LGD/011025/SH-MISC(2000)CONFIDENTIALThisreportissolelyfortheuseofclientpersonnel.Nopartofitmaybecirculated,quoted,orreproducedfordistributionoutsidetheclientorganizationwithoutpriorwrittenapprovalfromMcKinsey&Company.ThismaterialwasusedbyMcKinsey&Companyduringanoralpresentation;itisnotacompleterecordofthediscussion.LetterofProposal,LegendNovember,2001ImprovingProductQualityandDeliveryPerformancetoEnableProfitableGrowth2LGD/011025/SH-MISC(2000)EXECUTIVESUMMARY(1/2)Legendhascreatedsignificantvalueinthepastandhassetaggressivetargetsalsoforthefuture.Asimprovingproductquality(anddeliveryperformance)areprerequisiteforrealizingitstargetsLegendhaslaunchedthreeinitiatives–6sigma,i2,suppliermanagement–toaddresstheseissues.However,thelaunchedthreeinitiativesarenotsufficientandwillnotdeliverrequiredresults.Thus,Legendneedstoaddresstheproductquality(anddeliveryperformance)issuesmoreaggressively.¶Legendhascreatedsignificantvalueinthepastthroughfast,profitablegrowth.Ithassuccessfullyincreasedproductioncapacitytomeetgrowingcustomerdemand.Legendhassetaggressivegrowthandprofitabilitytargetsalsoforthefuture.¶Improvingproductquality(anddeliveryperformance)andconsequentlybrandvalue(relativepricevs.competition)areprerequisiteforLegendtorealizeitsstrategyinChinaandglobally.Thevalueofaddressingthequalityissuesisestimatedtobe~RMB130millionperannum¶Legendhaslaunchedthreeinitiatives–6sigma,i2,suppliermanagement-toaddressthequalityissues.Theseinitiativeswillnot,however,deliverrequiredresultsastheyarenotsufficientduetothreeshortcomings:1)Thethreeinitiativesareaddressingonlyafewofthecriticalissuesidentifiedineacharea,2)thethreeinitiativesarenotintegratedtoacomprehensiveprogramtoensuresustainabilityofresults,and3)thecurrentinitiativesdonotaddresstheorganizationalissuespreventinganysubstantialqualityimprovement3LGD/011025/SH-MISC(2000)EXECUTIVESUMMARY(2/2)¶Legendneedstoaddresstheproductquality(anddeliveryperformance)issuesmoreaggressivelytobeabletorealizeitsstrategyinChinaandgloballyby:•Integratingthethreeinitiativesintoacomprehensive,phasedprogramanddesigningacomprehensivequalitysystemandpolicydeploymentsystemacrossthevaluechaintoensurethesustainabilityoftheimprovements.Thequalitysystemwilldefinethekeyqualitymeasurementsandprocessesacrossthevaluechain.Thepolicydeploymentwillthenbreakdownbusinessleveltargetsintothelowestleveloftheorganizationtoensurelongtermsustainableimprovementsandsolvetheissuesofunclearresponsibilitiespreventingsignificantqualityimprovements•Prioritizingqualityissuesandlaunchingqualitycontinuousimprovement(CI)teamtosolvethemostcriticalone(s),followedbybuildingacorporateCIorganization.McKinseyhasindepthexpertiseandvastexperienceinhelpingcompaniestransformtheiroperationstosupplyhigherqualityproductsatlowercost.WebelievewecanhelpLegendtoimproveitsproductquality(anddeliveryperformance)torealizelargerpotentialmuchfaster.Byworkingtogether,wewouldalsobuildskillsatLegendorganization,sothatLegend’sownteamwilleventuallybeabletocontinuetheprocesswithoutsignificantMcKinseysupport.Asanextstep,weproposethefollowing3-stepjointapproachtoaddressthequalityanddeliveryperformanceissuesatLegend:•Step1(4weeks):PerformqualitysystemdiagnosticandprioritizequalityissuesalongthevaluechainfromcustomerservicetomanufacturingandR&D•Step2(8-10weeks):Redesignqualitysystem,setbusinesslevelimprovementtar...
