FACULTY OF BUSINESS & COMMUNICATION

SSP21803 – QUALITY AND PRODUCTIVITY MANAGEMENT

Semester 1, 2022/2023

MASTER OF BUSINESS ADMINISTRATION (ENGINEERING MANAGEMENT)

INDIVIDUAL ASSIGNMENT

Annual Report: SENHENG RETAIL SDN BHD (2019 – 2021)

Prepared by:

ANIS ELIANI BINTI ABDUL RAHMAN (2233433168)

Prepared for:

ASSOC. PROF. Ts. Dr. NORSHAHRIZAN BINTI NORDIN

Date of Submission: 16/11/2022 (Thursday): Week 5

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NO QUESTION

Question 1 : Summarize how quality is discussed or implied in the company’s

statement and philosophy. Are any changes in the perspectives of

quality evident over time?

Question 2 : Do you see evidence of implementations of the quality philosophies

discussed in the manual report?

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Contents

1.0 Introduction.........................................................................................................4

2.0 Background Of Company...................................................................................7

3.0 Background Of Study..........................................................................................9

4.0 Company’s Statement And Philosopy , And Quality Management Practise At Senheng

New Retail Sdn Bhd.....................................................................................................10

4.1 Company’s Leadership And Is Collectively Responsible For The Objectives And

Goals 12

4.1.1 The Role Of Individual Director..................................................................14

4.1.2 The Role Of Executive And Non-Executive Director.............................16

4.1.3 The Role Of Senior Independent Director................................................18

4.1.4 The Role Of President..................................................................................18

4.2.Promoting Good Business Conduct And Maintaining A Healthy Corporate Culture 19

4.3 Addresses Sustainability Risks and Opportunities in an Integrated And Strategic

Manner To Support Its Long-Term Strategy And Success......................................20

4.4 Staff Training and Recruitment..........................................................................21

4.5 Corporate Social Responsibility.........................................................................23

4.6 Incentives............................................................................................................25

4.6.1 Monetary Incentives....................................................................................25

4.6.2 Non-monetary Incentives.............................................................................25

4.7 Effective And Independent /Non Independent Audit Committee......................27

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4.8 Quality Assurance /Control of product and services..........................................32

4.9 Proposed Project Quality Plan............................................................................34

4.10 Supplier Partnership.........................................................................................35

4.11 Customer Satisfaction.......................................................................................37

5.0 Evidence Of Implementations Of The Quality Philosophies In The Perspectives Of

Quality Evident Over Time..........................................................................................41

5.1 Company Financial.............................................................................................41

5.2. Innovation System In Organization...................................................................43

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1.0 Introduction

Quality management is a recent phenomenon but important for an organization. However,

the importance of craftsmen diminished as mass production and repetitive work practices

their instituted. This approach’s aim was to produce large numbers of the same goods. The

first proponent in the US for this approach was Eli Whitney, who proposed (interchangeable)

parts manufacture for muskets, hence producing the identical components and creating a

musket assembly line. The next step forward was promoted by several people

including Frederick Winslow Taylor, a mechanical engineer who sought to improve industrial

efficiency. He is sometimes called "the father of scientific management." He was one of

the intellectual leaders of the Efficiency Movement and part of his approach laid a further

foundation for quality management, including aspects like standardization and adopting

improved practices. Henry Ford was also important in bringing process and quality

management practices into operation in his assembly lines. In Germany, Karl Benz, often

called the inventor of the motor car, was pursuing similar assembly and production practices,

although real mass production was only properly initiated in Volkswagen after World War II.

From this period onwards, North American companies focused predominantly upon

production against lower cost with increased efficiency.

Walter A. Shewhart made a major step in the evolution towards quality management by

creating a method for quality control for production, using statistical methods, first proposed

in 1924. This became the foundation for his on going work on statistical quality control. W.

Edwards Deming later applied statistical process control methods in the United States during

World War II, thereby successfully improving quality in the manufacture of munitions and

other strategically important products.

