Quality Management System in German Hard Coal Mining Lessons From 20 Years of Experience

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1 Paper ID 123 Quality Management System in German Hard Coal Mining Lessons From 20 Years of Experience Prof. Dr. Jürgen Kretschmann 1 *, Marcus Plien 2 1 President, TFH Georg Agricola University of Applied Sciences, Bochum 2 former Head of Quality Management at RAG Aktiengesellschaft, Lecturer at TFH Georg Agricola University of Applied Sciences, Bochum *Authors to correspondence should be addressed via kretschmann@tfh-bochum.de ABSTRACT In 1991, the German coal mining company RAG Aktiengesellschaft (RAG) decided to implement a Quality Management System (QMS) based on the DIN EN ISO 9000 expressing a vision and goals to fulfill the customers` demands. RAG reduced the customers complaints by more than 80 % from about four million Euros per year to less than one million Euros. This success results from consequent planning, describing and optimization of all processes along the value chain. 20 years of experience in German coal mining can be transferred to South East Asian mining companies in order to implement an excellent QMS by themselves. KEY WORDS: Quality management system, quality management philosophy, quality management strategy, implementation, transfer 1. INTRODUCTION Quality management (QM) is one of the oldest working management tools in the world. The survival of a tribe or nation has often been dependent on a high quality labor force or army and access to readily available materials. Consequently, outstanding monuments and artifacts of mankind; such as the pyramids of Egypt or codes of conduct established by Hammurapi, King of Babylon more than around 3,500 years ago, stand as testaments toward our ability to work collectively with excellent quality for common aims or goods. (Fig. 1) Fig. 1: Stelen from the Codex of Hammurapi, King of Babylon ( B.C.9 2. QUALITY AND QUALITY MANAGEMENT What does quality mean? Everyone might have a different opinion, but their perception is always subjective, as long as it is not measurable. The DIN EN ISO provides some definitions, but every company must ultimately develop its own philosophy and provide services and products that seemed to be attractive to their consumers in the past. True quality within a company can be measured by customer loyalty and increased sales. Radical changes within the social and economic stratum in the last century have brought about new business phases. During the building phase in Germany after 1945 it was important to rebuilt and organize the substantial needs. There was a lack of almost everything and the primarily sales argument was the availability. Between 1960 and 1990, the consolidation phase, the nation was focused on objectives; like, prosperity, security and prestige. The features of the consolidation phase were: increased demands, better product/service offers, and a higher competitiveness in the global economy marked the quality phase. The objective of the quality phase was to attain a stable market position, rise to QM-leadership status and still protect the fragile environment. The consumer market was ruled by excess supplies and fierce business competition. Quality, function, and a Clean Coal Technology 1

perceived value by consumers became the primary sales objectives. Since 2000, the business excellence campaign sought to not only make a company a player in the global markets, but also a leader.

