Introduction: Identification of key issues underlying problems
Eurasia identified Total Quality Management (TQM) as a model it could use to improve the quality of its products. Coowar describes TQM as “the application of quantitative methods and human resources to improve all the processes within an organization and exceed all customer needs” (6). TQM has been in Eurasia implemented since 1995. One of the philosophies identified by Eurasia is “Being the Best, Not Necessarily the Biggest”.
Eurasia identifies low-cost and personalized services as its main strategies. The company identified planning, budgeting, and rewards as measures that can be taken to consistently produce quality. Eurasia also identified customer value, human value, shareholder value, and leadership/ intellectual value as items in its leadership model. Eurasia’s reliability team analyzes problems when they occur. It uses onshore monitoring to check that standards are not violated.
One of the problems encountered by companies in the 1980s was a high number of ships with low demand for services. The high-profile accidents that occurred during the period were blamed on ship managers, which damage their reputation. Environmental safety became more recognized as national governments and international bodies became more concerned about the well-being of the environment. There were no training or education institutes in Hong Kong that trained maritime professionals.
It resulted in high training costs for the company. The company has reduced employee turnover to very low levels, which may reduce training costs. The creation of the International Ship Managers’ Association (ISMA) acted as a benchmark for high-quality products. Some of the competitors employed niche marketing, which would indicate that they are more specialized to carry out their services than Eurasia. Reducing costs remain a major challenge for the company. The company needs to develop a plan to incorporate change. The company needs to assign costs when improvement has occurred so that they can be easily converted into value-added.
Eurasia identified Total Quality Management (TQM) as a model it could use to improve the quality of its products. The president, Mr Bajpaee, has a lot of experience working in the shipping industry. In addition, Mr Bajpaee has experience in international quality control standards. TQM was implemented in 1995. Continuous improvement as a principle of TQM creates the ability to meet changing demands and changing industry conditions.
One of the philosophies identified by Eurasia is “Being the Best, Not Necessarily the Biggest” (Farhoomand 5). Eurasia identifies low-cost and personalized services as its main strategies. Personalized services mean that Eurasia provides ship owners with customized services based on their description and industry standards. It creates value for customers because they are given products that specifically fit their needs. Eurasia recognizes that profitability is not the purpose for business, though it is a necessity for running a business. Creating value for all stakeholders is more important.
The company identified measures that can be taken to consistently produce quality. They include planning, budgeting, and reward-recognition, among others. Planning is a useful measure of enhancing quality because it indicates whether a unit is able to meet the set goals. Budgeting enables the company and its units to utilize resources efficiently. It is also used to measure how effective the units are enhancing quality against costs. High quality and a high cost may not add a lot of value to customers. On the other hand, high quality at relatively lower costs may be considered as value addition to customers. Reward and recognition are important methods of providing incentives for better performance. The measures can be used for control.
Eurasia also adopted a leadership model in which performance is measured by five core values. These are customer value, human value, shareholder value, and leadership/ intellectual value (Farhoomand 8). These values, together with the key performance indicators (KPI), act as a guide in measuring quality. The quality management team has found areas that they can monitor for performance. The indicators are measurable, which meets the requirement of TQM.
Eurasia uses measurable factors for the KPI. For example, the return on investment on shareholder value is measured using numbers. Leadership/ intellectual category is measured by experience. Customer value is measured by the reliability of prices to customers (Farhoomand 13).
One of the problems encountered by companies in the 1980s is the high number of ships with low demand for services (Farhoomand 2). It is a matter of quality because ship managers are required to create value for the owners of ships, who could be the shareholders.
The shipping industry experienced high-profile accidents in the 1980s (Farhoomand 4). The root cause has not been clearly discussed, but it was blamed on low standards set by ship managers. It could be old ships with poor maintenance. Ship managers reduced the occurrence of future blames by creating the International Ship Managers’ Association (ISMA), which acted as a benchmark for quality. Ship managers who are members would no longer be blamed for low standards unless they are directly involved.
Environmental safety became more recognized as national governments, and international bodies became more concerned (Farhoomand 4). Ship managers had given little concern to the environment on their business. There was an increase in regulatory pressure when ship managers were faced with low-cost pressure (Farhoomand 6). The regulation will ensure that all players incur costs of protecting the environment.
Eurasia tried to create a more favourable condition for some of its employees by allowing them to travel with their family members (Farhoomand 7). It could result in increased costs. However, it adds value to the firm because it may increase the retention of highly-skilled employees.
