From The Case Study mentioned bellow answer the following questions Nestle had a strict quality system in place for some time but was such a system the answer? What Alternatives or mofifications would be needed to ensure the responsivness of such a system? Case Study It was a sunny February afternoon in 2001. Ren-Louis Jaccoud, Vice president of quality management at Nestle, was reading through reports about recent quality issues in well-known companies worldwide. He was stunned. How could these world- class corporations get themselves into this sort of trouble? In particular, with all the changes that had occurred in the last 10 years in the supply chain and business environment, Jaccoud was not confident that the current approach to managing quality had kept pace with them.

When Peter Brabeck took over as CEO he had given a clear message that consumer preference and safe products were a top priority 1or Nestie, inere was no need to convince Rupert Gasser, executive vice president for technical, production and R&D, who had started his career with Nestl in quality.

Having quality problems was no longer an issue only for the factory or production unit. It needed to be considered from the Lop management perspective With global brands, all the products carried a promise to the consumer. If the promise was not fulfilled, the impact was felt throughout the corporation.

It was typical to hear comments such as "Oh, quality is a given, you have to have quality or you cannot compete." The attitude had become too complacent: "We have achieved quality, so we do not have to worry about it." Jaccoud believed that many companies had these problems to some extent and knew that he had to see to it that Nestl did not fall into the same trap.

This was exactly the challenge Jaccoud faced. He wanted to ensure that Nestl would never be in a bad position because of quality problems. How should the company devote enough attention constantly to the issue of quality inside the company and across the supply chain? What was the best way forward? As of April 2001 Nestl was the world's largest food company. In 2000 its sales were SFr 81.4 billion, with a net profit of SFr 5.8 billion. The largest product groups were beverages (SFr 23 billion), milk products, nutrition and ice cream (SFr 22 billion), and prepared dishes, cooking aids and pet care (SFr 20.6 billion). At the end of 2000 Nestl had 479 factories worldwide and approximately 230,000 employees.

Its six worldwide brands included Nestl, Nescaf, Nestea, Maggi, Buitoni and Friskies The brand portfolio also included other well-known brands like PerrierT and Vittel (mineral water), Cailler and KitKat (chocolate).

Nestle had a quality management team, which set overall quality objectives policies and guidelines, planned the use of resources for these activities and reviewed the functioning of the quality system. Markets and business divisions had their own quality assurance responsibilities.

Development of Quality Management

Quality is consistent confornance to customers' expectations

Approaches to qualty control have evolved over the decades. At first the focus was on inspection (error detection), it was then based on statistical methods and quality standards. Further developments have taken approaches varying from quality assurance and quality systems and planning to total quality management, which includes all company operations.

This has led to a broader view of quality and a more accurate response to basic quality issues. But at the same time quality management issues have dropped off the top management agenda--they are already supposed to be at a high level.

The traditional quality management approach based on statistical methods evaluates the variation from the mean. All processes vary to some extent around the mean Typically companies have set their acceptable specification range to include three standard deviations (sigmas) on each side of the mean-based on nomal distribution, 99.7% of variations lie within this range. As long as a company is abie to manufacture its products within its specification range, the products can be deemed to be of acceptable quality. A new quality standard was introduced with Motorola 's Six Sigma program, It implied a defect rate of only 3.4 defects per million, In addition to the manufacturing specification, the Six sigma program included design efforts to remove the latent defects. Even with thas approach there is always a chance of detective products getting through the system The smaller the filter the better, but even one case in a million could cause a major problem. he improved overall quality standards imay also make organizations complacent about quality issues, since defective products are Supposediy rarer han ever before

Statistical methods are typically applied to components of producis--and Sometimes to the products themselves But there is another view quality in use 1he concept of confomance to customers expectations has to include unknOwn or unexpected phenomena. Customers will use--or abuse--a product in ways that are sometimes difficult to magine But if the product fails in this use, it is the product-and its brand--that can suffer,

Impact of Recent Cases Related to Quality

Jaccoud wanted to develop a concise report of the evolving set of issues and their implications for Nestl, as well as a means for the board to provide consistent directions for the Nestle organizaton.

