with other component processes of management and other processes, is defined through the questionnaire (the other 20 questions). Perspective of customers is analyzed from the aspect of quality (the next 10 questions), as well as the strength of the connection with previous and future perspectives. Financial perspective in this model is defined through competitiveness and productivity. This was especially analyzed in the questionnaire through the following 10 questions. By the analysis of responsibly from 35 organizations, it was determined that the mean evaluation of process s impact is as in the table (Table. 1). Table 1: Synergic effect of management process Mark of the process: Impact on: Quality: Price: Image: Total impact: P P P P P

29 Figure 7: Model of the relations of the process P1 with other processes Total (synergic) effect was determined on the basis of expert opinions. In the next phase, it will be determined on the basis of the application of simulation software based on the application of extended Petri nets. CONCLUSIONS From the above-mentioned, we can draw the following conclusions: In its development, quality had the phases of evolutionary and abrupt development in the 20 th century, 28

30 Business conditions have significantly changed in the 21 st century, so the trend of quality improvement and the quality of life were brought into question, Future of the quality and the quality of the future are becoming increasingly pervasive and mutually conditioned, Scenarios of quality in the future are increasingly dependent on global factors, Based on the application of suggested model of management process, the hypothesis H1 (Management process significantly affects the achievement of quality goals) is confirmed, because overall evaluation is about 7.5 on the scale 1-10, Impact of the process P1 (strategic management) on quality is evaluated to 5.4, which confirms the initial hypothesis H2 about insufficient presence of strategic management, which is measured through its impact on the quality, By analyzing the responses about the competence of managers (questions 1-4 in the questionnaire), it was determined that operations managers are the most competent (7.2), then medium level managers (6.5), while the competence of top management is the lowest (5.1), which confirms the hypothesis H3. REFERENCES [1] Aikens H., Quality Inspired Management: The Key to Sustainability, Prentice Hall, 2011., [2] Arsovski S., Menadžment ekonomikom kvaliteta, Centar za kvalitet, Mašinski fakultet, Kragujevac, 2002, ISBN: , [3] Arsovski S., Menadžment procesima, Centar za kvalitet, Mašinski fakultet, Kragujevac, 2006, ISBN: , [4] Bahtijarević Šiber F., Management ljudskih potencijala, Golden marketing, Zagreb, 1999, ISBN: , [5] Chaffey D., E-Business and E-Commerce Management, FT-Prentice Hall, 2007., [6] De Witt B., Meyer R., Strategy: Process, Content, Context, 3nd Edition, Thompson, London, 2004, ISBN: , [7] Foster T., Managing Quality: An Integrative Approach, Pearson & Prentice Hall, 2004, ISBN: , [8] Foster T., Managing Quality: Integrating the supply chain, Prentice Hall, 2010, ISBN: [9] Goetch D., Davis S., Introduction to Total Quality, Prentice Hall, Upper Saddle River, New Jersey, 1997, 29 29

31 [10] Hur M., The influence of total quality management practices on the transformation of how organizations works, Total Quality Management and Business Intelligence, Vol. 20, Numbers 7-8, p ,, ISSN: , [11] Jacka M., Keller P., Business Process Mapping: Improving Customer Satisfaction, John Wiley & Sons, Hoboken, NY, 2008, ISBN: , [12] Juran J., Managerial Breakthrough, Mc Grow Hill, New York, 1995, [13] Kaplan R., Norten D., Strategy Maps: Converting intangible assets into tangible outcomes, Harvard Business School Press, Boston, 2004, ISBN: , [14] Krkač K., Uvod u poslovnu etiku i korporacijsku društvenu odgovornost, Mate, Zagreb, 2007, [15] Merna T., Al-Thani F., Corporate Risk Management, 2nd Edition, John Wiley & Sons, Hoboken, NY, 2008, ISBN: , [16] Modrinić Z., Menadžerska kompetentnost, BMD MEGA, Beograd, 2006, ISBN: , [17] Nast Dž., Mapiranje ideje, Sezam Book, Zrenjanin [18] Rao et all., Total Quality Management: A Cross Functional Perspective, John Willey & Sons, New York, [19] Stefanović N., Stefanović Ž., Liderstvo i kvalitet, Centar za kvalitet, Mašinski fakultet, Kragujevac, 2007, ISBN: X, [20] Stefanović Ž., Menadžment, Ekonomski fakultet, Kragujevac, 2003, ISBN: , [21] Summers D., Quality Management: Creating and Sustaining Organizational Effectiveness, Pearson International Edition, 2009., [22] Thompson A., Strickland A., Strategic Management: Concepts and Cases, Mc Grow Hill, Boston, 2003, ISBN: , 30

32 Tomasz Hermaniuk The University of Rzeszów, Poland LEVEL OF QUALITY OF EDUCATION SERVICES ON EXAMPLE OF UNIVERSITIES FROM RZESZOW Key words: quality, higher education, quality of services ABSTRACT In today's reality the phenomenon of competition occurs in almost all areas of human activity. Usually associated with the business, it is expanding continuously its reach to include new spheres. These include inter alia the sphere of education, especially higher education, which represents one of the last stages of human learning, equipping graduates with the knowledge and skills necessary in their future life. On the quality of learning in higher education depends to a great extent the fate of people who begin their working lives. Higher education institutions have to fulfill an important mission connected with the preparation of their graduates to take on the challenges of the contemporary economy. This is strongly connected with the necessity of providing in the process of learning knowledge and skills and the shaping of certain characteristics and attitudes that determine the effectiveness of future operations and mobility necessary in today's world. The paper presents results of research conducted at four universities in Rzeszow. Their object was the level of provided quality of educational offer perceived by the students. INTRODUCTION Providing high quality educational services means the need to focus on the recipient and fulfillment of expectations, desires and preferences of students who are customers and consumers of educational services. Therefore, it is crucial to analyze the needs and expectations of customers and continuous improvement of curricula and other services provided by universities. Most representatives of the service sector are under increasing pressure to demonstrate that their offer is customer-focused and that they pay proper attention to continuous performance improvement. To perform better than competitors, it is essential that customer expectations are properly understood and measured and that any problems in service quality are identified and eliminated as soon as it is possible. Once they are identified, then right people work on identifying costeffective ways of closing service quality gaps and of prioritizing crucial gaps that should be closed first. While there have been numerous efforts to study service quality, there has been no general agreement on the methods of measurement of them. The majority of the work has attempted to use the SERVQUAL method in order to assess ser-

33 vice quality. This is an instrument that can be used in effort to ascertain gaps between customer expectations and perceptions of the service delivered. Service quality is a concept that has aroused interest and debate in the literature because of the difficulties in both defining and measuring it with no overall consensus. There are a number of different definitions of service quality. One that is commonly used takes into consideration marketing approach defines quality of services as the extent to which a service meets customers needs and expectations. This means that service quality can be defined as the difference between customer expectations of service and perception of experienced service. If expectations are on the higher level than performance, then perceived quality is below the satisfactory line and hence occurs customer dissatisfaction. This easily could lead to loss of customers and eventually to disappearing of the organization from the market. Measurement of the level of perceived service quality is a very useful source of information. It allows the comparison before and after undertaken changes, for the location of quality related problems and for the establishment of standards of performance for service delivery. The starting point in developing quality in services is analysis and measurement. The SERVQUAL approach, which is studied in this paper is the most common and popular method for measuring service quality. Its simplicity makes it the most commonly used tool. 1. HIGHER EDUCATION IN POLAND Higher education institutions have to fulfill an important mission connected with the preparation of their graduates to take on the challenges of the modern economy. This is connected with the necessity of providing in the process of learning knowledge and skills and the shaping of certain characteristics and attitudes that determine the effectiveness of future operations and necessary in today's world mobility. Starting from the nineties of the twentieth century, the higher education in Poland is undergoing a significant transformation. In addition to the already existing public schools were created and developed numerous private colleges. Previous master system was varied by introducing a two-stage study education system, which gives the possibility to continue education at the undergraduate engineering studies or at second degree. These changes favour the adaptation of the Polish educational system to world standards and, in particular to European standards. Already some of the universities offer regular studies in foreign languages. Students are also able to choose an individual course of study. 32

34 In the academic year 2010/2011 in 460 colleges and universities of all types 1841,3 thousand students were learning. The largest academic center in Poland is Warsaw, the largest university - the University of Warsaw educating 54,3 thousand students. The largest academic centers are located in cities with large numbers of inhabitants. Very dynamic growth in the number of university students was seen in the last decade of the twentieth century and in the first five years of the XXI century weakened in recent years. While the number of universities in the academic year 2010/2011 compared to the academic year 2000/2001 increased by 48,4%, in comparison with the previous year decreased slightly 1. At the beginning of the academic year 2010/2011 there were 328 nonpublic schools educating 580,1 thousand students (31,5% of all students), including 135,1 thousand students of the first year of study. In comparison with the previous year a slight decrease in the number of private colleges can be seen, moreover, the number of young people studying there fell by 8,4% 2. The public universities were the dominant form of full-time education, in which 67,5% students were taught, while private colleges and universities - parttime studies in which students represented 83,1% of learners at all. Since the academic year 2005/ when the number of students reached a historical record level of 953,8 thousand - number of students is steadily decreasing. In last five years it fell by 5,8%, and in the last year the decline was 3,1%. In the academic year 2010/2011 the number of full-time students amounted to 949,5 thousand persons, i.e. 51,6% of total enrollment, while in the part-time mode studied the 891,8 thousand people (48,4% of all students). The proportion of women among all students in the academic year 2010/2011 impact was 58,8%. Among those enrolled full-time programs was 57,2% of women, the part-time women students constituted 60,5% of all students 3. 1 Higher education institutions and their finances, GUS, Warsaw 2011, p op. cit., p op. cit., p

35 Table 1. Students and graduates of universities. Academic year Number of students Number of graduates 1990/ / / / / / / / / / / / / / / / / / / / / Source: Higher education institutions and their finances, GUS, Warsaw 2011, p. 25. Many private universities offer education at undergraduate only. These schools are often located in smaller centers, where the only and cheaper than studying in the university city of opportunity for education. 2. THE IMPORTANCE OF QUALITY IN HIGHER EDUCATION According to most experts, the future belongs to a knowledge-based economy, and the driving forces of modern economies are the intellectual capital and ability to innovate. This facts force the need to adapt education to the new needs and challenges. Without proper education it is difficult or impossible to build human capital, so necessary in stimulation of the developmental processes. Investments in this type of capital raise productivity, generate higher incomes of workers, enterprises and the state, foster inclusion of the national economy to the global trend of development of a new economy based on modern technologies. The concept of quality in higher education in Poland had its beginnings in the mid nineties of the twentieth century and was due to economic changes that resulted in a growing number of students, opening up new fields of studies, 34

36 changes in the curriculum and an increasing number of private universities, as well as the extension of cooperation with foreign universities 4. Until recently, as the primary cause of insufficient quality of educational services, among others factors were commonly pointed 5 : low level of preparedness of scientists to teach classes, low level of technology supporting the teaching process, little own contribution of students in conducting classes, low level of technical equipment of the universities. Fortunately, most of these problems were partially resolved, mainly through the use of European Union funds that supported polish education significantly. There are significant changes in the activities of a growing number of universities. Growing awareness of pro-quality makes increasingly more popular formal quality management systems, enabling to provide services at the level expected by customers and to maintain once established standard unchanged. The issue of forming an appropriate level of quality of educational services is determined by several aspects. These include, among others: the expectations of employers towards graduates, current and future needs of students, collaboration between research institutions and businesses, changes in educational standards and the growing competition between universities. The quality in case of universities and their educational offer takes the specific form. In this context, quality can be defined in five basic dimensions 6 : quality as the uniqueness (high standard of teaching), quality as the convergence (no procedural defects), quality as the fit to the needs (meeting the requirements of students), quality as the value in money dimension (efficiency resulting in high wages of graduates) quality as the transformation (continuous improvement and adaptation to the needs of the market). Poland's accession to the European Union has completely changed the perspective of education and range of possible actions of the universities. The opening of borders has created learning opportunities for students and researchers working in almost all countries of united Europe. National universities have gained new partners and potential students outside Polish borders. Also gained 4 Dobrzański L. A., Roszak M. T., Quality Managent in University Education, Journal of Achievements in Materials and Manufacturing Engineering, 2007, vol. 24, issue 2, p Rocki M., Jakość kształcenia ekonomicznego, PTE, Warszawa 2009, p Becket N., Brookes M., Quality Management Practice in Higher Education - What Quality Are We Actually Enhancing? Journal of HLS&T Education, 2009, p

37 access to methods and standards of the EU in building a quality system in higher education. Their selection should include the following 7 : the formal requirements resulting from legal regulations, strategy of development adopted by university and faculties, the degree of harmonization of policies with available resources, current level of information culture and management culture of university, level of awareness of work quality of staff, the requirements of the customers and other interested parties. The aim of implementation of internal and external quality systems in universities is to improve the quality of education. This should lead to improvement of the quality of competencies of graduates by creating with him learning outcomes with identification of necessary work. The basis of all quality management systems, including those implemented in higher education is the Deming cycle. It provides a foundation for a system that is used in all organizations. Four steps to an endless cycle: 1) plan - identifying the possibilities and opportunities, planning changes, 2) do - the implementation of planned changes, 3) check - an analysis of the results of implementation, identification and documentation of system weaknesses, 4) act - implementation of changes. The concept of TQM in higher education should be based on the following postulates 8 : all activities of university should be focused on the needs of students, common strategic objectives of the authorities and staff, commitment to quality of education in all organizational units of the university, to motivate researchers to raise their qualifications, implementation of educational activities as a process, system approach to management of the university and its computerization, university's self-improvement based on the Deming cycle, the right college team atmosphere. The socially responsible university should be aware of the liability incurred by itself related to the impact on the society and economy, dependent on 7 Stalewski T., Jakość kształcenia na kierunku zarządzanie i marketing, Difin 2005, p Rocki M., Jakość kształcenia ekonomicznego, PTE, Warszawa 2009, p

38 the ability of graduates to adapt to market and promote their economic competitiveness. Such an institution should have: awareness of the social role, care about employment prospects of graduates, delivering knowledge to problem-solving skills shaping the economic, social, political, market-based approaches to teaching and research. Ensuring high quality products and services will result in better and more practical professional competence of graduates, which will translate into an increase in the university's reputation and thus attract better and more ambitious group of students. 3. APPLICATION OF THE SERVQUAL METHOD Clearly from a best value perspective the measurement of service quality in the service sector should take into account customer expectations of service as well as perceptions of service. However it is apparent that there is little consensus of opinion and much disagreement about how to measure service quality. One service quality measurement model that has been extensively applied is the SERVQUAL model. As the most often used approach for measuring service quality SERVQUAL has been commonly used to compare customers' expectations before a service encounter and their perceptions of the actual service delivered. The SERVQUAL instrument is the predominant method used to measure consumers perceptions of service quality. It was created and developed in the mid eighties of the twentieth century by Parasuraman, Berry and Zeithaml. SERVQUAL originally concentrated on 10 aspects of service quality: reliability, responsiveness, competence, access, courtesy, communication, credibility, security, understanding the customer and tangibles. By the early nineties the authors had simplified the model to the useful acronym RATER coming from first letters of words: reliability - ability to perform the promised service dependably and accurately, assurance - (including competence, courtesy, credibility and security). knowledge and courtesy of employees and their ability to inspire trust and confidence, tangibles - physical facilities, equipment and appearance of personnel, empathy - (including access, communication, understanding the customer). caring and individualized attention that the firm provides to its customers, responsiveness - willingness to help customers and provide prompt service

39 In the service quality concept there are seven major gaps that can be investigated: Gap 1 - Customers expectations versus management perceptions, which is a result of inadequate marketing research orientation, inadequate upward communication and too many layers of management. A key way to narrow this gap is survey research. Gap 2 - management perceptions versus service specifications, which results from insufficient commitment to service quality, a perception of unfeasibility, inadequate standardisation and an lack of clear setting of goals. Managers need to make sure the organization is defining the level of service they believe is necessary. Gap 3 - service specifications versus service delivery as a result of role ambiguity and conflict, poor employee-job fit and poor technology-job fit, inappropriate supervisory control systems, lack of perceived control and lack of teamwork. Gap 4 - service delivery versus external communication that results from inadequate horizontal communications and propensity to over-promise. Managers need to audit the customer experience that their organization currently delivers in order to make sure it is in accordance with the specifications. Too often, organizations exaggerate the process of marketing communications, promising clients too much compared to what they actually can offer. Gap 5 - discrepancy between customer expectations and their perceptions of the service delivered. This comes from the influences exerted from the customer side and the gaps on the part of the service provider. In this case, customer expectations are influenced by the extent of personal needs, recommendations and own experiences from the past. Customers' expectations have been shaped by word of mouth, their personal needs and their own past experiences. Surveys after delivering the customer experience are important for an organization to measure customer perceptions of service. Gap 6 - divergence between customer expectations and employees perceptions, which results from the differences in the understanding of customer expectations by front-line service providers. Gap 7 - divergence between employee s perceptions and management perceptions. This appears as a result of the differences in the understanding of customer expectations between managers and service providers. The model of gaps identifies seven key divergencies relating to managerial perceptions of service quality, and tasks associated with service delivery to customers. Six gaps (Gap 1, Gap 2, Gap 3, Gap 4, Gap 6 and Gap 7) are identified as functions of the way in which service is delivered. Gap 5 pertains to the customer 38

40 and as such is considered to be the true measure of service quality. The Gap on which the SERVQUAL methodology has influence is Gap 5. SERVQUAL has its critics and is considered overly complex, subjective and statistically unreliable. The simplified RATER model however is a simple and useful model for qualitatively exploring and assessing customers' service experiences and has been used widely by service delivery organizations. It is an efficient model in helping an organization to shape up the efforts in order to cover the gap between perceived and expected service. The SERVQUAL measuring tool remains the most complete attempt to conceptualize and measure service quality. The main benefit to the SERVQUAL measuring tool is the ability of researchers to examine different service industries such as education, banking, healthcare, financial services, etc. In the SERVQUAL instrument, twenty two statements are used to measure the performance across five RATER dimensions, using a seven point Likert scale which measures both customer expectations and perceptions. It is important to note that without adequate information on both the quality of services expected and perceptions of services received then feedback from customer surveys can be highly misleading from both a policy and an operational perspective. The research on measuring service quality has focused primarily on how to meet or even exceed the external customer s expectations, and has viewed service quality as a measure of how the delivered service level matches consumer s expectations. These perspectives can also be applied to the employees of the organization and in this case, other important gaps could identified and closed in the service quality gaps model. The concept of measuring the difference between expectations and perceptions in the form of the SERVQUAL gap score proved to be very useful for assessing levels of service quality. With slight modifications, the SERVQUAL method can be adapted and used in any type of service organisations. Obtained information on service quality gaps can help responsible people in diagnosis of areas where performance improvement can be targeted in a best way. The largest negative gaps, combined with assessment of where expectations are highest, enables prioritisation of performance improvement and leads to establishment of several steps in the process of improvement. A particular advantage of SERVQUAL is that it tested an instrument that can be used for comparative purposes fairly. SERVQUAL, however, the benefits of being statistically important tool as a result of extensive field testing and refinement. As an instrument for general and widely used SERVQUAL can also be used for repeated regularly and used for comparative benchmarking. To appreciate more fully the benefits of using SERVQUAL, surveys should be 39 39

41 conducted regularly to enable periodic comparisons to determine how to improve services affected perceptions and expectations of the service at the time, and to determine the effectiveness of the development of services and initiatives improvement in the targeted dimensions. All service organizations are faced with the responsibility for its actions to clients and society as a whole. Therefore, their actions should be, especially in cases such as security, health care, special care. They should have in particular to improve access to its services, ensuring efficient and effective manner within the limited material and financial resources. It is worth noticing that the measurement systems themselves are often inappropriate, because the system designers do not know enough about what factors and elements should be measured. Some specialist claim that measuring customer perception of service may raise expectations and performed too often can actually lead to a loss of motivation of customers to respond properly. The basic aim and objective of the study is to determine the satisfaction level of the gaps in their elimination. Therefore, for obvious reasons, it is pointless to conduct research for organizations that do not see the need and do not show the will to implement appropriate changes representing the conclusion of the tests. 4. RESULTS OF RESEARCH The research method used in the study was the SERVQUAL questionnaire. In this case was used the variant called Servperf. It consists in the omission of phase of measurement of expectations and focus on making the measurement of quality perceived by the customer. The research tool used for the purpose of this study is a questionnaire for measuring the quality of educational services provided by universities and consists of two main parts. The first is an evaluation of the quality of educational services provided by the university. In the second respondent determines the level of significance of individual components of the service. A survey was conducted in May 2011, the group consisted of 272 students from four universities in Rzeszow: Rzeszow University of Technology (RUT) - 69 students, University of Rzeszow (URZ) - 69 students, University of Information Technology and Management (UITM) - 68 students. School of Law and Public Administration (SLPA) - 66 students. These are the four largest universities in the south-eastern Poland, educating thousands of students from numerous departments. 40

42 The questionnaire assessing the quality of educational services was based on the methods highlighted by the developers of SERVQUAL twenty-two statements describing the performance of universities. In the study a seven-point Likert scale was used, where the numerical values from 1 to 7 are assigned to answer, where individual points are assigned with meanings: 1 - strongly disagree, 2 - I do not agree, 3 - is unlikely to agree, 4 - hard to say, 5 - tend to agree, 6 - I agree, 7 - strongly agree. In the first part of study participants determined the degree of significance of individual components of an educational service, which are: technical equipment and material conditions of studies, university's ability to meet the needs of students qualifications and skills of staff (academic and administrative) building by staff of the university atmosphere of cooperation and mutual trust education quality and prestige of the university The relative importance of various elements was determined by the allocation of 100 points between the identified dimensions of quality of service. Then the score was divided by 100 to give the weight of the element. All weights sum up to 1. This step is verification of the level of significance of the individual components determining the perceived quality of service. Knowing the importance level is used to determine the weights of the elements that will be used to thus put a definite acquired in later stages of the results. According to results presented in table 2, it is noticable that for students of Rzeszow University of Technology, the most important factors are: technical equipment and material conditions of studies and education quality and prestige of the university. Both were assessed at 0,231. The least important factor was the building by staff of the university atmosphere of mutual trust and cooperation. The students of University of Rzeszow, the greatest importance attributed to the factors 3 and 4 (both assesed at 0,239). The least important to them was factor 2 (0,167). In the case of respondents studying at the University of Information Technology and Management, the least important element was a factor 4 (0,159). The most important were elements: 1 (0,235) and 3 (0,231). Students of the last of the surveyed schools - School of Law and Public Administration, as the least im

43 portant element considered factor 4, giving it a weight of just 0,123. The most important for them was a prime factor, gaining weight 0,275. Table 2. The importance of individual components of an educational service. Nr Factor RUT URZ UITM SLPA Technical equipment and material conditions of studies University's ability to meet the needs of students Qualifications and skills of staff (academic and administrative) Building by staff of the University atmosphere of cooperation and mutual trust Education quality and prestige of the University Source: results of own research. 0,231 0,176 0,235 0,275 0,192 0,167 0,173 0,162 0,183 0,239 0,231 0,241 0,163 0,179 0,159 0,123 0,231 0,239 0,202 0,199 The results indicate a divergence of expectations of students studying at various universities. That is probably some level of awareness of the capabilities of the institution when it comes to meet specific needs. This may result from one side of the experience already acquired. On the other hand, may indicate a flow of information from the existing college graduates surveyed. The next step in the study was to collect the results of assigning points (1-7), each describing the findings of educational services provided by the surveyed institutions. Table 3 shows the mean scores assigned to the universities, the students of each university. The study shows that the best features of University of Technology are: academic qualifications and knowledge of staff to answer questions of students staff (5,67), modern equipment (5,65), respect for the implementation of study plans and curricula (5,63). The lowest rated was the organization of activities on time convenient for all students assessed at 3,87. 42

44 Table 3. Average rating of statements by students from four universities Rzeszow. No Statement RUT URZ UIT M SLPA 1 The School has modern equipment 5,65 5,78 6,1 6,07 2 School facilities are visually appealing and comfortable (the building and surroundings) 5,1 4,88 5,4 6,57 3 The university has the infrastructure (parking, computers, meeting rooms), corresponding to the number of students 4,77 4,82 5,4 5,4 4 Materials related to the services of the University (leaflets, support materials, web pages) are attractive and legible 5,12 5,26 5,7 5,47 5 When the School promises to do something within a certain time, it does it 4,43 4,42 4,57 4,12 6 When you have a problem, the staff of the University are sincerely interested in the solution 4,37 4,68 4,53 3,5 7 The school takes care of the interests of the students (social assistance, dormitories, scholarships) 4,64 4,93 4,73 5,43 8 The University respects the implementation of study plans and curricula 5,63 5,5 5,5 5,23 9 Courses at the university are carefully prepared 4,9 4,43 5,27 4,97 10 University staff have academic qualifications and knowledge to answer questions students 5,67 5,43 5,53 5,9 11 University staff have academic qualifications and knowledge to answer questions students 5,23 4,9 5,07 4,7 12 School staff is always willing to help students outside the classroom 4,24 4,66 4,53 3,97 13 Staff outside the University presents the results of their research (publishing scripts, books, articles) 5,23 5,03 5,27 5,5 14 University staff have appropriate communication skills 5,07 4,93 5,53 5,53 15 Students of the University shall be promptly informed of important events for them 5,1 4,85 5,47 5,22 16 Employers have confidence in the quality of education at the University 4,28 4,92 4,67 5,2 17 University staff apply appropriate teaching methods 4,87 4,67 5,33 5,03 18 The services provided by subcontractors are of good quality 4,82 4,73 5,4 6,1 19 The school organizes activities on time convenient for all students 3,87 4,5 5,03 4,67 20 The composition of academic staff has a positive effect on the reputation of the University 4,83 4,9 5,1 5,9 21 University's reputation has a positive effect on the choice of its graduates by employers 4,36 4,69 4,47 5,13 22 University's reputation has a positive effect on her choice for students 4,64 4,67 4,73 5,22 Total 106,82 107,58 113,33 114,83 Source: results of own research. Far the highest rated feature in the University of Rzeszow was possession of modern equipment (5,65), the lowest score is assigned reliability, because the 43 43

45 statement "When the School promises to do something within a certain time, it does it" gained 4,42. Almost the same amount of points (4,43) was given to statement "Courses at the university are carefully prepared". In University of Information Technology and Management the highest score (6,10) was given to the modernity of equipment (as in case of URZ). Students are not very satisfied with university's reputation and its effect on the choice of its graduates by employers. The score was 4,47. Students from the School of Law and Public Administration are the most satisfied with visual appealing of school's buildings and surroundings. While the lowest average scores assigned to sincere interest of staff in solution of students' problems (only 3,5). Summarizing achieved results, the best average score - 114,83 - was obtained by School of Law and Public Administration. Second in this ranking was University of Inromation Technology and Management with total score of 113,33. Third was University of Rzeszow collecting 107,58 points. On the last place was Rzeszow University of Technology with 106,82 points. The next step in the study was to determine the differences between the perceptions of the quality of educational services, and the ideal situation in which the university receives maximum note of 7 points. For this purpose, the mean scores obtained for each of the analyzed statements was subtracted maximum value equal to seven. The resulting difference is a measure of derogation of service from an ideal situation. As a result of the sum of the results and dividing them by the number of questions in a group of statements obtained for each group by the average deviation from the ideal situation. This makes it possible to notice the areas that the greatest differ from the optimal situation. Then by dividing the sum of the differences of all five groups received a total measure of SQ without taking into account the weights of the groups of agents assigned to the participants. 44

46 Dimension of service I II III IV Nr of statement RUT Average measure of SQ Table 4. Gaps in the level of educational services. URZ Average measure of SQ UITM Average measure of SQ SLPA 1-1,22-1,22-0,9-0,93 2-2,12-2,12-1,6-0,43 3-2,18-2,18-1,6-1,6 Average measure of SQ 4-1,74-1,74-1,3-1, ,58-1,97-2,27-1,91-1,6-1,40-0,9-1,08 5-2,32-2,58-2,43-2,88 7-2,07-2,07-2,27-1,57 8-1,5-1,5-1,5-1, ,57-2,15-1,53-1, ,57-2,01-2,5-2,16-1,97-1,94-2,33-2,07 9-2,1-2,57-1,73-2, ,34-1,57-1,47-1,1 13-1,97-1,97-1,73-1,5 14-2,07-2,07-1,47-1, ,15-2,13-2,33-2,10-1,67-1,61-1,97-1,61 6-2,08-2,32-2,47-3,5 11-2,33-2,1-1,93-2,3 12-2,27-2,23-2,34-2,25-2,47-2,29-3,03-2,94 V 16-2,5-2,08-2,33-1,8 20-2,17-2,1-1,9-1,1 21-2,64-2,31 2,53-1, ,36-2,31-2,33-2,21 2,27-2,26-1,78-1,64 Unweighted average SERVQUAL measure -2,13-2,13-1,9-1,87 Source: results of own research. According to presented data, the highest average gap in the level of services provided by the Rzeszow University of Technology (-2,31) occurs in the V group - "Education quality and prestige of the University". The smallest difference (-1.97) was noted with regard to the first group of factors associated with Technical equipment and material conditions of studies. Where the system is also concerned the smallest difference in Group I, amounting to The greatest disparity (-2.25) was observed in group IV - Building by staff of the University atmosphere of mutual trust and Cooperation. As for the University of Information Technology and Management, the smallest difference was noted in Section I. It amounted to only 1.4. Similarly, as in the case URZ most remains to be done in 45 45

