TITLE A REPORT IN FULFILMENT OF THE BENCHMARKING STUDY VISIT ON TQM AND QCC OF BENCHMARKED COMPANIES

DATE OF VIST FEBRUARY 27, 2011 MARCH 05, 2011

LOCATION OF VISIT JAKARTA, INDONESIA BANDUNG, WEST JAVA, INDONESIA

PREPARED BY MR. CEZAR R. TRAVIA BENCHMARKING COORDINATOR

PRESENTED TO MINDANAO ASSOCIATION FOR QUALITY, INC. Through MR. DOROTHEO O. LACBAIN JR. - President

PREFACE:

THE PRESENTER WISHES TO EXPRESS WITH DEEP GRATITUDE TO EVERYONE WHO DIRECTLY OR INDIRECTLY FACILITATED IN MAKING THE STUDY VISIT A SUCCESS. KUDOS TO INDONESIA QUALITY MANAGEMENT ASSOCIATION (IQMA) AND THE PIONIR MAXIM MUTU INDONESIA (PT. PMMI), TO THE REPRESENTATIVES OF THE HOST COMPANIES BENCHMARKED; PT KRAMA YUDHA RATU MOTOR, PT INDOCEMENT AND PT JASA MARGA PURBALEUNYI.

MEMBERS OF THE BENCHMARKING TEAM:

1. 2. 3. 4. 5. 6. 7. 8. 9. Dorotheo O. Lacbain Jr. MAQ President Elvira A. Cajigas MAQ Vice President Delilah L. Soliva MAQ Secretary Maria Lenna Luz U. Rizon MAQ Treasurer Jerson N. Orejudos MAQ Auditor Cezar R. Travia CQP Manager Roly Ann A. Claro Representative, PILMICO Foods Corporation Caroline A. Neri Representative, Province of Misamis Oriental Estrella U. Pahalla Representative, RTWPB Region 10

10. Gay L. Molina Individual Member, MAQ Consultant 11. Concordia A. Roa Individual Member, MUST 12. Roy L. Pamitalan Individual Member, MSUIIT 13. Jingle B. Magallanes Individual Member, MSUIIT 14. Evelyn I. Rivera Office Staff, CQP 15. Neofita T. Japos Guest, RTWPB Region 10 16. Marc T. Claro Guest, Government Employee 17. Jesreel Gaza M. Travia Guest, Entrepreneur

CONTENTS:
PART I INTRODUCTION ABOUT THE LOCATION

PART II BENCHMARKING OUTPUT MEETING WITH IQMA BENCHMARKING AREAS - HUMAN RESOURCE MANAGEMENT HOUSEKEEPING PRODUCTIVITY QUALITY ASSURANCE OCCUPATIONAL HEALTH AND SAFETY CUSTOMER CARE

PART III LOOKING AHEAD

JAKARTA
Jakarta is the capital and largest city of Indonesia. Located on the northwest coast of Java, it has an area of 661 square kilometers and a 2010 census count population of

9,580,000. Jakarta is the country's economic, cultural and political centre. It is the most populous city in Indonesia and in Southeast Asia, and is the twelfth-largest city in the world. The city's name is derived from the Old Javanese word "Jayakarta" which translates as "victorious deed", "complete act", or "complete victory". The Japanese renamed the city "Jakarta" during their World War II occupation of Indonesia. Landmarks include the National Monument and Istiqlal Mosque. The city is the seat of the ASEAN Secretariat. Jakarta is served by the Soekarno-Hatta International Airport, Halim Perdanakusuma International Airport, and Tanjung Priok Harbour; it is connected by several intercity and commuter railways, and served by several bus lines running on reserved busways.

Administration
Officially, Jakarta is not a city, but a province with special status as the capital of Indonesia. It has a governor (instead of a mayor), and is divided into several subregions with their own administrative systems. As a province, the official name of Jakarta is Daerah Khusus Ibukota Jakarta ("Special Capital City District of

Jakarta"), which in Indonesian is abbreviated to DKI Jakarta. Jakarta is divided into five kota or kotamadya ("cities" - formerly municipalities), each headed by a mayor, and one regency (kabupaten) headed by a regent. In August 2007, Jakarta held its first ever election to choose a governor, whereas previously the city's governors were appointed by local parliament. The poll is part of a countrywide decentralization drive, allowing for direct local elections in several areas.

Government

In September 1945, the government of Jakarta City was changed from the Japanese Djakarta Toku-Betsu Shi into the Jakarta National Administration. This first government was held by a Mayor until the end of 1960 when the office was changed to that of a Governor. The last mayor of Jakarta was Sudiro, until he was replaced by Dr Sumarno as Governor. In 1974, Based on the Act No. 5 of 1974 relating to the Fundamentals of Regional Government, Jakarta was confirmed as the capital city of Indonesia and one of Indonesia's 26 provinces.

