Running Head: AN ANALYSIS OF QUALITY MANAGEMENT SYSTEM CHANGE

An Analysis of Quality Management System Change at Coca-Cola Ernest Shivers, Jeremy Stephens, & Johnath Stinnette Embry-Riddle Aeronautical University

AN ANALYSIS OF QUALITY MANAGEMENT SYSTEM CHANGE Abstract This paper will examine Coca-Colas quality management systems: The Coca-Cola Management System (TCCMS) and Coca-Cola Operating Requirements (KORE). It will analyze both the old system (TCCMS) and the new system (KORE). Based on this analysis, it will provide reasons for the change of systems as well as provide points for consideration in regards to the new quality management system.

AN ANALYSIS OF QUALITY MANAGEMENT SYSTEM CHANGE Table of Contents Title Page Abstract ... 1 2 3 4 6 7 11 14 15 17

Table of Contents Introduction

Research Setting Analysis (TCCMS) Analysis (KORE) Findings

Summary and Recommendations References

AN ANALYSIS OF QUALITY MANAGEMENT SYSTEM CHANGE Introduction Merriam-Webster defines the term quality as a degree of excellence, or superiority in

kind (Merriam-Webster, 2011). In todays business environment, companies must strive to find a way for their company or product to stand out from the competition. Early in the 20th century companies were able to easily differentiate their products based on traits like where their product was manufactured, the size of their customer base, or even how large the company was (Evans & Lindsay, 2011). Through the years, however, customers have become increasingly educated and discerning as to where they choose to spend their hard earned cash. Throughout the century, customers have demanded higher quality products and have not been afraid to prove it to companies by taking their business elsewhere. One needs to look no further than the decline of the American auto industry in that century as an example (Evans & Lindsay, 2011). As customers increasingly began shifting business away from lower quality American auto products to higher quality imports, American companies began to look to these foreign companies for the reason that they were gaining an edge. That answer was found in the philosophies and dedication to quality to which these foreign companies adhered (Evans & Lindsay, 2011). Defining quality in a business sense can be a confusing concept, partly because people view quality subjectively and in relation to differing criteria based on their individual roles in the production marketing value chain. In addition, the meaning of quality continues to evolve as the quality profession grows and matures. Early in the practice of quality, many companies and workers were focused on the quality of the final product. This focus led to quality controls,

AN ANALYSIS OF QUALITY MANAGEMENT SYSTEM CHANGE standards, inspections, and other ideas that began to require more and more of a companys resources. These types of quality controls also led to increasing costs such as reworking, repairing, or completely discarding a finished product (Evans & Lindsay, 2011). The work of such quality philosophers as Juran, Deming, and Ishikawa advocates the benefits of following sound quality principles, not just in the formation of a final product, but

throughout the entire organization. As companies began to adopt these ideas and methodologies, and consequently began to see a rise in quality, productivity, and profitability, this idea of total quality management began to find acceptance in the manufacturing, as well as the business world. Since the 1980s interest and implementation of quality systems has been increasing, to the point that there are numerous certifications and awards for companies in relation to their commitment to and implementation of quality management (Evans & Lindsay, 2011). A company can improve its processes, reduce waste, eliminate rework, increase production and efficiency, and reduce its manufacturing cost by successfully implementing a well structured Quality Management System. Multiple Quality Management Systems exist for a company to choose from such as the Baldrige Criteria, ISO 9000, and Six Sigma. Before a company chooses one, it must see how it fits its particular strategy and product, and then refine and implement it. Sometimes, if a chosen strategy does not produce the intended results, a company must choose to change its strategy, or introduce a completely new system.

AN ANALYSIS OF QUALITY MANAGEMENT SYSTEM CHANGE Research Setting and Quality Initiative This paper examines both Coca-Colas previous and current quality management systems, as well as providing possible reasons for the change in this area. The reasoning behind this type of analysis is primarily due to the companys unwillingness to provide hard data for a more scientific or numbers based analysis of quality issues at Coca-Cola. Material was limited to what Coca-Cola has published on their websites or in print, as well as what research others

have accomplished in this area. The conclusions postulated and recommendations offered at the end of this project can be considered accurate in an academic exercise, however due to lack of cooperation, a more subjective and definitive analysis of the complete picture is impossible.