Before dealing specifically with Nestle' s situation, Jaccoud wanted to review Tecent incidents in other companies and retlect on their impact on top managementThe Nestle quality system was designed to guarantee, when correctly applied, reject rates between sx and three sigmas according to the mpact of the defect

Coca-Cola's Health Scare in Belgium and France in June 1999

Wednesday June 9. 1999

In northern Belgium, 42 school children complained of nausea, headaches and stomach cramps Coca-Cola Belgum withdrew about 2.5 million 20 cl. glass bottles that had come from the Coca-Cola Enterprises plant in Antwerp.

Thursday June 10 1999

Reuters News Service reported on the health scare with Coca-Cola products in Belgiun A Coca-Cola spokesperson explained the situation

We withdrew the product not because of health concems, but because it did not meet our hgh quality standards. It takes a lot longer to test what causes an off lavor. There has been speculation, bul our scienlists have not determined the cause yet.

Friday June 11, 1999

Major news agencies reported the incident in Belgum. Belgian health minister Luc van den Bossche ordered the withdrawal of certain soft drinks as a precaulionary measure. Van den Bossche stated: Neither the Belgian food inspection services nor Coca-Cola know the origin of the problem Coca-Cola has done all kinds of tests but we cannot say anything sure yet.

A Coca-Cola spokesperson explained:

Even the Ministry of Public Health still does not know what caused this, but we do know one thing. which is that there is no threat to health comparable to the cufent dioxin contaminatton problem

Saturday June 12, 1999

Maureen O Sullivan, a spokeswoman for Coca-Cola Belgium said:

are relatively draconian but what is important is that consumers are reassured cision taken by Coca-Cola and the Belgian government.

Monday June 14, 1999

Another 44 children had suffered with stomach pains. A toxicology center had found signs of hemolysis-a blood disorder that causes the destruction of red blood cells-among people who had drunk Coca-Cola. Health minister Van den Bossche decided to withdraw all Coca-Cola products from the shelves witn immediate effect.

Tuesday June 15, 1999

Luxembourg joned in the ban and France imposed partial restrictions. Coca-Cola said its investigation found that two separate incidents had resulted in below par products. Philippe Lenfant, director-general of Coca-Cola Enterprises Belgium, said that the bottling plant in Antwerp had used the wrong carbon dioxide to add fizz to the drinks. He added that cans for the Belgian market from a canning plant in Dunkirk, France, had been contaminated with a fungicide used to treat "a Small number of transportation pallets. Coca-cola said that investigators had found no health concerns.

Wednesday June 16, 1999

More than 80 people fell ill in France after consuming Coca-Cola products. Chairman and CEO Doug lvester stated from Atlanta:"The highest priority is the quality of our products. n Belgium, the health minister Van den Bossche was not oleased"Communication with the health authorities] does not go via news conferences

Thursday June 17, 1999

The Belgian Health Ministry relaxed its ban on some Coca-Cola products. The ministry ordered Coca-Cola to withdraw and destroy all the banned products and reimburse consumers Friday June 18, 1999

French consumer affaits minister Maryise bebranchu criticized Coca-Cola for taking too long to provide the authorities With a full list of potentially contaminated proeducts

Wednesday June 23, 1999

Belgium ended the nine-day sales ban en Co0ca-Cola s drinks and allowed Coca- Cola to resume produetton at its two plants Ouite honestiy, 1 am responsible Anything that happens With Coca-Cola quality around the world is my responstbility, said lvester

Sunday June 27 1999

Lenfant acknowledged that Coca-Cola had mishandled the scare

ertain extent We have a crisis

admit that we perhaps lost control of the situaton managemet strategyBut the crisis was bigger than any worst case scenario wel could have imagmed The first couple of days of the crisis we did not know [the cause] and I humbly admit perhaps we should have said 50 more clearly. humbly accept that the mage of the company, which is often associated with its products, may have taken a nasty