2 perceived value by consumers became the primary sales objectives. Since 2000, the business excellence campaign sought to not only make a company a player in the global markets, but also a leader. Quality, prestige, needs and commitment to content became the primary sales objective. Today, companies are determined to manage their QMS efficiently and confront business challenges; such as, extensive flexibility, dynamic markets, rising costs and increased pressures from competitive global markets. Special emphasis must be placed on rapid adaption, if we are to remain competitive and successful. One of the central messages in QM is the ambivalent expression: Quality goes top down, or Quality is an issue of the head (Fig. 2). This expression is generally valid, no matter when or where it is used. operations all around the world, especially in the fields of quality management, risk management, occupational safety and health, lean production, and so on. Here the company has a lot of experiences that can be transferred to coal mining areas all over the world. 4. DEVELOPMENT OF THE QUALITY MANAGEMENT SYSTEM IN GERMAN HARD COAL MINING In 1989, the Board of Directors of the German hard coal mining company DSK (the hard coal producing subsidiary of RAG), decided to install a company-wide quality management system. The customer requirements had become more and more strict and the company had to fulfill their demands. To implement the system successfully a project was established and hand-picked project members had to enroll in several intensive quality management courses. These had a special emphasis on auditing and procuring the necessary requirements to be licensed. This endeavor helped to create a staff of 25 responsible people for QM and more than 200 QM supporters. Collectively they created a quality handbook for every mine and coking plant, made yearly audits and provided instructions and trainings for more than 27,000 employees. (Fig. 3) Fig. 2: Quality goes top down 3. HARD COAL MINING IN GERMANY The sole German hard coal producer, the RAG Aktiengesellschaft (RAG) is located in the German state of North-Rhine Westphalia (NRW). With its 18 million inhabitants, NRW is the largest federal state in Germany. In NRW, 90% of German hard coal and 50% of its brown coal are mined; in addition, 33% of the German energy is generated here while 40% of this amount is consumed as well. More than one million people are employed in the energy sector, mining and affiliated industries. Coal mining in NRW was the basis of the so-called economic miracle in Germany after World War II. But the production of hard coal began to decline in the 1960s, mainly due to increasing imports of cheap oil and gas. Due to its non-competitive production costs, Germany s hard coal production depends on subsidies. The EU government does not allow this kind of subsidies anymore; this is the reason why the German government has decided to cease them in 2018.This lack of funding will probably lead to the end of this more than 200 year-old industry. From hundreds of mines only three are still working in NRW. The era of post-mining has already begun. Nevertheless, the RAG is still working on an outstanding level compared to other hard coal mining The development of a QMS within the RAG shows that reaching a level of a well accepted, implemented and applied system takes a variety of individual steps and many years of time. It also shows that the decision to implement a quality management system must be made by the upper board of management and has to be supported by every division within the company and the individual employees, in order to be successful. The example of the RAG shows that it is important that a specific work group consisting of different employees of different parts of the company is defined; these employees serve as leaders of this newly defined philosophy. Their job is to make sure that as many employees become trained and sensitized about the idea of a quality management system, and even more important, about the philosophy and idea behind it. Besides the great amount of trainings that have to be offered, it is essential to create a handbook. In the case of the RAG it was crucial that this philosophy of the quality management system was introduced and implemented in every coal mine. This was done in a well planned step by step process over an amount of time, starting with pilot mines and coking plants and finishing in a roll-out process. The main points of the implementation process were: Successful preparation and execution of customer specific audits Clean Coal Technology 2

Documentation of the operational procedure by using quality management hand books specifically written for mines and coking plants Definition of company-wide and consistent quality standards

3 Documentation of the operational procedure by using quality management hand books specifically written for mines and coking plants Definition of company-wide and consistent quality standards Assurance of the QMS by using internal and external audits Limitation to the assurance of the product quality To secure the efficiency of the implementation the top management of RAG led the process actively. Beside of this an exchange of experiences between the different plants and mines of RAG was required, which included an internal benchmark of the implementation progress. Based on an overall strategy, standards for a successful implementation were defined that considered the specific and original conditions of every mine and plant. Also a planning and control concept (project controlling, program controlling, strategic controlling) was developed and implemented. Furthermore, the mine management had to learn to play an active role as a change manager, in order to act as promoter and multiplicator within the process. Furthermore, quality campaigns were run to sensitize employees regarding the importance of quality management. An example is a campaign on a calendar of the coal pit Walsum in (Fig. 4) Fig. 4: Coal is a Clean Product Campaign of the Bergwerk Walsum, in order to explain and sensitize RAG had realized there were too many customers complaints. Not surprising, given the fact, that customers demands were either not often considered, or they found themselves abandoned while having to deal with quality problems; such as, inadequate regulation of accommodation, misuse of time management (long waiting times) and a perceived level of organizational incompetence. Some mines had problems with grain size, the containment, and other parameters: quality water, ash or volatile matter. The payments for customer complaints were about 20 Mio /year. 20 years later the compensation for complaints was less than 0.5 Mio /year. RAG accomplished this improvement through a series of quality instructions to all employees - stressing the importance of creating a perfect product: This our customers deserve! We will all reap the benefits for a job well done. (Fig. 5) This is the reason why RAG instructed all employees with different theories of quality philosophies like shown in Fig. 6. But not only the mediation of different philosophies was important, we also sensitized everyone about the exploding costs in a production chain. The more time we invest in failure prevention the more money we save. There are 6 stages of product development: the definition, the development, the preparation, the building, the final check and the product in use. During the early stages of a product development process failure prevention causes the lowest costs. In the production or fabricate phase the detection of defects is more expensive. And when a product is delivered, the cost for a call back can easily rise to millions of Euros. This is demonstratively described in the Rule of Ten by the well-known German professor for quality management Tilo Pfeifer (Fig. 7). This simple business fact has significantly contributed toward RAG s current quality management philosophy. 5. DEALING WITH MISTAKES The way a company deals with mistakes is an issue that has an enormous effect on the development of a quality-orientated thinking within a company. This can be described with the following situation: An employee makes a mistake and tries to assign the guilt. His direct supervisor punishes him with salary deduction or, perhaps, regulates him to perform night-shift duties. His future behavior will undoubtedly cover-up mistakes to avoid losing face and punishment and consequently, the quality orientated behavior of him will decline. The problem: The company loses in the long run when this happens, because the quality in the workplace cannot be secured and mistakes cannot be used for improvements. A different approach: An employee makes a mistake and together with his supervisor they determine the reason for this mishap. The employee is now part of the solution, and will asset him in the future toward identifying potential hazard or mistakes that could be fatal or costly to the company. This is a win-win scenario based on quality orientated thinking. 6. THE PRODUCTION CHAIN As the pioneer in quality management William Edwards Deming has described in his chain reaction model improvements in quality management lead to a better performance of the company, help to secure work places and improve the return of investment (Fig. 9). Clean Coal Technology 3