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Quality leadership from a national perspective has changed over the past decades. After the

Second World War, Japan decided to make quality improvement a national imperative as part

of rebuilding their economy, and sought the help of Shewhart, Deming and Juran, amongst

others. W. Edwards Deming championed Shewhart's ideas in Japan from 1950 onwards. He

is probably best known for his management philosophy establishing quality, productivity, and

competitive position. He has formulated 14 points of attention for managers, which are a high

level abstraction of many of his deep insights. They should be interpreted by learning and

understanding the deeper insights. These 14 points include key concepts such as:

a. Break down barriers between departments

b. Management should learn their responsibilities, and take on leadership

c. Supervision should be to help people and machines and gadgets to do a better job

d. Improve constantly and forever the system of production and service

e. Institute a vigorous program of education and self-improvement

f. Drive out fear, so that everyone may work effectively for the company

Implementing TQM is not an easy concept and does have cost related to it. At times

implementing TQM may need huge financing and company would want to know if its efforts

have given any results. These performance measures have a huge role to play in the success

or failure of the company. Some of the basic ways to know the performance of the company

can be seen by the level of employee interaction, improvement in teams, level of customer

complaints, customer loyalty, reduction in defects, machine failure rates, quality performance

by suppliers, relations with suppliers and customers, increase in revenue, sales, shareholder

investors, etc. There are various models, which can measure the performance of the success

of TQM; ‘The Malcolm Baldrige National Quality Award (MBNQA) (American Model)’

framework is a very close replica of what TQM is. The Baldrige Criteria for performance
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excellence framework has seven categories that help company’s achieve excellence. The

seven categories are:

1. Leadership

2. Strategic Planning

3. Customer focus

4. Measurement, Analysis and Knowledge Management

5. Human resource focus

6. Operations focus

7. Business results

By assessing quality standards and performance along with the employee’s involvement and

customer’s satisfaction, it can be found that company applied those criteria as well as Deming

fourteen points to achieve its TQM as mentioned above.

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2.0 Background Of Company

Senheng New Retail Berhad is a Malaysia-based investment holding company. The

Company through its subsidiaries is a retailer of consumer electrical and electronic

products. The Company's products include digital gadgets, audio visuals, home

appliances and other products. It also engaged in the provision of delivery, installation,

maintenance, and repair services. The Company operates approximately 103 physical

stores in Malaysia. The Company's brands include Senheng and senQ. The Company's

subsidiaries include SC Alliance (M) Sdn Bhd, Senheng Captive Insurance Pte Ltd and

Senheng Electric (KL) Sdn Bhd.Founded by Lim Kim Heng, Senheng opened its first

store in 1 September 1989 with only half-a-store setup located in Pandan Jaya, Kuala

Lumpur. In 1995, the company launched a franchise program that was later discontinued.

It was due to lack of management system and the brand “Senheng” wasn't strong enough

to make it work at that point of time, thus the franchise program to be put on hold.

On 12 January 1996, Senheng started its nationwide expansion initiative by opening its

first outstation outlet in Negeri Sembilan, and then follotheyd by Malacca. Not long after,

Senheng set up more outlets across Malaysia and opened its first outlet in Vietnam. A

new franchise program was relaunched in 2001. In 2002, the company announced a fixed-

price policy, ending price-bargaining with customers. The company also began a

customer loyalty program and its own credit card.

In 2003, Senheng developed a new retail brand, senQ Digital Station, which focuses on

high end and premium electrical and electronic products, and is only located in malls to

cater to those with higher purchasing potheyr. The average size of a senQ Digital Station

was 20,000 sq ft (1,900 m2), 10 times the size of a Senheng outlet.The first senQ Digital

Station outlet was opened in South City Plaza near Seri Kembangan on 5 December
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2003.Customers can purchase their products from Senheng's theybsite and choose to self-

collect or pick up at any of their desired or nearest Senheng or senQ outlets.

Over the past few years, Senheng has been through many changes. These changes were

made to better serve thier customers. Even though the future has yet to unfold, they are

ready to adopt for changes necessary to meet your needs and provide enhanced shopping

experience for customer.

Mission :- is to create a better quality of living for you and us. Therefore, they create and

deliver these values to customer.

Quality Applied

1) Their products are branded and from reputable suppliers with a high standard of

quality control.