AN ANALYSIS OF QUALITY MANAGEMENT SYSTEM CHANGE Analysis of TCCMS The Coca-Cola company owns four of the top five soft drink brands (Coca-Cola, Diet Coke, Fanta, and Sprite; other brands include Minute Maid, PowerAde, Dasani Water, Crush,

and Schweppes. The company sells its products domestically as well as internationally. Atlanta pharmacist John Pemberton invented Coke in 1886. How has Coca-Cola been able to sustain its dominance and market share in the industry for so long? A major factor of Coca-Colas success can be attributed to their quality management system. A well implemented quality management system can introduce tremendous benefits to a company such as the reduction in manufacturing cost. With the extreme competition of products in the current global market, having an effective quality management system is essential for survival, and maintaining competitive advantage over other companies. Coca-Cola has incorporated a manufacturer based perspective pertaining to quality. In their view, quality is defined as the desirable outcome of engineering and manufacturing practice, or conformance to specifications. The practice of conforming to specifications establishes consistency in goods and services. At the Coca-Cola company, for example, quality is about manufacturing a product that people can depend on every time they reach for it, this according to Donald R. Keough, former president and chief operations officer. Through rigorous quality and packaging standards, the company strives to ensure that its products will taste the same anywhere in the world a consumer might buy them (Evans & Lindsay, 2011). In the mid 1990s, that company recognized that in order to remain competitive, it needed to change the way that its quality was managed, and adopted the ISO 9000 Quality System in response to this insight. Shortcomings were soon identified in this system as it pertained to the manufacturing and bottling of Coca-Colas products, and so they began to develop their own

AN ANALYSIS OF QUALITY MANAGEMENT SYSTEM CHANGE system using ISO 9000 as its basis. This initiative led to the development of the Coca-Cola Quality System (TCCQS) later renamed The Coca-Cola Management System (TCCMS). The system that Coca-Cola introduced to its bottlers and companies around the world adopted most of the principles of the ISO 9000 standards, and was tailored specifically for Coca-Cola. The requirements for the creation and management of a quality management system that

enable a company to manage, track and improve quality performance in a way that is compatible with the companys quality policy and objectives are set forth by the ISO 9000 system. TCCMS was the Coca-Cola Companys branded quality management system and was a combination of ISO 9001:2001 requirements as well as ISO 14001:1996, OHSAS 18001:1999 standards and HACCP requirements. TCCMS was similar to ISO 9001 in that they both have requirements governing the areas of Documentation & Record Keeping, Goal Planning and Objectives, Resources Management (both capital and human), Design & Development, Product Realization, Measurement, Analysis and Continual Improvement. These Quality Management Systems focused on creating a functional environment within the company that will foster consistently performed procedures to achieve customer satisfaction. This system also strove to continually improve the effectiveness of the operation. The purpose of this was to increase stakeholder value by using money more efficiently, in order to make more of it while not wasting it on rework (Peach, 2003). In order to be TCCMS certified, a division or section of the company had to undergo four phases to complete the process. Phase One Planning Phase. The company performs a comparison between the requirements of the standard and its current practices and procedures. Based on

AN ANALYSIS OF QUALITY MANAGEMENT SYSTEM CHANGE the results of this gap analysis, they develop an implementation plan of the activities that need to be performed to achieve certification. Phase Two Documentation Phase. The company focuses its attention on developing the required documents to address the requirements of the quality system. This documentation should have been identified during the gap analysis and this activity would be included in the activities of the implementation plan developed in Phase one. Phase Three Implementation Phase. In this stage, procedures developed from the previous phase are implemented. Training and document distribution is the main focus. Phase Four Continuous Improvement Phase. The phase that focuses on the

companys internal audit and continual improvement programs to ensure that they are working. Emphasis is on the ability of the company growth and improvement.