47 the fourth group of factors. The difference with the ideal situation was The last of the surveyed institutions (SLPA), the situation is best when it comes to Technical equipment and material conditions of studies Results achieved here, and he is the best among all of the units. Interestingly, in the fourth group of factors, the result is the worst of all surveyed universities and the difference amounted to points. The method of calculating the weighted average measure takes into consideration the relative importance of specific dimensions of educational service quality. The steps to achieve the weighted result of SQ are as follows: 1) for all respondents the average SQ score was calculated for each of the five dimensions, 2) SQ score multiplied each dimension, the average weight assigned to that dimension, 3) SQ scores were weighted in all dimensions, obtained the total weighted score SQ, summed over all the results and divided by the number of questionnaires, thus obtained the overall weighted result. Table 5. The weighted and unweighted average measure of SQ. Dimensions of quality of educational services RUT URZ UITM SLPA Technical equipment and material conditions of studies -0,46-0,34-0,33-0,30 University's ability to meet the needs of students -0,39-0,36-0,34-0,34 Qualifications and skills of staff (academic and administrative) Building by staff of the University atmosphere of cooperation and mutual trust -0,39-0,50-0,37-0,39-0,36-0,40-0,36-0,36 Education quality and prestige of the University -0,53-0,53-0,46-0,33 Overall weighted Servqual measure -2,13-2,13-1,86-1,71 Overall unweighted Servqual measure -2,13-2,13-1,9-1,87 Source: own research. As shows the data presented in Table 5, the best result (smallest difference between the perception of services, and an ideal situation), unweighted (-1.87) and 46

48 weighted (-1.71) was obtained in the case of School of Law and Public Administration. Next in order was the University of Information Technology and Management obtain weighted score of -1.90, and after taking into account weights. For other universities, we have seen a very interesting situation. Both the Rzeszow University of Technology, as well as the University of Rzeszow obtained identical results unweighted and weighted. In both cases, the difference from the ideal situation was This indicates a very even level of educational services provided by these units. CONCLUSIONS In the paper were reviewed the educational service quality issues and the model of gaps. There was also studied SERVQUAL method as an useful approach for evaluating the difference between customers' expectations and perception of quality of delivered services. The SERVQUAL instrument is extensively used to assess external service quality, the instrument can also be modified to assess the quality of the internal service provided by departments and faculties within a university. The results of the current study illustrate that organizations can assess five dimensions of service quality to ascertain the level of services provided, and to determine which dimensions need special attention and some intervention. Knowing the service quality dimensions, universities can judge how well they performed on each dimension and their representatives could identify the areas of weaknesses in order to make improvements. In conclusion, knowing how students perceive the service quality and being able to measure service quality, universities can benefit both quantitative and qualitative ways. The measurement of service quality can provide specific data that can be used in quality management. Assessing service quality and better understanding how various dimensions affect overall service quality would enable organizations to efficiently design the service delivery process. By identifying strengths and weaknesses pertaining to the dimensions of service quality organizations can better allocate resources to provide better service and ultimately better service to external customers. Generally speaking, the study of service quality is both important and challenging. Future efforts should continue to advance the understanding of the concept and the means to measure and improve service quality. REFERENCES [1] Becket N., Brookes M., Quality Management Practice in Higher Education - What Quality 47 47

49 Are We Actually Enhancing? Journal of HLS&T Education, [2] Cheverton P., Kluczowe umiejętności marketingowe: strategie, techniki i narzędzia sukcesu rynkowego, Helion, Gliwice [3] Dobrzański L. A., Roszak M. T., Quality Managent in University Education, Journal of Achievements in Materials and Manufacturing Engineering, 2007, vol. 24, issue 2. [4] Hill N., Alexander J., Pomiar satysfakcji i lojalności klientów, Oficyna Wydawnicza, Warszawa [5] Kotler P., Marketing od A do Z, PWE, Warszawa [6] Mazur K., Marketing usług edukacyjnych, WAPS, Warszawa [7] Nieżurawski L., Pawłowska B., Witkowska J., Satysfakcja klienta: strategia, pomiar, zarządzanie: koncepcja wewnętrznego urynkowienia współczesnej organizacji, Wydawnictwo Naukowe Uniwersytetu Mikołaja Kopernika, Toruń [8] Pomykalski A., Zarządzanie i planowanie marketingowe, PWN, Warszawa [9] Rocki M., Jakość kształcenia ekonomicznego, PTE, Warszawa [10] Sagan M., Standaryzacja instrumentów marketingu-mix, Difin, Warszawa [11] Stalewski T., Jakość kształcenia na kierunku zarządzanie i marketing, Difin [12] Styś A., Marketing usług, PWE, Warszawa

50 Martin Mizla The University of Economics in Bratislava, Slovakia SELECTED IMPACTS OF QUALITY COSTS DURING THE ECONOMIC CRISIS Keywords: crisis, costs, quality, EBIT ABSTRACT Crisis of economy makes very strong pressure to managers for cost cutting. The paper shows that approach related to direct costs and overheads is short-term only. The effort with long-term results must be focused on fixed and variable costs. They show relation to results of production effort in time of economical volatility as well as direct impact to EBIT. INTRODUCTION Quality is one of the main factors which influence the customer in selecting products and creating his/her loyalty. Enterprise, that wants to make business for a long time, ensures high quality of its products and constantly improves, or at least maintains, its positive reputation. Quality would be a guarantee of prosperity of a business by its external (i) increase in sales volume (ii) and partly in revenue and by its internal orientation towards (iii) production capacity optimization, (iv) employment security for its staff and (v) reduction of sensitivity level to negative changes. Necessities of competitiveness make organizations to focus internally on developing its human resources and structures. Usually grouping of employees into teams is used there. Success of teams depends on its direct business, but especially on improving the processes by (i) supporting the organization as a whole and (ii) by the attitude of employees to their processes and organization. The basic criterion is the attitude of employees to meet their personal needs (and targets). One of the basic needs of employees (which is manifested by a formal loyalty and is the engine of self-identification) can be seen in the above-mentioned job security (Fig. 1).

51 results of improvement effort for realization R percepcion of employees association of employees job stability Fig.Cycle of continuous improvement by staff Source: own processing 1. THE ECONOMIC CRISIS The economic crisis, like all crises, leads to unexpected instability or risk of achievement of the basic economic goals of individuals, groups, and entire communities. In doing so, there is also a threat to the persistence of adopted core values as well as reduction of possibilities of finding appropriate solutions limited by lack of disposable time. Appropriateness of hazard solutions depends on how deep the crisis has affected the entire economy and in which point the economic cycle is. In the economic sphere, we can say that the crisis occurs mainly to the negative changes on the demand side, to primary and secondary solvency and liquidity, to reduction of the usage of existing capacity, to the growth of unemployment and to increased inflation. Decline in overall consumption (demand) leads to financial problems on the revenue side of the firm. Negative impact of these changes is the firm's sensitivity to fluctuations in the economy. Under the sensitivity to fluctuations in the economy should be understood changes in aggregate demand that cause changes in sales. The answer is usually no attempt to establish a balance of pressure to reduce costs with a consequent increase in productivity. Methods and approach to reduce costs have a direct or indirect short-term or long-term impact on the quality of outputs produced, firm s reputation, the consumption of products of the firm (Fig. 2), and in the possibility of retaining, or ideally even increase, its market share. 50

52 status of economy quality of outputs consumption productivity financial problems cost cutting Fig. Cycle of impacts of economic crisis Source: own processing 2. QUALITY MANAGEMENT AND ECONOMIC CRISIS RELATIONS Economic crisis puts pressure on shifts in the understanding and management of quality. For example, taleof the ongoing economic crisis has shown that there are a surprisingly vulnerable those businesses which to formally declare not only the quality but they deal with quality fairly and in long term. Companies with ownership of quality management systems according to ISO 9001 certificates also suffer by fluctuations in the economy and in some cases even stronger than companies without certificates. This phenomenon can be called the paradox of improvement (or improvement paradox). Crisis can be seen as an acute effect of a number of possible long-term causes. Its primary cause is a passive approach to the management of small deviations from normality. Management at the acute onset of a crisis is oriented to immediate corrective action with a fast response time. Management in time of acute problems tends to act quickly, which wants to show its initiative and make you feel that the situation keeps well in hands. Quick responses to acute long-term problems masks the symptoms and real causes are not removed. So, there is constant self-degradation of the firm in progress. As the results, the corrective actions taken are appropriate in the short run, but in the long run it causes decline of efficiency and deepening in the problem

53 problem symptoms B fix R unintended consequences Fig. 3 "Fixes That Fail" archetype Source: adapted from Senge, P.M., The Fifth Discipline: The art and practice of the learning organization. Doubleday, New York ADDRESSING THE DIRECT IMPACT OF THE CRISIS BY MONITORING COSTS Onset of the crisis always activates the managements of firms to action. In doing so, in fact top management has very few resources for immediate response in the hands. Briefly we can say that senior management can partly influence with an organizational structure and costs, including labour. It is natural area definition of possible immediate action in case of urgency. The area of organizational change is often associated with a reduction in the number of working days a week, firing and saving of labour costs. Another area of costs savings, for example is inventory reduction. During the crisis, there is a significant reduction in incomes of the firm. Maintaining liquidity and continued satisfaction of the owners by dividends in such cases can only be reached by reducing the direct and overhead costs, which leads to an increase in net income. This leads to the meticulous organization managements focus on initiatives aimed at reducing costs. To the fore then come superficial characteristics such as stoppage or reduction of errors. In order to reduce costs there is also an alteration of raw materials for the production for less expensive but also for less appropriate. Increase or at least stabilisation of the income level is often covered with supply of goods with lower quality. The starting point is the dissatisfaction of managers with economic outcomes and with results of improvement. Attention of managers is then focused to 52

54 review the appropriateness of the methodology used for quality assurance. Amended methodology with emphasis on reducing costs replaces the old methodology and usually brings some positive short term results, but on the side of employees leads to loss of their job security (Fig. 4). Change of the orientation to reduce direct costs and overheads then leads to a change in corporate culture and employee attitudes. The result of the changed approach is then reduction of effectiveness of efforts to carry out the new methodology and, consequently, increased psychological pressure of managers to employees resulting in dissatisfied employees. Improvement activity in this case takes the management also with centralization of power. method B methodology suitability method A R preassure of managers realization effectiveness results of improvement effort for realization R percepcion of employees association of employees Fig. 4 Cycles of cost-orientation Source: own processing job stability Management of direct and overhead costs during the crisis is important, but in the long term quality does not give the opportunity to show how a change in the amount of sales influences the amount of operating profit (EBIT); respectively, how it affects the sensitivity of organization to economy. Variation in sales 53 53

55 up or down can be caused for example by decline in aggregate demand, by loosing customers or by increase of sales by improving firm offers thanks to a higher quality. The question is whether businesses those invest in higher levels of quality while maintaining the same amount of total costs are more sensitive to fluctuations in the economy or exhibit greater stability in spite of those changes. An important assumption is that changes in the economy affects all competitors equally, which means that, for example, decrease / increase in sales is proportional for all competitors. The sensitivity to fluctuations in the economy - the changes in business operating profit (EBIT) thanks to the overall cost structure - describes the effect of operating leverage (DOL) 1. This relationship is expressed by formula (1). At the same time, the DOL gives information about the value of operational risk that is associated with the level of fixed costs. DOL = (% EBIT) / (% S) (1) DOL degree of operating leverage % EBIT the percentage change in operating profit (earnings before interest and taxes) % S - the percentage change in net sales Quality costs are due to poor quality of existing non-quality or trying to maintain the quality and efforts to prevent poor quality. Looking at the frequency of the process it can be concluded that the absolute number of internal and external errors in their specific probability depends on the amount of production. These costs can include the variable cost of quality. It should also be noted that the firm does not know when and in what quantities of products there is a rework needed. This is reason why the company must incur costs to ensure constant quality (e.g. the need for measurements and their calibration). Various training courses and different associated costs are related to it. These types of costs can be classified as fixed costs which exist independently on the amount of production. Among the fixed costs we can also count the costs with jumping increase thanks to the initial investment in quality. Based on these dependencies, we can say that quality costs are divided into fixed and variable costs. The basis for classifying the quality costs into fixed and variable costs is their dependence on the volume of products sold. When com- 1 [1] Dębski, W., Teoretyczne i praktyczne aspekty zarządzania finansami przedsiębiorstwa. PWN, Warszawa, 2005, s

56 pared with most commonly used quality costs model P-A-F, costs of failures (F) are variable costs, and majority of prevention costs (P) as well as appraisal costs (A) are fixed costs. By calculating the DOL, the company can analyze the impact of changes in the cost structure of quality to the level of operating profit now and make same estimations for future. Appropriate quality costs management leads to a decrease in the cost of failures (F) and to an increase in the cost of prevention (growth of fixed costs and decrease of variable costs). Efforts to increase the production volume results in increasing the degree of production automation and consequently to an increase in fixed costs and declining variable costs. In this sense it should be noted that the steady rise in fixed costs as a result of quality improvement in case of the decline leads to increases of business risk. CONCLUSIONS Firms with higher level of fixed capital response to external factors more extremely than firms with higher level of variable capital. Automation of production directly influences the overall increase in the share of fixed capital in the firm. By calculating and monitoring the DOL, the firm can analyze the impact of changes in cost structure to the level of operating profit. The firm management should seek ways not only how to improve business processes in order to reduce both external and internal fails, but also in prevention losses and appraisal losses as a generator of fixed costs. This is the way how to reduce business risk and how to reduce firm s sensitivity to fluctuations in the economy. REFERENCES [1] Dębski, W., Teoretyczne i praktyczne aspekty zarządzania finansami przedsiębiorstwa. PWN, Warszawa, 2005, s [2] Duignan, P., Using Outcomes Theory to Solve Important Conceptual And Practical Problems in Evaluation, Monitoring and Performance Management Systems. In: American Evaluation Association Conference 2009, Orlando, [3] Dooley, K. - Johnson, T. Bush, D., TQM, Chaos, and Complexity, Human Systems Management, Vol. 14, No. 4, 1995, s [4] Georgios, G. - Enklawa, T. - Washitani, K., Hidden quality costs and the distinction between quality costs and quality loss. Total Quality Management & Business Excellence. Volume 12, Issue 2, March 2001, s [5] Kano, N., The Role of TQM in Economic Crisis Category A Strategy vs. Category J Strategy. In: ANQ Congress, Tokyo, [6] Senge, P.M., The Fifth Discipline: The art and practice of the learning organization. Doubleday, New York,

57 Tomasz Nitkiewicz Cracow University of Economics, Poland THE DETERMINANTS OF ENVIRONMENTAL MANAGEMENT SYSTEM IMPLEMENTATION IN POLISH COMPANIES Key words: environmental management systems, determinants and effects of EMS implementation, reasons for non-implementing EMS ABSTRACT The objective of the paper is the evaluation of motives and effects of environmental management systems implementation in Polish companies as well as analysis of obstacle preventing them from implementing these systems. Reaching the objective of the paper is based on analysis of the results of two surveys made in 2011 on company representatives. First of the surveys was the quantitative research and was commissioned by PARP on the population of 1000 small and medium enterprises. Second survey, of qualitative character, was made by Department of Product Technology and Ecology, Faculty of Commodity Science CUE on the population of 61 companies. In the paper the comparative analysis of the results of surveys is made in the scope of motives, effects and barriers of environmental management systems implementation. In the summary of the paper some key similarities and differences between the results of the two surveys are interpreted as well as some important phenomena. INTRODUCTION The recent history concerning management oriented research is quite rich in sustainability related issues, such as: corporate social responsibility, environmental management systems or eco-efficiency. The reasons for that research orientation are connected to the redefinition of socio-economic policy and the role of companies in its implementation. Environmental management system (EMS) is one of the tool of reorienting company management to this new policy paradigm. Still it is non-obligatory instrument and could be freely used by the companies depending of their market situation, relationship with stakeholder groups, economic condition or organizational culture. The paper tries to investigate the issue of environmental management system implementation exploring its motives, achieved results and on the other hand obstacles restraining companies from its implementation 1. 1 Adamczyk J., T. Nitkiewicz, Programowanie zrównoważonego rozwoju przedsiębiorstw, PWE, Warszawa 2007.

58 The inspiration for this investigation was provided by two research projects that have been realized last year in Poland and that are resulting in key data on EMS implementation issue. Author uses the results of surveys that have been realized within two projects in order to shed some light on motives, effects or obstacles related to EMS implementation in Polish companies. The text is structured in 5 chapters including the description of environmental managements systems and its use in business sector, presentation of scope and range of interpreted research, presentation of the results of two surveys and comparative analysis of the two surveys. The final part of the paper is dedicated to the interpretation of its analytical part and presentation of the conclusions. 1. ENVIRONMENTAL MANAGEMENT SYSTEMS AND ITS USE IN BUSINESS SECTOR Environmental management systems are commonly recognized as tools to transfer the concept of sustainable development to the process of management of business entities. The issue of transferring sustainability principles to companies starts with evolving them into concepts and ideas how to approach them from business perspective. The concepts are quite diversified and include such claims life-cycle thinking, industrial ecology, eco-efficiency, cleaner production rules or dematerialization. The logic of constructing environmental tools for sustainability implementation is presented on Fig

59 Fig. 1. The logic of constructing environmental tools for sustainability implementation Source: based on Nitkiewicz T., The Tools of Implementing Sustainability in Business Sector, [in:] The Role of Business in Achieving Sustainability; Part 1: Instruments and Strategies, V. Modrák, T. Nitkiewicz (eds.), published by T.U.Košice, F. of Manuf. Technologies, Prešov 2010, p

60 These concepts need really rich toolbox in order to be successfully implemented. Possibilities here are divided into three groups: (1) public management tools, (2) analytical tools and (3) process tools. All the environmental tools, especially analytical ones, are based on certain assumptions and models that describe the relationship between the industrial activities and environmental impacts. Technical models are still being developed in order to project the actual impacts of human civilization on environment. Additionally, there is a vast group of supplementary tools, that are referring to different aspects of sustainability but could strongly contribute to its environmental aspects 2. Process tools are internally or externally operated tools that aim at improving environmental aspects of company s activities that could be used occasionally or in a systemic manner. There are some complex managerial instruments like environmental management systems or specific purposes oriented instruments like eco-labels. The practice of last few decades shows that in European Union only two types of environmental management systems are recognized and being implemented: ISO system and Environmental Management and Audit Scheme (EMAS). The ISO system is an international standard laying down requirements concerning the environmental management system. It is designed to enable an organisation to formulate both its policy and objectives taking into consideration legal requirements and information concerning significant impact on the environment 3. EMAS is a legal regulation, which provides for the rules of implementation of the environmental management system along with strictly defined requirements for testing and minimising pollution 4. The ISO and EMAS system share certain features, it is also worth stressing that holding the ISO certificate ensures partial meeting of the EMAS requirements 5. The diversification of the two systems is not the area of interest in this paper and both systems are treated as a company engagement to better manage their 2 Nitkiewicz T., The Tools of Implementing Sustainability in Business Sector, [in:] The Role of Business in Achieving Sustainability; Part 1: Instruments and Strategies, V. Modrák, T. Nitkiewicz (eds.), published by T.U.Košice, F. of Manuf. Technologies, Prešov 2010, p PN-EN ISO 14001: System zarządzania środowiskowego, Pochyluk R., M. Macniak, J. Szymański, M. Behnke, H. Moora, A.-R. Bachmann, Wspólnotowy System Ekozarządzania i Audytu (EMAS): Poradnik dla organizacji, Konsorcjum Royal Haskoning Rotterdam, SEI Tallinn, LEMTECH Konsulting sp. z o.o. Kraków, Kraków Wojnarowska M., M. Sołtysik, The Concept of Enterprise Operations Programming in the Conditions of Sustainable Development, [in:] The Role of Business in Achieving Sustainability; Part 1: Instruments and Strategies, V. Modrák, T. Nitkiewicz (eds.), published by T.U. Košice, F. of Manuf. Technologies, Prešov 2010, p

61 environmental issues. Acronym EMS, used later in the text, refers to any one of them and does not distinguish them at any rate. If some specific features of these two systems are brought out it is specifically indicated in the text. Treating EMS as a tool for sustainable development implementation leads to assumption that its implementation relates also to some non-environmental benefits. Of course, environmental issues are the key area of EMS influence but directly and indirectly the effects of its implementation may spread over the economic and social aspects of company functioning. The expected effects of EMS implementation are presented in Table 1. Table 1. Expected effects of EMS implementation Areas of benefits Benefits for enterprise efficient waste management economic knowledge of the needs of business partners and customers improved competitive position improved environmental protection level environmental minimised breakdown risk reduced pollution emission improved company image improved internal communication social growing social awareness on the state of environment provision of information on the functioning of an environmental management system in an enterprise Source: based on Kuciński K. (ed.), Strategie przedsiębiorstw wobec wymogów zrównoważonego rozwoju, Oficyna Wydawnicza, Warszawa As show in the table 1 obvious environmental connotation of EMS does not need to limit its effect in other areas of company functioning. The buildup of EMS on more universal management systems platform (e.g. using ISO 9001 standard to develop ISO 14001) results in transferring some of its benefits together with EMS implementation. Moreover, the common platform for different management systems favors the implementation of integrated management systems that cover vast spectrum of company functions and parameters such as quality, environmental issues, safety and security measures or social accountability. 2. SCOPE AND RANGE OF RESEARCH Research results presented below are based on two surveys that were made in First one of them was made by Polish Agency for Enterprise Develop- 60

62 ment (its organizational acronym in Polish language is PARP) within the framework of their project on Sustainable Production Design and is referred as PARP survey later in the text. Second survey was made by Department of Product Technology and Ecology (its organizational acronym is DPTE) on Cracow University of Economics within the framework of their research project on Ecology oriented actions within product policy of companies and is referred as DPTE survey later in the text. The respondents of PARP survey were representatives of small and medium companies recruited on the base of their knowledge on the following issues: - strategies and investment plans of a company, - impacts on natural environment resulting from company functioning, - implemented sustainable production design (in a case that any such solution was implemented. The survey was made of the random profiled sample of 1000 companies classified as small and medium enterprises. According to the methodological expertise, selfemployment based companies (with 1 employee) were excluded from the sample. Tab. 1 presents the structure of the sample with regard to the size of enterprises included in the survey. Table 2. Sample structure of PARP survey concerning size of companies Size of enterprise Number of employees Number of enterprises in the sample Micro from 2 to Small from 10 to Medium from 25 to Total 1000 Source: based on Anuszewska I., K. Podlejska, A. Jackiewicz, M. Filipek, Zrównoważona produkcja w działalności przedsiębiorstw: Raport z badania, PARP, Warszawa, Each one of size categories included companies from different branches and localizations in order to reflect actual structure of companies in Poland. The survey was made in winter/spring season 2011 by face-to-face individual interviews. The scope of the research was very vast and included also investigating some issues related to environmental management systems. The survey made within DPTE project was rather small scale and included 61 companies located in małopolskie and śląskie voivodships mostly (central southern part of Poland). The sample was profiled and limited to production companies. No limitations were made concerning the size of a company. The respon

63 dents of DTPE survey were representatives of companies with knowledge on production, sales and environmental issues. Tab. 2 presents the structure of the sample with regard to the size of companies included in the survey. Table 3. Sample structure of DPTE survey concerning size of companies Size of enterprise Number of employees Number of enterprises in the sample Micro from 1 to 9 8 Small from 10 to Medium from 25 to Large 250 and more 21 Total 61 Source: own research within DTPE project (not published yet) The survey was made in December 2011 by computer-assisted web interview (CAWI). The scope of the research reflected the topic of the DPTE project and included also issues related to environmental management systems and their use in companies. It is important to mention some key differences between the 2 surveys. First of all, PARP survey was made on SME sample only, while within DPTE survey large companies were represented by more than 30% of a sample. Secondly, PARP survey was profiled, in a sector and localization manner, in a way to depicture the structure of SME sector in Poland. DPTE survey was profiled but only in a way to include production companies. Finally, PARP survey was typical big scale quantitative research matching the representativeness criteria while DPTE survey was rather type of qualitative research. Both of the surveys included very differentiated questions and the issue of environmental management systems was only one of many issues investigated. Nevertheless, the approach to EMS issue was rather similar in both of the surveys and included such elements as: implemented management systems, reasoning and motivation behind their implementation, obstacles and barriers within implementation process and objectives of implementation and their realization. DPTE survey went deeper into details concerning EMS related issues and investigated also plans concerning their implementation in the future, the reasons of failing to reach EMS implementation objectives and the structure of objectives. In order to avoid confusion due to use of results of two surveys their presentation is made in separate chapters and the discussion of the results and their comparison follows in the next chapter. 62

64 3. PRESENTATION OF PARP SURVEY RESULTS RELATED TO EMS Fig. 2 presents the motives of implementing EMS in companies with regard to the importance assigned to them. The survey proposed 9 motives and respondents ranked their importance from not important to very important ones. Fig. 2 presents only answers of companies that ranked motives as very important and important. It is evident that the most important motives to implement EMS are of economic nature. Almost 70% of companies that had implemented EMS made it to reduce their material and energy costs. Second group of motives relates EMS implementation to possible market effects such as improving competitiveness (almost 56% of respondents), adjustment of company operating to consumers needs (52,5%) and improving company image (almost 50,5%). Ranked as fourth important motive is care for natural environment (almost 51%). Implementation of EMS is not regarded as a way to improve innovation capacity of a company (only almost 31% of respondents), and it is not also regarded as a way to reduce environmental payments and fees that company bears (only 31,3%). Fig. 2. Motives of EMS implementation according to PARP research project [N=71; share of companies responding that given motive is very important or important] Source: based on Anuszewska I., K. Podlejska, A. Jackiewicz, M. Filipek, Zrównoważona produkcja w działalności przedsiębiorstw: Raport z badania, PARP, Warszawa,

65 The companies that had implemented EMS indicated benefits and gains resulting from it. Fig. 3 presents the share of companies responding that given benefit is important or very important. The two benetits are the most common ones: increase of income and improving the profitability (over 90% of companies) and improvement of market position (87%). It seems that EMS implementation brings some important economic and market effects to the company. Surprisingly, the third spot in ranking of most important benefits is taken by the increase of company innovation capacity (over 69%). According to the motives investigated in the same survey this type of benefit was rather of minor character in undertaking EMS implementation. Just next to building up innovation capacity establishing and tightening of cooperation with other enterprises is indicated as important benefit from EMS implemenation (near to 87%). On the other side, EMS implementation does not seem to influence company image too much or increase ecological conciousness of company employees or even to decrease the environmental impacts posed by company (12%-13,5% of companies indicates them as important benefits from EMS implementation). Two previously presented questions from PARP survey investigated the motives and benefits of those companies that implemented EMS. Fig. 5 presents the reasons of non-implementing any EMS with high or very high importance prescribbed to them. The most important reason seems to be no real need to change the current functioning of a company (over 79% of companies). It is worth to remind that these opinions are collected from employees that have general idea on strategic and environmental issues in the companies, and their assessment reflects the actual practice in their functioning. The next two responses refer to financial and economic barriers or rather percieved lack of potential benefits (over 61%) and public incentives (57,6%). The rest of the reasons seem to be of rather minor importance and reach barely above 50% share in total number of responses. 64

66 Fig. 3. Benefits of EMS implementation according to PARP research project [N=71; share of companies responding that given benefit is very important or important] Source: based on Anuszewska I., K. Podlejska, A. Jackiewicz, M. Filipek, Zrównoważona produkcja w działalności przedsiębiorstw: Raport z badania, PARP, Warszawa, PARP survey investigated also the financing sources for EMS implementation, support from other organizations for EMS implementation process and perception on differences between two systems: ISO and EMAS. The most commonly used financing source for EMS implementation is company own money (in 75,4% of companies that implemented EMS), bank credit (69,6%) and resources of European Union dedicated to improving management and environmental issues within Polish companies functioning

