2018

PROGRESS REPORT

AUTOMOTIVE

Dinged and Dented

Falsified quality data and flawed safety inspections tarnish manufacturing industry’s reputation in Japan

The "Made in Japan" seal has long been a status symbol for Japanese manufacturing organizations and a selling point over cheaper products from other countries in an ultra-competitive market.1

Until recently, that is.

Over the past few months, several scandals have come to light in the Japanese automotive and manufacturing industries. Kobe Steel Ltd., Nissan Motor Co. and Subaru Corp. have been in the media spotlight for falsifying quality data and for faulty vehicle inspections.

Kobe Steel

In October, it was discovered that Kobe Steel, Japan’s third-largest steel maker, had been falsifying its quality data for at least a decade. The organization admitted that workers altered data about the strength and durability of its steel, copper and aluminum products, and data on its iron ore powder. An internal investigation uncovered 70 cases of data tampering.2

More than 500 Kobe Steel customers across the world are affected by the falsified data, including Boeing, Ford, General Motors and Mitsubishi Heavy Industries, who are left scrambling to verify the quality and safety of their own products.

Among the customers affected is Central Japan Railway, which discovered that, although there isn’t a safety issue, some of the Kobe Steel products it uses for its bullet trains do not meet Japanese Industrial Standards.3

Four other customers that use Kobe Steel aluminum—Toyota Motor Corp., Mitsubishi Motor Corp., Honda Motor Corp. and Mazda Motor Corp.—confirmed their inspections haven’t uncovered any vehicle safety issues.4

Yoshihiko Katsukawa, a managing executive officer at Kobe Steel, said an internal investigation at the organization did not uncover any other cases of data tampering, and an external investigation of all Kobe Steel units worldwide has been launched.5

"We can’t rule out the possibility that the external investigation will find other cases," Katsukawa said.6

Gary Tsuchida, a spokesperson for Kobe Steel, said the organization regrets what has happened.

"There were tens of employees involved. It seems, in some cases, quality control was undertaken by veteran employees who had lots of experience, [were] highly trusted within the organization, and somehow these discrepancies slipped by them."7

Repeat offender

This isn’t Kobe Steel’s first brush with scandal. In fact, there have been several incidents over the years, according to reports:

  • June 2016—For more than nine years, Kobe Steel’s affiliate, Shinko Wire Stainless Co., falsified the tensile strength data of its steel wire.
  • 2008, 2011 and 2013—Kobe Steel failed to report income tax to authorities.
  • 2006—Kobe Steel admitted it had been falsifying the soot emissions data from blast furnaces at its manufacturing plant in Kakogawa, Japan.
  • 2006—Kobe Steel exceeded the established limits for ground and water pollution.
  • 2005—Kobe Steel took part in bid rigging for a bridge project.8

Could the behavior that contributed to the latest scandal be ingrained in Kobe Steel’s corporate culture? It seems likely at least some Kobe Steel executives knew about the data falsification. According to a retired former employee, the organization has a reputation for turning a blind eye.

"The corporate culture was to look the other way even while you saw what was going on … They were supposed to be instilling a culture that paid attention when improprieties were discovered," the former employee said. "In the end, they didn’t create such a corporate culture. That’s management’s responsibility."9

During Kobe Steel’s internal investigation, the organization discovered that some employees obstructed the investigation by covering up deceptive practices.

"Unfortunately, several employees, including those in positions of management, were involved … We are not sure how and when they covered it up," Naoto Umehara, vice president of Kobe Steel, said.10

How bad is it?

The external investigation is still in its early stages and a full report is expected by the end of the year, but it’s obvious the impact of the situation is huge.

According to Kobe Steel, data was falsified for 2,200 tons of copper products, 19,300 tons of aluminum and 19,400 pieces of aluminum castings and forgings—all of which was shipped to customers.11

In addition to the organization’s shares dropping 22% after the scandal was discovered, experts estimate it could cost $133 million to replace the affected parts—not to mention Kobe Steel could be held financially responsible if its customers recall any of their products containing Kobe Steel material.12

To remedy the issue, Kobe Steel is considering automating product data input and implementing a system that requires at least two workers to double-check data.13

But even if it can prevent further data falsification, Kobe Steel CEO Hiroya Kawasaki admitted that the scandal has severely damaged the organization’s reputation.