2) Customers can access various quality bathroom, bedroom, living room systems to

kitchen appliances and electronics in their stores.

3) Provide professional in-store and after-sales services, we ensure timely shipment

of goods from warehouse to stores and to customers.

4) They are a reliable organization with reaching 100 stores established nationwide

5) Fast and efficient to response

6) Superb quality of services

3.0 Background of Study

For the purpose of this study, it focuses more on the total quality management (TQM)

practices by the organization and its relationship with the quality performance. The Total

quality management (TQM) can be define as a management philosophy that seeks to

integrate all organizational functions such as marketing, finance, design, engineering, and
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production, customer service and other functions, to focus on meeting customer needs and

organizational objectives.

Globalization, industry growth and technological change interact to create alternative

environments with varying levels of dynamism and complexity requiring realignment of

operation strategies. Along with quality, cost, delivery, and flexibility, customer focus is

another competitive priority to adapt fitting operation strategies proactively in changing

environments. Regardless of the effort by managers of such environments to raise their

performance, they still face major challenges in how to implement such strategic initiatives

for company business excellence. Effective strategy deployment can be assumed as one good

way to make such initiatives successful. However, despite all effort made in the different

fields in adapting new strategies and implementation procedures, sustainable development in

industries has become a major concern in the last decade both in developed and developing

countries. It is widely accepted that customer satisfaction is the primary focus in modern

business success. Companies must always put the customer needs in first place. This has

resulted in the exercise of value creation. Therefore, with the concept of value, customer

value has become a source of sustainable competitiveness. Therefore, companies have

adopted different platforms for value creation, such as; mass production, streamlined supplier

networks, value in design, lean Construction/production, six sigma and, total quality

management (TQM). However, TQM represents a platform for marketing potentialities, and

synergistic in facilitating efficient management of process for value creation and delivery in

the highly dynamic and competitive market. TQM as a management approach focus on the

early involvement of all organization members at early stage of the procurement process,

therefore, taking the right decision at early stage will save a great deal of time effort and

money leading to more added value to the Customers.

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4.0 Company’s Statement and Philosophy, And Quality Management Practise at

Senheng New Retail Sdn Bhd

TQM and Performance TQM and financial performance development might be further

studied by making a follow-up study of the companies included in the investigation, in order

to study whether the advantageous financial performance also holds in a longer perspective.

Advantageous financial performance might be considered a major incitement for commitment

and motivation among employees and management. Since their motivation and commitment

are vital areas for sustaining TQM, se e.g. Dale et al. (1997), maintained advantageous

financial performance is of importance for the future progress of TQM. Furthermore one

could include other organisations, companies that applied for the award and that reached a

certain level in the assessment, in order to enlarge the empirical foundation and further

outline how different levels of TQM adoption affect financial performance. The present

investigation of TQM implementation and financial performance development might also be

complemented by studies designed to analyse more clearly the possible casual links leading

to increased financial performance. The research conducted within the framework of this

thesis used comparisons between examples of successful TQM implementations and two

control Companies (i.e. 81 competitors and branch indices), studied during two time periods,

in order to analyse effects on financial performance. Since the investigation is divided into

implementation and post implementation periods, and the positive divergence is consequently

is more significant during the post implementation period, one might argue that the findings

indicate links bettheyen successful TQM implementation and advantageous financial

performance SenHeng Retail Sdn Bhd, see Figure 4.1

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Figure 4.1 Internal And External Factors, Which In Turn Have An Impact On Financial

Performance for SenHeng Retail Sdn Bhd

Senheng’s Seamless New Retail Model aligns 9 key aspects of new retail concept for

seamless efficiency and customer experience such as :

 Product

All products are available across online and retail stores

 Pricing

Consistent product pricing across all physical and online stores

 Inventory

Central Distribution Centre (CDC) serving as main hub, integrated to seamless retail

platform

 Logistics

Centralised model since 2018 enables efficient logistics from CDC to regional hubs

and last-mile

 Payment Mode

Multiple modes of payment across online and physical stores

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 Repair & Service

Offers repair and services for all products

 Loyalty Program

Valuable PlusOne loyalty program for members satisfaction, including additional

warranty coverage and exclusive benefits

 Promotion

Consistent promotions and discounts displayed across online and physical stores

 Benefits

Sales personnel are incentivised for sales across physical store, telemarketing and

online platforms for consistent customer service delivery

4.1 Company’s Leadership And Is Collectively Responsible For The

Objectives And Goals

Deming is saying that to sustain success of an organization leaders need to move

beyond the typical command-and-control, numbers driven, they stern management

theories and instead, embrace the theories that are a part of his New Philosophy.