67 Fig. 4. Reasons of non-implementing EMS according to PARP research project [N=932; share of companies responding that given reason is very important or important] Source: based on Anuszewska I., K. Podlejska, A. Jackiewicz, M. Filipek, Zrównoważona produkcja w działalności przedsiębiorstw: Raport z badania, PARP, Warszawa, Only small number of companies received some support from public institutions, research and development units or non-governmental organization while taking their efforts to implement EMS. The perception of ISO and EMAS differences does not significantly relates to the objectives of the paper and this issue is not brought here. 4. PRESENTATION OF DPTE SURVEY RESULTS RELATED TO EMS Fig. 5 presents the reasons of non-implementing any EMS. In DPTE survey no weithing system was used for this question and companies has indicated only the reasons that stays behind their decisions of non-implementing EMS. The most often used justification of non-implementing EMS system is no awarness of such a need. Again the positions and qualifications of respondents suggests that this the point of view of a company and its strategy concerning the issue of EMS implementation. All the other reasons of non-implementing EMS are far less common and one of them did not find any support at all (uncertainity of the 66

68 effects of EMS implementation). It is noticable that high costs are not considered as important or common reason for non-implementing EMS. Fig. 5. Reasons of non-implementing EMS according to DPTE research project [N=27; share of responding companies] Source: own research based on DPTE research project On Fig. 6 the objectives of EMS implementation are presented. Again no weighting system was used in that questions and companies have indicated only the assumed objectives of EMS implementation. The most common objective is to improve the image of a company (almost 92% of companies indicated that objective). The second ranked objective is to decrease the enironmental costs (62,5%). The third ranked objective is to improve the relationship with institutional environment of the company. It seems that public relation related issues and needs (company image and relationship with institutional environment) are the most important reasons of EMS implementation here. All the other objectives are not considered that often to lie behind EMS implementation. Fig. 7 presents the actual effects of EMS implementation. Again no weighting system was used in that questions and companies have indicated only the effects they relate to EMS implementation. The whole ranking reflects the ranking in previous question on EMS implementation motives. The most common effect is the improvement of company image (41,7% of companies indicated that effect), the second is the decrease of environmental costs (37,5%) and third most common effect is the improvement of relationship with institutional environment of a company (29,2%). Besides the fact that the certain effects are not so common as assumed objectives the sequence of them is the same

69 Fig. 6. Objectives of EMS implementation according to DPTE research project [N=24; share of responding companies] Source: own research based on DPTE research project As previously presented data proves the objectives of EMS implementation are not always reached the following questions investigate the reasons of these failures. Fig. 8 presents this issue with the share of companies indicating certain reasons. the population of companies that answers this question recriuts from those that did not manage to fully achieve EMS implementation objectives. The most common reason of failure in achieving EMS implementation objective is lack of sufficient financial resources (almost 54% of responding companies). Fig. 7. Effects of EMS implementation according to DPTE research project [N=24; share of responding companies] Source: own research based on DPTE research project 68

70 All the other reasons are not so common and probably had some minor significance in the EMS implementation process. Fig. 8. Reasons of failure in achieving EMS implementation objectives according to DPTE research project [N=13; share of responding companies] Source: own research based on DPTE research project The last question related to EMS implementation in DPTE survey was on its effects on better identification of environmental issues within company itself and its surroundings. Almost every company implementing EMS has noticed such an effect on better perception of environmental internal issues and more than a half of them has noticed effect in form of better perception of environmental external issues. 5. COMPARATIVE ANALYSIS OF PARP AND DPTE SURVEY RESULTS There are three major topics that could be used to structure the comparative analysis of the two surveys. These three topics are: company motives to engage in EMS implementation, actual effects of its implementation and reasons for non-implementing any EMS. The following part of the chapter explores each topic in a comparative analysis and discusses the differences between the results of two surveys. The most common motive to implement EMS according to PARP survey is to reduce material and energy costs in a company with a share of companies perceiving it as important or very important at 69,2%. In fact the share of companies supporting that motive is not very different and amounts to 62,5% in DPTE survey. The DPTE survey this motive is only second ranked and its share is far behind the leading motive, which is to improve company image and reaches share 69 69

71 of 91,7% of population of companies. The same motive is ranked fifth in PARP survey with share of 50,4%. There could be different explanations of that difference but one of them could be quite easily brought down with concrete data. In DPTE survey results the share of large companies in those that implemented EMS systems is quite excessive (62,5%) and all of them responded that to improve company image is one of key objectives of EMS implementation. In PARP survey no large companies were interviewed and excluding them from DPTE survey population would probably decrease the importance of company image as EMS implementation determinants. The reason that lies behind large companies interest in improving their image relates to their bigger impact of consumers and other stakeholders (just as an effect of its operating scale), better developed organizational structures, higher environmental pressures from its surroundings and incorporation of environmental issues in their functioning. Since the pressures are beard and environmental issues are dealt with large companies use EMS implementation to get some extra effects like improving their image not especially counting on cost reduction or improving their competitiveness. Another important difference occurs when the relationship with institutional surroundings is concerned. In DPTE survey these motive is ranked as third and its share amounts to 58,3%. In PARP survey such a motive was not included but instead other quite relevant motive was present: to increase chances of getting subsidies from public funds. The relationship between the two motives is straight forward and has causal character in a way that improving relationship with institutional surroundings should lead to increasing chances of getting some support from public funds. The motive of increasing chances for getting subsidies from public funds has 46,5% share in those of important and very important significance for companies. This almost 12 points difference might have some justification in size of the companies and shows process orientation of large ones (to reach objective they need to build up the conditions supporting it) and effect orientation of smaller ones (focusing on the final effect will eclipse the way to reach it). Analyzing the effects of EMS implementation it is important to mention that PARP survey was much more diversified in this matter and included 15 possible responses while in DPTE survey only 8 were included. Despite of this scale differences there are some interesting pairs of effects that need to be compared. Again, first of them is the effect of EMS implementation on company image. In DPTE study it is the most common effect for 41,7% of respondents while in PARP survey it is one of the least popular ones with share of 12,5%. The justification for it is the same as in the case of motives and relates to the excessive share of large companies in those that implemented EMS in DPTE survey. But it 70

72 could also underline the different aspect of SME sector functioning. Company image seems not to occupy mind of SME managers. Perhaps, care for image is present there but it is not integrated in its character but exists in number of lesser cares such as attractive price, decent quality, reliability or accessibility. Some other pairs of effects could be placed on two opposite poles in each survey. For example establishment and tightening of cooperation with other companies has 68,6% share in PARP survey responses while similar effect, namely establishment of new business contacts has only 8,3% share in DPTE survey. Environmental cost decrease is second ranked effect in DPTE survey with its 37,5% share while in PARP project it is ranked as 8 th most important effect with 29,3% share. There are some similarities as well, like in the case of acquiring new customers that gets 25,5% share in PARP survey results and 20,8% in DPTE survey. It is also the case when the effect of improvement of efficiency is concerned. The key factor responsible for that confusion with the identification and assessment of EMS implementation effects might be related to omitting some categories in DPTE survey and focusing the responses of companies on most universal ones such as improving company image. The improvement could be related to market effects, changes in the process of products and services it offers or its organizational structure and therefore should be treated as a platform for aggregating some more specific effects that were not involved in questionnaire. Some interesting remarks could be made on the basis of motives/effects ratio while EMS implementation is concerned. Fig. 9 and Fig. 10 present the share of motives and effects in companies surveyed in PARP and DPTE projects respectively. As shown on Fig. 9 there is no common trend for motives/effects ratio in PARP project. Most of the motives have the bigger share in responding companies than its corresponding effects. It is the case for financial support from public funds, company image improvement, meeting the needs of customers, environmental impact decrease and costs decrease. Motives generally outreaches effects in these cases and the ratio illustrates the rate of unfulfilled expectations of companies implementing EMS

73 Fig. 9. Motives/objectives ratio according to PARP research project [N=71; share of companies responding that given benefit is very important or important] Source: based on Anuszewska I., K. Podlejska, A. Jackiewicz, M. Filipek, Zrównoważona produkcja w działalności przedsiębiorstw: Raport z badania, PARP, Warszawa, In some cases, like reduction of environmental payments and fees beard by companies or more rational management of material resources, the motives/effects ratio is almost equal to 1. These cases are quite specific issues that are placed in the very centre core of EMS concept. Finally, there are two cases, when effects significantly exceed motives. It is the case for the increase of company innovation capacity and market position improvement. It seems that the first issue relates to the one of key EMS feature, namely continuous improvement, that is not well perceived by parties not involved in its implementation. The explanation of the second issue is more complicated and potentially might include the suggestion that the consciousness of environmental issues in business sectors is much stronger than it seems. As shown on Fig. 10 there is the common trend for all the motives/effects ratio in DPTE survey results. Generally, the motives appear twice more often than effects. There are some small deviation from this rule but it never comes to the situation, observed in PARP survey results, that effects equal motives or even exceed them. 72

74 Fig. 10. Motives/objectives ratio according to DPTE research project [N=24; share of responding companies] Source: own research based on DPTE research project It is hard to identify one reason for such a difference between effects/motives ratio in PARP and DPTE surveys. Some trails might lead to the different population of two surveys but in fact, only when EMS implementing companies are concerned, this difference in not that significant (71 companies in PARP survey and 24 in DPTE survey). Also the inclusion of large companies in DPTE survey does not explain the issue clearly enough. Moreover, the difference could be also much more significant if all the effects included in PARP survey would be grouped in a way to fit fully in the set of included effects. In the case of DPTE survey the motives and effects are the same. Possible explanation could be found if the positions of the survey responding representatives in their companies could be cross-referenced to this ratio, but it is not possible due to lack of such data from PARP project. The reasons for not implementing EMS seem to be the most consistent issue within the two surveys. The most important factor restraining companies from implementing EMS is their conviction that there is no such need and environmental issues in company functioning are taken care of appropriately. This reason 73 73

75 has the biggest share in PARP survey (79,1%) as well as in DPTE survey (70,4%). DPTE survey results could be used to shed some light of this issue. Almost all of the companies, except one, that stated that there is no need of changing environmental issues have never experienced any benefits from its environment oriented activities. It seems that environmental issues have rather cost requiring connotation and making this cost even higher through EMS implementation and maintenance is not desirable at all. Even if the practice of EMS implementation in companies could prove to some extent that the cost increase is not necessary the case it is not convincing enough. One obvious difference between the surveys is the share of high costs of EMS implementation in the set of reasons of non-implementing them. In DPTE survey the share of cost is 18,5% only while in PARP survey it is 49,6%. Additionally, PARP survey includes some more economic oriented reasons for nonimplementing EMS such as lack of financial benefits from it (57,6%) or lack of economic incentives offered by public institutions (57,6%). Economic issues stand strong among the others when the results of PARP survey are concerned and are ranked as 2 nd, 3 rd and 5 th most important reasons for non-implementing EMS. Again explanation could involve the share of large companies in DPTE survey and their less cost-benefit oriented approach to EMS implementation. On the other side, more than a half of SMEs investigated in PARP survey admitted that they have no knowledge on EMS functioning and therefore could not be required to assess what they do not know. Besides DPTE survey investigates the importance of legal requirements in non-implementing EMS while PARP survey omits this issue. Lack of legal requirements for EMS implementation is second ranked barrier in DPTE survey and reflects rather small self- or market driven motivation to do it. Complicity of EMS implementation process is one of the issue surveyed in both cases but in a different ways. DPTE survey includes such a direct response with 14,8% share while in PARP project it is divided into several responses such as: lack of substantial public support (52,1%), lack of knowledge on EMS functioning (50,5%), lack of potential partners interested in EMS implementation and supporting the process (44,1%) and lack of qualified personnel (44%). CONCLUSIONS The analysis of the results of surveys concerning the ESM implementation issues leads to the following conclusions: 74

76 - the dominating motive for EMS implementation for SMEs is to gain some direct benefits, preferably of financial character, while big companies tend to focus on improving its image, - the expectations of companies on EMS implementation are concerning also the improvement of relationship with its institutional surroundings and to gain some profits from this improvement, - in general, the motives of EMS implementation and expectations of companies are confirmed in the structure of implementation effects with some noticeable decrease of its rate, - most SMEs are experiencing income increase and market position improvement effect with EMS implementation while for large companies it results first of all in improvement of their image, - some common effects of EMS implementation for every type of companies are: acquiring new customers, improving efficiency or decreasing costs, - the major factor preventing companies from implementing an EMS is their consciousness that there is no such need and that their activity is organized well enough at least when environmental issues are concerned, - another group of factors restraining companies from EMS implementation refers to economic issues and includes such factors as high costs of EMS implementation and unsure benefits resulting from it. Some important differences in PARP and DPTE surveys are indicated especially of approaches to EMS implementation from the perspective of large companies and SME. In the case of large companies the EMS implementation plays important role in building their image while for SME it is sophisticated way to get some costs reductions and efficiency gains. ACKNOWLEDGEMENTS The paper is based on partial results of the project no. N N titled Ecology oriented actions within product policy of companies that is financed from National Science Centre resources. REFERENCES [1] Adamczyk J., T. Nitkiewicz, Programowanie zrównoważonego rozwoju przedsiębiorstw, PWE, Warszawa [2] Anuszewska I., K. Podlejska, A. Jackiewicz, M. Filipek, Zrównoważona produkcja w działalności przedsiębiorstw: Raport z badania, PARP, Warszawa,

77 [3] Kuciński K. (ed.), Strategie przedsiębiorstw wobec wymogów zrównoważonego rozwoju, Oficyna Wydawnicza, Warszawa [4] Nitkiewicz T., The Tools of Implementing Sustainability in Business Sector, [in:] The Role of Business in Achieving Sustainability; Part 1: Instruments and Strategies, V. Modrák, T. Nitkiewicz (eds.), published by T.U.Košice, F. of Manuf. Technologies, Prešov [5] PN-EN ISO 14001: System zarządzania środowiskowego, [6] Pochyluk R., M. Macniak, J. Szymański, M. Behnke, H. Moora, A.-R. Bachmann, Wspólnotowy System Ekozarządzania i Audytu (EMAS): Poradnik dla organizacji, Konsorcjum Royal Haskoning Rotterdam, SEI Tallinn, LEMTECH Konsulting sp. z o.o., Kraków [7] Wojnarowska M., M. Sołtysik, The Concept of Enterprise Operations Programming in the Conditions of Sustainable Development, [in:] The Role of Business in Achieving Sustainability; Part 1: Instruments and Strategies, V. Modrák, T. Nitkiewicz (eds.), published by T.U. Košice, F. of Manuf. Technologies, Prešov

78 Paweł Nowicki Tadeusz Sikora Cracow University of Economics, Poland HACCP SYSTEM DOCUMENTAION PROCESS ACCORDING TO THE OPINION OF THE EMPLYEES OF BISTRO BARS Key words: HACCP, documentaion, food market, catering services, employees opinion ABSTRACT With the growing importance of food safety, there can be noticed an increasing interest of food safety management in food production, trade and services companies 1,2,3. For several years, in Poland, there has been noticed a growing trend for eating outside the home. Currently, consumers have a catering service not only to meet their basic nutritional needs, but offered services include a wider scope, as well as a growing group of customers. A good example are petrol stations, where there are bistro bars situated 4. Catering companies, including bistros at petrol stations, in order to succeed in the market, in the company's strategy must take into account customer requirements and needs as well as implement a quality assurance system. Proper quality is a guarantee of regular customers and the ability to grow and profit 5, 6, 7, 8. The aim of this article is to present the opinion of bistro bars employees on the requirement of HACCP system documentation process. 1 Kijowski, J., Sikora, T. (red.): Zarządzanie jakością i bezpieczeństwem żywności. Integracja i informatyzacja systemów. WNT, Warszawa Kołożyn-Krajewska D., Sikora T.: HACCP. Zarządzanie bezpieczeństwem żywności, Teoria i praktyka Wyd. C.H. Beck, Warszawa Luning P.A., Marcelis W.J., Jongen W.M.F.: Zarządzanie jakością żywności. Ujęcie technologiczno-menedżerskie. WNT, Warszawa Czarniecka-Skubina E.: Jakość usługi gastronomicznej w aspekcie żywieniowym, technologicznym i higienicznym. Żywność. Nauka. Technologia. Jakość, 2006, 1(46) Supl., Nieżurawska M.: Jakość żywności a preferencje konsumentów. Przemysł Spożywczy, 2001, 55, 12, Nowicki P., Sikora T., HACCP system functioning evaluation model based on bistro bars in Poland (w) Safety in Food Production Chain pod red. G Krasnowska, A.M. Salejda, Wydawnictwo Uniwersytetu Przyrodniczego we Wrocławiu, 2011, s Nowicki P.: Poziom zapewnienia jakości świadczonych usług przez sieć barów bistro w opinii klientów, Żywność. Nauka. Technologia. Jakość, 2/2009,s Kafel P., Kluczowe czynniki TQM wpływające na wyniki finansowe przedsiębiorstw branży spożywczej, Zeszyty Naukowe Uniwersytetu Ekonomicznego w Krakowie, nr 815, Kraków 2010

79 1. RESEARCH MATERIAL The study was conducted in 2008 in nine provinces, using the survey method with a questionnaire developed for this testing. The selection of regions was not random but there had been selected all provinces in which there were located the most of the stations of selected company. In other provinces the number of stations was very small, so that is why they had not been tested. The study covered bistros of selected network of petrol stations in the number of 210 stations. The study subjects were employees of petrol stations. There was implemented and maintained HACCP system in the tested bistro bars of the selected fuel company. The menu included: sandwiches, hot dogs, casseroles, and drinks such as coffee and tea. In addition to offering products there were also offered as ready-made supplied products and only served to the customers (cakes, tortillas, sandwiches). Bistros' employees of fuel stations network were surveyed with an anonymous questionnaire designed to determine their level of knowledge, safety awareness and hygiene of food processing and serving. Respondents were selected randomly from among those who currently were working in bistros. The total number of respondents was 280 people and it obtained a representative sample of the whole population. The correct completed questionnaires replied only 269 respondents. The study was conducted at the stations during the two consecutive months in order to ensure homogeneity of the respondents, due to the level of knowledge of employees and organizational standards in the bistros. The questionnaire survey intended for employees included 22 closed questions and one open-ended question, which allowed to obtain a precise answers. In addition, respondents answered questions categorized due to socio-economic characteristics. The results obtained in the study were analyzed statistically using multiple methods of analysis of variables, both qualitative and quantitative, including descriptive statistics, statistical inference, and multivariate analysis methods 9. THE RESULTS The characteristics of the social structure of the respondents are presented in Table. 1. Among 269 employees who have properly filled out the survey, the biggest group were women (78%). Taking under consideration the educational level of respondents, the biggest group were people with high school education 9 Kot S. M., Jakubowski J., Sokołowski A., Statystyka, Diffin,

80 (46%). In terms of age of the largest group of bistros' employees were people below the age of 35 (74% in total). Analyzing the work experience, it was found that the vast majority of people has been working in bistros over 6 years, which may indicate that workers with such experience will have extensive knowledge in the health and safety of food production. Table 1. Social structure of the respondents Gender Percentage [%] Woman 78 Man 22 Age: Percentage % below years old years old years old 7 above 55 years old 0 Education: Percentage [%] primary 2 vocational 6 high school 46 high-bachelor 21 high-master 25 Years of work in the bistro: Percentage [%] below above 6 48 Source: own research. Employees of the bistros of selected gas stations were tested in 9 regions of Poland. Quantitative distribution of surveyed workers in the various provinces are presented on Figure 1. Employees have the largest representation in Slaskie region, because in this province there is situated a biggest number of fuel stations of the selected company. It is connected with the Katowice conurbation and a very high concentration of population in this area. In other provinces the number of surveyed respondents was lower, due to smaller number of petrol stations there

81 Fig. 1. The number of surveyed employees i selected regions. Source: own research. As for the location of the particular stations of the test group regarding the size of the city (Fig. 2), the vast majority (52%) was located in cities with more than 100 thousand residents. A large percentage of stations was also located in cities from 10 to 100 thousand residents. Fig. 2. Location of stations. Source: own research. 80

82 One group of questions that were posed to employees, were questions about the formal operation of the HACCP system and enterprise policy. In the first, employees were asked if in the HACCP system filling out forms confirming the efforts and keeping them for a specified period of time is mandatory. Nearly 98% of employees responded properly, which is not particularly surprising in the company, where is very important to keep records (Fig. 3). Fig. 3. The employees opinion in the importance of fulfilling and keeping records confirming HACCP system functioning. Source: own research. It is also notoicable that, however there was only 2% of wrong answers, all of them were selected by women. The rate of correct responses provides a good preparation of employees, and a high awareness of the creation of records and technical functioning of the system. Employees were also asked about purpose of development and keeping a documentation of the HACCP system, containing four variants of answers. Among them they had to indicate in their opinion all correct options and that is why answers do not sum up to 269 (Fig. 4). The correct responses were variants "a" and "b", and of such a combination correctly replied to this question 61% of the surveyed employees. Taking into account the multiplicity of answers to some variants, the vast majority of workers indicated at least one correct answer

83 Fig. 4. The employees opinion on the purpose of development and keeping a HACCP documentation in the enterprise. Source: own research. Answer "a" have indicated 216 employees, of which 164 in combination with a second right answer "b". It follows that employees in general, properly understand the purpose of development and compiling documentation of the HACCP system, but there are also noticeable voices expressing a negative opinion on the subject. Probably the people who marked answer "c" and "d" expressed its disapproval of the operation of the HACCP system in the enterprise. Analyzing the distribution of answers to a question concerning the purpose of developing and keeping record versus education of employees in accordance with the expectations it can be observed, that among people with primary and vocational education, responses more often appeared as incorrect (Fig. 5). In the other groups there can be observed an inverse proportion, which may lead to the conclusion that having a higher education level the employee can correctly identify the objective of the development and compiling documentation of HACCP system. This suggests a higher level of knowledge of these workers. 82

84 Number of people primary high school master vocational bachelor primary high school master vocational bachelor Correct answer Education Incorrect answer Fig. 5. The employees opinion on the purpose of developing and keeping record versus education. Source: own research. In turn, based on the distribution of answers to the question concerning the purpose of developing and keeping records relative to work experience of employees (Figure 6), it can be observed that only in the case of employees working more than 6 years in business, the ratio of correct to incorrect responses is shaped in 2:1 proportion. Similar proportions are observed in the group of workers with the shortest experience, but the size of this group of workers is very small, so the sample is not representative. In the other groups the distribution of responses is shaped by about 50% of correct and incorrect responses. This finding could suggest that workers with the longest work experience understand the idea of documenting and maintaining a functioning HACCP system in the best way. The verification independence test of the chi-square was found, that there were statistically significant differences in frequency responses due to the work experience of employees

85 While the distribution of responses relative to location of the station indicates that the greatest differences in the numbers of correct to incorrect responses can be observed in the case of stations located in cities from 10 to 100 thousand population (Fig. 7) Number of people below 1 year from 1 and 3 years from 3 and 6 years over 6 years below 1 year from 1 and 3 years from 3 and 6 years over 6 years Correct answer Years of work Incorrect answer Fig. 6. The employees opinion on the purpose of developing and keeping record versus years of work in the bistro. Source: own research. In 68% of locations, employees working at stations in cities from 10 to 100 thousand inhabitants correctly answered this question, which is essential information that employees in this group learned the principle of documenting and maintaining the HACCP system. In the case of cities with over 100 thousand population the difference was no longer so clear and it was 54% to 46% of the correct and incorrect responses. 84

86 Number of people below from to over village/close to main road/airport below from to over village/close to main road/airport Correct answer Incorrect answer Location of the station (size of the city - based on the number of inhabitants in the cities) Fig. 7. The employees opinion on the purpose of developing and keeping record versus location of the station/bistro. Source: own research. The verification test of the independence of the chi-square was found that there were statistically significant differences in frequency of responses due to the location of the station. By analyzing the distribution of numbers of correct and incorrect responses for development and purpose of record keeping relative to region (Fig. 8), it can be observed that the highest percentage of correct answers was in Dolnośląskie (76%). On the other hand in the regions of Wielkopolska, Mazowieckie, Śląskie and Kujawsko-Pomorskie the correct response rate varied from 63 to 68%. The least employees that understand the idea of documenting and maintain the functioning of the HACCP system are in the Warmińsko-Mazurskie, where, as the only one of surveyed regions, the proportions were reversed from the others, where the majority of incorrect responses occurred (67%). In the other provinces the majority were correct answers, ranged from 55 to 58% of correct answers

87 40 35 Number of observations małopolskie wielkopolskie łódzkie warmińskomazurskie mazowieckie śląskie dolnośląskie kujawskopomorskie zachodniopomorskie Region of Poland Fig. 8. The graph interaction of numbers of correct and incorrect responses on purpose of development and compiling documentation relative to the region of Poland Source: own research. In the last question, bistro employees were asked about their opinion on the policy actions of the company and its high level of care for the health safety of produced food (Fig. 9). Surveyed employees had a choice of 5 options for answers that they had sort out by allocating ranks, where 1 rating determines the least impact, and evaluation of 5 the greatest impact. ich may be effectively used to pursue its objectives. Analysis of employees' opinion showed that the efficiency in conducting its policy, the company achieves by applying the principles of the HACCP system and inspections and audits at stations. In the group of 2 to 3 evaluations, employees most often indicated staff training, compliance with procedures and instructions and frequent cleaning of the bistro. A surprising result is the presence of biggest number of indications in the group of responses, which have the least im- 86

88 pact on the effectiveness of the company's policy for variant "e" - inspections and audits at stations, very often this action was shown to be very effective. Fig. 9. The employees opinion on the policy actions of the company in the range of the food safety. Source: own research. Taking into account the overall distribution of responses, it can be seen that the opinions of employees for the actions used to implement the policy of the company are distributed relatively evenly, which may indicate that there is no only one tool with wh 87 87

89 CONCLUSIONS 1. The employees in general correctly understand the purpose of developing and keeping the records of the HACCP system documentation, but there are also noticeable signals expressing a negative opinion on this subject. 2. Higher education can correctly identify the objective of the development and compiling documentation of HACCP system, and suggests a higher level of knowledge of these employees. 3. The employees with the longest years of working in the company, in a best way understand the idea of documenting and maintaining the HACCP system. 4. The work experience of the employee significantly affect the perception of the idea of documenting and maintaining a functioning HACCP system. 5. The location of gas station with the bistro bar significantly impact on employee perceptions of the idea of documenting and maintaining a functioning HACCP system. 6. According to employees effectiveness in conducting its policy, the company achieved through the application of the HACCP system principles and the checks and audits of bistro bars located at the gas stations. The research presented in this paper was founded from the Ministry of Science and Higher Education grants no: N N in the year REFERENCES [1] Czarniecka-Skubina E.: Jakość usługi gastronomicznej w aspekcie żywieniowym, technologicznym i higienicznym. Żywność. Nauka. Technologia. Jakość, 2006, 1(46) Supl., [2] Kafel P., Kluczowe czynniki TQM wpływające na wyniki finansowe przedsiębiorstw branży spożywczej, Zeszyty Naukowe Uniwersytetu Ekonomicznego w Krakowie, nr 815, Kraków 2010 [3] Kijowski J., Sikora T. (red.): Zarządzanie jakością i bezpieczeństwem żywności. Integracja i informatyzacja systemów. WNT, Warszawa [4] Kołożyn-Krajewska D., Sikora T.: HACCP. Zarządzanie bezpieczeństwem żywności, Teoria i praktyka, Wyd. C.H. Beck, Warszawa [5] Kot S. M., Jakubowski J., Sokołowski A., Statystyka, Diffin, [6] Luning P.A., Marcelis W.J., Jongen W.M.F.: Zarządzanie jakością żywności. Ujęcie technologiczno-menedżerskie. WNT, Warszawa [7] Nieżurawska M.: Jakość żywności a preferencje konsumentów. Przemysł Spożywczy, 2001, 55, 12, [8] Nowicki P., Sikora T., HACCP system functioning evaluation model based on bistro bars in Poland (w) Safety in Food Production Chain pod red. G Krasnowska, A.M. Salejda, Wydawnictwo Uniwersytetu Przyrodniczego we Wrocławiu, 2011, s

90 [9] Nowicki P.: Poziom zapewnienia jakości świadczonych usług przez sieć barów bistro w opinii klientów, Żywność. Nauka. Technologia. Jakość, 2/2009,s [10] Rozporządzenie (WE) nr 178/2002 Parlamentu Europejskiego i Rady z dnia 28 stycznia 2002 r. ustanawiające ogólne zasady i wymagania prawa żywnościowego, powołujące Europejski Urząd ds. Bezpieczeństwa Żywności oraz ustanawiające procedury w zakresie bezpieczeństwa żywności. [11] Rozporządzenie (WE) nr 852/2004 Parlamentu Europejskiego i Rady z dnia 29 kwietnia 2004 r. w sprawie higieny środków spożywczych