"The credibility of Kobe Steel has plunged to zero. We will make efforts to regain trust as soon as possible," Kawasaki said.14

Unauthorized inspections

Nissan and Subaru also have been in the spotlight recently for using unauthorized employees to perform the final safety checks of their vehicles. The checks are required by Japanese regulations before a vehicle can go on sale in the country.15

Although the issues were discovered earlier this year, they have existed for decades—since 1979 at Nissan and for about 30 years at Subaru.16

Both automakers performed the required final safety inspections, but Nissan used employees who weren’t registered as final inspectors, and Subaru’s unauthorized inspectors borrowed seals from registered safety inspectors.17

The result? Faulty inspections were performed on vehicles sold only in Japan’s domestic market, but the number of vehicles affected is still significant: Nissan already has recalled about 1.2 million vehicles, and Subaru is recalling 400,000 vehicles in Japan.18

According to reports, Subaru employees didn’t fully realize that what they were doing was actually violating Japanese regulations.19 Nissan, however, is a different story.

Nissan first admitted the inspection issue on Sept. 29. Three days later, Nissan President and CEO, Hiroto Saikawa, said measures had been implemented to prevent the issue from recurring.

However, after those preventive measures were put in place, Nissan discovered that unauthorized employees still were performing inspections at three of its assembly plants, which prompted Nissan to stop production at six plants.20

"I am deeply sorry for customers who trusted our preventive measures," Saikawa said.21

During a third-party investigation of the issue, misconduct in final inspector exams also was discovered. In some cases, examiners provided examinees with answers to test questions.22

Bad reputation

For a country that prides itself on the quality of its products, the hits kept coming in 2017. Besides marring the "Made in Japan" reputation, the recent scandals revealed systemic problems in Japan’s manufacturing industry, according to Zhu Yan, professor of economics at Takushoku University in Japan.23

Without serious change at many levels within these organizations, deception and mismanagement will continue to breed and quality will suffer. That’s worrisome.

"Ccorporate governance in Japan is defective in supervision and lacks checks and balances," said Jin Jianmin, a senior fellow at Fujitsu Research Institute in Tokyo. "Without an efficient supervision mechanism and under huge pressure to make a profit among fierce competition, enterprises could easily turn to cheating, and such misconduct is hard to uncover at an early stage."24

—compiled by Lindsay Dal Porto, assistant editor

References

  1. Jonathan Soble and Neal E. Boudette, "Kobe Steel’s Falsified Data Is Another Blow to Japan’s Reputation," New York Times, Oct. 10, 2017, http://tinyurl.com/nyt-kobe-steel.
  2. "Kobe Steel Scandal Sparks Car and Train Checks," BBC News, Oct. 12, 2017, http://tinyurl.com/bbc-kobe-steel.
  3. Yuka Obayashi and Tomo Uetake, "Kobe Steel Crisis Deepens as More Data Tampering Revealed; Shares Tumble," Reuters, Oct. 10, 20107, http://tinyurl.com/reuters-kobe-steel.
  4. Sean McLain, "Embattled Kobe Steel’s Aluminum Clears Safety Checks at Toyota, Honda, Other Automakers," Wall Street Journal, Oct. 19, 2017, http://tinyurl.com/mkt-watch-kobe-steel.
  5. Obayashi and Uetake, "Kobe Steel Crisis Deepens as More Data Tampering Revealed; Shares Tumble," see reference 3.
  6. Ibid.
  7. "Kobe Steel Scandal Sparks Car and Train Checks," see reference 2.
  8. Taro Fuse, "Scandal-hit Kobe Steel Has a ‘Look the Other Way’ Culture, They Say in Hometown," Reuters, Nov. 4, 2017, http://tinyurl.com/reuters-kobe-steel-more.
  9. Ibid.
  10. Kazuaki Nagata, "Kobe Steel Said Employees’ Cover-Up Hampered Internal Probe on Data Falsification Scandal," Japan Times, Oct. 20, 2017, http://tinyurl.com/japan-times-kobe-steel.
  11. Soble and Boudette, "Kobe Steel’s Falsified Data Is Another Blow to Japan’s Reputation," see reference 1.
  12. Masumi Suga and Chikako Mogi, "Steel Firm Faked Data for Metal Used in Planes and Cars," Bloomberg, Oct. 9, 2017, http://tinyurl.com/bloomberg-kobe-steel.
  13. "Kobe Steel Executives May Have T Data Falsification, Sources Say," Japan Times, Nov. 7, 2017, http://tinyurl.com/japan-times-kobe-more.
  14. Yuka Obayashi, "Kobe Steel CEO Says Data-Cheating May Have Spread Beyond Japan as Government Orders Probe," Reuters, Oct. 11, 2017, http://tinyurl.com/reuters-kobe-steel-cheating.
  15. Andrew Krok, "Nissan, Subaru Cop to Decades of ‘Flawed Vehicle Inspections," Cnet, Oct. 27, 2017, http://tinyurl.com/c-net-kobe-steel.
  16. Kae Inoue and Jie Ma, "Nissan Has Conducted Unauthorized Vehicle Checks Since 1979," Bloomberg, Oct. 26, 2017, http://tinyurl.com/bloomberg-nissan-checks.
  17. Krok, "Nissan, Subaru Cop to Decades of ‘Flawed’ Vehicle Inspections," see reference 15.
  18. Ibid.
  19. Yuri Kageyama, "Subaru Chief Says Inspections Were Flawed, Like Nissan’s," U.S. News, Oct. 27, 2017, http://tinyurl.com/us-news-nissan.
  20. "Nissan Says Unauthorized Checks Continued at Four Plants," Cetus News, http://tinyurl.com/cetus-news-nissan-checks.
  21. Ibid.
  22. "Nissan Reveals Misconduct Over Inspector Exams," Jiji Press, Nov. 6, 2017, http://tinyurl.com/jiju-press-nissan.
  23. "News Analysis: ‘Made in Japan’ Falls From Grace Amid Scandals, Systematic Flaws in Manufacturing Industry," Xinhuanet, Oct. 10, 2017, http://tinyurl.com/xinhuanet-analysis.
  24. Ibid.