Economy and governance

Jakarta's economy depends heavily on financial service, trade, and manufacturing. Industry includes electronics, automotive, chemicals, mechanical engineering and biomedical sciences manufacturing. In 2009, 13% of the population had an income per capita in excess of US$ 10,000 (Rp 108,000,000). The economic growth of Jakarta in 2007 was 6.44% up from 5.95% the previous year, with the growth in the transportation and communication (15.25%), construction (7.81%) and trade, hotel and restaurant sectors (6.88%). In 2007, GRP (Growth Regional Domestic Product) was Rp. 566.45 trillion. The largest contributions to GDRP was by finance, ownership and business services (28.7%); trade, hotel and restaurant sector (20.4%), and manufacturing industry sector (15.97%). In 2007, per capita GRDP of DKI Jakarta inhabitants was an 11.63% compared to previous year A new law in 2007 forbids the giving of money to beggars, buskers and hawkers, bans squatter settlements on river banks and highways, and prohibits spitting and smoking on public transportation. Unauthorized people cleaning car windscreens and taking tips for directing traffic at intersections will also be penalized. Critics of

the new legislation claim that such laws will be difficult to enforce and it tends to ignore the desperate poverty of many of the capital's inhabitants.

BANDUNG

Bandung (pronounced [bndu]) (Indonesian: Kota Bandung) is the capital of West Java province in Indonesia, and the country's third largest city, and 2nd largest metropolitan area in Indonesia, with 7.4 million in 2007. Located 768 m (2,520 ft) above sea level, Bandung has cooler temperatures year-around than most other Indonesian cities. The city lies in a river basin surrounded by volcanic mountains. This topography provides a good natural defense system, which was the primary reason for the Dutch East Indies government's plan to move the colony capital from Batavia to Bandung. The Dutch colonials first opened tea plantations around the mountains in the eighteenth century, followed by a road construction connecting the plantation area to the capital (180 km or 112 miles to the northwest). The European inhabitants of the city demanded the establishment of a municipality which was granted in 1906 and Bandung gradually developed itself into a resort city for the plantation owners. Luxurious hotels, restaurants, cafes and European boutiques were opened of which the city was dubbed as Parijs van Java (Dutch: "The Paris of Java").

Administration and demographics

The city area in 1906 was 19.22 square kilometers and by 1987 it was 167.2965 km. The city administration is divided into 26 subdistricts (kecamatan) and 139 villages (kelurahan). A mayor (walikota) leads the city administration. Since 2008, the city residents directly voted for a mayor, while previously mayors were

nominated and selected by the city council members or known as the Regional People's Representative Council (DPRD). As of 2003, the total number of city administration personnel is 20,163. In 2005 the population was 2,290,464, with a density of 13,693 people/km.The May 2010 census count result is 2,393,688 people making it the third most populous city in Indonesia, after Jakarta and Surabaya. Most of Bandung's population are of Sundanese descent. Javanese is the largest minority, from nearby province and the eastern part of Java. Minangkabau people are also counted as significant minority. Notable minorities include Chinese Indonesians, Indian Indonesians, and Korean Indonesians.

Economy
Bandung economy is mainly built upon tourism, manufacturing, textile/apparel, education institutions, technology, retail, services, plantation/agriculture, financial, pharmaceutical, food, among others. Those are the major investments and most popular fields/industries being sought here. Bandung has nearly 50 higher educational institutions and is among the most popular destination for education in Indonesia. Creative-based culture has shaped the basis of Bandung economy. The once quiet residential district of Dago has become an important business and entertainment centre. Chic cafes and restaurants are spreading out along Dago Street. In the early 1990s Cihampelas Street became a popular clothing store location. The distro sell stylish non-trademarked products, made by local designers. Books, indie label records, magazines, fashion products and other accessories are typical distro products. After their products receive large teenagers attention, then these local designers make their own clothing company. Now, there are more than 200

local brand names in Bandung. Distro distance itself from factory outlet in term of its philosophy. Distros come from individual designers and young entrepreneurs, while factory outlet products come from a garment factory.

MEETING WITH IQMA OR INDONESIA QUALITY MANAGEMENT ASSOCIATION

Hosts: Mr. Idaris Simorangkir and Madam Rini Simorangkir Venue: Grand Tropic Suites Hotel, Jakarta 28 February, 2011

A semi-formal introduction was done between the hosts and members of the MAQ Benchmarking Team headed by Mr. Dorotheo O. Lacbain Jr.. Exchanges of hellos and handshakes as a gesture of goodwill between two parties.

