TQM Analysis of Lucent Technologies

Table of Content

The following is an attempt to analyze AT&T’s use of Total Quality Management throughout its organization. Since AT is an elaborately enormous corporation I will focus my study to AT Power Systems/Lucent Technologies. This division of AT has been the industry standard for excellence since TQM was first introduced to the company. AT Power Systems has become one the world’s most dynamic companies because of its use of TQM. I will provide a brief description of who AT&T Power Systems is, a description of the events that lead up to its use of TQM, AT&T’s TQM philosophy, and how this philosophy was implemented. Finally I will discuss the benefits AT Power Systems realized through their use of Total Quality Management.

AT Power Systems provides a verity of power products for the data processing and telecommunications industries. Power System and its 4,200 employee’s design, develop, manufacture, and market electronic power systems, components, and power supplies to an increasingly international marketplace. In the past ten years AT&T as a whole has gone through a dramatic metamorphous. It was forced to change from a large telecommunications monopoly providing universal telephone service, to a competitive global corporation providing a full range of communication services and technologies. The “new” AT&T is a potpourri of smaller, highly focussed entities. Each entity has its own customers, competitors, and operational functions.

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Power Systems is the pinnacle of the “new” AT&T. In less than five years Power Systems has become the prototype for successfully implementing the cultural and organizational revolution know as Total Quality Management. It has not only received internal recognition, but external achievement as well. In 1994 Power Systems was the first American company to win Japan’s prestigious Deming Prize for Quality Management. In the same year AT’s long distance division won America’s Malcolm Baldrige National Quality Award. AT’s TQM philosophy made it the first corporation to win these two awards.

Why did Power Systems change to TQM?

Prior to 1990 Power Systems provided equipment for only its parent company AT&T. Power Systems was a lackluster division of AT&T that reported losses in numerous quarters. As the scope AT&T and business as a whole changed Power Systems was forced to survive on its own. No longer would losses be tolerated, if the work couldn’t be completed in a cost-effective manner the division would be sold and the work would be given to an outsourcer.

A.M. (Andy) Guarriello, Vice President & COO of Power Systems, was given the job of implementing TQM. Guarriello along with Power Systems management team launched the “Dallas Vision” project, an initiative involving physical, organizational, and philosophical changes that soon led to the adoption of Total Quality Management as the management system for the future. Power Systems consolidated several of its locations into several small internal business units. These units would become to foundation that Power Systems operated on. Each units is given the resources to develop, engineer, manufacture, and its products. Functions such as human resources, finance, marketing, and sales are provided by smaller organizations developed to support the internal units.

Power Systems Dallas unit was completely redesigned. This 900,000 square foot facility was rearranged into what AT calls “focused factories. Each “focused factory” has the capability to accept incoming material, manufacture, and ship finished products. This layout was designed much within the guidelines of the Japanese JIT system. Power Systems took the Japanese approach to TQM and modified to fit the AT&T culture. The TQM criteria developed within Power Systems were selected to ensure the company’s ongoing focus on high standards for customer orientation, process excellence, employee involvement and continuous improvement.

AT&T’s TQM philosophy has three main components Quality Policy Deployment, Daily Work Management, and Quality Improvement. These three components combine to ensure robust solutions and continuous improvements. Quality Policy Deployment is the process of aligning the company’s attention and resources on a few high-priority, customer-focused issues. This is done to achieve to realize vast improvements in performance. Daily Work Management is a process of defining, measuring, and managing the day-to-day work of individuals and groups to obtain incremental improvements. This gives individual employees the opportunity to see improvements in measures they understand. Quality Improvement is a team-based problem-solving methodology that uses the seven-step process known as the “QI story process.” The “QI story process” is designed to detect and eliminate errors that cause defects. Together these three concepts formed an effective solution to Power Systems earlier problems.

Underlying these three concepts are four principles that are the foundation of AT&T’s TQM philosophy. These four are customer satisfaction, management-by-fact, respect for people, and P-D-C-A. P-D-C-A is Plan-Do-Check-Act developed by Shewhart. These four principles helped Power Systems implement its cultural change. Without any one of these TQM will not work, so Power Systems’ management instituted a training regiment that had every employee had at least two full days of training within the first year of implementation.

Power Systems has instilled pride in each one of its employees, which perpetuates outside the business to their customers. Each manager, worker, team member, and internal group believe that they can make a difference in the operation of the company. Each also believes they have the responsibility to produce a quality product efficiently that not only meets their customer’s needs, but also makes profit. This attitude as propelled Power Systems, or as it is now known Lucent Technologies, to the top of its industry.

What Benefits did Power Systems see from TQM?

Power Systems surpassed the expectations of management to realize colossal growth. Below is a list of improvements from a 1994 AT&T press release. These improvements pertain specifically to Power Systems.

· Number of customers increased by six times.

· Sales revenue grown by 20 percent.

· Operating return on assets (ROA) comparable to top 50 U.S. corporations.

· Customer satisfaction improved to industry-leading position.

· Product shipped to customers’ request date 95 percent of the time.

· Outgoing quality (ppm) improved by a factor of twenty.

· New product introduction interval reduced by one-half.

· Inventory and investment cut in half.

· Quality Improvement teams grown from zero to almost 300.

· Employee suggestions increased from 50 to 7000 per year.

· ISO 9000 certification for all locations.

· All chlorofluorocarbon (CFC) usage and toxic air emissions eliminated.

· More than 98 percent of all possible items recycled.

· “Workplace of the Future” a model of union-management cooperation.

Through the use of TQM Power Systems has thrust its way into the industry lead for quality management. All of the above benefits are directly related to the implementation of TQM and its philosophies. Power Systems took a stance against the traditional American way of doing business. In this increasing global marketplace businesses must change or they will become extinct. AT&T’s Power Systems was one the first American companies to adapt Japanese quality management styles to one that works here.

AT&T’s Power Systems is now Lucent Technologies, one of the fastest growing companies in the communication industry. AT&T is the leading American corporation in regards to quality management. When asked to comment on AT&T being awarded both the Deming and Baldrige Awards AT&T Chairman Robert E. Allen said, “Receiving these awards is like winning both the World Series and the World Cup on the same day.” Allen went on to say, “I couldn’t be more proud of the men and women of AT&T who earned this remarkable achievement; they know that the real winners are our customers.” I think the reason that AT&T has been successful with its TQM is that this philosophy has become inbreed into the culture at AT&T. Allen comments are a testament to that.

Andrew M. Guarriello’s participation in AT’s implementation has earned a spot in the Shingo Prize Academy. The Shingo Prize Academy consists of individuals who have distinguished themselves in the area of manufacturing excellence. Other members of the Academy include Dr. Eliyahu M. Goldratt and Jerry J. Jasinowski.

Shingo Prize for Excellence in Manufacturing. “Shingo Prize Manufacturing Academy”. [http://www.usu.edu/~shingo/academy.html]

AT&T. “Welcome to AT&T MICROELECTRONICS”. [http://www.careermosaic.com/cm/att_micro/att_micro1.html]

Byrnes, and Adele Ambrose. “AT&T wins Baldrige Award and Deming Prize in quality coup ” [http://www.att.com/press/1094/941018.chb.html]

Gualt, and Betsy Harrod. “Power Systems is first U.S. manufacturer to win Deming Prize”. [http://www.att.com/press/1094/941018.meb.html]

Dean, Edwin. “Total Quality Management”. [http://akao.larc.nasa.gov/dfc/tqm.html]

An Analysis of TQM at AT&T’s Power Systems/Lucent Technologies

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