This company is headed by a board, which assumes responsibility for the company’s

leadership and is collectively responsible for meeting the objectives and goals of the

company. The board who is responsible for instilling good corporate governance

practices, leadership and effectiveness of the board is appointed.

The duties and responsibilities of the Board are clearly outlined in the Board Charter

as follows:
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a) to review and adopt strategic plans, addressing the sustainability of the Company

and its subsidiaries’ (“the Company”) business;

b) to oversee the conduct of the Company’s businesses and evaluate whether or not

the businesses are being properly managed;

c) to identify principal business risks faced by the Company and ensure the

implementation of appropriate systems to manage these risks;

d) to consider and implement succession planning, including appointing, training,

fixing the compensation of and, where appropriate, replacing members of the Board

and Senior Management;

e) to develop and implement an investor relations programme or shareholder

communications policy for the Company;

f) to review the adequacy and the integrity of the Company’s internal control systems

and management information systems, including systems for compliance with

applicable laws, regulations, rules, directives and guidelines;

g) to promote good corporate governance culture together with Senior Management

within the Company for reinforcing ethical, prudent and professional behaviour; and

h) to review, challenge and decide on Senior Management’s critical proposals for the

Company, and oversee its implementation by the Senior Management.

4.1.1 The Role Of Individual Director

The Executive Chairman, Mr. Lim Kim Heng carries out a leadership role in

the conduct of the Board and its relations to shareholders and other stakeholders. He

is responsible for instilling good corporate governance practices, leadership and

effectiveness of the Board as a whole. There are two main aspects to the Chairman’s
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role. They are the Chairman’s role within the boardroom and the Chairman’s role

outside the boardroom as stated in the Board Charter. Second practice is positions of

Chairman and CEO are held by different individuals. There is a clear segregation of

responsibilities bettheyen the Chairman and President to ensure there is an appropriate

balance of potheyr, authority and accountability at the Board level. The Chairman

carries out a leadership role in the conduct of the Board and its relations to

shareholders and other stakeholders. He is responsible for instilling good corporate

governance practices, leadership and effectiveness of the Board as a whole. As such,

the Board has outlined the Company’s corporate governance policy in the form of a

Board Charter that defines the respective roles, responsibilities and authorities of the

Board, both individually and collectively, and of management in setting direction,

management and control of the organisation.

The purpose of this Board Charter is to document the policies upon which the

Board has decided to meet its legal and other responsibilities. This Charter is

designed to provide guidance and clarity for Directors and Management regarding

the roles and responsibilities of the Board and its Committees, the requirements of

Directors in carrying out their stewardship role and in discharging their duties

towards the Company as well as the Board’s operating practices.

There is a clear segregation of responsibilities between the Chairman and

President to ensure there is an appropriate balance of authority and accountability at

the Board level. The Chairman carries out a leadership role in the conduct of the

Board and its relations to shareholders and other stakeholders. He is responsible for

instilling good corporate governance practices, leadership and effectiveness of the

Board as a whole. The President’s primary objective is to seek to achieve the on-

going success of the Company through being responsible for all aspects of the
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management and development of the Company. The President is of critical

importance to the Company in guiding the Company to develop new and imaginative

ways of winning and conducting business and must possess industry knowledge and

credibility to fulfil the requirements of the role.

Senheng New Retail Berhad is an investment holding company, and through wholly-

owned subsidiaries, they are a retailer of consumer electrical and electronic products.

The Board of Senheng recognises the importance of adopting high standards of

corporate governance throughout the Group as a fundamental part of discharging its

responsibilities to protect and enhance shareholders’ value and financial performance

of the Group.