HEALTHCARE

Report: 5 States Show Drastic Improvement in Hospital Safety

Hospitals in five states—Idaho, Oregon, Rhode Island, Hawaii and Wisconsin—have experienced the most improvement over a five-year period since the healthcare advocacy group, Leapfrog, began grading hospitals on safety in 2012.

"By making Hospital Safety Grades public, we’ve galvanized major changes in these states and many communities," said Leah Binder, president and CEO of Leapfrog. "Not only does it require dedication from national organizations, such as Leapfrog, to make this information public, but also from local coalitions, regional leaders, employers, business leaders and other community organizations to work with these hospitals and their communities to improve the quality and safety of healthcare."

Other highlights from the group’s hospital safety report include:

  • Of the 2,632 hospitals graded, 832 earned an "A," 662 a "B," 964 a "C," 159 a "D" and 15 an "F."
  • Hospitals with "F" grades are in California, Washington, D.C., Florida, Illinois, Maryland, Mississippi and New York.

The grades, updated every six months, are calculated by top patient safety experts and peer reviewed.

To see more specifics, visit www.hospitalsafetygrade.org.


HEALTHCARE

More Hospitals Adopting Electronic Quality Metrics

More U.S. hospitals are adopting and reporting electronic clinical quality measurements (eCQM) to drive quality improvement, according to a recent Joint Commission report.

In 2016, 470 Joint Commission-accredited hospitals voluntarily submitted eCQM data to the commission, an increase from 436 hospitals from the previous year. Surveys of the commission’s accredited hospitals indicate high awareness of eCQM reporting requirements, and most hospitals plan to report 2017 eCQM data to the Centers for Medicare & Medicaid Services next year.

"Hospitals that voluntarily shared information with the Joint Commission over the past year are helping the entire industry move forward by showing others how to use electronic clinical quality measures to improve care and ultimately achieve better health and save lives," said David W. Baker, the commission’s executive vice president of the division of healthcare quality evaluation.

For more details from the report, visit http://tinyurl.com/joint-comm-quality-report.


Getting to Know …

Michael Kent Hart

Current position: Founder of HUMAN, a consulting and training firm.

Education: MBA with a specialty in total quality management from the University of Leicester, England.

What was your introduction to quality? I was attending university for civil engineering in 1983 when I took a summer job as an SPC coordinator. I ended up as a quality manager, and the rest is history.

Is there a teacher who influenced you more than others? Why? Andrew Faulkner, my eighth-grade teacher from Batawa, Ontario. He had a huge class of hormone-raging pre-teens, but still managed to keep his cool under pressure.

Do you have a mentor who has made a difference in your career? My mentors were the employees and students who questioned what I did and why I did it. They challenged me and drove me to become better at what I do.

What’s the best career advice you’ve ever received? Everyone is a leader, and everyone is a follower at different points in their lives. If you can’t control a successful outcome, you can always take steps to influence it.

Have you had anything published? An 80-page thesis on "Conscious Human Intention in the Workplace and its Effects on Improvement Initiatives."

Any previous jobs you consider noteworthy? Facilitating the adoption of a multi-faceted business management system with the Bank of Canada that encompassed ISO 9001, ISO 14001, OHSAS 18001 and the bank’s own security requirements. This happened long before integrated management systems became popular.

Are you active in ASQ? Responsible for marketing, member programs and events for ASQ’s Ottawa Valley Section. Also served as the section’s excellence chair.

What noteworthy activities or achievements outside of ASQ do you participate in? Member of the national board of directors for the Canadian Public Sector Excellence Network. Currently serve as chair of its board advisory committee.

Any recent honors or awards? Elected to ASQ’s 2017 class of fellows.