In a recent study, it was found that in the Caribbean alone, not one of the eighteen bottlers had yet to be certified in the four phased TCCMS system, despite the fact that the system had been implemented successfully elsewhere in the world. The top reasons for deficiencies in implementation of the certification procedures identified by this study were as follows: lack of time to devote to quality initiatives, insufficient management and employee preparation (to include training and understanding of personal role), Resource Restrictions/ Limitations, the company has a reactive focus, rather than proactive focus, and finally lack of management commitment. All of the top five reasons stated for the lack of certification were identified as direct causes by 50% or more of respondents in the survey. The research concluded that the first

AN ANALYSIS OF QUALITY MANAGEMENT SYSTEM CHANGE four reasons listed were rather the cause of the fifth reason, lack of management commitment (Lowe, 2008). In virtually all schools of quality management philosophy, it is imperative that the management be committed to quality. Every aspect of the corporate culture, every decision

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made, every action taken, must have quality at its core. George and Weimerskirch (1998) state that in leading the transition to systems management, the first step for any company president, chairman or CEO is the committal of themselves and the company to the process. Without this type of commitment from management, the implementation of any quality management system is doomed to fail.

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Analysis (KORE) As the Coca-Cola brand has expanded with the introduction of its brands in new markets throughout the world, there has been a greater need to not only produce a consistent product, but to increase the reliability of its procedures, regardless of where they are carried out in the world. In January of 2010, the previous method known as the Coca-Cola Management System (TCCMS) was replaced with the Coca-Cola Operating Requirements (KORE). The new operating system is designed in reaction to the dynamic business environment. They do this by incorporating product quality, environmental, and occupational safety and health. Where TCCMS governed beverage production, KORE takes all system wide operations and applies the same standards to which the beverages were held. Where the previous method was primarily manufacturing based, KORE attempts to be more of a total quality management process. A major component of the KORE process is establishment of a governance process to monitor procedural compliance throughout the entirety of operations, as well as ensure the integrity of the end product. ISO 9001 continues to be at the heart of the food certification process in all of its subsidiary bottlers. Additionally, there is a strict series of standards that are placed upon all of the suppliers in order to increase product uniformity, as well as mitigate negative consequences of their operations (both actual and potential). Coca-Cola has several standards requiring suppliers to act in an ethical and legal manner. Another aspect of KORE is the integration eKOsystem; Coca-Colas standards for environmental management. Coca-Cola eKOsystem is based around five policies: commitment to lead, compliance with environmental regulations worldwide, reducing environmental impact while recognizing opportunity, maintaining accountability for their actions, and increasing community involvement.

AN ANALYSIS OF QUALITY MANAGEMENT SYSTEM CHANGE In addition to preserving the environment and maintain consistency in beverage production, worker safety and health is also stringently pursued. In a world where operational risk management is becoming an ever present tool, Coca-Cola is integrating these principles

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through the use of Hazard Analysis and Critical Control Points (HAACP) into system standards. Preventative action along with increasingly demanding standards are employed whenever new processes and products are introduced into the system. OHSAS 18.001 continues to be the basis for worker safety, while Coca-Cola applies even stricter requirements on top of this to ensure worker safety. KORE places a requirement to implement, establish, and maintain a safety and quality assurance program that is in compliance with standards laid out within the operating requirements. KORE seeks to incorporate the three fundamental principles of Total Quality. It does this in the following manner: 1st Principle A focus on customers and stakeholders. By ensuring that the individual suppliers adhere to solid legal and ethical requirements, customers worldwide can be sure that they are supporting a brand that is attempting to do well and give back to their quality of life. 2nd Principle Employee engagement and teamwork by everyone in the organization. Customer-supplier relationships are fostered in such a way to ensure that positive relations are maintained throughout. A renewed focus on worker safety is crucial in maintaining engagement and process improvement. 3rd Principle A process focus supported by continuous improvement and learning. Cross functional teams are formed to provide constant analysis and

feedback to the board of directors. These teams provide insight in to the

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operations; as well identify areas of weakness. Once identified, these teams work to provide effective solutions to the identified problems.