An opportunity for MAQ to touch base with an Indonesian National Productivity Organization or Country NPO for the benchmarking exercise. Likewise, a network can be created with IQMA to further enhance the MAQ understanding on the Indonesian benchmarked companies Best Practices on TQM and QCC.

BENCHMARKING VISIT OUTPUT

HUMAN RESOURCE MANAGEMENT RATIONALE

HR was considered as one of the benchmarking parameters on the premise that people form part of an organizations most valuable resources. The importance of maintaining an efficient and productive workforce cannot be overemphasized to stay

in business. The ISO standards confirm this through the significance it attaches to HR development as a contributory factor in making quality products / services.

Specifically, the areas, which the team wanted to benchmark, were on: how the company is organized: reporting relationships, hierarchical or structural levels involved, and the influence of union

how the company is managed: management style, transparency of action, openness of communication channels

how people are developed: competencies

training programs, development of skills and

how support mechanisms are set-up in terms of: hiring/keeping employees rewarding/recognizing employee contributions evaluating performance and how data is used promoting employee involvement measuring organizational health / climate

FINDINGS The first visit to PT Krama Yudha Ratu Motor Company, this company adopts a modular hierarchy structure where partially-autonomous modules linked by standardized interfaces permit decentralized adaptation and innovation for each department. It allows each department to independently decide its own efficiency and resources allocation, which is very suitable for flexible manufacturing company. The second visit to PT Indocement Citeureup Factory, the company follows the Dual Frame Organization: Command and Control Framework on one hand and the

Work Coordination Framework on the other hand. To cite some peculiar differentiations;1. Vertical & static view (school of management) for Command and Control framework while horizontal & dynamic view (school of leadership) for Work Coordination framework 2. Hierarchal (superior-subordinate relationships) for Command & Control framework while coordinating (customer-supplier relationships) for Work Coordination framework. Process team in the Dual Framework is quite similar from most Philippine companies where, teams are linked to Company Vision, Condition of Excellence and Key Management processes. By the third visit to PT JASA MARGA (Persero) Tbk., it became apparent that there are issues, which are either legally or culturally, bounded which make them unfeasible in the Philippine setting. These may be sound practices but difficult to duplicate. To cite:

Union In PT Krama Yudha Ratu Motor, union has a bigger influence in many decision making e.g. in scheduling of working hours for productivity, the management has to meet with the union. While in PT Jasa Marga, influence of union is non-threatening to the company. In fact, all employees are members of the union (from top to bottom) except the Board of Directors. Any issue that may arise from operation is being discussed among members.

People dynamics Across the three benchmarked companies, reporting system is quite similar i.e., using the line of bureaucracy. Related to this, it is observed that in order to motivate people to contribute improvement ideas, the need for employee involvement, recognition and incentive programs are integral part of company policy.

Observations for best practices:

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Presence of system to take stock of HR skills: In PT Indocement, there is the so called Talent Management Matrix whereby, optimizing potential and aligning into position. Performance versus Potential matrix is maintained to keep track of employee training needs and actual skills acquired. A good strategy for ensuring availability of competencies at all times. In PT Krama Yudha Ratu Motor Company, the budget for training alone is 1.5mio IDR per employee per year or equivalent to 7,500Php.

Compensation & Benefit: It was observed that in the three benchmarked companies, employees are receiving much higher salary vis--vis the government mandated minimum wage (1.2 mio IDR/month or 250Php per day). However, one notable benefit which is distinct from Philippine taxation scheme is that, employees at PT Jasa Marga enjoy almost non-taxable income. The company shoulders the income tax of employees.

Executive Development Program: In PT Indocement, every executive of the company will undergo the Executive Development Program. It is a one-year course to build comprehensive managerial and business skills to strengthen company competitiveness. This is jointly developed with lecturers from the University of Indonesia.

Corporate Social Responsibility: This is one notable undertaking pursued by PT Indocement: the companys passion to take good care of its stake holders. Livelihood program for both the employees and people living within the area where the company operates. Conversion of several hectares of land at the mining site to Jatropha plantation (jatropha seed as an alternative source of energy). Think, the company strength is their commitment to both society and environment_ the 8 Millennium Development Goals; G1Eradicate extreme hunger and poverty G2- Achieve universal primary education G3- Promote gender equality and empower women G4- Reduce child mortality G5- Improve maternal health G6- Combat HIV/AIDS, Malaria

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and other diseases G7- Ensure environmental sustainability and G8- Develop a global partnership for development.