What was the last movie you saw? "War for the Planet of the Apes."

Personal: Married with four children and six grandchildren.

What do you do for fun? I play the guitar, read historical fiction and practice reiki energy healing.

Quality quote: If you say it can’t be done, you’re right. If you say it can be done, you’re equally right. We move in the direction of our intention.


CUSTOMER SATISFACTION

Car Renters at Airports More Satisfied

Airport rental car companies in North America are experiencing an uptick in overall customer satisfaction despite increased airport passenger congestion and ongoing logistical challenges caused by construction projects at airports.

"Lower prices are having a positive effect on perceived value for renters, which is raising overall levels of satisfaction, but several other key quality measures—notably, wait times and problems with the pick-up and return processes—have not improved over the past four years," said Michael Taylor of J.D. Power. "But cheaper daily rental rates overcome those negatives for most renters."

Specific results from the J.D. Power survey include:

Satisfaction is up, prices are down: Overall rental car satisfaction improved by 22 index points to 826 (on a 1,000-point scale) this year, driven primarily by increases in satisfaction in the cost and fees factor. The average reported daily rental car price dropped $11 per day this year.

Wait times and problems with pick-ups and returns have increased: Wait times to pick up a rental car have gone up two minutes, on average, since 2013. Of customers who experienced a problem, 20% reported a problem with the pick-up process and 17% reported a problem with the return process, a situation largely attributable to increased passenger volume and construction at airports.

Even in price wars, features and benefits have a big effect on satisfaction: Even though price perceptions have the greatest effect on overall satisfaction, renters who choose rental car brands based on price alone are the least satisfied (787 index points), while customers who choose a rental car brand based on features and benefits are the most highly satisfied (889 index points).

Social media is a problem resolution battleground: About 70% of renters who post online about their rental experience expect a response from the rental car company, far outpacing the expectations of hotel guests and airline passengers, both of whom come in at 45%. When a rental car company simply responds to a post, satisfaction increases 63 index points on average. If the issue is resolved, the satisfaction score jumps 95 index points.

For more on the survey results, visit http://tinyurl.com/car-rental-study.


HEALTHCARE

21% of Americans Experience Medical Errors

A recent survey showed that 21% of Americans report having personally experienced a medical error. When the errors occur, they often have a lasting impact on the patient’s physical and emotional health, financial well-being or family relationships, the survey showed.

"The survey results show that Americans recognize that patient safety is a critically important, but complex, issue," said Tejal K. Gandhi, chief clinical and safety officer at the Institute for Healthcare Improvement (IHI) and president of the IHI/National Patient Safety Foundation Lucian Leape Institute, which organized the survey with the National Opinion Research Center at the University of Chicago.

"The focus on diagnostic errors and the outpatient settings closely parallels other research in this area and confirms that healthcare improvers need to take a systems approach to safety that encompasses all settings of care, not just hospitals," Gandhi said.

Beyond personally experiencing errors, 31% of Americans reported that someone else whose care they were closely involved with experienced an error.

The survey found that ambulatory settings are a frequent site of medical errors, and that errors related to diagnosis and patient-provider communications are the most commonly reported.

For more on the results, visit http://tinyurl.com/ihi-med-error-survey.


News Briefs


The Leapfrog Group
, a healthcare advocacy organization, is hosting its first national healthcare ratings summit Dec. 6-7 in Arlington, VA. Get more details at https://healthcareratingssummit.com.

The International Association for Food Protection is looking for nominations for its 2018 awards. All award nominations and applications are due Feb. 20. For more information, visit http://tinyurl.com/food-protect-awards.

Feraidon Ataie, an assistant professor of engineering at California State University-Chico, has won the 2017 Professor of the Year Award from the American Society for Testing and Materials (ASTM) International, a global standards development organization. The award recognizes the contributions of educators in developing students’ understanding of standards. For more details, visit http://tinyurl.com/astm-prof-award.

A team of students from Loyola University in Chicago recently won the fourth annual American Production and Inventory Control Society and "The Fresh Connection" International Student Team Competition. The competition involves presenting teams with supply chain problems and having them solve the problems using a computer simulation game. This year, 10 teams competed. For more details, visit http://tinyurl.com/apics-team-winner.


New @ ASQ

Applications for the 2018-19 Ellis R. Ott Scholarship are now available through ASQ’s Statistics Division. The $7,500 scholarships are for students in master’s degree or higher programs with concentrations in applied statistics or quality management. The 2017-18 scholarship recipients were: Ruth Sirkin of North Carolina State University and Claire Kelling of Pennsylvania State University. For more information and an application form, visit http://asq.org/statistics/about/awards-statistics.html. Applications will be accepted Jan. 1–April 1.


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