91 Rodica Pamfilie Elena Roxana Stan The Bucharest Academy of Economic, Romania MANAGING QUALITY COSTS A MUST FOR GROWING ORGANIZATIONAL PERFORMANCE (A CASE STUDY ON ROMANIAN BUSINESS HOTELS) Key words: quality costs, management performance, competitiveness ABSTRACT Today, organizations establish as primary objectives their survival on the market, maintaining solvency, and obtaining short and long term profitability when under the impact of globalization and increasing competition. Consequently, organizations need to approach quality in terms of their respective costs, being aware of their competitive attitude on the market. Quality costs allow performance evaluation by drawing a parallel between products and services, on one side and, respectively, between its departments, too. Learning about the activities generating quality costs and their involved estimation, permit ranging the identified main problems according to their importance. The present paper aims to highlight the importance given by the managers of the 4-star hotels on Bucharest business market considering the above presented aspects and based on our research work aiming to highlight their real values of quality costs and benefits revealed by their knowledge. INTRODUCTION Hospitality industry is the service sector considered the most important of the global economy, currently with the fastest growing. Hospitality industry is a profitable industry that depends especially on free time and disposable income. In the literature, opinions regarding the scope of the hospitality industry are divided. The most limited view includes, in the hospitality industry, lodging and food service 1. Other specialists include, besides the two categories mentioned, 1 Dopson R. L., Hayes K. D., Managerial Accounting for the Hospitality Industry, John Wiley & Sons Inc., New Jersey, 2009, pag. 5 it can include a variety of managers in related fields Medlik S., Dictionary of travel, tourism and hospitality, Third edition, Butterworth Heinemann, Oxford, 2003, pag. 86 imprecise term, most commonly used as a synonym for hotel and catering industry/services

92 the leisure services 2. Broader approaches of hospitality industry include also other activities, namely transport, health and education 3. Companies providing those services are companies that focus on involvement in relationships they have with customers, whose primary concern is the welfare and satisfaction of guests. Internationally, in recent decades, there have been many changes. Global market and competition increasingly fierce led organizations to realize that their survival on the market depends on the high quality products and services that they produce or sell. The meaning of quality continues to evolve as the quality profession grows and matures. Neither consultants nor business professionals agree on a universal definition. 4 Being considered a strategic element of the overall management of an enterprise, quality is the main factor regulating the market through client. Having in mind that the customer chooses from the market products and services which best meet his needs and expectations, companies are starting to focus on achieving quality programs. Quality programs require integration and correction of all processes related to quality during the creative of value process for customers. Organizations from hospitality industry must always set as main objective high quality of services, because customer satisfaction is the key to success for any organization. In the hospitality services, unlike other categories of service, the consumer active participation in service consumption differs depending on the nature and content of the tourism types. Dr. Gennady Voronin and Mr. Yury Samoylov mention, in the paper Quality Vital and Moral category! 5, the main issues that presents quality as a profitable thing, namely reduce work without added value; saves time; ensures human safety, health and their environment; and guarantee the future for the next generation of our civilization. In the literature, is stated that improving quality of products and services of an organization has positive effects on increasing profit margins and on market position of the organization. The main objectives of an organization are surviving 2 Hayes K. D., Ninemeier D. J., Human Resources Management in the Hospitality Industry, John Wiley & Sons Inc., New Jersey, 2009, pag. 5 Kandampully J., Mok C., Sparks B., Service Quality Management in Hospitality, Tourism, and Leisure, The Haworth Hospitality Press, New York, 2001, pag. 4 3 Tesone D., Principles of management for the hospitality industry, Butterworth-Heinemann, 2010, Oxford, pag. 5 DeFranco L. A., Noriega B. M. P., Cost Control in the Hospitality Industry, Prentice Hall, New Jersey, 1999, pag. 6 4 Evans R. J., Lindsay M. W., Managing for quality and performance excellence, 8 th edition, South-Western Cengage Learning Inc., Ohio, 2008, pp The paper was presented in 54th EOQ Congress, Izmir, 2010, available on

93 on the market, maintaining solvency and obtaining short-term profitability. Additionally, there is added obtain long-term profitability. Quality influences the economic activity of firms in two main ways: on costs, on sales revenue. They are very different concepts, although interacting in some aspects. There are methods to assess the effect of quality on costs, which involves assessing the various categories of costs to achieve quality and categories of costs paid for poor quality. 6 The main problem of quality management is the identification of an optimal relation between quality and costs. First used in Western Europe in the early 60, the cost of quality term originates in the costs study conducted by Fiegenbaum 7. Quality costs are the costs involved in achieving and maintaining desired quality by following the criteria required under current legislation and regulatory standards; and also costs incurred in creating products or providing services inadequate in terms of quality. 1. QUALITY COSTS IMPACT ON PERFORMANCE OF HOSPITALITY INDUSTRY ORGANIZATIONS All the competitors have access to the same techniques, technologies, skills. The real differentiating factor is to create an organization that is able to set out winning objectives and meet them (obviously through an intelligent use of all existing technologies). 8 Identifying quality costs influence on financial results of an organization is relatively difficult; this is due to the difficulty of quantifying certain categories of quality costs. Quality costing system has the potential to become an excellent tool in the overall management of a business. It can provide an indication of the health of management performance in many areas of the organization. Measurements of quality related costs also reveal shortcomings in cost allocation, standards, procedures and practices which may remain undetected by the more commonly used production / operation and labour based analysis. 9 Measuring cost of quality support internal quality audits. This is the basis to identify defects/nonconformities and frequency of occurrence, activities performed to prevent recurrence of de- 6 Juran M. J., Planificarea calității, Editura Teora, București, 2000, pp Feigenbaum Vallin Armand is American, born in Businessman and quality control expert, Feigenbaum invented the concept Total Quality Control (later known as Total Quality Management), and introduced the Quality Costs concept. 8 Conti T., Systems thinking in quality Management, The TQM Journal, Vol. 22 No. 4, 2010, Emerald Group Publishing Limited, , pag Chopra A., Garg D., Behavior patterns of quality cost categories, The TQM Journal, Vol. 23, No. 5, 2011, Emerald Group Publishing Limited, , pag

94 fects/nonconformities, determining monthly and annual cost of defects/nonconformities. Knowing these issues, staff can focus on keeping control of the main causes of identified problems. If one department within the organisation can produce an improvement in costs, timeliness or quality, then this can have a significant effect on the strategic direction of the organisation. 10 Managers of many companies do not know or are not very interested in knowing the exact values of quality costs. They lose sight of the benefits that brings the knowledge of those costs, respectively the trend analyzes and forecast of these costs by category, budgeting, setting out key areas for improvement and facilitating making decisions about cost categories that must be reduced or eliminated. Lack of quality costs implies the impossibility of establishing losses involved by non-quality products and services. Those are considered an indicator of the efforts made to maintain and improve quality of provided products and services. Care is needed in the way budget and performance information is presented, because this is likely to influence its reception. A way of setting out the information, based on its segregation into those items which the operating manager can and cannot control, will help in the appropriate and efficient analysis of various aspects of the organisation s performance. 11 Measuring quality costs focuses attention on main area of their reduction, allows performance measurement and creates an internal knowledge base for products, services, processes and departments. 12 Short-term (usually a bad commercial circumstances) many organizations reduce costs of quality assurance by reducing evaluation of prevention costs, because they are very easy to control and (mostly) are directly reflected in classic accounts. 13 Ramdeen, Santos and Chatfield, in the article Measuring the cost of quality in a hotel restaurant operation, mention the main categories of strategic benefits derived from measuring and maintaining quality cost using the model of three categories of costs (PAF), namely benefits resulting from prevention activities that aimed identifying potential problems before they occur; benefits from evaluation activities to ensure that quality products and services meet specific standards, 10 Walker D., Improvement in Costs, Timelines or Quality Within One Department Can Affect The Strategic Direction of an Organisation, International Journal of Applied Strategic Management, Volume 1, Issue 2, ISSN , available on 11 Harvey M., Three-Way Path to Fair Analysis of Performance, International Journal of Applied Finance For Non-Financial Managers, Volume 1, Issue 3, ISSN: X, available on 12 Spatariu E. C., Analiza costurilor calității, Tribuna Economică, V. 16, Nr. 15, 2005, pag Parker W. G., op. cit., pag

95 that will satisfy customer requirements; and benefits resulting from the identification of service gaps that will allow overall assessment of quality products and services. If known elasticity of demand for a product or service, between improving quality and sales value can be established a connection. Quality improvement programme and quality costs reduction opportunities can help making provisions through guarantees, penalties, remedy noncompliance, carrying the debts arising from customer refusal to pay. Making this category of provisions it must take into account the probability of risk factors. They are different from the costs included in costs of quality assurance category, being considered factors that influence the price. The value of provisions can be reduced if decreases the probability of some external noncompliance costs appearance, which increases customer confidence in the organization's ability to provide quality services. The projects selected for improvement should link to the broader business goals. The business goals might be lower costs, improved profitability or increased market share. The external failures that have the biggest impact on the business goals should be selected for improvement. Problem solving activities must be completed to determine the root causes of the failure. 14 It requires selecting and applying a solution. When data is collected it must be established their source, to verify the veracity of information. Depending on organization size, the range of activities, quality management system and how costs are controlled, are established sources of information about quality assurance costs. In practice it is considered that can be used as sources of information all records of a company, actively involving managers and staff implicated in the activity. An important role has the persons in charge of financial reporting. Various user groups apply a series of accounting ratios to interpret and appraise financial performance and such comparisons may include: 15 The current year s results with previous year, to establish whether performance is more favourable or adverse than before. The current year s results with those of comparable companies in the same line of business, to establish whether the company is performing better or worse than its competitors. Current performance against a standard or benchmark of performance. 14 Beecroft D. G., Cost of Quality, Quality Planning and The Bottom Line, G. Dennis Beecroft Inc., Ancaster, Canada, Dunn E. P., Financial Performance Indicators, International Journal of Applied Finance For Non-Financial Managers, Volume 1, Issue 1, ISSN X 94

96 Comparisons of one segment or division of a business with others to establish which parts of the business are achieving their objectives. In hospitality industry, from data sources used to identify quality costs we find: program and audit reports, forms for specifying certain categories of expenditure, budget reports by department, supply agreements, records of training programs, customer complaints. It is very important in establishing the quality cost reduction program, not to delay its implementation because of accessibility of data sources. An essential role it has knowledge that may exist, for certain categories of costs, partial data or no data. In some cases it is accepted a data accuracy of ± 25%. Of course, fixing the problem next week or next release, or letting customer support deal with it does not get rid of the failure cost; it only defers it until later. The company ends up paying the cost one way or the other. 16 It is considered that increasing the period between the finding of the defect and the removal; determine the increases of additional costs of the organization. In hospitality industry organizations, the existence of deficiencies that may occur when a service is provided is considered to be because by the fact that they have not gone through the previous evaluation stages. No they could not, if we consider that, essentially, the services are immaterial and intangible. G.W. Parker presents, in his book Quality Costs, the effect of reducing quality assurance costs. Called leverage of quality or quality lever on performance of an organization, with a proportion is equivalent to increasing turnover, and is determined by the relation: C. AC.. E pc = 1+ R Pr Where: E pc Leverage of quality R Proportion of costs of quality assurance reduction C.A.C. Cost of quality assurance Pr Profit This concept does not involve quantitative improvement of efficiency, but has an illustrative role. The main disadvantage of this comes from practice, because the total quality assurance costs are not known exactly, their percentage reduction being hypothetical. If we analyze the effectiveness of investments, in terms of allocating human and financial resources, the attention should be focused more on prevention activities, than on assessment activities. This approach is because prevention activities involve reducing defects, while assessment activities discover defects, not 16 ASK Process Inc., 2003, disponibil pe

97 reduce them. Addressing primarily the prevention costs can reduce total quality costs and change the structure of quality assurance costs. 2. POSSIBILITIES FOR IMPROVING THE ECONOMIC FACTOR OF AN ORGANIZATION IN TERMS OF QUALITY COSTS Companies can lose money because they fail to use significant opportunities to improve their costs of quality. Most cost accounting data are not revealed to the public and are rarely exchanged among businesses, and there is no known study testing the effect of organization size, i.e., small and medium sized enterprises (SME) and large organizations, on quality costs. 17 Profitability together with productivity are key business objectives and management activities focus on these factors accordingly. There is hardly a business management decision that does not influence productivity and its development. 18 To identify opportunities for improving the economic factor of an organization in terms of quality costs should be considered economic and financial aspects of the organization. Managers need to realize and to consider conduct an effective activity. Organisations wishing to provide to customer services at competitive prices, should consider the quality of services they provide and the economic usefulness of the service. Figure 1 shows the nonlinear relationship that exists between the level of service quality and the price that customers are willing to pay. In terms of company competitiveness, respectively of the quality costs share of the amount of income, 0.4 (40% of price unit) is the critical level. For an organization to be profitable in a given period of time, total quality costs related to the number of clients must be less than 0.4 x Pu. 17 Kendirli S., Tuna M., In the context of total quality management, quality costs and effects on financial decisions: a research in Çorum s enterprises, International Journal of Entrepreneurship, Volume 13, 2009, pag Nebl T., Schroeder A. K., Understanding the interdependencies of quality problems and productivity, The TQM Journal, Vol. 23, No. 5, 2011, Emerald Group Publishing Limited, , pag

98 Price/unit (P u ) P u P u, current 0,4 x P u TQC, critical TQC, current Optimization trend of total quality related costs/unit (TQC u ) for a given level of quality (Q current ) Minimum level of conformity Q current 100% Quality conformity Figure 1 Company`s profitability from the perspective of quality-related costs Source: Brad S., A General Approach of Quality Cost Management Suitable for Effective Implementation in Software Systems, Informatica Economică, vol. 14, no. 4/2010, pag. 101 Although some quality improvements may increase revenues and decrease costs simultaneously, efforts to improve customer-perceived quality usually increase profits through revenue expansion, and efforts to improve the efficiency of internal processes tend to increase profits through cost reduction. 19 The economic factor, if we speak about for-profit organizations, is determined by the ratio of profit value and cost value. Improving the economic factor involves a structured approach who will take into account on the one hand increase earnings and reduce costs on the other. 19 Rust T. R., Moorman C., Dickson R. P., Getting return on quality: revenue expansion, cost reduction, or both?, Journal of Marketing, Vol. 66, No. 4, Oct. 2002, pp

99 Launching new products/services Improve product/service Development of unique product/service Reduce time to launch Encourage innovation Increased price etc. Table 1 Improvement of gain/cost report Increasing gain/cost report Increase earnings Cost reduction Improvement of marketing Reducing compli- Reducing nonucts/services for existing prodance costs compliance costs Winning new customers Keeping existing customers Multiply sales markets Exploitation of reputation Better use of resources, etc. Reengineering processes Improve process capabilities Improving competences Reduce wastage and repair Reduce Waste Time reduction Reduce pollution and accidents, etc. Source: adapted from Froman B., Manualul calității Instrument strategic al abordării calității, Editura Tehnică, București, 1998, pag. 136 (ISO/CD 10014) In specialized sources, is mentioned that quality assurance costs are close to gross profit related to turnover values, in some cases being even twice as large. Therefore results the benefits of implementing a quality assurance cost reduction program, reflected by increasing profits. Establishing a relationship between cost categories published in the analyzes of quality and results of a company, as well as determining the indicators of performance report to quality requires in terms of an organization considerable financial and organizational efforts. 3. THE IMPORTANCE GIVEN BY MANAGERS OF 5 AND 4-STAR HOTEL IN BUCHAREST TO KNOWLEDGE ACCURATE VALUES OF QUALITY COSTS AND ITS BENEFITS To identify the importance given by managers of hospitality industry organizations to quality and cost of quality, we conducted a survey among 4 and 5 star hotels in Bucharest. The survey was conducted among these categories of classification, based on the idea that the potential of an organization to meet market quality requirements and benchmarks is the financial, technical, and organizational and personnel resources available. Considering the questions to be answered when assessing a representative sample for this research has established that the most appropriate is the sampling rate. Knowing that, on the Bucharest market, on 01/06/2011, operating 48 hotels 98

100 of 5 and 4 star ( the number of units of observation was of 32 hotels (2 hotels of 5-star and 30 hotels of 4 star). To obtain necessary information was used direct quantitative research, which aimed to record the responses to questions from a questionnaire. Questions in the questionnaire is mainly addressing to managers of the units among the research is conducted. The survey was conducted from April to July Recognising that accounting systems do not allow highlighting the quality costs, the undertaken research aimed to identify whether among analyzed hotels exist an own system for highlighting, correction, collation and synthesis of each type of quality cost. These question responses were 100% negative. This situation is because between managers and specialists on quality problems there are communication barriers. Therefore, managers do not understand very well the consequences of identifying and evaluating the quality costs on economic and financial results of companies. For answers to the question regarding the interest in the existence of a system for highlighting quality costs specific to the hospitality industry, was established that, from 32 respondents, only 9 said that they are interested in such a system, in while 15 consider that is not necessary to place a special emphasis on separate highlight of quality costs. 8 respondents reasons that they would be interested in a such a system which highlights the quality costs specific to hospitality industry, but in his election they would consider the implications, generated costs, and the person making this system. Regarding to the quality costs share of total turnover, on the responses obtained from managers of hotel units among which was the research conducted, we could conclude that quality assurance costs to approximately 37.5% of the units is less than 10% of turnover. While for 62.5% of units the quality costs are between 10% - 25% of turnover. In terms of quality cost structure, the share of quality cost categories varies as follows: prevention costs between 5% - 50%, evaluation costs between 5% - 40%, internal nonconformities costs between 10% - 60% and external nonconformities costs between 10% - 40%. In the literature, the average total cost of quality assurance for products is: prevention 2% - 10%, evaluation 15% - 34%, internal nonconformities cost 21% - 49%, external nonconformities costs 20-48%. Responses were given by managers and reflect the fact that they are not aware of the quality cost categories that are actually found in hotel units. Given the importance of the human resources, material and the way complaints are solved, was set the costs share of these categories. As a result of responses centralization were obtained the following average weights for the quality cost categories: quality costs with material 43.59%, quality costs 99 99

101 with human resources 29.06%, costs of poor quality generated by resolving complaints 15.63% and other quality-related costs 11.72%. CONCLUSIONS Many economists/managers of an organization neglects to consider a very important issue for the efficiency of their activity, namely the realization that, at an equal price, customers prefer the organization that provide better quality services and in case of organizations providing equal in terms of quality, customers will choose organizations with lower prices. This means concentrating their resources on key issues of the organization, to know and solve them quickly. Representing a potential source to maximize the organizations profit, quality costs can be used as a tool for optimization of processes and activities relevant to quality. However after the conducted research we established that managers of 5 and 4-star hotel in Bucharest does not realize the importance and advantage of highlighting, correction, collation and synthesis of each type of quality cost. Quality costs are not perceived as an important tool for valuing quality and are not used as tools to optimize activities relevant to quality. Which implies that, as previously mentioned, in these hotels there are communication barriers between Persons responsible with quality, Accounting and Managers. REFERENCES [1] ASK Process Inc., 2003, available on (20/12/2011) [2] Beecroft D. G., Cost of Quality, Quality Planning and The Bottom Line, G. Dennis Beecroft Inc., Ancaster, Canada, 2000 [3] Brad S., A General Approach of Quality Cost Management Suitable for Effective Implementation in Software Systems, Informatica Economică, vol. 14, no. 4/2010 [4] Chopra A., Garg D., Behavior patterns of quality cost categories, The TQM Journal, Vol. 23, No. 5, Emerald Group Publishing Limited, , 2011 [5] Conti T., Systems thinking in quality Management, The TQM Journal, Vol. 22 No. 4, Emerald Group Publishing Limited, 2010 [6] DeFranco L. A., Noriega B. M. P., Cost Control in the Hospitality Industry, Prentice Hall, New Jersey, 1999 [7] Dopson R. L., Hayes K. D., Managerial Accounting for the Hospitality Industry, John Wiley & Sons Inc., New Jersey, 2009 [8] Dunn E. P., Financial Performance Indicators, International Journal of Applied Finance For Non-Financial Managers, Volume 1, Issue 1, ISSN X [9] Evans R. J., Lindsay M. W., Managing for quality and performance excellence, 8 th edition, South-Western Cengage Learning Inc., Ohio,

102 [10] Froman B., Manualul calității Instrument strategic al abordării calității, Editura Tehnică, București, 1998 [11] Harvey M., Three-Way Path to Fair Analysis of Performance, International Journal of Applied Finance For Non-Financial Managers, Volume 1, Issue 3, ISSN: X, available on (12/12/2011) [12] Hayes K. D., Ninemeier D. J., Human Resources Management in the Hospitality Industry, John Wiley & Sons Inc., New Jersey, 2009 [13] Juran M. J., Planificarea calității, Editura Teora, București, 2000 [14] Kandampully J., Mok C., Sparks B., Service Quality Management in Hospitality, Tourism, and Leisure, The Haworth Hospitality Press, New York, 2001 [15] Kendirli S., Tuna M., In the context of total quality management, quality costs and effects on financial decisions: a research in Çorum s enterprises, International Journal of Entrepreneurship, Volume 13, 2009 [16] Medlik S., Dictionary of travel, tourism and hospitality, Third edition, Butterworth Heinemann, Oxford, 2003 [17] Nebl T., Schroeder A. K., Understanding the interdependencies of quality problems and productivity, The TQM Journal, Vol. 23, No. 5, 2011, Emerald Group Publishing Limited, [18] Parker W. G., Costurile calității, Editura Codecs, București, 1998 [19] Rust T. R., Moorman C., Dickson R. P., Getting return on quality: revenue expansion, cost reduction, or both?, Journal of Marketing, Vol. 66, No. 4, 2002 [20] Spatariu E. C., Analiza costurilor calității, Tribuna Economică, V. 16, Nr. 15, 2005 [21] Tesone D., Principles of management for the hospitality industry, Butterworth-Heinemann, Oxford, 2010 [22] Voronin G., Samoylov Y., Quality Vital and Moral category!, 54th EOQ Congress, Izmir, 2010, available on (20/12/2011) [23] Walker D., Improvement in Costs, Timelines or Quality Within One Department Can Affect The Strategic Direction of an Organisation, International Journal of Applied Strategic Management, Volume 1, Issue 2, ISSN , available on (12/12/2011)

103 Jan Rewilak 1 Tomasz Tokaj 2 1 Cracow University of Technology, Poland 2 PPUH Malbox ZPChr, Poland RISKS OF MAKING NON-OPTIMAL DECISIONS RELATED TO QUALITY IMPROVEMENT BASED ON PARETO ANALYSIS Key words: Pareto-Lorenz Analysis, Pareto Chart, quality improvement, 20/80 rule, quality tools ABSTRACT Pareto Analysis is one of the basic quality tools, commonly used in selection of activities improving quality of products or/and processes. Dominant strategy of manufacturing companies which use Pareto method is only evaluation of occurrence frequency of problems. The paper analyzes potential risk of decision making process based only on this single criterion. Furthermore, the article presents possible applications of others than frequency analysis criterions to Pareto Analysis in order to reduce risk of wrong decisions. Practical restrictions resulting from realities of production companies are also addressed. 1.BASIC QUALITY TOOLS During its activity, each production company, despite using numerous security system (preventive actions), encounters quality problems. The changeability of processes is a result of many different factors. As one of Murphy s laws says: Anything that can go wrong will go wrong. This saying, describing in a pessimistic way the effect of human activity, can be applied to many aspects of the surrounding reality. It has also been popularized in industry, among services responsible for quality, where it describes directly the consequences of the inappropriately secured (preventively) production process. Another Murphy s law warns: Left to themselves, things tend to go from bad to worse. That means that the lack of commitment into corrective actions will cause an accumulation of the problems, resulting in turn in growing losses coming from the production of faulty products, which will have to be repaired or destroyed, or the yet higher costs of the client s complaint will have to be covered. The common sense hidden in Murphy s laws points clearly to the need for undertaking constant actions meant to remove the causes of the potential and ensuing problems.

104 The obligation of a constant training is included in the guidelines of the quality norms ISO as well as in its specification ISO/TS being its enlargement for the automotive industry. The training consisting on gradual improvement of the processes and products may be treated as a systematic problem solving. A problem does not, however, have to bring negative associations. There may be a problem of inconsistency (divergence between what is required and what has been achieved) or a problem of an identified opportunity to increase the efficiency or effectiveness of a process (in this case the problem is brought by a positive thinking about the future). In order to efficiently solve a problem, knowledge about the process or the object to which the problem refers, the range of appropriate tools, methods and skills about their proper use are necessary 3. Traditional management quality tools include: -the check sheet meant for gathering data and ordering information about a specific product or process; -the histogram allowing a graphical representation of the frequency of occurrence of the value of the random variable within a specified range and the character of this changeability; -the control card allowing a statistical supervision and control of the process, a current evaluation of its stability and a periodical evaluation of ability; -the Ishikawa diagram allowing the analysis of the factors having an impact on the effect of the process or of the causes of the inconsistency; -the scatter diagram giving a graphical representation of the relationship between two variables (e.g. related to the problem and to the factor having a possible impact on it); -flow chart allowing to represent the sequence and relationships between the actions realized in the processes; and the tool being the topic of the present article: -the Pareto diagram which allows to identify the factors having a key impact on the analysed problem, described (measured) by a specific quantity. 1 PN-EN ISO 9001:2009 Systemy Zarządzania Jakością Wymagania. Polski Komitet Normalizacyjny. Warszawa Systemy Zarządzania Jakością - Szczegółowe wymagania w zakresie stosowania ISO 9001:2008 w produkcji seryjnej oraz produkcji części zamiennych w przemyśle motoryzacyjnym. Specyfikacja techniczna ISO/TS 16949: Hamrol A.: Zarządzanie jakością z przykładami. Wydanie drugie zmienione. Wydawnictwo Naukowe PWN, Warszawa, 2007, s

105 2.PARETO-LORENZ ANALYSIS The Pareto-Lorenz analysis is a tool used to identify factors having the biggest impact on chosen quantities which describe either the process or the characteristics of the product. The essence of the method is based on the work of the Italian economist Vilfred Pareto who was examining the wealth of the 19 th century Italian society. He noticed that 20% of the families in Italy possess as much as 80% of the wealth of this country. By finding also such an uneven distribution in other situations, Pareto has formulated a rule known at present as the 20/80 rule. It says that the occurrence of the majority of the events can be observed in a small fragment of possible circumstances 4. The universal rule created by Pareto says therefore that 80% of all events come from 20% of causes. M.O.Lorenz, similarly, picturing the unevenness of the wealth distribution, represented this phenomenon on a chart by using, unlike Pareto, the curve of the cumulated values of the examined data. The Lorenz s rule says that in a heterogeneous community 20% of its elements represent 80% of the cumulated values of the feature, for which the community is being analysed (serves as a choice criterion) 5. The result was the dispute about the method authorship. The representation of the Pareto diagram and the Lorenz curve on one chart has ended the argument. The Pareto presentation showing the share of specific groups and the Lorenz presentation showing the cumulated values of the groups make the Pareto-Lorenz diagram. The proceedings to follow while creating the Pareto-Lorenz diagram can be schematically presented on the following scheme: The 20/80 rule says that there is a basic inequality between causes and effects, expenditures and results, effort and benefit. Causes, expenditures or efforts can be divided into two groups: -the majority which has lesser impact, -the small minority which has a great, dominant impact. 4 Łańcucki J., Kowalska D., Łuczak J.: Zarządzanie jakością w przedsiębiorstwie. Wydania pierwsze. Wydawnictwo OPO. Bydgoszcz 1995, s Szczepańska K.: Koszty jakości dla inżynierów. Wydanie pierwsze. Wydawnictwo Placet. Warszawa 2009, s

106 Scheme1. Sequence of actions in preparing Pareto-Lorenzo analysis Source: own study Usually, effects, results and benefits come from a small fraction of causes, expenditures or efforts leading to their achievement. The relationship between causes, expenditures or efforts on the one hand and effects, results or benefits on the other is therefore generally unstable 6. A classical example of qualitative use of the Pareto-Lorenz analysis in industry is gathering data about the number of occurrences of the specific events, defaults or other factors having an impact on the quality of the processes and products in order to being able to making decisions about corrective actions. The example below shows the possibility of using the Pareto-Lorenz diagram for the analysis of the defaults appearing during the production process. The collected data show the direction the management of the company should take in their action on the first place. A company producing metallic elements using the cold working technique (in the automotive industry) produces oil pans. In the production process within 1 6 Koch R.: Zasada 20/80. Lepsze efekty mniejszym nakładem sił i środków. Wydawnictwo Medium. Łódź 2003, s

107 month there were 130 incompatible oil pans out of In the faulty pans, 16 types of defaults were stated table 1. Table 1 The frequency of defects occurrence in the oil pans Source: own study These data are presented in a Pareto Lorenzo diagram. Figure 1 Pareto-Lorenzo diagram for oil pans defects according to their frequency Source: own study The following conclusions can be drawn from the Pareto-Lorenz diagram: -80% of defective oil pans are caused by three defects, ie A-scratches, B-lack of marking, C-dents; 106