4 Beside of this more general strategic perspective, in daily business the transfer of extern and intern "customer-relationship management" has been an important and successful step in RAG s quality campaign. Every employee should be himself a part of the chain in the company s production line. The next chain link can only be perfect, when perfect results of the forerunner are delivered. Therefore, RAG focused to improve the customer-relationmanagement; internally and externally. Knowing that communication is the key to a perfect working process, RAG implemented daily 5- minutes quality talks in every segment of the production chain. Periodic meetings with the customer also helped fulfilling the customer's expectations and establishing a more secure client/business base (Fig. 10). 7. EXPERIENCES FROM THE IMPLEMENTATION PROCESS To implement a QMS in a mining company is not a simple task that can be done easily. It has to be carefully planned and takes a lot of time and efforts. Setbacks in the process have to be calculated and a realistic project plan is the basis for success (Fig. 11). The experience of the implementation process in RAG lead to following advices: First of all you had to be honest and blunt about the current situation. Analyze carefully and accurately. The success or failure of a product is significantly influenced by the price and product quality. Companies must estimate the acceptance of a new product in advance. When planning the characteristics of a new product, it is to calculate the risk if the potential customer will accept these and will be willing to pay a higher price. Technical extensive and innovative products do not necessarily lead to the expected market success. Only a few producers compete in all categories of quality One aspect of quality can often only be improved at the expense of another one. Technical constraints represent barriers. The companies have to develop their success position in the market regarding to the 7 categories. It is important to define exclusive, competitive features, in order to separate themselves. Last but not least you had to think in long terms, when making the decision to install a QMS! 8. CONCLUSIONS The RAG coal mining company has more than two decades of experiences in implementing, developing and successfully running a QMS. These experiences can be transferred to South East Asian mining companies. However, QMS in South East Asia have to be adapted to the specific situations of the companies. There is no one-size-fits-all - solution possible. ACKNOWLEDGEMENTS The authors would like to thank Ms. Anja Hamer for her great support during the creation of the paper. Clean Coal Technology 4

5 ADDITIONAL FIGURES Fig. 3: Workshops in Quality Management, Duration: 1994-Mai 2006 Fig. 5: Result of lack of quality Clean Coal Technology 5

6 Fig. 6: Quality philosophies Fig. 7: Rule of Ten by Prof. Tilo Pfeifer Clean Coal Technology 6

7 Fig. 8: Dealing with mistakes Fig. 9: Deming's chain reaction Clean Coal Technology 7

8 Fig. 10: Customer relationship management (external and internal) Fig. 11: Typical project development Clean Coal Technology 8

Behaviors That Revolve Around Working Effectively with Others Behaviors That Revolve Around Work Quality

Behaviors That Revolve Around Working Effectively with Others 1. Give me an example that would show that you ve been able to develop and maintain productive relations with others, thought there were differing