There were no training or education institutes in Hong Kong that trained maritime professionals (Farhoomand 7). As a result, ship managers had to incur high costs into training. In other industries, companies employ those who are already trained. The costs would be even higher had Eurasia not reduced turnover rates among seafarers. It means the company had to replace the employees who had left by training new ones.
Eurasia’s reliability team analyzes problems when they occur (Farhoomand 8). They identify root causes which are an important approach, according to system thinking. System thinking requires that problems are solved from their root causes. It involves identifying the extent of the sections affected by the problem. The problems are categorized before they are solved. It creates an opportunity to learn from problems. The company uses circulars to give updates to the crew. Coowar (42) explains that regular reviews are necessary for TQM. Eurasia conducts regular appraisals (Farhoomand 7).
The ISMA code of ship managers was formed in 1998 (Farhoomand 6). It ensures that members are protected from undeserved blames from problems that they encounter in the industry. It sets minimum standards that are approved by international bodies.
Awards are a better method of being rated against major players in the industry. Eurasia has won two awards, which it uses to build a reputation on standards (Farhoomand 9). It also indicates that Eurasia has exceeded the minimum requirements for quality standards.
The changing industry environment for ship managers was becoming a new challenge. New ships with a higher speed had entered the industry (Farhoomand 9).
The company has reduced employee turnover to very low levels. Coowar (7) elaborates that TQM creates a workplace that makes workers satisfied. It is an opportunity to reduce training costs and retain experienced workers. Experienced workers can find better solutions to problems than newly trained workers. The company has improved on the quality of training by increasing the length of time it takes to complete training.
Eurasia’s organizational structure allows information to flow easily. There are different levels of problem-solving. The company’s self-check offers an opportunity for work units. They can solve problems in a timely manner. Cross-check, and external check options will find out problems that may have evaded the units’ supervisors or crew (Farhoomand 8). Eurasia should be able to ascribe good leadership system by empowering workers and reducing controls (Coowar 17). Eurasia offers self-examination as an option to seafarers.
The company is threatened by a need to reduce costs. The need to reduce costs is against the requirement to improve standards. Higher standards may require increased costs. The internal failure costs are poor quality products identified before they reach the customer (Coowar 53).
Some of the competitors used niche marketing, which would indicate that they are more specialized to carry out their differentiated services than Eurasia (Farhoomand 3). On the other hand, Eurasia approach gave clients the assurance that they can find all services from a single company (Farhoomand 5). It involves a problem of quality because a more specialized company may be perceived as more competent.
Shipowners in high-cost countries were faced with the challenge of the labour force (Farhoomand 9). Trade unions that advocate for seafarers would interfere with low labour cost.
Eurasia recruited crews internationally (Farhoomand 7). It may create communication barriers if they do not speak a common language. It could also create a culture-clash if employees are not trained on cultural differences.
Eurasia’s reward system may create a culture of competition instead of collaboration if it is not administered properly.
The financial crises in Asia delayed plans for expansion to cover a larger area. One financial crisis was in 1997, and another in 2004 (Farhoomand 3). They limit the firm’s ability to create value for shareholders because of the reduced demand for products.
Eurasia should develop a plan to implement changes. Coowar (40) discusses that problems should be measured using numbers. For example, waste should be identified by the cost of waste. Eurasia should consider methods that conserve the environment as corporate social responsibility through voluntary compliance. Customers will soon want to be associated with companies that care for the environment. Eurasia needs to determine the costs of poor quality products to customers. The external failure costs are recorded when poor quality products reach the customer. It is based on customer complaints.
The internal failure costs are recorded when the working units identify and eliminate products they consider to be below standards. Eurasia should focus on prevention of poor quality products before they are identified by the customer. The company should measure prevention costs and appraisal costs because they ought to reduce as improvement takes place—appraisal costs associated with examining conformity to standards (Coowar 52). The firm needs to identify and eliminate areas that do not add value to the firm. These actions are taken mainly because costs are a major concern to Eurasia. The company can benefit from improvement if they are assigned costs that can be considered as value-added.
Coowar, Rosida 2009, Quality Control: Chapter 2 – Total Quality Management and Principles. Web.
Farhoomand, Ali. Eurasia International: Total Quality Management in the Shipping industry. Hong Kong, Asia Case Research Centre, 2004. Print.