108 -assuming that it would be possible to eliminate these three defects (theoretical assumption), the impairment of the production would be at 20% of the current state, so from the sum of the total 130 gaps it would remain only 26 deficiencies to eliminate; -Therefore, it is appropriate to focus corrective action on deficiencies identified in order to dramatically reduce the impairment of the production; -scratches have the largest share of the total defects. The elimination of this defect would reduce the deficiency of around 30%. 3. QUALITY TOOLS VS. QUALITY MANAGEMENT PRINCIPLES According to the latest update to ISO 9004:2009 7, a lasting success of the organization is possible under the condition of implementing eight quality management principles. This set of these rules has its roots in quality guidelines developed by Deming and points to the following principles: - customer orientation; - leadership; - involvement of people; - a process approach; - system approach to management; - continuous improvement; - making decisions based on facts; - mutual beneficial relationships with suppliers. The seventh of these rules provides that in decision making, one has to rely on data and information based on facts. Management requires continuous decision-making. It is important that these decisions were taken based on the current state of affairs, therefore systematic collection of information is necessary. In the quality management data acquisition means the gathering of quality records, often aided by quality tools. Besides the traditional quality tools (listed in the first chapter of this article) there is a group called new quality tools. These include: the affinity diagram, interrelationship digraph, tree diagram, prioritization grid, matrix diagram, process decision program chart, activity network diagram. The seventh principle of quality management urges therefore to observe, measure, control, record, or to gather facts and analyze them before deciding on improvement activities, also in terms of choice of non-compliance or defects, 7 PN-EN ISO 9004:2009 Zarządzanie mające na celu osiągnięcie trwałego sukcesu organizacji - Podejście przez zarządzanie jakością

109 whose reduction (or even elimination) is taken into consideration in the first place. This can lead to: - a long time taken for making decisions, and thus to potentially long period of time during which there will be defective products before effective corrective action are taken; - incurring significant costs of the data (facts)acquisition required for the decision; - mental elimination of preventive approach, which promotes the superiority of prevention over correction. Preventive measures are often taken in the absence of "hard data" and thus the facts, which are expected in the seventh principle of quality management and corrective action are be designed based on the identified problems (facts). Because the fact is interpreted as an event that took their place in history, prevention, on the other hand, requires a reach of thought into the future (eg in the form of risk analysis). For this reason, you can bet the idea that the principle of "making decisions based on facts," undermines the preventive approach to improvement. Unless the interpretation of this rule will expand its field of application to: - observation and analysis of historical facts (for similar processes, projects and products) in order to predict the potential weaknesses in the new (similar) process, design and product in order to decide on the need for appropriate preventive security, or - observation of the facts resulting from the research (simulation, prototype, pre-production) of new products and processes before starting the production. Industrial practice shows that the seventh principle of quality management is not, in general, interpreted in the above (expanded) way. 4. HOW ARE DECISIONS MADE ON IMPROVEMENT ACTIONS? A typical decision-making process on improvement in manufacturing companies can be illustrated by the diagram below. Practice shows, however, that the use of this methodology to identify the causes, to which corrective action should be addressed is often unrealistic because the acquisition of information about the facts being the causes of detected defects is very costly and time consuming. Data on defects, which are acquired by manufacturing organizations generally relate only to the number of defective units of a particular product or the number of different types of defects. 108

110 Scheme 2 The typical step by step decision making process in productions companies Source: own study These data are then referenced to the production volume to calculate the deficiency indices. Contrary, therefore, to the principle of "making decisions based on facts" it is generally not practiced in the production companies to acquire the "facts" or information about the causes of defects in order to develop on their basis the Pareto-Lorenz analysis of the reasons, to predict the reasons for the elimination (reducing the likelihood of occurrence)in accordance with the principle of 20/80. How then decisions are made regarding the elimination of the causes? Identification and selection of the causes is often a debate in the team exchanging the opinions and experiences, often unsupported by "hard data" but by intuition, sometimes backed up by a brainstorm or using Ishikawa diagram (which does not choose the causes to eliminate, but points to and determines the cause and effect relationships between them). It is a standard that manufacturing companies apply simple rates of production quality like DPMO (Defects Per Million Opportunities), PPM (Parts per Million), FTY (First Time Yield) or defectiveness (%). These indicators have defined goals for the specified time. Those responsible for these objectives to be achieved most effectively, naturally choose to eliminate the most common defects, represented on the Pareto-Lorenz chart by the first posts, according to their knowledge of the facts. It is easy to show that it is not necessarily the optimal

111 strategy for improving the quality of the company, despite the fact that decisions are taken based on facts. 5. PARETO-LORENZ ANALYSIS TO OTHER CRITERIA? Standing on the ground of the seventh principle of quality management, the question arises: what other criterion should be used for the Pareto-Lorenz analysis, so that the decisions taken about the improvement were closer to the optimum? In the Pareto-Lorenz analysis the data can be used containing the costs of actions affecting the implementation of certain projects 8. Let us add, therefore, a further criterion to the analysis: internal costs (consequences) of defects. Table 2 Internal unit cost of defects of oil pans Source: own study These costs consist on inter alia: costs of scrapping defective products (commonly: irreparable lacks), costs of repair of products that have removable defects (colloquially: repairable defects), costs of additional inspections and testing, costs of the defective product reclassification, analysis costs, costs of changes 8 Miller P.: Systemowe zarządzanie jakością. Koncepcja systemu, ocena systemu, wspomaganie decyzji. Wydanie pierwsze. Wydawnictwo Difin. Warszawa 2011, s

112 and approvement of deviations from the specifications, the cost of downtime, overtime, etc. Using the still above-mentioned example of oil pans, the internal unit costs (consequences) of defects were calculated - Table 2, estimating and summing these component costs for each defect separately. Estimated costs are shown on the Pareto Lorenz chart - Figure 2. Figure 2 Pareto-Lorenzo diagram of internal unit cost of defects occuring in oil pans Source: own study By analyzing the obtained Pareto-Lorenz chart for the criterion of internal unit cost of defects, we can make the following observations: - 80% of defects are generated by four faults, identified by codes H, I, P, F, that is: cracks, constrictions, leakage, wrong position of barrier after spot welding; - by eliminating the four defects from the sum of all unit costs of 964 PLN a reduction in unit costs about 770 PLN would be reached; - the drawback generating the biggest internal cost unit are cracks making the cost of 250 PLN or 25.9% of all defects; Comparing the data from the two previous studies, ie taking into account the frequency and internal cost of defects it can be stated that they give different indications in terms of priorities for implementation of corrective action. Using the data from both studies, you can make another Pareto-Lorenz chart which is the product of the frequency of defects and its internal unit cost. This way we obtain the Pareto-Lorenz analysis of the aggregated internal costs of defects - Table 3, Figure

113 Table 3 Aggregate internal cost of defects of oil pans Source: own study Figure 3 Pareto-Lorenzo diagram of aggregate internal cost of defects occuring in oil pans Source: own study This analysis, compared to two already done Pareto-Lorenz analyses, suggests again other priorities for corrective action. Using the criterion of aggregated internal costs of defects it can be observed that: - 82% of the aggregated internal costs are caused by seven of the 16 defects, described by codes: F, D, H, I, A, P, B, namely: wrong position of barrier 112

114 after spot welding, improperly welded drain plug, cracks, constriction, scratches, leakage, lack of marking. - Total cost of internal defects is 2084 PLN, by eliminating the identified seven flaws, the defects cost will be lowered by about 1710 PLN; The costs of internal inconsistencies are, of course, only one part of the losses that may result from the formation of the defect. These are the only costs that accumulate in the plant manufacturer. Significantly higher costs arise if the defective product reaches the customer. Then outside the already incurred costs of internal inconsistencies additional costs are generated namely external costs of non-compliance. These include costs of: complaints, sorting and possible repair service, returns including transport costs, contractual penalties, potential costs of the client s detention process, service, warranty returns, claims for damages, loss of reputation with customers, loss of profits. These costs, however, are very difficult to estimate, which means that in industry they are generally not counted. It demands the development of an adequate computational model for the company, highly skilled professionals, and collecting and analyzing large amounts of additional data, and so they are labor intensive. For the analysed example of the oil pans production an estimate was carried out about the unit cost of external noncompliance - the results are shown in Table 4 and the Pareto-Lorenz diagram - Figure 4 summarizes the data for such an analysis. Table 4 External unit cost of defects of oil pans Source: own study

115 Figure 4 Pareto-Lorenzo diagram of external unit cost of defects occuring in oil pans Source: own study Pareto-Lorenzo analysis conducted for the unit cost of external defects suggests the following conclusions: % of total unit costs are made by three drawbacks, ie: P-leakage, I- constriction and F-wrong position of barrier after spot welding; -their elimination will reduce the total unit cost of PLN external value of about PLN. Table 5 Total external cost of defects in oil pans Source: own study 114

116 Similarly to the internal costs, this time you can also calculate the total cost of the external defects of non-compliance during the relevant period. Table 5 presents the results from which the Pareto-Lorenz analysis was developed - Figure 5. Figure 5 Pareto-Lorenzo diagram of total external cost of defects occuring in oil pans Source: own study The Pareto-Lorenz analysis based on the criterion of the total external cost of defects indicates the following conclusions: % of the total external costs of oil pans defects are caused by 3 defects such as D- improperly welded drain plug, F-wrong position of barrier after spot welding, P-leakage; -elimination of defects D, F, P will lower overall cost of defects, ie about PLN of PLN; 6. PARETO-LORENZ ANALYSIS FOR THE CAUSES OF DEFECTS The Pareto-Lorenz analysis for defects is only a preliminary step for actions leading to the elimination or reduction of problems. The introduction of effective corrective action, however, requires identifying the causes of problems (defects). It is clear that if the cause is not identified and removed completely or partially (actions meant to remove the causes), and only the incompatibility is removed (actions meant to remove the results), the problem appears again. In order to seek the causes selected to eliminate the defects, a number of tools can be used. The following tools are used commonly: brainstorming, cause and effect

117 Ishikawa diagram, planning of the experiment (DOE - Design of Experiments) and the 5Why principle. The identified causes will have to be subject to further analysis (quantitative), as it will be necessary to select among them those reasons to which the first corrective action should be addressed. What criteria should be followed when determining the order of elimination of the causes? The most common criterion is the frequency (probability) of occurrence of the cause. The Pareto analysis should therefore be carried out in terms of frequency of the causes of the defect. Data on the causes of defects in industrial reality are usually not systematically collected, they are often fragmentary and scattered, mostly in the records relating to activities post-complaint, and mostly they are missing altogether. It seems that the reasons for this are as follows: - Inability to identify the causes, - Lack of defined responsibilities for identifying and collecting data on the causes, - Insufficient human resources (engineers in the departments of quality and production), - Lack of awareness of the benefits of having data on the causes and results of their analysis; - High cost of obtaining data on the causes of defects in the production because of the number of necessary observations and measurements (especially in manufacturing processes for complex products with a potentially large number of types of defects), measurements allowing to record the reasons would require monitoring of a large number of factors - the parameters of the process, tools and the properties of input materials and components, or even staff behaviour - all of the people who may affect the quality of the product (eg operators, setters, maintenance personnel, logistics, etc.); - The need to having knowledge about the correlation between the above mentioned parameters and the characteristics of the product (the failure of which is a defect of the product) and the need to periodically update this knowledge, - High cost of updating data on the reasons for the amendment of the processes (technology, tools, parameters, methods, personnel, suppliers), including the implementation of corrective action changing the probability of occurrence of certain causes. It follows that a doubt can again be expressed on the validity of using the seventh principle of quality management in the global (ie, in the context of the entire production process) planning of the optimal corrective action based on observation of the causes of defects. It seems that decisions about corrective actions for the continuous improvement of processes and products based on the facts is particularly difficult and costly on the level of the causes of defects. Industrial practice confirms this conclusion. In general, in fact, the frequency of causes is 116

118 determined approximately, like: common, rare, very rare or almost impossible. The application in this case the Pareto-Lorenz analysis (the so-called second row - for causes) seems pointless and unrealistic. On the other hand, it confirms the accuracy of the FMEA method, which in relation to the production process (PFMEA) allows for such an analysis and description of the frequency of the causes of defects by means of the conventional rate of frequent cause of defect (Occurrence) evaluated at a scale of It is worth mentioning that the Pareto- Lorenz analyzes for causes by the above mentioned rate (Occurrence) is one of the forms form of reporting the results of the process risk analysis performed with the PFMEA method. CONCLUSIONS The Pareto-Lorenz analysis is primarily a diagnostic tool that allows organizations to determine the most important problems 9. The analysis may be multi-leveled and may relate to various aspects of the emerging problems. As was indicated in the example of oil pans above, the analysis may relate to the frequency of defects, can be directed to the internal unit costs, aggregate internal costs or unit and aggregate costs of external inconsistency. The Pareto-Lorenz analysis can also be performed to determine the ranking of causes of defects, it is rare, however, for many reasons described above. As has been shown, in practice almost exclusively the Pareto analysis of frequency defects is applied. With consideration of the application of the Pareto-Lorenz analysis for planning continuous improvement processes the following conclusions can be drawn: - the seventh principle of quality management should be interpreted flexibly and not to the letter. Improvement decisions based solely on the facts ("hard data") represented by the Pareto-Lorenz analysis can lead to different decisions depending on the data, that is on the costs and the possibility of their acquisition, and not on the profitability of the planned activities, the enterprise interest. The recommendation to base the decisions on the data can also be read as an incentive to improve quality through corrective rather than preventive action, which rarely can be supported by the facts, but rather based on the estimation, anticipation, extrapolation or subjective assessment; 9 Miller P.: Systemowe zarządzanie jakością. Koncepcja systemu, ocena systemu, wspomaganie decyzji. Wydanie pierwsze. Wydawnictwo Difin. Warszawa 2011, s

119 - the Pareto-Lorenz analysis as a qualitative tool can be used to support decision-making processes to improve on the condition of consciousness of the importance of decisions depending on the type of data held and analyzed; - Those responsible for quality improvement should be aware that the performance of Pareto-Lorenz analysis, and then the application of the approved quality tool, does not guarantee to take informed decisions. The example showed that the Pareto-Lorenz analysis of defects generated in the production of oil pans, using different criteria, does not show unequivocally defects, for which improvement action should be taken in the first place. Each of the criteria provided different priorities when it comes to the order of elimination of defects; - belief in the veracity of the Pareto principle, against the failure of several studies(on costs) presented, leads to the assumption that the analysis performed did not cover all defects or all costs, which further reduces confidence to the decisions made on the basis of the performed Pareto-Lorenz analysis showing "facts "; - Commonly dominant in manufacturing companies the strategy to eliminate the most common defects, often presented in Pareto-Lorenz graphs, (with the objectives defined in terms of defects, DPMO, etc.) generates decisions on improvement activities far from optimal due to ignoring the financial criteria; - Improving the quality by using the Pareto-Lorenz analysis according to financial criteria requires the development of company strategy viable to be carried out, giving a clear indication of the priorities of the elimination of defects with an accuracy of their causes. The examples of the attempts to account for the financial criterion in planning quality improvement presented above show the dependence of decisions on the type of available data, whose gain is associated with different cost and reliability, the assessment of which is beyond the scope of this article, and certainly should be an important criterion for making decisions on the improvement quality. Unfortunately, the Pareto-Lorenz analysis does not conventionally take into account the reliability (uncertainty) of the analyzed data. It seems worth pondering the possibility of rough assessment of the reliability (uncertainty and resolution) of the data provided by the Pareto-Lorenz analysis through the degree of compliance to the 20/80 rule. 118

120 REFERENCES [1] Hamrol A.: Zarządzanie jakością z przykładami. Wydanie drugie zmienione. Wydawnictwo Naukowe PWN, Warszawa, [2] Koch R.: Zasada 20/80. Lepsze efekty mniejszym nakładem sił i środków. Wydawnictwo Medium. Łódź 2003 [3] Łańcucki J., Kowalska D., Łuczak J.: Zarządzanie jakością w przedsiębiorstwie. Wydania pierwsze. Wydawnictwo OPO. Bydgoszcz 1995 [4] Miller P.: Systemowe zarządzanie jakością. Koncepcja systemu, ocena systemu, wspomaganie decyzji. Wydanie pierwsze. Wydawnictwo Difin. Warszawa 2011 [5] Szczepańska K.: Koszty jakości dla inżynierów. Wydanie pierwsze. Wydawnictwo Placet. Warszawa 2009 [6] PN-EN ISO 9001:2009 Systemy Zarządzania Jakością Wymagania. [7] PN-EN ISO 9004:2009 Zarządzanie mające na celu osiągnięcie trwałego sukcesu organizacji - Podejście przez zarządzanie jakością. [8] Systemy Zarządzania Jakością - Szczegółowe wymagania w zakresie stosowania ISO 9001:2008 w produkcji seryjnej oraz produkcji części zamiennych w przemyśle motoryzacyjnym. Specyfikacja techniczna ISO/TS 16949:

121 Beata Starzyńska Poznan University od Technology, Poland THE SELECTION OF QUALITY TOOLS FOR IMPROVING MANUFACTURING PROCESSES IN PRODUCTION COMPANIES Key words: quality management, quality tools, process improvement, DSS ABSTRACT All the employees responsible for, and engaged in all processes must be equipped with proper tools allowing them for quick easy but also efficient undertaking of improvement activities in all areas of creating value for a client. To solve the problem effectively one needs knowledge about the process (or the product) which the problem concerns, resource of appropriate tools and procedure methods and the ability of their proper use. Such an approach enables efficient management and use of possessed information (both quantitative and qualitative), and also generating new knowledge in the area of manufacturing process improvement. The recognition of this possibility has become a prerequisite for the development of the methodology, and based on the developed methodology the system of selection and application of the quality management tools for the improvement of manufacturing processes, which at the same time ensures the full use of the employees knowledge. INTRODUCTION Modern companies have found themselves in a situation where the ability of dynamic adaptation to changing market conditions is a key factor to competitive advantage. That means that all the employees responsible for, and engaged in all processes must be equipped with proper tools allowing them for quick easy but also efficient undertaking of improvement activities in all areas of creating value for a client. In production companies the core processes include manufacturing processes together with supporting processes (transport, storage) and service processes (control and measurements). The Process Improvement is implemented in the form of two strategies: firstly, extensive activities requiring high expenditure on radical step change of the qualitative process capacities (new technologies, machine park modernization, etc.) (breakthrough projects); secondly intensive activities involving effective use of already existing material and information resources used in these processes (small-step ongoing improvement activities). While the first approach allows for radical increase of quality capacity of the

122 process, the second approach allows for gradual improvement of actual qualitative capacity of the process and coming closer to the potential qualitative capacity. Improvement involving gradual enhancement of the processes and products arising from their implementation may be regarded as problem solving, which may not always be associated negatively. In such approach the aim of the improvement provides a guideline to actions which can be entered in the framework of a large number of available methodologies, models and problem-solving cycles (Table 1). The problem can, in fact, be found in the discrepancies between what is required and what is gained in the production processes (disadvantage), and seeking possibilities to increase efficiency or effectiveness of the process ( a case of positive thinking). Table 1. Improvement and/or problem-solving methodologies (own data) (Brassard 1994) (Hamrol 1998) (Tague 2005) (Van Loon 2006) Select and describe opportunity (P) Problem identification Identify charter and make initial plans (D) Set goals -clearly defined goals -fuzzy goals Describe current process (P) Describe root causes (P) Collection and preliminary data analysis Theories and hypotheses formulation Identify customers and requirements (D) Assess current state (D) (M) Thinking -reflective (review) -decision (actions) -creative (innovation, ideas) -strategic (setting directions) -lateral (opportunities) -critical (problem solving) -judgmental (quality appraisal) -holistic (total) -systems (relationships) Act -prioritize actions -proactive/consensus actions (in team) -reactive/coordination actions -action tracking Develop solutions or change (P) Adoption of working hypothesis Define preferred state, gaps between current and preferred state, and improvement opportunities (A) Review -compare goals to actions outcomes -find mistakes -learn about improvement opportunities

123 Implement solution or change (D) Review evaluation results (C) Reflect and act on learning (A) Consideration of alternative solutions Design of the solution Analysis of the solution weak points Implementation of the solution System monitoring after implementation Identify barriers and root causes (A) Develop improvement solutions and plans (I) Implement plans (I) Monitor results; recycle if necessary (I) Standardize (C) Conclude project, identify lessons learned, and recognize accomplishment (C) Supply Improvements -describe improvement -categorize improvement -select improvements -convert improvement opportunity to a goal To solve the problem effectively one needs knowledge about the process (or the product) which the problem concerns, resource of appropriate tools and procedure methods and the ability of their proper use. In a modern-managed and knowledge-based enterprise all accessible data and information should be used, which, when processed into information, create a source of formalized explicit and so called tacit knowledge possessed by employees who are directly and indirectly involved in the implementation of manufacturing processes. Such a solution increases the effectiveness of decisions made in the area of gradual improvement of business activity (the area of improvement in the current work is determined by basic processes of machine parts manufacturing, together with supporting processes (transport, storage, maintenance and repair of the machines), and service processes (quality control, administration, at al.) To make the knowledge of the manufacturing processes sufficient for their gradual improvement, two conditions need to be met: the notion that variability is an integral component of each process, and that every basic component of the process (e.g. in form of a technological operation) is a source of information and treating the employee (operator) as an equivalent source of information about the processes (experience, qualifications, creativity, reactivity to problems, independent decision-making, etc.). 122

124 Featured, mutually complementary data and information sources may be effectively converted into generally available knowledge with the use of numerous but rarely fully used tools for quality management. Such an approach enables efficient management and use of possessed information (both quantitative and qualitative), and also generating new knowledge in the area of manufacturing process improvement. The recognition of this possibility has become a prerequisite for the development of the methodology, and based on the developed methodology the system of selection and application of the quality management tools for the improvement of manufacturing processes, which at the same time ensures the full use of the employees knowledge. The basis for developing the methodology was the identification and generalization of relations between broadly defined quality management instrumentation and effectiveness and efficiency of the activities in the area of manufacturing process improvement in production companies. The new aspect of organizing and creating rules of selection of tools for management in the area of methodology in relation to previous studies was to see the potential of employees, as the richest source of knowledge concerning production processes thus, perceiving the quality management tools as instruments for developing and creating knowledge about production processes with an active participation of the employees. 1. IMPROVING THE QUALITY OF MANUFACTURING PROCESSES BASED ON KNOWLEDGE Finding parallels between the concept of quality management and the newly emerging areas in business allows for having a new perspective on the role and place of quality tools in managing a business. An example of such a connection is linking quality management with knowledge management. Quality management, in its most developed form, emphasizes a balanced use of all company s resources including the incorporeal ones, known as knowledge. In turn, one of the directions of quality management development is to elaborate methods and techniques to allow its effective use in an enterprise. In this way, both these lines complement each other, becoming a feature of the knowledge-based businesses. Perceiving knowledge as one of the most important sources of competitive advantage concerns not only service companies (e.g. consulting), in which the intellectual capital of employees is an essential resource converted into their products, such as expertise, projects and software. Knowledge is also an important resource for enterprises, in which manufacturing processes prevail. It is treated as another resource that allows to combine limited physical resources: labour, capital, raw materials into a combination of greater value for the customer. The condition for the effective use of knowledge is the realization of the fact that it is a

125 specific intangible factor and its resources are not diminished as a result of being used, on the contrary - acquiring, using, disseminating knowledge results in enriching it. These processes may be implemented in a company only with the participation of employees because knowledge is a potential strongly related to man. The concept of knowledge can be defined as the capacity of the employee or a team to use the material resources and information in a variable environment. It is a term relevant to the activities of both service and manufacturing companies. However, manufacturing companies, in addition to standard procedures, require specific solutions where they apply specific knowledge - technical knowledge. Its characteristic features are (Fischer, Stokic 2002): - concentration of knowledge around specific products, processes, technology, - clear transition and comprehension of the knowledge concerning products and processes, - assigning employees double roles: users and sources for knowledge management system, - diversity of tacit knowledge sources (which is manifested in the skills of employees): from production workers and engineers to specialists in specific areas and managers, - enrichment of introduced products, structures, rules with a description of proceedings in the form of documentation, procedures and instructions, - understanding the course of processes - combining the circulation of material and human resources in a company with a parallel flow of information. The basis for creating and enriching knowledge are data and information. In the production company data consist of raw numbers and facts which describe events or phenomena, such as the amount of input material for shaping machinery, results of measurements, number of deficiencies, machine s production year. To make the data useful for the company, they need to be processed into information, i.e. arranged, interpreted, ordered, assigned to specific phenomena. The information resulting from above mentioned data include: material supply specification, information about deregulation of processes, a list of inconsistent products, machine condition report, respectively. Transforming information into knowledge, however consists in associating it within a specific context and the association is made by men. The context in a production company is the process of production, and thus the knowledge is concentrated around products and processes. The above mentioned definition of knowledge concerns only its explicit part, expressed in formal language, which is relatively easy to manage and use in 124

126 a company. This type of knowledge is, in fact, fairly easy to locate, acquire, develop, disseminate and preserve (Probst, Raub & Romhardt, 2002). All employees also posses tacit knowledge. This is a personal, individual knowledge consisting of personal beliefs, system of values, intuition, feelings and attitude, which often have roots in practical actions. The knowledge of an individual employee is a basic element of the source of knowledge in the company. Once this type of knowledge has been used through using quality management instrumentation the company gains a new kind of competence. This includes, in particular, the quality management tools, which can be described as innovative, focused on generating and managing ideas, concepts or information, which in effect make it easy to create and develop the knowledge needed to take effective action to improve manufacturing processes. In this case, the quantitative tools are less useful since they are aimed at collecting and processing data related to various aspects of quality and are used in individual work. The possibility of using the instruments of quality in completing frequently occurring "knowledge gaps" and in creating new knowledge is justified, in particular through collective quality problem-solving (e.g. generating ideas, organizing ideas, identifying relations, settling choices, working out the solution details, etc.). Such a working system guarantees dissemination of employees tacit knowledge, collective creation of solution patterns, sharing experiences, and ultimately making the "new" knowledge accessible to everyone - in particular for the purpose of increasing quality capacity in manufacturing processes. Reaching for the quality management tools at the same time facilitates the "transition" between the tacit and explicit character of knowledge, which is defined in literature as processes of knowledge conversion (Nonaka, Takeuchi, 1995). Depending on the direction of transformation of tacit knowledge into explicit one, there are four ways of knowledge conversion: - socialization conversion of tacit knowledge into tacit one, e.g. through observation, imitation, practice; - externalization conversion of tacit knowledge into explicit one through dialogues, using metaphors or analogies; - combination conversion of explicit knowledge into explicit one through various methods of converting information; - internalization converting explicit knowledge into tacit one as a result of learning through acting. The concept of knowledge-based improvement has been present in numerous publications, e.g. (Deslandres 1997), (Mukherjee 2000), (Linderman 2004). The basis for creation of technological knowledge, understood as understanding the effects of the input variables [of a process] on the output is a learning cycle. In the process of knowledge creation, which enables improvement of process quality,

127 there are two linked learning processes: conceptual and operational learning. In essence, conceptual learning is a continuous search for an answer to the question of why a particular phenomenon occurs, and thus acquisition of know why? type of knowledge. Contrary to the above mentioned knowledge, operational knowledge is about introducing changes into the process and observing the obtained results. It is also acquiring skills of how to deal with undesirable phenomena, what makes it know how? type of knowledge (Mukherjee 2000). Continuous gradual improvement of production process quality and activities connected with problem solving require constant complementing of knowledge gaps within the area of so called quality control knowledge by employees (managers and front-line employees). It is very important in this particular area of business activity since that knowledge allows to identify discrepancies, prevent deficiencies, increase quality capacity of the processes, etc. This also means that all employees responsible for, or engaged in implementation of the processes should be equipped with appropriate methods and tools, which will allow them for quick easy and efficient decision-making and action undertaking. 2. SYSTEM FOR SELECTION OF QUALITY TOOLS FOR BUSINESS PROCESS IMPROVEMENT 2.1. GENESIS OF THE SYSTEM DEVELOPMENT Within the framework of a project financed by the Ministry of Science and Higher Education (N N ) a new system has been developed. It is a decision-supporting system for selecting and applying tools and methods of quality management in the improvement of production processes. The abundance and variety of quality management tools demonstrated in the course of literature research (Grabowska & Starzyńska, 2010) (Starzyńska, Hamrol & Grabowska, 2010) on the one hand, and possibility of their broader use in practice (presented in the project surveys) resulted in the development of the system. The system provides a user, who reaches for quality management tools and methods, with an easy and quick access. The application was designed to provide as much flexibility to the knowledge stored in the database system, as possible, to enable continuous expansion of the criteria for selection of tools - and ultimately expanding the knowledge stored in the system with methods / programs for improvement and / or solving problems (see Table 1. ). The basis for the system software was a developed method of criteria matrix (Starzyńska, Hamrol & Najlepszy, 2009). Its implementation in the system has allowed to gain knowledge about the tools (and methods), of quality management of a new structure (a description of 126