GOOD HOUSEKEEPING RATIONALE Good housekeeping is closely related to safety issues. Cleanliness promotes safety and work efficiency. At the end of the line, it contributes to productivity and quality. Benchmarking parameters are on:

how the company sets its standards for cleanliness: conscious effort to define what levels of cleanliness are acceptable and not

how the company manages and disposes of waste materials: responsibility of keeping the environment clean

how involved are the employees in the housekeeping activities of the company: responsibility issue

FINDINGS

The general practice across the companies visited is being implemented both by management and employees in fact, in PT Krama Yudha Ratu Motor the standard of cleanliness is documented based on ISO 14001 Series of 2007. While at PT Jasa Marga, they have the so called Green Policy where application of Environmental Department Regulation with reporting system every 6 months and the Prevention Program based on Consultant report. At PT Indocement on the other hand, they
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have this Basic Concept of Indoor Cleaning Services a matrix on cleaning area versus cleaning targets. The cleaning status is reported on the daily as well as monthly basis.

Waste disposal management is strictly implemented due to stringent government regulations. At PT Indocement, there is an Internal Waste Management divided by two sections: Housekeeping / Maintenance and Laboratory / Polyclinic. The former handles the domestic and hazardous wastes while the latter handles hazardous liquid and infectious wastes.

Observations for best practices: At PT Krama Yudha Ratu Motor one of the QCCs presented a project on How to Reduce Waste Generation from Canteen with successful implementation.

PRODUCTIVITY RATIONALE Productivity emanates from a concept that enables a company to: a) enhance production output by utilizing available resources more effectively and efficiently in order to provide customers more product value and b) provide its employees with an expanded sense of personal satisfaction by opening new avenues toward personal growth and advancement.

Benchmarking parameters are on: What continuous improvement tools are used

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What methods are employed in controlling cost What types of measurement tools used in determining productivity levels What are the interventions necessary to improve productivity

FINDINGS Only two from the three benchmarked companies have clear productivity initiatives because they are engaged in manufacturing while the third organization is a service provider. In PT Krama Yudha Ratu Motor, assembler of Mitsubishi vehicle for commercial purposes the Kaizen Lean Production: Kitting system is being employed where teams engaged in major projects to improve production levels. Here, QCCs reward/recognition and suggestion system can leverage to motivate people in increasing productivity. Man hour per unit, OEE and Direct Run are measurement tools in establishing production levels and targets. Todays benchmark is 15Manhours per unit. Another notable figure for this company is their First Time Capability or FTQ. Since 2007 up to 2010, the percentage increase is remarkable from an average of 41% to 86% in four categories. A very challenging target was set for 2011 at 90%. How? In-line quality check is done in every section; Body parts stamping, pretreatment, cathode electro deposition, under & top coat, trimming, line test and touch-up before delivery. Product complaint is nil (one complain in 2010 on slight brake problem) and no product recall.

In PT Indocement, the plant capacity is 18.5Mio Ton against their 2010 production volume of 12.9Mio Ton making Indocement the biggest cement producer in

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Indonesia. This company uses several continuous improvement tools to support productivity namely; QCC Tulta, One Sheet Project, Six sigma, PSS, PQI and SS.

QUALITY ASSURANCE RATIONALE It is understood that quality of the product or service is the responsibility of everyone in the organization, especially line personnel who has the direct control on product quality or services for that matter. Therefore, it is incumbent upon both management and line personnel that all the planned activities, preventive or precautionary measures are taken to ensure that the pre-defined quality of a product and services will be reached.

Benchmarking parameters are on: What are the methods in ensuring quality before products leave the plant How product traceability is instituted How quality audit is performed

FINDINGS The three companies visited and even PT Jasa Marga (a tollroad operator) being a service provider, all are ISO certified. Both PT Krama Yudha Ratu Motor and PT Indocement although they are of different product category, their quality assurance methodology are quite similar in many respects. Example, quality checking conducted in every segment of the

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process line, 100% quality assurance check in accordance to SOP. However, a distinct system of keeping quality tests at PT Indocement which not applicable in PT Krama Yudha Ratu Motor.

For product traceability, both companies are using Barcode system. CBU date for PT Krama Yudha Ratu Motor while product sign code for PT Indocement.

OCCUPATIONAL HEALTH AND SAFETY RATIONALE It is believed that safety is everyones concern and in fact a universal gesture by companies across. It is everyones duty to ensure that his/her actions or decisions do not endanger the safety of himself/herself and of other persons in the work place. For this reason, the participants take Occupational Health and Safety or OHSA as one major consideration for observation during the life of the benchmarking visit.