AN ANALYSIS OF QUALITY MANAGEMENT SYSTEM CHANGE Findings In virtually all schools of quality management philosophy, it is imperative that the management be committed to quality. Every aspect of the corporate culture, every decision

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made, every action taken, must have quality at its core. George and Weimerskirch (1998) state that in leading the transition to systems management, the first step for any company president, chairman or CEO is the committal of themselves and the company to the process. Without this type of commitment from management, the implementation of any quality management system is doomed to fail. Even though KORE principles have only recently been implemented, initial data seems to suggest a successful transition. In 2010, Coca-Cola was given a 92.6 rating on the Global Package Quality Index, which is its highest score to date. As the business operating environment has changed, Coca-Cola seems to be taking the lessons of the Juran, Demming, and others and embraced the concept of quality throughout the entire spectrum of operations. It would appear that a culture of quality is being established and embraced, whether the top tier of management or the factory line worker. Lessons learned from the Coca-Cola Quality System (both good and bad) are being applied to all operations in order to increase brand persona around the globe.

AN ANALYSIS OF QUALITY MANAGEMENT SYSTEM CHANGE Conclusions and Recommendations After reviewing both methods employed by Coca-Cola, it would appear that they are making significant progress with regards to realizing its newest quality vision. In the past few

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years, they have earned ever higher marks in quality performance recognition. We conclude that Coca-Colas primary purpose for changing its quality management system was to further embrace a total quality philosophy. As previously stated the original TCCMS was only applied to the bottling division of the company. This move, while helpful in one area, neglected to ensure that all parts of the company had embraced a quality philosophy. With all quality initiatives it is imperative that the change in philosophy be applied across all areas of the organization so as to affect a change in the organizations culture. Failure to do so will inevitably lead to many of the symptoms listed for TCCMSs failure in the Caribbean region, most importantly the lack of commitment by upper management. Demings 14 Points specifically illustrate the necessity for applying any quality initiative to the entire organization. Point 1: Create a Vision and Demonstrate Commitment, is the first step in ensuring the success of a quality initiative, and Coca-Cola was misguided by not adhering to this idea in its implementation of TCCMS. Even if the quality initiative was an outstanding example of Demings other 13 points, vision and commitment is the cornerstone on which all other points are built. Without that foundation, the entire quality program will eventually lose steam and cease to be effective. KORE can essentially be viewed as a reboot of TCCMS, with specific effort to demonstrate commitment by top management, as well as to infuse a culture of total quality throughout the entire company. By way of recommendation, Coca-Cola would do well to remember the results of the surveys conducted during their TCCMS days, and ensure that similar problems do not occur. As

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it has been said in the past, the most effective thing that can be done by the corporation would be to ensure that management continues to support the initiatives introduced; and that this embracement occurs in all of its subsidiaries and suppliers, from the top all the way down. Continued adherence to the total quality principles, as well as the fundamentals of quality greats such as Deming and Juran, will allow the Coca-Cola brand to survive for another 125 years.

AN ANALYSIS OF QUALITY MANAGEMENT SYSTEM CHANGE References Evans, J., & Lindsay, W. (2011). Managing for Quality and Performance Excellence. Mason, OH: South-Western Cengage Learning. George, S. & Weimerskirch, A. (1998). Total Quality Management. (2nd ed.). New York, NY: John Wiley & Sons, Inc. Lowe, A. (2008). Quality System Implementation in the Caribbean with Focus on Caribbean Bottlers. Thesis. California State University Dominguez Hills. Peach, R.W. (2003). The ISO 9000 handbook. (4th ed.). USA: QSU Publishing. The Coca-Cola Company. (n.d.). Retrieved from http://www.thecocacolacompany.com/citizenship/quality.html Environmental Management System. (n.d.) Retrieved from http://www.thecocacolacompany.com/citizenship/environmental_management_system.html Coca-Cola Quality Management (n.d.) Retrieved from http://www.cobega.es/sites/eng/quality/management.aspx

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