128 tools and methods through a set of attributes and their possible conditions). The developed method required collecting domain knowledge concerning developed and recommended tools and methods of quality management. In the language of knowledge management it is codified knowledge, and thus explicit and available to the interested (in literature), which in the developed system has been given a new structure (characteristics of tools by a complete set of attributes and their conditions). Theoretical knowledge constitutes the core of the knowledge stored in the developed system and it is static knowledge. The functionality of the created system allows for extension. Extending this knowledge is related to the possibility of incorporating characteristics of other instruments to the system, e.g. acquired from other areas of business improvement process (e.g. lean management, lean six sigma, TPM). The supplement of the knowledge stored in the system was the knowledge acquired through the sample survey (conducted among manufacturing companies of Wielkopolska), the purpose of which was to gain knowledge from experts, which would then provide having been placed in the database system an optimized access to relevant tools and methods of quality management for system users. The source of the knowledge was a conducted study concerning expertise, utilization and evaluation of the suitability of the methods and tools in solving problems during production processes and providing technical services. The user can thus benefit from both theoretical and practical sources of knowledge. That results in the system s hints of what variants of using a particular tool/method there are (e.g. application purpose, phase of the process), and also in tips concerning certain limitations of their use in practice (e.g. type of needed data, team work only, etc.). Algorithms implemented in the application allow the user to perform a double role, so often emphasized in the literature and concerning knowledge management in manufacturing companies. Each employee of a manufacturing company plays a double role: the user and the knowledge provider. Within the project study, an employee using the application is a user of the gathered knowledge (domain knowledge, concerning quality management tools and also the knowledge obtained from surveys) and, at the same time, they are the source of knowledge about choices and evaluation of already used tools. The resources of static knowledge in the system complete the resources of dynamic knowledge, the source of which is a learning mechanism (designed algorithm) whose task is to constantly enrich the system knowledge resources through gathering information about users choices (remembering activities and preferences of a user), and about the evaluation of efficacy of used tools (statistics on tool selection and evaluation)

129 Compared to previous studies, the proposed solution has two distinguishing features: while the way of presenting tools and methods of quality management in the extensive literature on the subject is directed to indicate the possibility of their application and does not include restrictions on their use in practice the developed methodology fills this gap it enables a choice of a useful instrument while taking into account such restrictions as procedural, informational, organizational, personnel limitations, et al.; the methodology has been implemented in a form of software application, supporting the selection of an instrument of quality management taking into account multiple criteria of selection (decision support system DSS). The main objective of the application is to help the inexperienced user in selecting the right tool by responding to a series of questions, clarifying the needs and expectations of the user SYSTEM FUNCTIONALITY The developed system is characterized by solutions typical of systems called DSS. The elements of the decision support systems make possible: continuous improvement of the program knowledge through collecting information on choices made by a user and a system evaluating the effectiveness of problem solving with the use of a particular tool, remembering user s actions and preferences, keeping statistics on tool choice. Moreover, the application learns the user s actions and stores tool selection paths in order to lead the user to proper tools quicker in future. The building elements of the system include: Knowledge base a declarative form of knowledge written with the use of special rules. Recording of tools and criteria describing them, recording of methodology as decision trees. Data are stored in form of tables connected to one another by relations. Acquired knowledge base dynamic knowledge, recording of selected tools, criteria and their evaluation. This knowledge is used to influence results, so as to suggest the best choice to the user. Information about selected criteria (or the path in decision tree), the order of the choices made and evaluation of a chosen tool is stored in the database. Additionally, the frequency of choice of a particular tool is also stored. Explaining mechanism allows a user to obtain information on why the system suggested a particular hint. Showing a user which criteria are met by a chosen tool, or what was the path that led him to such a result. 128

130 Opportunity of becoming acquainted with the description of a selected tool and its features. Concluding mechanism the main element of the system responsible for reasoning. Use of method of criteria matrix algorithm to calculate a ranking of tools corresponding to criteria chosen by a user. Knowledge base editor allows to modify the knowledge stored in the knowledge base. Enables extension of the knowledge with new tools, criteria or methodologies. It also allows introduction of statistics. Decision supporting mechanism a mechanism collecting information about actions and choices made by a user, as well as a mechanism moderating the results of the concluding mechanism in order to suggest an optimum result. The algorithm suggests suitable tools according to evaluations which were made earlier by a user, determines the optimal order of specifying the criteria. User interface visualization of the knowledge represented by the system allows to introduce information about searched tools. The application allows for, and supports: selection of an appropriate quality tool/method for improvement of quality in an enterprise, introduction of new tools, defining new criteria of quality tool selection, defining rules of conflict between tool selection, introduction of new methodologies for the selection of tools, assistance for a user with becoming acquainted with new tools, interactive interface with hints, introduction of evaluation results of already used tools (used tools and their evaluation), service by unqualified and qualified staff TECHNICAL REQUIREMENTS AND IMPLEMENTATION The application is designed for Microsoft Windows, which is widely used in companies. The used technology has been adjusted in such a way as to allow the application operate with older versions of the systems. Application system requirements are: Windows 98 or later.net platform 2.0 or later

131 To implement the application (MDI-type) there have been used currently popular technologies, providing a convenient and transparent working environment: Integrated Development Environment (IDE) Visual Studio 2008 Microsoft s flagship tool for application development Language of programming C# object-oriented programming language, a part of.net platform Database SQLite3 free SQL database engine, does not require additional service for database access Properly designed and fully implemented database plays a key role in the application: stores information about introduced tools of quality improvement, tools characterising criteria, rules of conflict between criteria, relations between tools (originally contained in specially prepared matrix, data on methodologies, statistics on tool selection, information about the user s actions during tool selection, tool evaluation SOFTWARE INTERFACE The operation of the system can be divided into two main parts: the so called expert interface and user interface (Fig. 1). Such a solution is a consequence of the assumptions about the flexibility of the system in the context of its accumulated knowledge. A user, via the user interface, uses knowledge accumulated in the system, and additionally, he is a source of knew knowledge (going back to the selection session allows him to evaluate the usefulness of the chosen tool in practice). On the other hand, the knowledge accumulated in the system at the given moment can be continuously extended with further tools and methods the expert module is designed for introducing new knowledge. In addition to the implementation of the method of criteria matrix, possibility to introduce (also via the expert interface) methodologies of improvement/problem-solving has been implemented. They have been implemented in the form of hierarchy trees. Going through consecutive levels of a particular methodology or making a leap from one methodology to the other, a user can also receive a hint of which tool they should use, without defining the selection criteria in the criteria matrix module. 130

132 Fig. 1. Example window (own data) EXPERT INTERFACE Database editor window (Fig. 2) allows to add, edit, and delete data from the database. This part of the program is mainly designed for an expert to enter knowledge about tools and their characteristics and to implement the methodology of problem solving / improvement. Data are presented as a tree split into two subtrees: Tools and Methodologies. The editor window is divided into parts. The left side of the window allows to navigate through the data stored in the database and to edit the items. The right side shows additional information about the selected item in the tree. The tree structure of the instruments has a fixed structure, and each level of the tree performs a different function. The first level contains the names of defined tools, the second level contains the names of the criteria for describing the tool. In the third and last level there are features of the tool. The criteria and characteristics are global in nature - this means that by adding a criterion for one tool, it is automatically added to the other tools. The same rule applies to properties within a given criterion (Fig. 3). The criteria that do not have any defined value of a feature are assigned a black icon to enable convenient location of gaps in the knowledge about the tool. Defined features are assigned a red or green icon, which describes the condition of a given feature (e.g. true/false). In order to change the state of a feature for a given tool, one needs to

133 check or uncheck the box to the icon s left. To add a new tool one needs to check Instrumenty ( Tools ) and click Dodaj ( Add ) button located on the toolbar above the tree. The same procedure applies to adding criteria or features, i.e. in order to add a criterion one needs to check one of the tools and to add a feature one needs to check an appropriate criterion. Fig. 2. Database editor window (own data) Fig. 3. Characteristics of quality tools in the form of a tree diagram (own data) 132

134 Clicking on a particular type of an element in the tree changes the outlook of the right side of the window. Selecting a tool causes the appearance of the following tabs: Description, Alternative names, Application, Procedure of use, Examples, Links. The first five tabs, divided into separate categories, allow to add a tool description. Editing can be performed in the text box (for example, by pasting the text) or by importing a text file in "RTF" format. The tab entitled Powiązania" ( Links ) allows to define relations between tools for easier location of similar tools or those linked by another relation (Starzyńska, 2010). The relations are unilateral, i.e. if the tool A is a predecessor for the tool B, the inverse relation does not occur automatically, one must add it manually for the tool B. The application does not have restrictions on the number of types of relationships. New types of links can be defined by clicking Edycja powiązań ("Edit links") (Fig. 4). Fig. 4. Edit links window (own data) In order to clarify the character of the criteria for quality tools search there are two tabs available in the system database in the tree of the database editor: Opis ( Description ) and Rodzaj kryterium ( Criterion type ). Functioning of the Opis tab is exactly the same as in the case of editing tool property. The content of the Opis box is used in the method of criteria matrix to inform a user about the meaning of a given criterion. In the Rodzaj kryterium tab one can define a character of a searched tool through checking an appropriate box on the screen. Additionally, the criterion can be marked as critical, what causes special treatment of such a criterion when calculating the tool ranking (Fig. 5.)

135 Fig. 5. Types of criteria window (own data) Choosing a feature in the knowledge editor tree a user has 2 tabs available: Opis ( Description ) and Sprzeczności ( Conflicts ). The Opis tab works in exactly the same way as the ones mentioned before. The content of Opis tab is presented to a user in the method of criteria matrix after checking a feature of the tool which was inserted in the generated ranking list. In turn, in the Sprzeczności tab, a user of the system expert can define which of the tool features are mutually exclusive. Defining the conflict is a bilateral relation, i.e. if a feature A is inconsistent with B, it will automatically reverse the relation. Defining the conflict will - according to the present method - block possibility of checking two contradictory features for the same tool (Fig. 6). A part of the database editor, i.e. methodology edition, allows entering the mentioned methodologies of conduct in the area of process improvement (e.g. PDCA) or problem solving (e.g. DMAIC). The methodologies are stored in the form of tree diagrams. At each level one can define Opcje ( Options ) which a user can select by going to the next sub-stages of a methodology. In addition, each option can have a defined question (or statement) explaining what needs to be determined in a particular methodological step. 134

136 Every methodological path needs to end with an assignment of an appropriate quality tool (expert role), tool or leap to another methodology (e.g. stage of a similar nature). Fig. 6. Defining conflicts window (own data) In order to add a new methodology step, one needs to select an element which will undergo a process of decomposition into sub-stages. After clicking Dodaj ( Add ) on the toolbar the user expert will be presented with a window where he can enter the name of a new element and select a type of the new element. Possible options include: option question, leap and tool. Pytanie ( Question ) is about defining a new choice or step in a given methodology (Fig. 7). Skok ( Leap ) allows to refer to another methodology or direct a user to a different place of a currently viewed methodology. Narzędzie ( Tool ) is about defining the final selection which a user can make using a particular methodology path, i.e. it consists in hooking up from the system database a tool which can be used at this stage

137 Fig. 7. Edition of the stages of improvement methodologies/problem solving (own data) USER INTERFACE The method of criteria matrix allows to find directly an appropriate tool meeting criteria chosen by a user. The user proceeds to the next search steps by clicking on the appropriate tab or using navigation buttons located at the bottom of the screen. At each step one checks features of interest in certain tool describing criteria. At any time it is possible to go to Podsumowanie tab ( Summary ), where a current ranking of the tools meeting chosen criteria is located (Fig. 8 and 9). Fig. 8. Summary tab (own data) 136

138 On the right side there is a visualization of the matrix showing features of a viewed tool and information on which of the features chosen by the user are met and which are not. Pointing the cursor at particular matrix cells the user receives information about the name of the feature assigned to a particular cell. At the bottom of Podsumowanie tab there is a help divided into 6 categories describing a highlighted tool. The help allows to become familiar with characteristics of a given tool and to expand the user s knowledge on its use (Fig. 9). Fig. 9. An example of a tool ranking (own data) Fig. 10. Priority window (own data) In order to determine the characteristics of a searched tool more accurately, the user can assign significance to each criteria to stress which features are important

139 In addition, the criteria may be identified as critical to force the compliance with the characteristics by the searched tool (Fig. 10). Critical criterion is a special function which ensures that all selected features within the criterion are strictly met by the searched tool. The tools not meeting the critical features are not taken into account when calculating the ranking. This results in significant restriction of a group of searched tools (the tab with a critical criterion is marked with a red circle on the icon - next to the name) GENERATING TOOL RANKING AND STUDYING THE APPLICATION Indicating choice criteria and features of the searched quality tool by a system user leads to generating a ranking list of tools in the system. The ranking can be viewed at any time of choosing the tool features by going to Podsumowanie tab. The list presents a ranking of the tools sorted by compatibility with the userselected features. The outlook of the matrix allows for visual analysis of which features are met by the selected tool. Each tool is given a description allowing for getting acquainted with its characteristics. If a tool is described by a given criterion, and the value of the feature has not been entered into the system through the knowledge editor, it is highlighted by colouring the feature of such a criterion black ( see Fig. 9), and the compliance of the tool is calculated in a different way. The application remembers the changes made by the user while selecting the features (or rather their states) in particular criteria in the method of criteria matrix (a module of the same name is located in the main window of the application). The database stores the order of criteria and feature selection made by the user. The user, having used the selected tool, can go back to a previously saved session and determine if the selected tool fulfilled his expectations in practise. The evaluation of sessions is very important for the program to be able to determine if a given selection path is appropriate. Collecting information about sessions in the systems allows for an effective search of a tool through using prior experiences of other system users. CONCLUSIONS The proposed method of criteria matrix is an element of a developed methodology of selection and application of quality management tools for improving quality of production processes in a manufacturing company, while providing a complete use of employees knowledge. The prerequisite for developing the search algorithm is the abundance and variety of quality tools presented in the available textbooks and manuals in such a form that does not allow for their quick and precise selection, especially during production processes. The main goal of 138

140 developing the method was a transition from the characteristics of given tools in form of their unstructured description (tool description) to defining them via a complete set of features, which, as a consequence, allow do define multiple criteria for their choice (tool selector) by a user. Such a solution was a result of conducted analyses of the tools and quality management methods which are present in the literature and used by companies. Those tools and methods are claimed to be particularly useful in operating conditions. The consequence of such an assumption was the designing a selection procedure for choosing an appropriate (searched) tool as a process of multicriterion selection. The development of the method was thus connected with appointing a complete set of features characterising the tools, and with recognising and determining their possible condition. Each feature takes one or more values assigned to a given feature e.g. input data type, as a feature distinguishing a tool, can have one of possible values: numerical or non-numerical. The method of criteria matrix has been implemented as an executive algorithm of the computer program which supports in certain production conditions a selection of the most useful quality tool (Starzyńska & Hamrol, 2012). Making use of the algorithm allows for selecting an appropriate tool, i.e. the one that, to the highest degree, meets the selection criteria introduced by a user, out of all criteria included in the created database of the quality management tool system. REFERENCES [1] Brassard M., Ritter D.: The Memory Jogger TM A Pocket Guide of Tools for Continuous Improvement & Effective Planning, GOAL/QPC, Methuen Ma, USA [2] Deslandres V., Pierreval H.: Knowledge acquisition issues in the design of decision support systems in quality control, European Journal of Operational research, Vol. 103, pp , [3] Fischer U., Stokic D.: Organisational Knowledge Management in Manufacturing Enterprises Solutions and Open Issues, [w:] Materiały Konferencyjne: Challenges and Achivements in E-Business and E-Work Contents, tom II, IOS Press Ohmsha, Amsterdam [4] Grabowska, M., Starzyńska, B., Klasyfikacja instrumentarium zarządzania jakością na potrzeby doskonalenia procesów w przedsiębiorstwach, Zeszyty Naukowe Uniwersytetu Szczecińskiego, Ekonomiczne Problemy Usług, 2010, nr 51, str [5] Hamrol A., Mantura W.: Zarządzanie jakością - teoria i praktyka, Wydawnictwo PWN Warszawa Poznań [6] Linderman K., Schroeder R.G., Zaheer S., Liedtke Ch., Choo A.S.: Integrating quality management practises with knowledge creation processes, Journal of operations Management, Vol. 22, pp , [7] Mukherjee A.S., Lapré M.A., Van Wassenhove L.N.: Knowledge Driven Quality improvement, Management Science, vol. 44, No. 11, Part 2 of 2, pp. S35-S49,

141 [8] Nonaka I., Takeuchi H.: The Knowledge-Creating Company. How Japanese Companies Create the Dynamics of Innovation, Oxford University Press, new York, U.S.A [9] Probst G., Raub S., Romhardt K.: Zarządzanie wiedzą w organizacji, Oficyna Ekonomiczna, Kraków [10] Starzyńska, B., Hamrol, A., Najlepszy, Z., Nowa metoda doboru narzędzi jakości na potrzeby doskonalenia procesów wytwarzania, 2009, Zarządzanie Przedsiębiorstwem, Nr 2, str [11] Starzyńska B., Hamrol A., Excellence Toolbox decision support system for quality tools & techniques selection and application, Total Quality Management & Business Excellence, 2012, Estimated Publication date - 30 March (Online) [12] Starzyńska B., Hamrol A., Grabowska M., Poradnik menedżera jakości kompendium wiedzy o narzędziach jakości, Wydawnictwo Politechniki Poznańskiej, 2010 (stron 210) [13] Starzyńska, B., Macierz powiązań metod i narzędzi jakości jako element metodyki doskonalenia procesów wytwarzania, Zeszyty Naukowe Politechniki Poznańskiej, Budowa Maszyn i Zarządzanie Produkcją, 2010, nr 13, str [14] Tague N. R.: The Quality Toolbox, ASQ Quality Press, Milwaukee, Wisconsin [15] Van Loon H.: Reach for the stars - Leadership and management in the new millennium, Leistungs Consult GmbH, Nottingham

142 Miladin Stefanović Slavko Arsovski Zora Arsovski University of Kragujevac, Serbia THE KEY ISSUES IN QUALITY ASSURANCE OF ENGINEERING EDUCATION AND PREPARATION FOR INTERNATIONAL ACCREDITATION Key words: quality, engineering education ABSTRACT Engineering education as well as quality of engineering education is very important issues. In this paper the main issues in quality assurance and enhancement system for engineering education will be covered. Finally the development of new flexible study program models in order to reach interdisciplinary for new qualification frameworks will be presented. INTRODUCTION Planning the implementation of quality assurance is a complex process that depends on many different internal and external factors. Planning the implementation is defined by the capabilities of management to visualize the educational position of the University and to evaluate University s strengths, weaknesses, opportunities and threats. Serving to the educational purposes, planning the implementation of quality assurance must be integrated into the University s strategic objectives and then transferred to other parts of the organization. Planning the implementation, as a part of strategy formulation, should be reflected in 1) University s vision and mission development, 2) goals setting, 3) strategy development aimed at achieving goals, 4) implementation and execution of the strategy, and 5) monitoring, evaluation, control and readjustment of the strategy. Finally, planning must account for all possible implementation barriers. In order to achieve general goals following steps should be taken: 1) Consideration of all relevant frameworks such as: European and national qualifications frameworks in the partner countries, Dublin descriptors, European Accredited Engineer (EUR-ACE) criteria- and Criteria ASIIN s Requirements and Procedural Principles 2) Reviewing quality standards for learning, education and training: ISO / IEC , ISO 9241, TQM.

143 Quality is at the heart of Europe s vision to become worldwide reference for education and training by Generally the issues of engineering education is very important and was treated in number of papers 1, 2 both in the world and n fast developing countries 3, 4. In order to join to this process Serbia needs quality assurance and enhancement system for engineering education. They could be many different approaches that could lead to that direction. In this paper the major issues in quality assurance of engineering education 5, 6. Quality Assurance of engineering education through accreditation could be one approach 7, 8. The complete process could be divided in two different processes. The first one is development of quality assurance and enhancement system for engineering education and development of new flexible study program models in order to reach multidisciplinary and new qualification framework. In this paper we will also present the set of possible actions for both processes that could eventually lead to improvement of engineering education. 1 Mathur R. M., Venter R. D., Quality Assurance of Engineering Education in Canada: its suitability for graduates working in global markets, Vol. 16, Int. J. Engng Ed.,Canada, Arsovski Z, Approach to Quality Assurance in Higher Education - International Journal for Quality Research, Vol. 1, Center of Quality, University of Montenegro, Montenegro, Center of Quality, University of Kragujevac, Serbia, Carnoy M., Dossani R., Tilak J., Understanding the Expansion and Quality of Engineering Education in India, Stanford University, Banerjee R., Muley V.P., Engineering education in India, Published by Observer Research Foundation Mumbai, India, , Spasos S., Aleksandris A., Petropoulos G. and Vaxevanidis N.M., Implementation of efqm model in a Greek engineering higher education institute: a framework and a case study - International Journal for Quality Research, Vol. 2, Center of Quality, University of Montenegro, Montenegro, Center of Quality, University of Kragujevac, Serbia, Shekhar S. N. C., Rao K. N. and Subbaiah K.V., Enhancing the Quality of Engineering Education Institutions (EEIs) Through GAP Analysis - International Journal for Quality Research, Vol. 4, Center of Quality, University of Montenegro, Montenegro, Center of Quality, University of Kragujevac, Serbia, Prados J. W., Peterson G. D., Lattuca L. R., Quality Assurance of Engineering Education through Accreditation: The Impact of Engineering Criteria 2000 and Its Global Influence, Journal of Engineering Education, Jan Reyes N. R., Candeas V., Cañadas F., Reche P. and Galán S. G., Accreditation and Quality Assurance of Engineering Education Programs in the European Higher Education Area, New Challenges in Engineering Education and Research in the 21st Century, Budapest,

144 1. QUALITY ASSURANCE AND ENHANCEMENT SYSTEM FOR ENGINEERING EDUCATION This first process needs to establish infrastructure and framework for ensuring the quality assurance in engineering education. This covers three steps: (1) Establishment of Committee for quality of engineering education; (2) Promotion of necessity of quality assurance and enhancement system based on the best international practice and (3) Implementation of quality assurance and enhancement system at beneficiary faculties. 1.1 Establishment of Committee for quality of engineering education Establishment of Committee assures that quality of engineering education will be introduced, checked and the most important measured using the same criteria. This Committee could support permanent bodies on Serbian Universities, coordinate their activities, monitoring procedures of quality assurance for engineering education, work on improvement of internal processes and quality management, keep public relations and work on specific projects such as international offices establishment etc. This Committee could be composed of experts in academia, scientific associations and industry and also include one student representative. They comprise the persons most knowledgeable about accreditation procedures, standards and systems of higher education in general. The most important issue is selection and training of persons that will consist Committee for quality of engineering education. 1.2 Promotion of necessity of quality assurance and enhancement system based on the best international practice This action should promote necessity of QA system based on the best international practice in order to promote vision of diverse system with shared goals all over the Europe, in accomplice with mutual quality assurance principles. In order to achieve this goal it is necessary to: 1) Establishment of a group of quality assurance promoters; 2) Promotion of necessity of QA on three tracks: a) Importance for prospective students; b) Placement of graduates on the labor market; and c) Demands from the relevant professional field. 3) Promotion importance of QA because it is crucial to keep the outcome ori

145 ented process balanced and provides mechanism for control of educational process. 1.3 Implementation of quality assurance and enhancement system at beneficiary faculties A quality assurance system for educational activities is a prerequisite for an accreditation. Quality assurance should provide: 1) A quality assurance system shall sufficiently document quality assurance work. 2) A quality assurance system shall uncover poor quality. 3) A quality assurance system shall include all processes of importance for educational quality. 4) The institutions shall have routines enabling the continuous improvement of the system. According to reviewed material and the best European practice with full support of for quality of engineering education, Serbian universities should take following action s in order to implement developed QA system: 1) Development of self-assessment procedures for engineering education. 2) Training of people for self-assessment and writing of self-report. 3) Performance of self-assessment and identification of necessary measures and actions. 4) Implementation of procedures for quality assurance at beneficiary faculties. 2. DEVELOPMENT OF NEW FLEXIBLE STUDY PROGRAM MODELS IN ORDER TO REACH INTERDISCIPLINARITY AND NEW QUALIFICATIONS FRAMEWORKS The second process represents actions in development of specific study program models using developed infrastructure. This covers three steps: (1) Review of current standards in engineering education and contemporary qualifications frameworks; (2) Creation of new flexible study program models in order to reach interdisciplinarity and new qualifications frameworks and (3) Developing of partnership with enterprises through student practice organization. 144

146 2.1 Review of current standards in engineering education and contemporary qualifications frameworks New flexible study program models should be based upon following issues, using best practice from Europe: 1) Identification of engineering education outcomes. 2) Development of set of requirements and procedural principles contain a list of educational outcomes for engineers. 3) Separation of two fields: specialist competencies and social competencies. 4) Clear definition of the knowledge, skills, competencies (specialist and social) to be achieved in the engineering programs. 5) Definition of measures by which these competencies are to be achieved. 2.2 Creation of new flexible study program models in order to reach interdisciplinarity and new qualifications frameworks The study program has core importance for quality education. Creation of new flexible study program models should be performed through folowing steps: 1) Definition of study programs oriented towards the targeted objectives and qualification profiles. 2) Definition of formal outcome of an assessment and validation process which is obtained by individual has achieved learning outcomes to given standards (Figure 1). 3) Definition of competency profile that describe enables graduates to have employment corresponding to their qualification. 4) Identification of demands from industry. 5) Definition of the structure of the programs (Table. 1 and Table. 2, according to ASIIN recommendations 9 ). 9 Shekhar S. N. C., Rao K. N. and Subbaiah K.V., Enhancing the Quality of Engineering Education Institutions (EEIs) Through GAP Analysis - International Journal for Quality Research, Vol. 4, Center of Quality, University of Montenegro, Montenegro, Center of Quality, University of Kragujevac, Serbia,

147 Table. 1. ASIIN - General Mechanical Engineering Bachelor, mechanical engineering, more research-oriented (based on the example of the 6th semester) ECTS % ECTS CP Mathematic-scientific fundamentals Mathematics, chemistry, physics, informatics min. 18 min. 32 Engineering fundamentals Technical mechanics/mechanical dynamics/theory of vibrations, fluid mechanics, technical thermodynamics, electrical engineering and electronics, materials engineering, measurement engineering and control min. 28 min. 50 engineering, fundamentals of the elective subject (techn. physics, techn. informatics, etc.) Engineering applications Construction/product development/manufacture min. 12 min. 22 Advanced subjects, focal subject orientated on fundamentals according to choice min. 6 min. 10 Cross-subject contents Subjects in the fields of economics, non-technical electives, lan- guages min. 10 min. 18 (as far as not taught in the afore-mentioned subjects) Bachelor s Thesis: 12 Practical training (technical laboratory) min. 6 Total CP 180 Table. 2. ASIIN - General Mechanical Engineering Master, mechanical engineering, more research-oriented, (on the example of the 4th semester) ECTS % ECTS CP Advanced fundamentals in mathematics, natural sciences and engineering Mathematic methods, advanced mechanics or heat and matter transfer, min. 19 min. 22 technical informatics, elective subject (construction theory, techn. physics, etc.) Advanced engineering applications Machine engineering, production technology, energy management, etc. min. 19 min. 22 (incl. laboratory, industrial placement) Advanced subjects, focal subject Orientated on fundamentals according to choice min. 22 min. 26 Cross-subject contents Subjects in the field of economics, non-technical electives, lan- guages min. 10 min. 12 (as far as not taught in the afore-mentioned subjects) Master s Thesis min. 15 Practical engineering activity (technical laboratory, as far as not contained in previous studies) min. 5 Total CP

148 Figure 1. Focus on outcomes 2.3 Developing of partnership with enterprises through student practice organization It is very important that engineering education ensure industry focus, research focus, industrial placements and professional qualification conferred by the degree. The competency profile for engineering education enables graduates to take up employment corresponding to their qualification. In order to achieve these goals it is important to develop partnership with enterprises to ensure: 1) That an adequate connection to professional practice has been integrated into the programme (external placements, laboratories, projects, etc.). 2) Graduates are well prepared to work in existing or foreseeable professional fields and to face challenges in their (specialist) field. Besides it is important to have: 1) Data, statements and forecasts on demand from industry are available. 2) Existing labour market demand for graduates with the relevant qualification profile. All of this could be achieved by developing partnership with enterprises through: students practice, students projects for industry, demands from industry for new skills

