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, INDONESIABANDUNG, WEST JAVA, INDONESIA

PREPARED BY

MR. CEZAR R. TRAVIÑA – BENCHMARKING COORDINATOR

PRESENTED TO

MINDANAO ASSOCIATION FOR QUALITY, INC.Through

MR. DOROTHEO O. LACBAIN JR. - President

PREFACE:

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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. Dorotheo O. Lacbain Jr. – MAQ President

2. Elvira A. Cajigas – MAQ Vice President

3. Delilah L. Soliva – MAQ Secretary

4. Maria Lenna Luz U. Rizon – MAQ Treasurer

5. Jerson N. Orejudos – MAQ Auditor

6. Cezar R. Traviña – CQP Manager

7. Roly Ann A. Claro – Representative, PILMICO Foods Corporation

8. Caroline A. Neri – Representative, Province of Misamis Oriental

9. 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. Traviña – Guest, Entrepreneur

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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

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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 sub-

regions 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 country-

wide decentralization drive, allowing for direct local elections in several areas.

Government

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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

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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 [bənˈduŋ]) (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 km². 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

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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/km².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

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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 organization’s most valuable resources. The importance of

maintaining an efficient and productive workforce cannot be overemphasized to stay

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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 : training programs, development of skills and

competencies

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

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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-à-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 company’s 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; G1-

Eradicate 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. Today’s 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 everyone’s concern and in fact a universal gesture by

companies across. It is everyone’s 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 employee’s 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) year-

round 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 cut-

down 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 won’t 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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