4.1.2 The Role Of Executive And Non-Executive Director

Executive Directors are, as employees, involved in the day-to-day

management of the Group. Non-Executive Directors are further classified as:

i. those who have no direct or indirect pecuniary interest in the

Company other than their Directors’ fee, related emoluments and their
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“permitted” holdings of shares in the Company, i.e. Independent Non-

Executive Directors; and

ii. those who have no direct or indirect pecuniary interest in the

Company other than their Directors’ fee, related emoluments and their

“permitted” holdings of shares in the Company, i.e. Independent Non-

Executive Directors; and

iii. those who are not employees of the Company or affiliated with it in

any other way and are not involved in the day-to-day running of

business but have pecuniary interest in the Company, either as

shareholders or otherwise and whether direct or indirect, i.e. Non-

Executive Directors.

Non-Executive Directors act as a bridge between Management, shareholders and other

stakeholders. They provide the relevant checks and balances, focusing on

shareholders’ and other stakeholders’ interests and ensuring that high standards of

corporate governance are applied. Letters of appointment for Non-Executive Directors

do not set out a fixed time commitment for board duties as the Board believes that the

time required by the Non-Executive Directors may fluctuate depending on demands of

the business and other events. However, it is expected that Non-Executive Directors

shall allocate sufficient time to the Company to perform their duties effectively.

4.1.3 The Role Of Independent Non-Executive Director

Independent Directors are essential for protecting the interests of shareholders and

can make significant contributions to the Company’s decision making by bringing in

the quality of detached impartiality.

The emphasize that even if a person does not fall within any of the disqualifying
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indicators enumerated out in, both the Director and the Board must give effect to the

spirit, intention and purpose of the definition of an Independent Director. There must

be a conscious application of the test of whether the said Director is able to exercise

independent judgment and act in the best interests of the Company.

The attributes of collegial yet independent decision-making that must be vested in the

Independent Director will be determined in part by the character of the individual and

that of the whole ethos of the Board.

4.1.3 The Role Of Senior Independent Director

Senheng may appoint a Senior Independent Director to whom concerns may be

conveyed by shareholders and the public. The role of the Senior Independent Directors

include:

 Acting as a sounding Board to the Chairman;

 Serving as an intermediary for other directors when necessary;

 Acting as point of contact for shareholders and other stakeholders

particularly on concerns which cannot be resolved through the normal

channels of the Chairman and/or President; and

 Providing leadership support and advice to the Board in the event that the

Board is undergoing a period of stress.

4.1.4 The Role Of President

The President is responsible for implementing the program to achieve the

Company’s goals and vision for the future, in accordance with the strategies, policies,

programs and performance requirements approved by the Board. The position reports

directly to the Board. The President’s primary objective is to seek to achieve the ongoing

success of the Company through being responsible for all aspects of the management and
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development of the Company. The President is of critical importance to the Company in

guiding the Company to develop new and imaginative ways of winning and conducting

business and must possess industry knowledge and credibility to fulfill the requirements

of the role.

The President will manage a team of executives responsible for all functions

contributing to the success of the Company.

Effectively overseeing the human resource of the organization with respect to key

positions in the Group hierarchy and ensuring the general well-being of employees,

including the determination of remuneration as well as terms and conditions of

employment for Senior Management personnel and issues pertaining to discipline of all

employees. Developing long-term strategic and short-term profit plans, designed to

ensure that the Group’s requirements for growth, profitability and return on capital are

achieved.

4.2.Promoting Good Business Conduct And Maintaining A Healthy Corporate Culture

The Company’s management guides the strategic direction of their sustainability pursuits

based on economic, environmental and social (“EES”) considerations. The management

oversees their sustainability performance, while representatives from various business units

are tasked to implement identified sustainability initiatives.

The board establishes a Code of Conduct and Ethics for the company, and together with

management implements its policies and procedures, which include managing conflicts of

interest, preventing the abuse of power, corruption, insider trading and money laundering.