149 CONCLUSIONS International accreditation could contribute to higher internationalization of faculties and universities as well as faster integration in EU educational environment. Engineering education demands laboratories and organization of educational process in industrial environment as well as dynamic and flexible educational process and quality teachers. In this paper we presented on of the possible approach in improving the quality of engineering education through two steps: development of quality assurance and enhancement system for engineering education; and development of new flexible study program models in order to reach multidisciplinary and new qualification framework. Considering that this profile of education is very important for modern society and creation of new value the quality of engineering education is important issue 10. REFERENCES [1] Mathur R. M., Venter R. D., Quality Assurance of Engineering Education in Canada: its suitability for graduates working in global markets, Vol. 16, Int. J. Engng Ed.,Canada, [2] Arsovski Z, Approach to Quality Assurance in Higher Education - International Journal for Quality Research, Vol. 1, Center of Quality, University of Montenegro, Montenegro, Center of Quality, University of Kragujevac, Serbia, [3] Carnoy M., Dossani R., Tilak J., Understanding the Expansion and Quality of Engineering Education in India, Stanford University, [4] Banerjee R., Muley V.P., Engineering education in India, Published by Observer Research Foundation Mumbai, India, [5] Spasos S., Aleksandris A., Petropoulos G. and Vaxevanidis N.M., Implementation of efqm model in a Greek engineering higher education institute: a framework and a case study - International Journal for Quality Research, Vol. 2, Center of Quality, University of Montenegro, Montenegro, Center of Quality, University of Kragujevac, Serbia, [6] Shekhar S. N. C., Rao K. N. and Subbaiah K.V., Enhancing the Quality of Engineering Education Institutions (EEIs) Through GAP Analysis - International Journal for Quality Research, Vol. 4, Center of Quality, University of Montenegro, Montenegro, Center of Quality, University of Kragujevac, Serbia, [7] Prados J. W., Peterson G. D., Lattuca L. R., Quality Assurance of Engineering Education 10 Arsovski S., Arsovski Z., Andre P. and Stefanović M., Relation Between Organizational and Information Resilience: Away for Improvement of System Capacity - International Journal for Quality Research, Vol. 4, Center of Quality, University of Montenegro, Montenegro, Center of Quality, University of Kragujevac, Serbia,

150 through Accreditation: The Impact of Engineering Criteria 2000 and Its Global Influence, Journal of Engineering Education, Jan [8] Reyes N. R., Candeas V., Cañadas F., Reche P. and Galán S. G., Accreditation and Quality Assurance of Engineering Education Programs in the European Higher Education Area, New Challenges in Engineering Education and Research in the 21st Century, Budapest, [9] Möhren J, (2010), The Accreditation Process and Criteria - International Accreditation of Engineering Studies June 16, German University in Cairo (GUC), [10] Arsovski S., Arsovski Z., Andre P. and Stefanović M., Relation Between Organizational and Information Resilience: Away for Improvement of System Capacity - International Journal for Quality Research, Vol. 4, Center of Quality, University of Montenegro, Montenegro, Center of Quality, University of Kragujevac, Serbia, Acknowledgment Research presented in this paper was supported by Ministry of Science and Technological Development of Republic of Serbia, Grant III-44010, Title: Intelligent Systems for Software Product Development and Business Support based on Models

151 Amalia Venera Todorut Constantin Brâncusi University of Târgu-Jiu, Romania THE IMPORTANCE OF ORGANIZATIONAL CULTURE TOWARDS QUALITY IN THE SOCIETY BASED ON KNOWLEDGE Key words: culture, organization ABSTRACT To have a strong organizational culture, oriented toward quality, implies: entire staff awareness regarding quality, continuous use of quality management principles en entire organization, regardless of hierarchy, promotion of the values and behavioural rules strengthening quality and idea that whatever organizational target is, it is fulfilled only through a constant pursuit on stakeholder s satisfaction. I present the characteristics of the new organizational culture in society based on knowledge and the efficiency of the organizational culture toward quality. INTRODUCTION Culture is considered to be the invisible force behind easily observable and tangible things within an organization and it is also, the social energy that causes people to act. We may compare the organizational culture of an organization with an individual personality, which meets a number of visible and less visible issues, but provides vision, purpose, direction and energy for development. Any organization can be seen as a social structure consisting of a group of people who work together to achieve the organization s goals. The success of an organization is conditioned on whether the staff acted as one to achieve its goals. A major factor influencing the unit of personnel action is the organizational culture. Two of the most commonly encountered senses in the literature are presented 1 : 1) The organizational culture is the personality of the organization ; 2) The organizational culture is a set of traditions, values, procedures, concepts and attitudes that create the context of everything we do and think within the organization. 1 Popa, I., Dobrin, I., Cultura organizațională orientată spre client, in revista Calitate-acces la succes, anul 10, nr. 4, 2009, pp. 27

152 The author who had an overwhelming contribution in clarifying this concept is Edgar Schein 2, who defines the notion of culture as: a pattern of basic assumptions invented, discovered or developed by a given group, as it learns to cope with their problems of external adaptation and internal integration that has worked well enough to be considered valid and, therefore, to be assimilated by the new members of the group as the correct way to perceive, think and feel about these problems. Culture is presented more as a configuration with powerful procedural elements than a structure in the classical sense of this concept. The essence of the organizational culture is not what is visible on the surface, but what is shared by the groups of people in the organization and how they understand and interpret the culture. Organizational culture is a combination of human elements, conscious and unconscious, rational and irrational, group and individual, between which runs complex and fluid inter-influences, with a major impact on the functionality and the performances of the system. 3 Organizational culture is the set of principles, values, attitudes, beliefs and expectations shared by the environment of an organization, and the quality of culture means all the knowledge gained or recognized of values referring to quality, on which the organization develops its own capacity to survive in its external environment and administer their own affairs. 4 The new culture of quality should be directed to create new value added, in all aspects, and the quality culture approach involves the internal and external stakeholders engagement. 1. THE CULTURE OF QUALITY IN THE ORGANIZATION The complexity of the concept of organizational culture is given by the indisputable connection between quality culture and performance. The establishment of a theoretical framework of the organizational culture can be done by examining the relationships on two axes: internal-external and flexibility-control. 5 The first reflects the organization s orientation to internal dynamic or external 2 Schein, E., Organizational Culture and Leadership, Jossey-Bass, A Wiley Imprint, 4th edition, San Francisco, 2010, pp Verboncu, I.,(coordonator), Strategie-cultură performanță, Editura Printech, București, 2008, pp. 84; 4 Stanciu, I., Managementul calității totale, Editura Cartea Universitară, București, 2003, pp Nguyen, N., Gestion de la qualite, Ed. Cheneliere Education, Montreal, 2006, pp

153 environment, while the second expresses a preference for control or flexibility in the organizational structure. Combining the two axes creates five forms of cultural orientation, including in quality domain: a) Hierarchical culture (stability and control by coordination, communication, information); b) Group culture (cohesion and ethics through training and development); c) Rational culture (productivity and efficiency by planning, appropriate goals and objectives); d) Development culture (confidence, acquisitions of resources, external support through adaptive capacity); e) Corporative culture; Quality culture within the organization should be based on a long term vision and is characterized by confidence, creative thinking and investment in training. 6 In addition, this culture should be based on the principles of total quality management. Confidence, as a feature of quality culture, may be the reliable word or promise made by one part to another. 7 Confidence is the underlying assumption that the parties meet their obligations. The multidimensional approach of mutual confidence requires the following elements: good communication, a greater sensitivity to differences and diversity within the organization or external environment and the decentralization of the decision-making power and a greater autonomy of the work teams. Confidence brings an important contribution to the personal development of the organization s members, to their ability to cooperate, to establish a better organizational climate, to the effectiveness of problem-solving processes and to improve the overall performance. Confidence also allows the creation or strengthening of an organizational culture, oriented towards the continuous improvement of quality and excellence. Creative thinking has an important role, expressed through creativity, which plays a decisive role in the renewal and improving of quality. The small teams have a fundamental role and they allow the development of the creative spirit, thus, helping to improve the working climate, the communication among members, the greater openness and freedom to advance ideas. Creative thinking is enhanced by an appropriate participatory management and staff s ability. 6 Paraschivescu, A., O., Managementul excelenței, Editura tehnopress, Iași, 2009, pp Paraschivescu, A., O., Managementul excelenței, Editura tehnopress, Iași, 2009, pp

154 To all these, the investment in training is added, which represents a susceptible element, which contributes to the formation and enrichment of the quality culture. The training programs are open to all members of the organization. Total quality strategy must be understood by all the employees to raise awareness, motivate them to do right from the first time and every time and to give the customer the place it deserves. The organizations with a favourable climate for quality culture have some common characteristics that are based on stakeholders, innovation, staff, new created value, on the development and promotion of quality culture, as seen in Figure 1: The knowledge and satisfaction of the stakeholders requirements Quality culture Characteristics Staff s training and accountability Continuous improvement through innovation; new created value for the customer Fig.1 The characteristics of the organization with a favourable climate for the quality culture Quality culture is therefore based on a value system that exists within an organizational environment and which is oriented towards the maintenance and continuous improvement of quality. 2. ORGANIZATIONAL CULTURE AND THE TOTAL QUALITY MANAGEMENT To be able to describe the existing correlations between the organizational culture and TQM implementation, the idea of Edgar Schein 8 has represented a 8 Schein, E., Organizational Culture and Leadership, Jossey-Bass, A Wiley Imprint, 4th edition, San Francisco, 2010, pp

155 starting point, which considers six component elements of the organizational culture: a) Behaviour rules; b) Norms in work teams; c) The dominant values adopted; d) The rules established for an efficient functioning of the company; e) The philosophy that guides the organization politics towards customers and its own employees; f) The spirit and the climate within the company and the way in which the organization s members interact with those outside it. The culture of an organization is, therefore, an assembly of characteristics which distinguish it from any other organization and represent its intangible patrimony. In this context, the quality strategy is, deeply, influenced and conditioned by the level and complexity of the organizational culture. The creation of a coherent and successfully applicable strategy is possible only in the context of a complete and correct adaptation to the existing organizational culture. On the contrary, the strategy will be seen as a strange body and a strong phenomenon of rejection will stop its implementation. In its turn, the quality strategy is on short, medium and long term for the organizational culture, as 9 : a) On short term, by violent shocks, in case of a major disagreement between the proposed strategy and the existing organizational culture; b) On medium term, by the transformation and gradual adaptation of the organization culture to the needs of strategy functioning and its effectiveness; c) On long term, by the prefiguration of a new set of values able to sustain and develop the elaborated strategy. Thus, it can be concluded that between the two entities, strategy of quality and organizational culture, there is a bi-univocal correspondence. The key to an effective implementation of TQM is TQM understanding not as a management tool, but as a fundamental change in the management philosophy. TQM can not be installed in an organization, it may be rooted in the organizational culture, both developed by the top management and maintained by members of the organization. The emphasis is on developing an organizational culture, which is compatible with TQM tools and techniques and it is important to realize that the in- 9 Popa, I., Dobrin, I., Cultura organizațională orientată spre client, in revista Calitate-acces la succes, anul 10, nr. 4, 2009, pp

156 stallation of these tools and techniques the organization in the organization is not equivalent to implementing quality. TQM can not be confined only to this stage, which is nothing but a necessary condition, but not sufficient for the existence of total quality. TQM is a fundamental change in the management philosophy of the organization 10, the term total suggesting that the entire organization must be involved. It is obvious that TQM is more than management tools and techniques, because it can not be installed as a software program. The effective implementation of TQM is dependent on a compatible organizational culture. In the literature there are identified eight cultural elements that lead to the development of an appropriate TQM environment 11 : 1) The information on quality should be used to improve, not to judge or control the organization s staff. The role of information should be the one which helps solve the problems arising in connection with customers satisfaction. If employees feel that negative information will result in sanctions, the management will not have access to this information; 2) An organizational culture oriented towards quality is a long process. The set up of the quality management system determines major changes in the general management of the organization. The entire management of the organization is reshaped so that it can guide and control the organization towards quality, in the direction of obtaining the maximum satisfaction for all those who are interested in the organization s results. Also, the cultural values promoted with the implementation of quality management system are a consequence of the changes emerged in the organizational culture. For the change as a sequence of organizational events to be successful, more steps are required, as shown in figure number 2: Also, the success of the change process, as a psychological process, is conditioned on how the change is perceived, both at individual and organizational level. This change takes place on the following areas: cognitive, behavioural and action 12, as shown in figure number 3: The success of setting up a quality management system, as a process of changing the organizational culture, is closely related to how the organization 10 Murray, M., Total Quality Management (TQM), About.com Guide, New York, 2011, pp Sashikm, M., Kiser, J., K., Putting Total Quality Management to work; What TQM means, How to Use it and How to Sustaint it over, Berett-Koehler Publisher, Dallas, 1993, pp Popa, I., Dobrin,I., Cultura organizațională orientată spre client, in revista Calitate-acces la succes, anul 10, nr. 4, 2009, pp

157 staff responds to this process from a cultural aspect. To get a positive response it is necessary for the organization staff: The involvement of all employees in the changing process; The planning of activities that will support the change; Implementation of the planned elements; The evaluation of the results obtained from change; Institutionalization of change (maintaining the need of producing changes to continuously improve quality) Fig. 2 The necessary steps in the process of change a) To know what is the implementation of the quality management system at individual and group level (the cognitive plan); b) To have a positive attitude to changes that involve the configuration of the quality management system (the action plan); c) To develop a certain individual and group behaviour, which sustains the implementation and maintenance of a performant quality management system (the behavioural plan); The implementation of TQM principles is possible only by creating a strong culture, through the awareness of all staff, on what quality means in the current context. 156

158 Cognitive Plan Faiths, knowledge, values related to different situations or events Behavioural Plan Emotional tendencies as a response to different situations or events Action Plan Action (behavioural acts) done to assimilate the role Fig.3 The plans of change Particularly significant in shaping and developing a culture that will allow getting the total quality is the approach of a set of elements, which determine the full involvement of the staff. Therefore, we must take into account a number of exogenous and endogenous variables in the holistic approach of staff involvement. Professional ethics Usefulness perception Risk perception Subjective norms Attitude towards involvement Intention of involvement Auto-efficiency Employees involvement Fig.4 The conceptual model of employees involvement

159 Exogenous variables refer to professional ethics, subjective norms, perceived usefulness, and perceived risk. 13 Attitude towards change and the intention to involve are the intermediate endogenous variables and the effective involvement is an endogenous variable. We propose a conceptual model concerning the relationship between the employees involvement, attitude and intention in the context of TQM, in figure number 4: This model emphasizes the relationship between the TQM practices, including leadership, culture, quality, staff involvement and quality performance. CONCLUSIONS To have a strong organizational culture, oriented towards quality, it is necessary to reach the following issues: the awareness of all staff on the importance of quality; consistent application of quality management principles throughout the organization; the promotion within the organization of those values and behavioural norms that support the idea of quality, of the idea that whatever is the goal of the organization, this is achieved only by a constant preoccupation to satisfy all those interested in the organization s results. Having an organizational culture oriented towards quality, implies the existence within it of some values, perceptions and representations strongly related to quality. Thus, quality becomes an important element of organizational cohesion and, at the same time, one of the most important factors, which determines the success of the organization. REFERENCES [1] Murray, M., Total Quality Management (TQM), About.com Guide, New York, 2011, pp. 156; [2] Nguyen, N., Gestion de la qualite, Ed. Cheneliere Education, Montreal, 2006, pp.84, 507; [3] Paraschivescu, A., O., Managementul excelenței, Editura tehnopress, Iași, 2009, pp. 73 [4] Popa, I., Dobrin,I., Cultura organizațională orientată spre client, in revista Calitate-acces la succes, anul 10, nr. 4, 2009, pp ; [5] Sashikm, M., Kiser, J., K., Putting Total Quality Management to work; What TQM means, How to Use it and How to Sustain it over, Berett-Koehler Publisher, Dallas, 1993, pp.79. [6] Schein, E., Organizational Culture and Leadership, Jossey-Bass, A Wiley Imprint, 4th edition, San Francisco, 2010, pp , 77; [7] Stanciu, I., Managementul calității totale, Editura Cartea Universitară, București, 2003, pp Tang, Z., Chen, X., Wu, Z., Using behavior theory to investigate individual level determinants of employee involvement in TQM, in Total Quality Management, 2010, accesed March 12th,

160 [8] Tang, Z., Chen, X., Wu, Z., Using behaviour theory to investigate individual level determinants of employee involvement in TQM, in Total Quality Management, 2010, accesed March 12 th, 2012 [9] Verboncu, I., (coordinator), Strategie-cultură performanță, Editura Printech, București, 2008, pp. 84;

161 Ada Mirela Tomescu University of Oradea, Romania STUDY REGARDING THE CULTURE OF QUALITY IN BIHOR COUNTY FIRMS Key words: culture of quality, enterprise, Romania ABSTRACT The aim of this study is to create a better understanding of how one can make sense of the concept of quality culture, and its intensity measured in Romanian enterprises located in Bihor County. In this paper, we concentrate on the following objectives: - to construct a tool and to develop its own methodology; - to measure the intensity of the culture of quality in the organizations operating in bihor county; - to identify the differences, if any, between the culture of quality in the various firms. - to emphasize relevant features referring to the culture of quality in bihor firms. This study was conduct last year (2011) in 50 enterprises, located in a County form the Northwestern part of Romania, which amounts for 3.2% of country s territory of the country, hosting approx. 549,752 inhabitants, making it 12 th largest County in Romania in terms of population. Bihor county's economy is characterized by continuous development. Compared to other counties or its proximity to Hungary, it may be one of the counties privileged in terms of its economic level of activity; in terms of contribution to the state budget, Bihor County is the 5th largest contributor (after Bucharest and Constanta, Prahova, Bacau) and the 2 nd largest in the North-West of the country, after Cluj. In Bihor county firms there is a tireless preoccupation of the managers to develop a culture of quality and to improve its capability to provide quality. Most of the managers belong to the last typology of the three presented above. The employees are to a great extent the supporters of continuous improvement of quality. It is important that they capitalize the continuous improvement in the daily practice, the motivational system in the firm being vital in this view. Yet, insignificant, there is a difference between the firms with foreign controlling capital and the firms with Romanian controlling capital. INTRODUCTION The purpose of our study is to measure the intensity of the culture of quality in the Romanian organization, for quality is strongly related to the organizational culture, therefore the purpose of the study carried out and its results are presented in this paper concentrate on the following objectives: - To construct a tool and to develop its own methodology which we could measure with the intensity of the culture of quality in an organization.

162 - To measure the intensity of the culture of quality in the organizations operating in Bihor county. Taking into consideration the size of such a study and the costs involved, we have been constrained to Bihor county, planning, in not such a far future, to expand our study to the level of the entire Romanian market. - To identify the differences, if any, between the culture of quality in the firms with foreign controlling capital and those with Romanian controlling capital. - To emphasize other relevant features referring to the culture of quality in Bihor firms METHODOLOGY AND WORK HYPOTHESIS The survey was drawn up taking into account the following dimensions defining the culture of quality in a firm (TQM principles): 1) The Pro-quality Leadership. The first ten questions of the survey target the pro-quality leadership exercised within an organization. Obviously, it is determinative for the culture of quality within an organization. Its capability to acquire quality, an aspect emphasized by the SR EN ISO 9001/2001 quality standard, by the TQM principles, and also by the majority of models of excellence such as EFQM shows this connection. 2) Customer orientation. The set of questions from 11 to 17 are meant to measure the orientation of the organization towards the customer. It will never be possible to talk about a culture of quality when the orientation towards the customer is absent. 3) The exploitation of the innovative potential of the employees. The set of questions from 18 to 20 targets the analysis of the way in which the premises to exploit the innovative potential of the employees are created, especially exhibited as suggestions for improvement. 4) Starting from the continuous improvement principle. If the employees are not receptive to change, they will not be the advocates of continuous learning as a fundamental premise of progress, characteristic to any organization learning and applying the continuous improvement, the organization will never reach excellence. Excellence being the desideratum leading to acknowledgment and success. Question 24 evaluates the extent to which the employees consider themselves responsible for the quality of results obtained. To consider yourself responsible for the quality of the results obtained represents the most appropriate form of feedback for performance in work, being a premise meant to overcome real/current limits, implicitly for the continual improvement of the process/system in which the employee brings his contribution. To consider yourself not responsi

163 ble for the quality of the results obtained makes you find other people to blame and not solutions when there are certain problems/generating inaccuracies. It is rather created a striving, non-cooperating atmosphere to the disadvantage of a constructive, stimulating atmosphere, oriented towards solution identification. 5) Process orientation. The set of questions were drawn up starting from the process orientation as a fundamental principle of quality management. Question 25 measures the trans-departmental cooperation absolutely necessary, considering the fact that quality is the result of a trans-departmental process. The existence of a trans-departmental cooperation demonstrates the fact that the employees, no matter the department they belong to, subscribe to a common purpose, to satisfy the customer to the highest level. Question 26 refers to the communication quality in an organization. Communication is the basis of a transdepartmental process in order to obtain quality results. 6) The involvement of the entire personnel represents one of the fundamental principles of total quality management (TMQ), and the empowerment of the employees represents an advanced form of their involvement. Question 27 deals with the problem of empowerment, its importance to achieve quality being related to efficiency and quality results. Empowerment = alignment + authority+ capability + commitment 1 The alignment implies the subordination of all the employees activities to the superior purposes of the organization in order to achieve them. A relevant example of authority given to employees is that of the Ritz- Carlton hotel company, within which each employee is authorized to spend up to 2,000USD, outright, to solve a guest s problem, so that the guest is satisfied 2. The employees capability refers to the fact that the employees must know the actions they must engage in and how to react in order to achieve the objectives set. The commitment implies the employees taking responsibility to achieve the success of the organization, doubled by concrete initiatives in this direction. For an organization it is vital to get the employees commitment, continuously demonstrating them that they are valuable members of the organization, being 1 Juran M. Joseph, Godfrey A. Blanton, Manualul calităţii Juran, Editat de SRAC, Bucureşti 2004, pp Bruhn Manfred, Orientarea spre client temelia afacerii de succes, Editura Economică, Bucureşti, 2001, pp

164 grateful and rewarding them appropriately. Some companies name these employees, suggestively, champions. 7) Teamwork. Question 28 targets the teamwork, so necessary to solve some more and more complex problems the contemporary organization has to face. Practice often confirms that the team is essential to efficiently achieve success following the well-known paradigm that the whole is bigger than the sum of its parts. 8) Preventive attitude the target being zero defects. Question 29 was conceived starting from the defect prevention principle. We are aware of the fact that it is much cheaper to prevent than to rectify. Considering the fact that the customer s degree of satisfaction will be determined by the performance of the entire value-generating system, the organization will have to manage partnerships with the other members of the chain (suppliers, distributors). Question 30 refers exactly to this aspect. 9) Question 31 starts from the premise according to which human resource is the most important resource of an organization, its quality influencing significantly the capability of the organization to provide quality. The investment in the human resource will be determinant for the road towards excellence of the organization. The starting hypotheses of our study are the following: - the organizations have or have not developed a great culture of quality; - there is a difference between the culture of quality in the majority organizations with foreign controlling capital and those with Romanian controlling capital, meaning that in the organizations with foreign controlling capital the culture of quality is stronger than in the national organizations; By the methodology we conceived, we allowed a score of maximum 100 points to each variable included in the applied questionnaire. The scale applied to each question corresponds to the following score: to a very great extent 100 points; to a great extent 75 points; to a small extent 50 points; to a very small extent 25 points; at all 0 points. Thus, the maximum score can be obtained by a firm by applying the survey and which reflects the intensity of the culture of quality, is of 100 points. We present further the results of the research carried out. 2. THE MEASUREMENT OF THE INTENSITY OF THE CULTURE OF QUALITY IN BIHOR COUNTY FIRMS For this research, we chose a sample of 50 enterprises activating in Bihor county from the small and middle sized category. The small enterprises were not

165 included in the sample for some of the aspects targeted by the survey questions are specific only to small and middle sized enterprises. For instance, it is rather difficult to talk about an organization s mission in the case of a firm with 5 employees, when a great deal of these firms have not declared their mission or do not have a strategic overlook on their future. The period of research is May-July 2012, and the sampling method is the snowball method. The instrument used in this research is the survey. It has been applied to middle managers in the firms, especially to the quality manager or the person in charge with quality. We have made this decision for we considered that a middle manager can be objective, equidistant regarding the evaluation of the managerial team and of the employees at the operational level. The first premise of this research refers to the fact that the organizations functioning in Bihor county have not developed a strong culture of quality. After quantifying the score obtained by all the 50 firms in the sample, the following resulted: - the minimum score obtained within the sample was of 45,94 points ; - the maximum score obtained within the sample was of 89,86 points; - average score is of 73,18 points. These results, especially the average score of 73,18 points, invalidate to a great extent the first hypothesis of the research according to which the organizations activating in Bihor county have not developed a strong culture of quality. Yet, the following observations are required: - The application of the survey to a member of the managerial team has positively influenced, to a certain extent, the average score obtained. - The intensity of the culture of quality at the managerial team level is, generally, higher than at operational levels. Therefore, the culture of quality loses from its intensity in the transmission process from the leadership level to the operational level. The phenomenon is identical to the transportation process of the thermal/heat agent from the supplier (The Electric Power Company) to the beneficiary (the consumers of heat energy), one being the temperature when supplying and another when receiving. In both cases, the increase of the efficiency of the transmission system is followed, the transport system respectively. - The homogenization of the culture of quality in the entire organization can be achieved only through an aggressive pro-quality leadership (in the good sense of the word) through an innovative motivational system and through an appropriate personnel recruitment policy. 164

166 3. THE MEASUREMENT OF THE DIFFERENCE BETWEEN THE INTENSITY OF THE CULTURE OF QUALITY IN THE FIRMS WITH FOREIGN CONTROLLING CAPITAL AND THOSE WITH ROMANIAN CONTROLLING CAPITAL The second premise of the research refers to the fact that there is a difference between the culture of quality in the firms with foreign controlling capital and those with Romanian controlling capital, meaning that in the organizations with foreign controlling capital the culture of quality is much stronger. After quantifying the score obtained by all 50 firms in the sample, we had the following results: - the average score obtained by the companies with foreign controlling capital was of 77,83 points. - the average score obtained by the companies with romanian controlling capital was of 72,02 points. We notice the fact that the firms with foreign controlling capital have a clearly superior score as compared to the firms with Romanian controlling capital. Yet, the difference is not significant. One of the explanations would be that in the firms with foreign controlling capital the majority of employees are also Romanian. Yet, it is more difficult to export a certain organization culture than a technology. An example in this view was the Nokia factory at Jucu. Out of the approximately 3,000 employees working in the factory located near Cluj, 200 were involved in the recovery work of the faulty products. According to a source within the firm, it is the highest percentage of employees involved in this kind of work of all the Nokia factories worldwide. Apparently, the Nokia factory of Jucu was a relocation of the Germany factory. In reality, the differences are significant from several points of view, including the culture of quality. 4. RELEVANT ASPECTS OF THE CULTURE OF QUALITY IN BIHOR COUNTY FIRMS Other relevant aspects referring to the culture of quality in Bihor county firms we had studied are the following: 1. Ways to capitalize the ideas regarding the employees improvement; 2. The extent to which the employees of the firms are the supporters of continuous learning in order to improve their performance; 3. The extent to which the employees of firms are perceptive to change

167 4. The degree to which the employees of firms are the supporters of continuous adaptation. One of the most important aspects for the development of the culture of quality refers to the way in which the organization capitalizes the ideas regarding the employees improvement. Question 19 of the survey targets exactly these aspects. According to the results obtained, we drew up the graph in Figure 1. Analysing this graph, we notice that: - The most used method to capitalize the ideas regarding the employees improvement are the meetings, 94,1% of firms using them for this purpose. - The suggestion system is used by more than half of the firms surveyed, although in certain firms it does not appear in an institutionalised form. - Very few of the firms use the quality circles, only 11,1% of the surveyed firms. Although it is a very efficient instrument, it has not been used yet on a large scale in Bihor county firms. - The percentage of the firms using improvement project teams is relatively low. The two instruments, the quality circles and the improvement project teams, are specific to the firms with a strong culture of quality. These instruments do not only identify the improvement ideas, their successful implementation being a priority. The lack of the quality circles and of the improvement project teams from the majority of firms demonstrates the firms inability to capitalize, meaning to implement, the ideas regarding the employees improvement. - Brainstorming, too, as an instrument for the generation and collection of the improvement ideas is little used in the Bihor firms. In spite of the fact that they have proved their efficiency, and we cannot talk about their character of novelty, the brainstorming, the quality circles and the improvement project teams are not the privilege of Bihor firms. It can be noticed that 71,8% of the employees are to a very great extent and to a great extent the supporters of continuous learning in order to improve their performances, which represents a significant percentage. It is important that, in reality, the employees, in order to operationalize this skill, consider this responsibility as being their own and not only of the firm s. 166

168 Fig. 1 Ways to capitalize the ideas regarding the employees improvement Table 1 The extent to which the employees of firms are the supporters of continuous learning % Cumulative percentage to a very great extent 10,6 10,6 to a great extent 61,2 71,8 to a small extent 23,5 95,3 to a very small extent 4,7 100,0 Total 100,0 Fig. 2 The extent to which the employees of firms are the supporters of continuous learning