Benchmarking parameters are on: How safety committees are organized and structured How accidents in the work place are handled What is employees attitude towards safety How are working conditions and environmental issues are addressed

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FINDINGS All the three benchmarked companies are ISO certified. It was observed that health and safety programs are imbedded in the Company policy as in most companies in the Philippines.

One notable observation from PT Indocement is, their Comprehensive Health Program divided into 4 stages namely; preventive, promotive, curative and rehabilitative. Company total manpower of 2,855, a dedicated Health Department was created and manned by 72 staff ranging medical officers & aids, hygiene patroller and general practitioners.

In safety, PT Indocement best practice perhaps is in their Indocement Safety Observation Program or I-SOP with adherence to 1) improving safety behavior through observation and communication 2) intranet based web application and 3) 5 simple steps: Plan, Stop, Observe, Act and Report. With quite a large number of employees, the company is augmented by the following safety initiatives; a) yearround OHS training for all employees b) communication through brochures, safety films & videos, OHS performance board, etc. c) consultation and participation (safety talk) specially in Mining division d) safety administration/monitoring system through; printing of daily inspection, generate summary report and generate status log e) fire brigade section for; emergency response and maintenance of fire protection equipment.

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PT Indocement is a recipient of several national awards and recognition such as, Golden Flag from Ministry of Manpower for safety management system and the GREEN RATING from the Ministry of Environment, only two companies did received this national award so far. In PT Krama Yudha Ratu Motor, working condition at the assembly line is much better than the other companies visited. The area is spacious although indoor but open air. The 5S markings are very visible with pedestrian lanes for guests. Workers are wearing prescribed uniform and PPEs at areas specified. The company has adopted this year a socialize reward system for Zero accident in the form of cash incentive.

CUSTOMER CARE RATIONALE Customer care is the lifeblood of any business. You can offer promotions and cutdown on prices to bring in as many new customers as you want, but unless you can get some of those customers to come back, your business wont be profitable for long. Therefore, customer care is all about bringing customers back. And, about sending them away happy enough to pass positive feedback about your business along to others, who may then try the product or service you offer for themselves and in turn become repeat customers.

Benchmarking parameters are on:

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How is feedback gathered from customers and how it is integrated into the operation

How is customer complaint being handled How customer expectations are ensured

FINDINGS PT Krama Yudha Ratu Motor being an assembler, all units produced are brought to the Marketing Division of the company. Its guarantee for costumer satisfaction is ISO certification with in-line checks in every segment of the assembly line and the shower test (systematic detection system on defective parts or non-conformance to specification) before every unit leaves the plant.

In PT Jasa Marga, customer satisfaction can be measured through statistic growth of road users although the growth and number of road related accident. Using 2009 versus 2010 statistic a 5.8% growth is significant and the number of road related accident recorded in 2010 is nil. The best practice for benchmark is perhaps on road repair. A hole on the road of about 5 inch-diameter will trigger repair or patch-up. A laboratory or workshop module of 20 X 20 inches patch-up material is available and it will 15 minutes to do the repair (excluding the preparation time).

In PT Indocement, there is this so called STR system or Indocement Semen Tiga Roda Customers a) direct selling and b) indirect selling. Both are linked to; Distributors, Ready Mix, Industry, Project/Developer, Oil Cementing and the

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Government. It has an integrated online system to facilitate customers performing the order. Segmentation of the customers is based on work fields or sectors.

Indocement provides various channels to gain feedback from customers. All customers could contact Indocement via toll free, SMS or email and get the response directly. To maintain relationship with customers, SMD conduct call/visit and organize Distributors Meeting. Customer feedback is integrated into Indocement operation: Sales & Marketing Division (SMD) is the gateway for all customer inquiry, request and feedback. Based on those feedbacks, SMD will coordinate with other Divisions to solve customer issues. They will respond with the best solution and SMD will inform the solution to customers.

To ensure customer expectation is the primary task of Sales & Marketing Division to do this, Customer satisfaction is calculated / measured by marketing research and it is conducted through the year. The data will be a reference in executing or handling the cases. The customer expectation is then reported to Dept., SMD Division Manager and Management for actions/follow-up based on management policy. Sales Department on the other hand, will arrange schedule of regular meeting/visit with customers. On the visit, try to solve the cases/issues faced by customers. If necessary, other division staff will accompany SMD to ensure that customers got the best care and solution.

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LOOKING AHEAD Possibility of integrating the best practices benchmarked to the MAQ training modules which are applicable and responsive to the needs of clients. Best practices benchmarked can be replicated to corporate, government and other institutions where applicable. The process undertaken by MAQ Benchmarking Team can be a step-board in making improvements to future benchmarking activities.

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