Thursday August 18, 1999

The European Comnission stated that Coca-Cola's explanation of its sae contaminated drinks in Belgium and France was "not entirely satisfactory. The report stated, "the real reasons for the widespread reports of ilness remain unknown

March 2000

The Ad Hoc Committee of the High Hygiene Couneil released its report on the incident Tins report stated:

th conctusion is that this is not a case of intoxIcation from the consumption of the sott drmks The most probable explanation of the observed symptoms is the presence of a bad odor andor tuste which in sensitive people tiggered a psychosomatie reaction with real conplaints such as a tendency to vomit or actual vomiting and fecling generally ill, as a resuft Fhe entire incident has all the charactenstics of mass sociogenie illness (MSI)

Conclusion

The health crisis had a direct impact on the company Coca-Cola Enterprises, bottler of Coca-Cola products n Europe and North America, was hit both on sales and costs

During the second quarter of 1999, Coca-Cola Enterprises reported one-of product recall costs of US$103 million

The volume of sales in the Benelux countries declined approximately 29% in the second quarter of 1999, with a decline of almost 70% in thee month of June.

Bridgestone/Firestone Tire Recall in August 2000

Tuesday May 2, 2000

The National Highway Traffic Safety Administration (NHTSA) opened a preliminary nvestigation into possible tread separation in Firestone tires, which were fitted as standard on the Ford Explorer

Monday May 22, 2000

Bridgestone/Firestone's prepared statement said

We contnually monitor the pertormance of af! our tire lhnes and the ob reintorces our beliet that these ar high-quality tires

Tuesday August 1L 2000

Two safety groups (Public Citizen and Strategic Safety asked Ford to recall millions of cars, saying the tread could peel off their Firestone tires. Bridgestone/Firestone officials could not be reached for Comment.

Wednesday August 2 2000

Major news agencies carried the story of the NHTSA investigation A federal agency had received complaints that 21 deaths had resulted from accidents allegediy caused by Firestone tires. Earlier in the summer, the NHTSA had said that it knew of only four cases Bridgestone/Firestone said in its statement that properly nflated and maintained Frestone ATX, ATX II and Wildemess tires Were among the safest on the road The company also urged concerned owners to go to local service centers for a free inspection

Thursday August 3, 2000

Ford announced that it had launched an intensive investigation.

Friday August 4. 2000

Sears Roebuck & Co., the number one tire retailer in the USA stopped selling certain Firestone tires. Bridgestone/Firestone reiterated that its tures were safe.

Saturday August 5. 2000

A Bridgestone/Firestone spokesperson said

Customers who would like to exchange their tires will be given a credit toward new tires based on the remaining life of the tires

Monday August 72000

The NHTSA spokesperson said At least 46 deaths are potentially related to alleged tire tread separation the number of complaints had reached 2/0, compared with 193 in late July and 90 1in May Bridgestone shares declined by more than 10% on the Toky0 stock market

Wednesday August9

The executive voluntary recall of 15-inch tires, estimating million

president of Bridgestoneirestone, Gary Crigge, announced a number of tires involved to be 6.5

We have been working around the clock wilh ietNHTSA and Ford to understand the issues at hand and io determine the best path foriward Given the preponderance ot incidents in four southern states, and the limited Supply ot eplacement tires at this time, we will be undertaking a three-phase recall by state

Monday August 14 2000

BridgestoneFirestone released a statement including the following:

so we can to determine what, if any, problem there may have been

with the design or manutactureof these tures. We remain contident that the Decatur plant is and has been world-el Tuesday August

An NHTSA official should have been in the recall

We continue to investigate whether 16-inch tires

Thursday August 24 2000

Masatoshi Ono, chief executive of Bridgestone/Firestone, stated:

All our plants meet QS9000 standards. I do not know the details of what particular workers said they did, but I have complete confidence in our products quality. Conclusion

During the fall, the investigation continued It found that the factories where Firestone tires were produced met standards set by the Us authorities and Ford but the tires produced there varied in quality.