169 It can be noticed that 65,9% of the employees are perceptive to change, which represents a significant percentage. The dynamic character of quality requires perceptiveness to continuous change. The improvement of quality requires a continuous succession of changes. Table 2 The extent to which the employees of firms are perceptive to change % Cumulative percentage to a very great extent 9,4 9,4 to a great extent 56,5 65,9 to a small extent 28,2 94,1 to a very small extent 5,9 100,0 Total 100,0 The continuous improvement and re-engineering are not possible when receptiveness to change is missing. The firm s adaptability to frequent changes occurred in its external environment highly depends on the extent to which the employees are perceptive to change. Fig. 3 The extent to which the employees of a firm are receptive to change An overwhelming percentage of 85,9% of the employees are to a very great extent and to a great extent the supporters of the continuous improvement of quality. It represents a good premise for the improvement of competitiveness of firms in Bihor county. 168

170 Table 3 The extent to which the employees of firms are the supporters of continuous change/improvement Cumulative percentage % to a very great extent 12,9 12,9 to a great extent 72,9 85,9 to a small extent 12,9 98,8 to a very small extent 1,2 100,0 Total 100,0 Fig. 4 The extent to which the employees of firms are the supporters of continuous change/ improvement In this research, we have identified three managerial typologies regarding the attitude towards the problem of quality: - The managers who do not understand the strategic importance of quality, for which they treat it superficially. The probability to develop a culture of quality in the organizations run by them is almost zero. - The managers who understand the strategic importance of quality, yet they consider that they do not have the time and the resources necessary to devote themselves to it. Perhaps it is required a major failure (the loss of a very important bid/contract due to their organization s incapacity to provide quality) for them to change their approach. - The managers who understand the strategic importance of quality and devote considerable time to this problem, including to the development of a culture of quality in the firms they manage

171 CONCLUSIONS The conclusions of the research carried out are the following: 1) In Bihor county firms there is a tireless preoccupation of the managers to develop a culture of quality and to improve its capability to provide quality. Most of the managers belong to the last typology of the three presented above. 2) The employees are to a great extent the supporters of continuous improvement of quality. It is important that they capitalize the continuous improvement in the daily practice, the motivational system in the firm being vital in this view. 3) Yet, insignificant, there is a difference between the firms with foreign controlling capital and the firms with Romanian controlling capital. 4) Dependent on the procurement of the financing sources in the future we intend to expand our research to the level of Romanian firms and to fathom our research by measuring the correlation coefficient between the dynamic of the firms turnover and the intensity of the their culture of quality. REFERENCES [1] Băcanu B., Management strategic în turism. Concepte și studii de caz, Editura Polirom, 2009; [2]Bruhn M., Orientarea spre client temelia afacerii de succes, Editura Economică, Bucureşti, 2001; [3] Mintzberg, H. Managers not MBA`s, Meteor Press, București, [4] Juran M. J., Blanton A. G. Manualul calităţii Juran, Editat de SRAC, Bucureşti

172 Grzegorz Wróbel University of Information Technology and Management in Rzeszów, Poland INTEGRATING OF SIMULATION MODELING METHOD WITH THE CONCEPT OF LOW-COST PROCESS IMPROVEMENT Key words: simulation, model, process improvement, kaizen, optimization ABSTRACT Activity in the area of process improvement increases in the periods of recession. There are two ways of process improvement. The first one is radical investment in technology and infrastructure. The second one concerns the commonsense based on human efforts, with features of small improvements regularity. One of the main practical functions of simulation modeling is the optimization of processes. Simulation modeling methodology can be integrated in the classic practical PDCA improvement process, as an alternative tool for identification and elimination of waste, analysis and implementation of optimization ideas. Simulation models also allow to determine the influence of changes proposed into the process flow. The attached example of the simulation shows the ability to identify areas of improvement and actions suggested. INTRODUCTION Keeping a company competitive in dynamically changing market conditions requires from contemporary managers not only specific competencies but also flexibility in the choice of management concepts and methods and techniques supporting them on operational level. It is relatively easy to prove the thesis that in prosperous economy and with relative ease in decision making, bearing comparatively lower risk, managers try to intensify actions focused on aggressive, offensive strategies aiming at company s development, expanding its market share or at least consolidating its competitive condition. In the situation where it is impossible to improve market absorption, with the signs of a slump in economy leads as business practices shows to intensification of controlling actions and looking for savings. In other words, the tool to defend profits, often planned in development strategies or expected by strategic shareholders, is internal optimization, leading to increase of company assets productivity. On operational level it boils down to increased attention to process quality, elimination of waste on the specific stages of the value stream chain and efficient product flow.

173 The focus of managerial decisions therefore decidedly moves to the inside of an organization. What is the reason for that? In the outside environment there are not many chances to prove one s marketing or commercial effectiveness and, what is more, the elements of this environment are not within direct managerial control and are not the asset that can be managed and improved. It certainly does not mean resignation from market monitoring especially taking into account the need for analysis of risk occurring more often than in the periods of prosperous economy. World class competitors (global corporations in a way setting trends in modern management) consequently realizing their longterm strategies, not resigning, despite economic turbulences, from their market expansion plans and quality policies on their internal processes. Bering in mind the significance of process improvement, especially important during slumps in economy, a problem arises related to the choice of methods and tools which allow for identification, analysis and possible implementation of potential savings and improvements. 1 The essence of this problem is the evaluation of possibilities of their implementation which depend on two factors: human, related to adaptation to change, understanding, acceptance and implementation of new rules, work procedures, organizational culture; financial, related to investment in technologies, infrastructure and it tools. Success in the world economy is very often perceived in three main categories: competition, risk and innovation. What determines success is the speed of taking accurate decisions and solid informational support of this process. Let s consider several examples of the influence of competition and risk on customer-oriented enterprises. Production and distribution of goods and services not directly connected with the information on demand is economically unprofitable. The result of such approach are high stock levels, which, in turn, minimize company s profits. Electronic goods lying idly in warehouses depreciate in view of technological and innovative changes systematically introduced in new products. Food filling the shelves pass its use-by date and service providers and service staff wait idly for customers making no profits. 1 I base the thesis about particular interest in process improvement concepts on conversations with participants of congresses, conferences and training courses organized in the years , that is the commencing period of world crisis. The number of participants and general demand for the know how in the fields of kaizen, lean, process simulation increased significantly (Congress Gemba Kaizen, Kaizen College). It might also be an effect of marketing activities and temporarily increased interest of quality managers in these concepts. Nevertheless, without market demand this kind of services and enterprises could not have taken place on such a scale. 172

174 From the perspective of company management practice one cannot afford to keep unused assets (people, machines) on one hand, and, on the other, to lead to insufficient supply and as a result to loose customers. Suppliers of various goods, for instance retailers refuse to accept storage costs, which they would have to sell in sales later. In reply to the need to meet customers requirements quickly and accurately the concept of pull production (pull system) has been developed. According to its principles goods and products are only produced if a need for them appears. In theory it sounds like a perfect solution. In practice though it is difficult to implement. Similar scenarios refer to other sectors. Banks want to optimize employment levels by opening the suitable amount of branches serving customers and dealing with their financial needs. Grocery shops face a similar problem with balancing their cash desk personnel and employees who restock the shelves. Logistics units in the army have to maintain a specific spare parts level for machines and devices, and deliver them to the places, where they are needed at a time. Hospitals have to know what the optimal amount of rooms, beds and equipment is necessary to cure patients diverse in terms of illness types and their medical condition, while trying to minimize operational costs and keep their activities profitable. 1. THE IMPORTANCE OF SIMULATION MODELING IN PROCESS IMPROVEMENT People in organizations are learning concepts such as Lean, Six Sigma, and Continuous Improvement to analyze and improve their operations and the way they interact while doing business. Many of the concepts involve people at all levels of an organization studying and improving their operations using simple analytical tools. Unfortunately, a company or organization generates more innovative ideas than it can handle. Priorities for funds have to be considered as well as the impact of the innovative concept. With highly interactive systems, a great idea for one area may actually harm another. For example, a lean team on the production floor gave a recommendation for how they could increase the capacity of their assembly line without the need for additional equipment or personnel. They suggested that by making a minor change in the resource flow path, they could share part of the path with a nearby line that had excess capacity. There also were proposals from lean teams on another line claiming efficiency improvement, including the line sharing part production. Someone has to decide if

175 the proposed efficiency gain would actually be achieved and be sustainable through production forecasts for both lines. 2 Before defining the significance of computer simulation to process improvement and managerial decision support, let s interpret the term simulation as such. To simulate means to copy or imitate a real-life system with the help of experiments carried out on the model representing (showing) this system. Simulation is, however, not only imitation and experimentation. It encompasses such activities as defining, designing and model building, and, among others: definition of experiments to be carried out, gathering and analyzing of data needed to start the model, analysis and interpretation of results gathered from carried out experiments. Therefore, to simulate is to participate in the process, which includes all the above-mentioned activities. In view of quite broad possibilities of decision support coming from the use of computer simulation modeling processes, one may pose a question regarding their role, use and integration with classic, common sense methods of process improvement kaizen and lean. Rational necessity of combining these two approaches and obtaining synergy in the form of higher and consistent quality standard has been indicated by the author of kaizen Massaki Imai. This demand, taken into account the support of both kaizen and computer process modeling has been presented in drawing 1. Figure 1. Kaizen integration with innovation and computer simulation modeling support. Source: Own study basing on Imai M., Kaizen. Klucz do konkurencyjnego sukcesu Japonii, Wydawnictwo MT Biznes, Warszawa 2007, s Beaverstock M., Greenwood A., Lavery E., Nordgren W., Applied Simulation. Modeling and Analysis using Flexsim, Flexsim Software Products, Inc., Canyon Park Technology Center, Orem, USA, 2011, s

176 On account of the necessity of buying license for simulation software and the cost of quality engineers training in the scope of object-oriented modeling, the methods of computer simulation should be categorized as quality investments rather than minor everyday kaizen improvements. On the other hand the speed of carrying out multi-variant experiments, the overview of changes in quality indicators at many process stages with no resources being excluded from current operations are the advantages of this solution. Taking into account the benefits related to saving the time spent on the carried out analysis (PDCA improvement process), computer simulation methods supplement detailed observations of specific workstation areas and sections and redirect them to wider process perspective (multichannel processes, production line etc.) In this way, single workstation improvements and spot-on waste elimination leads not only to higher quality standards reached in this area but its influence on the whole process it affects is checked. It results in the possibility of multiplying the specific kaizen actions as well as of checking them in terms of integration in the process as a whole. It s worth remembering that modification of a single element of the value chain has its consequences in the product flow. It in turn influences the mode of operation and work organization in the preceding and following links: for instance a change in operation time or in setup of machine X may result in development of bottle necks or changes in the whole production cycle. Summing up the support of process improvement by the methods of simulation and experiment analysis may be realized on two planes: 1. Innovative, in which simulation concerns: complex projects, process models with multiple elements and criteria, designing of organizational systems from scratch (Greenfield investments), tool support for realized concept of business process reengineering. Example: building of a football stadium, simulation of people flow in the system of entrances and exits and the logistics of their transport. Optimization criteria: safety standards (stadium leaving time), public transport organization (the number of vehicles, communication routes, timetables), road capacity (the layout of infrastructure surrounding the stadium). 2. Kaizen continuous improvement in which simulation supports and verifies improvement ideas from the perspective of the entire process. These are simple flow models concerning analyzed workstation. Example: Change in machine and device setup in a workstation (layout). Change in machine change-over time. Optimization criteria: balancing the entire production line (one piece flow time), productivity (operator and the machine s working

177 time, OEE), minimization of storage space (accumulation of a number of flow elements in queues storage places). 2. CLASSIC METHODS OF PROCESS IMPROVEMENT AND OPTIMIZATION OF A VALUE CHAIN Improvement of quality standards concerns the assets as such (human, IT, fixed) but also value development processes where the assets are used. The level of process quality depends on the effectiveness of utilization of assets in the supply chain and on employment of methods allowing for maximization of the value added. Finally, the third if not the most important object of improvement is the product itself (service), reflecting in its features the process value as well. Product / service marketing interpretation scheme and the scope and the influence of quality actions on its specific components has been shown in drawing 2. Higher quality of assets has an influence on the product core, the real and extended product. Process quality exerts direct influence on such aspects as: project, price, customer care, deliveries, service. Figure 2. Product s components and the division of improvement activities Source: Own study Generally, the concepts of process improvement and optimization of value stream can be divided into two groups. The first includes the concepts which require serious capital investments, the other low-cost concepts based on human effort and common sense. BPR (Business Process Reengineering) would be included in the first group, KMS (Kaizen Management System), TQM and TFM in the second. Leaving aside the issues of asset improvement and development of technical and functional standards of the product as such, I will concentrate on process quality improvement methodology. 176

178 Process quality can be understood as: - the level at which customer requirements are met through the use of a specific method of product manufacturing, service provision (perspective of external client defining the product and the way it is manufactured); - work organization methods and effective use of available assets with the goal of maximizing value added and eliminating waste, monitored by a measurement system related to quality targets and taking into account accepted standards: trade, quality management systems, and safety and environment protection systems (perspective of a company realizing a given management concept) Process quality improvement is realized with the utilization of a number of methods and techniques. The most commonly used among them are the low-cost quality management concepts kaizen and lean referred to in this paper as classic tools. A cohesive system of all process improvement systems has been proposed by Masaaki Imai and is referred to as KMS (Kaizen Management System). The system is presented in drawing 3. Figure 3. Kaizen Management System Source: ( ) The basis for the use of particular methods and tools in four main process improvement concepts is the awareness and functioning of quality culture manifesting itself through the following activities, artifacts, rules and norms of behavior (total change management):

179 1. The awareness of muda, that is perceiving work environment from the angle of the objects and actions which add value for the client and the ones which do not add value becoming different kind of waste (muda). This awareness leads to identification and elimination of excessive production, supplies, shortages, unnecessary movement, process errors, waiting and transportation. 2. Standardization, consisting of identification and documentation of the best way of performing particular work. The standard sets the process quality level, which, in the early phase of implementation is unstable, becomes a maintained standard in the course of gaining experience, undergoing training and with the support of lean. 3. 5S is a basic technique used to keep order with the goal of improvement of process quality, work effectiveness and discipline. The techniques comprise of realization of five subsequent steps (actions): selection, systematics, cleaning, standardization and self-discipline Visual management. All activities, which through the system of labels, symbols and other visual effects, aim at quick and understandable presenting of any information and gembutsu (process objects). Visualization should assist in quick understanding of gemba, identification of flow in the process and perceiving all its abnormalities. Without introduction of the above actions and improvement techniques there are no real chances of implementing any of kaizen systems as they formulate fundamental attitude and style of work aimed at improvement. Their effective introduction into a company s practice allows for taking care of implementation of four main pillars of KMS in organizational system. 1. Total Flow Management. Main goal process improvement through flow optimization. Management, which utilizes tools that streamline flow and eliminate waste in production sections: VSM (value stream mapping), SMED, kanban, line balancing and one piece flow, low-cost automation, just in time, logistics organization close to mizusumashi etc. 2. Total Productive Maintenance. Main goal process improvement through extensive machine park management. Management, which utilizes the following tools: kobetsu kaizen board, machines utilization effectiveness measurement (OEE), creation and visualization of machine park maintenance standards, autonomous maintenance 3 Imai M., Gemba Kaizen. Zdroworozsądkowe, niskokosztowe podejście do zarządzania, Wydawnictwo MT Biznes, Warszawa, 2006, s

180 independent maintenance of workstation standards, monitoring of MTTR, MTBF indicators, EEM Early Equipment Management. 3. Total Quality Management. Main goal process improvement through managing its quality standards, organization of a company s quality activities engaging all employees at every organizational level. Currently, continuous improvement has been included in international norms of ISO quality management systems. Management according to this concept encompasses the use of the following tools: QFD, FMEA, SPC, experiments design, block diagram, Ikishawa diagram, ABC method, control charts, one point lessons, quality self-control matrix etc. 4. Total Service Management. Main goal process improvement in service units (administration departments). The concept is in fact integrated with three previous ones, but taking account of the specificity of service processes (supporting). Tools similar to the ones used in production, aimed at helping in waste elimination, standardization, visualization and flow optimization. KMS model is supplemented by a diagram of conduct logic in every of the abovementioned management concepts, despite their profile orientation to flow (TFM), machines and devices (TPM), standards and people (TQM), and business and administration (TSM). The logic is built on the general rule of perceiving all actions from the perspective of process, supply chain, where the actions between an individual supplier and consumer are verified in terms of three key criteria (time, cost and quality). KMS is than quite a consistent system. There is however one fundamental question. Where in this system is the most appropriate place for simulation modeling? Without any doubt, process and its flow improvement as a general function of simulation and dynamic analysis (process functioning in a given time space), is close to the concept of TFM. The focus of this approach is in the first place on tasks and goals related to: design and improvement of production lines, optimization of their supply, synchronization of individual links (workstations) and leveling their work, planning in pull system and space utilization. Time, cost, quality (standard), metric area (surface area), supply level, queues and bottle necks are among the most common problem criteria for process analysts, kaizen-lean managers, maintenance staff. The tasks of process improvement are commonly ascribed to the structures responsible for quality management. It is where simulation modeling competencies should be located, integrated with kaizen-lean team competencies or extending this team by an engineer, modeler, IT specialist-designer supporting their work from the technical perspective

181 3. THE POINT OF APPLICATIONS OF SIMULATION MODELS IN MANAGERS DECISION SUPPORT SYSTEMS Managerial work creates the need to understand, analyze and optimally manage a given area. Organizational system conveys to the decision-makers a number of information on its operation, on the basis of which attempts are made at choosing optimal solution with the estimated risk of making a mistake. As quite often are these analyses complex and multi-criteria, managers help themselves with various IT systems including simulation applications. Process simulation modeling software should be treated as a mainly analytical tool, which helps engineers and managers in decision making in the scope of process design and its operational exploitation. The main idea of simulation applications use is then decision making process support, for various managers with emphasis on quality managers, maintenance engineers and kaizen-lean managers. Simulation applications should be integrated and constitute a fixed element of IT decision support system. The place and role of simulation models within the organization matrix is presented in drawing 4. Figure 4. Model based decision support system Źródło: Beaverstock M., Greenwood A., Lavery E., Nordgren W., Applied Simulation. Modeling and Analysis using Flexsim, Flexsim Software Products, Inc., Canyon Park Technology Center, Orem, USA, 2011, s. 6. The main effect of process simulation use is: 180

182 design and process modification costs savings, the possibility of multiple experimentation with changes and adaptations with the goal of optimizing all process elements and shortening the time necessary to get the optimal solution, within given boundary conditions: human resources, technology, know how, infrastructure. The basic functionality of simulation software is the possibility of building a real model of a system / process, for example production process (some applications allow for its development in 3D graphics), and then in specific shorter than real life time frames allow for studying and analyzing its functioning (flows). The cost of such simulation is much lower than carried out in real life with the exclusion from current operation of the chosen spatial area (production hall or its part) as well as all the assets engaged in the process or located in the excluded space. Fulfilling the role of an analytical tool with what-if functionality, computer process simulation provides feedback related to many proposed solutions, which may help narrow the scope of analytic engineer s optimal search. With the help of realistic graphic animations and extensive reports on, for instance efficiency, downtime, change-over, queues, one piece flow etc., it is quite quickly possible to identify process quality problems and evaluate their alternative solutions. Summing up, computer process simulation allows to avoid many design errors before their costly implementation: process layout, additional investments in infrastructure, devices, people, methodology of systemic operational work with its procedures and policies. Improvements, which in the past took months or even years of implemented experiments with simultaneous deprivation of assets for current business operation, can be achieved within days or weeks with the use of computer simulation. It is obvious that not all actions and activities must be analyzed with the use of computer simulation. The basic criterion for or against the use of computer modeling is the level of problem complexity. The aim of every simulation is an analysis of activities (process course) and obtaining as a result, the indicator values, the knowledge of which is necessary to estimate the effectiveness or problem solution. If individual process activities occur sequentially and there are no stoppages, bottle necks or unexpected problems identified in this chain, all indicator values can be calculated in a normal spreadsheet. 4 4 Beaverstock M., Applied Simulation, op.cit., s

183 What kind of optimization problems can be tackled and at the same time what effects can be achieved with the use of computer simulation model solutions? The list below presents the most important and the most common tasks of simulation optimization. Process simulation is used to: improve the utilization of owned equipment and machines, reduce waiting time and size of queues, allocate assets successfully, minimize negative effects of breakdowns, minimize negative effects of rejections and losses (waste), analyze alternative investment ideas, determine capacity times, analyze cost reduction plans, set optimal batch quantity and spares sequence, optimize priorities and logic of dispatch of goods and services, train operators in general system maintenance and work efficiency, demonstrate new design tools and possibilities, manage everyday operational decisions. The use of software in creation of process simulation models, experimenting and analysis of their optimization, is known in business practice but is not common. To the greatest extent simulation methods and software offer is characteristic of business activity in the United States. The key barriers preventing wider use of these tools in our economy are: high purchase cost of commercial licenses; necessity to acquire knowledge of both object modeling and systemic analysis (process); narrow scope of training services and technical support for modelers and process analysts; relatively little utilization of simulation software in education of engineers, IT specialists, logistic staff and economists. Simulation modeling methodology against classic approach to process improvement. Simulation modeling methodology basically consists of six stages. Their number differs in various sources but they always covers a similar scope of activities. Their allocation to kaizen PDCA improvement cycle has been presented in drawing

184 Figure 5. PDCA cycle and assigned phases of simulation modeling Source: Own study. The following set of activities are characteristic of individual stages of simulation modeling. In principle they correspond to PDCA technique (Plan-Do- Check-Act) in the continuous improvement concept: 1. Problem definition and determination of simulation goal. It is the first stage without which it is difficult to imagine any model. Every improvement and optimization is built on the ground of standardized level of process quality or on the essence of the problem. Otherwise we would be dealing with pure theorizing or art for art s sake. Subsequent cycle of PDCA should not be started if the process being improved is unstable. In order to improve anything, its initial state should be known beforehand and controlled. At this stage, the data and information is collected necessary for a detailed characterization of the process being examined (system documentation, current measurement in gemba kaizen). Activities of this stage include: description of initial state, problem characteristics, goal of model creation and experimentation, definition of key efficiency indicators, definition of main decision variables, definition of scope, assumptions and simulation conditions. 2. Model operational characteristics. At this stage the most important activity is graphic presentation of the whole analyzed process. Analyst

185 184 modeler, in communication with quality engineer, create object flow diagram (OFD) on the basis of which, simulation model will be created. OFD is supplemented with additional diagrams (for example flowchart) and pictures from gemba kaizen. 3. Model construction. After collecting necessary information computer simulation model is created. This activity can be carried out by a constructor or IT designer, leaving part of simulation analysis and experiments to quality engineer. Object modeling competencies are necessary to carry out this activity. At this stage the following actions are taken: choice of simulation measurements, definition of properties, labels and operations of flow elements, of fixed objects and actors (operators), determination of objects logic and contents of global tables. This stage can be considered equivalent to the stage of do in classic cycle of PDCA improvement. 4. Experiments design. Preparation of even the most detailed simulation model does not solve the essence of a problem and does not justify its creation. Having a basic model of a chosen system at his disposal, quality engineer makes a process flow diagnosis starting simulation. In the simulation, quality engineer identifies places and objects, which do not meet process standards or input improvements from workers suggestion systems and analyzes their influence on indicator improvements and the flow in the whole process. For this purpose he makes all sorts of modifications in the model s layout elements and their features, creating individual model versions and carries out experimental simulations for each of them. 5. Analysis of experiments results and choice of optimal solution. Individual experiments variants and model variables manipulation should lead to the choice of the right model i.e. the one that meets the assumed (anticipated) effects of the proposed process changes (improvements) or the goals of carried out audit (cost controlling, identification or elimination of waste). If: proposed changes introduced to the model generate the expected improvement effects (positive validation result) and, at the same time, the scope of their implementation in operation practice is not time-consuming and does not require incurring significant costs and,

186 introduced modifications do not require starting the procedure of technological corrections, budget changes in order to finance investments and decisions of higher management, then, at this stage of modeling, quality engineer with the process owner takes the decision about potential practical verification of the implemented changes. Positive outcome of the improvement s evaluation results in its implementation and procedural documentation and, at the same time finishes PDCA cycle (stage 6). Launch of the new process standardization is the subsequent task. Negative result which despite simulation being carried out, because of too simplified assumptions or errors in simulation model can also occur leads to suspension or rejection of change proposal, or its archiving for the use in the future. 6. Graphic presentation of the right version of a result simulation. Management decision. The last stage of continuous improvement is implementation of the improvement. In the case of model solutions going, in terms of scope, cost or competencies, beyond lower and middle management, simulation is presented in a graphic form (at present some software offers 3D rendering) with analysis results to adequate level of management who finally accept or reject (suspend) the project s implementation. 4. EXAMPLE OF THE USE OF SIMULATION MODELING IN PROCESS OPTIMIZATION Process simulation and optimization analysis software has been evolving for years, like operation systems, management systems, managerial decisionsupport systems, office applications for vector graphics, finance management, documentation etc. An example of the use of simulation modeling for process optimization problems will be presented on the basis of the use of one of the most commonly used software in the USA, i.e. Flexism from Flexism Software. Flexism is classified as software for discreet events simulation. It means it is used in system modeling in which, in the result of certain events, the state in is individual points (areas) changes in time. Current state of point data (system elements) may be classified as follows: idle, busy, locked, while client order reception, product movement, machine breakdown etc. Elements, which are processed in discrete simulation model, can be physical products, but they can also be clients, documents, tasks, drawings, telephone conversations, s. These elements

187 go through various processing series, queues, transportation which are defined as process flow. Each step of this process can require one or more of assets such as machines, conveyors, operators, vehicles or various kinds of tools. Some of these assets are stationary, some movable, some dedicated to specific tasks, some multitask. Summing this short characteristics up, there are three basic problems which may be solved with the use of this software: Customer service problems: the need for customers and their requirements service at the highest satisfaction level at the lowest price; Production problems: the necessity to manufacture the right product at the right time and at the lowest possible price; Logistic problems: the necessity to deliver the right product to the right place at the right time at the lowest possible price. Presented case study comes from the project realized by the team of Jonathan Carter, Preston Cauley and Selvarani Radhakrishnan. The main goal of selected door assembly process simulation was the verification of possibility of adjusting its organization in such a way that enables to carry out production plan within 5 working days and 7,5 hours working day, compared to current state of 10 hour working day and work on some Saturdays. Figure 6. Diagram of the door assembly process and assembly components Source: ( ). The achievement of the assumed effects was verified by checking the values of basic variables in four experiments. The first concerned introduction of 186

188 only one queue to the process (elements storage area) in front of assembly workstations. The second included hiring an extra person responsible for so called setup, that is, preparation of elements for assembly. The third added a worker to the putty and clamping stations to eliminate all bottle necks. The fourth in turn combined all the above scenarios in order to minimize total process time and cost. The basic variables optimized in the process were: total daily operation time (activities) and total daily labor cost. The diagram of performed activities has been presented in drawing 6. Figure 7. Object Flow Diagram Example of the door assembly process. Source: Carter J., Cauley P. Radhakrishnan S., Door Assembly Process Improvement Simulation, Flexsim Software Products, 2011, s. 8. Simulation modeling uses similar situation analysis and diagnosis techniques as the ones known in logistic management concepts or in total flow management. The use of graphic presentation of the process including fixed objects,

189 process activities, flow direction and optimization indicators is an example of that. The diagram is called OFD (Object Flow Diagram) and in essence conveys similar information to process analyst as a diagram presented in classic VSM method (Value Stream Mapping) or in a block diagram (flowchart). An example of a simple flow diagram for door assembly process has been presented in drawing 7. In drawing 8 an image of input model created in Flexism simulation has been presented showing all fixed process assets (input, waiting queues, workstations, output) and the network of their interconnections with the product flow direction (door components) indicated. Figure 8. Screenshot 3D view of the basic simulation model in Flexsim. Source: Carter J., Cauley P. Radhakrishnan S., Door Assembly Process Improvement Simulation, Flexsim Software Products, 2011, s. 11. The values of the analyzed variables in individual simulation experiments have been presented table 1. Table 1. The results of base case and four simulation experiments. Base case Scenario 1 Scenario 2 Scenario 1 Bonus Scenario 2 Bonus Average time (in minutes) Standard deviation (in minutes) Minimum value (in minutes) Maximum value (in minutes) Average assembly cost $ $174 $ $177 $ Average clamb cost $ $116 $89.20 $118 $86.80 Average mud and putty $90.15 $87 $66.90 $88.50 $65.10 cost Average setup operator cost $33.45 $

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