At the beginning of 2001 the impact for Bridgestone/Firestone incuded

Profit for the financial year ending in December 2000 was far below the company's projection (Y13 billion vs. Y85 billion)

By January 2001 Bridgestone had lost about Y1.2 trillion in market value

The company announced that president Yoichiro Kaizaki was to step down in March 2001

Food Poisoning in Japan due to Snow Brand Milk Products in June 2000

Tuesday June 27

Before noon, the company received a call om a consumer claiming to have vomited after drinking Snow Brand low-fat mik Other members of the public made similar complaints during the day to the Osaka municipal government. All the board members ot Snow Brand Mk Produets were attending the annual shareholders meeting in Tokyo

Wednesday June 28, 2000

The municipal govermment ordered Snow Brand to recall all its low-fat milk However, the company did not comply, mantaining there was nothing wrong with ts products hat evening the board members at the annual shareholders meeting discussed whether or not the company should recall the products The president Tetsuro Ishikawa was not consulted at this time.

Thursday June 29. 2000

Snow Brand informed the Osaka municipal government of its decision to recall the products at 9:00, almost two days after the first call. Snow Brand conducted its first inspection by taking samples from 95 places in the production line. Saturday July 1.2000

Snow Brand president Ishikawa said at a press conference:

I could have acted more promptly if i had been involved in the discussion.. Low-fat milk is an unprofitable product for our company, so the incident will have little impact on our ability

Luesday Ja

42000

A Company spokesperson said it could no longer keep track of the number of complants because there were just too many

the whole company is in a state of panic. The management has not iold me anything aboOut what they will do next. Our sales staff is in a difficult position because they have not been kept informed of the developments

Thursday July 6, 2000

President Ishikawa announced he would resign in September.

Wednesday July 12 2000

Snow Brand announced it would voluntarily suspend operations at its 21 factories.

Thursday July 13, 2000

Employees of Snow Brand Milk Products were puzzled and concerned by their company's suspension of production at all 21 factories

Friday July 14, 2000

Snow Brand said it was even considering changing its brand--a household name in Japan

Wednesday July 26 2000

Snow Brand ran an advertisement in about 70 newspapers across the nation, apologizing for the scandal and promising to ensure safety in the future.

Friday July 28, 2000

President Ishikawa resigned two months ahead of schedule, along with seven members of the company's executive board. Post-Analysis of the Cause .of the Food Poisoning

On Friday March 31, 2000 the Snow Brand Taiki Factory in Hokkaido, Japan experienced a power failure. For about three hours the raw milk in storage at the time was held at temperatures between 20C and 40C. The milk in question was not destroyed but used for skimmed milk powder production on Apri 10. On Tuesday June 20, the skimmed milk powder produced at the T aiki plant on April 10 was shipped to the Snow Brand Osaka factory. On Friday June 23 and Monday June 26 the Osaka factory shipped reconstituted milk produced during the previous week.

Conclusion

The health scare lasted for almost two months, caiusing food poisoning in more than 14,000 people and the death of one person. The end results for Snow Brand included

Snow Brand Milk Products was expecting to make its first loss in 50 yearss due to a steep fall in sales

Snow Brand s shares lost more than a third of their value in the first weeks after the news emerged

About 30 out of 500 sales agents for Snow Brand Milk Products had gone out of business or halted operations as a result of the outbreak

The new president, Mr Nishi, commented: It will take several years before We become what we were pror |to the incident.

Challenges for Managing Quality

As he thought about these cases, Jaccoud wondered to what extent Nestl was immune to such unpleasant surprises. He knew that quality was all too easily taken for granted.Top management often assumed quality was a given and concentrated on ofher more urgent matters. But was this the right approach? The impact of quality problems, real or perceived, could have far-reaching Consequences

How should top management go about managing quality? How could Nestl quickly respond to a major quality challenge? Nestl had had a strict quality System in place for some time, but was such a system the answer? What alternatives or modifications would be needed to ensure the responiveness of Such a system?