The Code of Conduct and Ethics is published on the company’s website. The Board of

Directors of Senheng shall ensure that the Company upholds high standards of ethics and

corporate behaviour . A governing Board is in a position of trust. It holds in trust not only the
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Company’s physical and intellectual assets but also the efforts of those who have gone

before. It preserves and grows these things for the current and future generations. Its

stewardship will protect the organisation from harm and steer it towards positive

achievement. In that light and in the performance of their duties, a Director of Senheng is first

and foremost held accountable in demonstrating Corporate Governance, relationship with

shareholders, employees, creditors and customers and social responsibilities and the

environment.

Executive management of the Group’s business, covering, inter- alia, the

development of a sustainable strategic plan, an annual operating plan and budget,

performance benchmarks to gauge Management’s performance, and an analysis of

Management reports.

4.3 Addresses Sustainability Risks and Opportunities in an Integrated And Strategic

Manner To Support Its Long-Term Strategy And Success

In establishing a Fixed Purpose Towards Improvement of the company by adapting

Total Quality Management (TQM) by planning for quality in the long term. Companies also

resist responding with short-term solutions. With that, Senheng Retail Sdn Bhd prepares to

face the challenges of the future, and always aims to be better. The board together with

management takes responsibility for the governance of sustainability in the company

including setting the company’s sustainability strategies, priorities and targets. The board

takes into account sustainability considerations when exercising its duties including among

others the development and implementation of company strategies, business plans, major

plans of action and risk management. Strategic management of material sustainability matters

should be driven by senior management. The Board understands the importance of the

pertinent environmental, social, and governance factors on affecting the Company’s

performance and has been actively taking in the sustainability in every decision making
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process. The board and management have been continuously engaged and considered the

views of its internal and external stakeholders to better understand their interests and

subsequently align the Company’s sustainability initiatives to be relevant to the stakeholders’

needs. The Board of Directors is responsible to review and adopt strategic plans, addressing

the sustainability of the Company’s business. The management guides the strategic direction

of their sustainability pursuits based on economic, environmental and social (“EES”)

considerations. The management oversees their sustainability performance, while

representatives from various business units are tasked to implement identified sustainability

initiatives.

The Company carried periodically review with its internal audit team and

management team on the discussion on sustainability reporting. The employees are aware of

the company’s approach towards sustainability. The Company maintains an integrated

Governance Risk Compliance (“GRC”) approach to effective corporate governance,

enterprise risk management, and corporate compliance with applicable laws and legislation.

Information on the Company’s sustainability strategies, initiatives and practices as well as the

performance are presented in the Sustainability.

4.4 Staff Training and Recruitment

Quality management process relies heavily on trainings. It is therefore extremely

necessary that trainings must be managed, effective and must be able to achieve desired

outcomes. Senheng believes in the innovative capabilities of their employees, and they

provide ample opportunities for career development and professional growth. They conduct

regular training programmes for their employees to enhance their customer service,

management and technical skills. This includes physical and online trainings conducted by

their training provider, SH Retail Academy Sdn Bhd.

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Additionally, they organise overseas study trips for their employees to understand and

learn the differences in retail culture and dynamism of supply chain countries. On average,

each employee undertook 17.5 of training activity in 2021, compared to 18.1 in 2020. The

Company also maintains an incentive training programme that helps retain the services of

high performing store managers. Shortlisted managerial candidates who have achieved

certain performance metric are offered the opportunity to receive commissions on store sales.

At the end of the incentive programme, qualified store managers will also stand a chance to

become the franchisee of the Company. They also offer a Back to School (BTS) programme

to selected high potential employees, to promote mobility or horizontal career progression.

Through the 5-day BTS programme, employees undertake theoretical and practical education

and gain cross functional understanding across their operations. 80% of their office-based

Department Heads are internally promoted, while 100% of their outlet managers are

internally promoted.

Training and education programme in 2021 (selected):

• Customer Service

• Leadership

• Franchisee

• Logistics Personal Development

• HQ Personal Development

• Management + New Retail

• Kaizen PDCA Training

• Management
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4.5 Corporate Social Responsibility

Based on Deming's teachings, the organizational structure—and, importantly, the

reward and recognition system—must promote organizational values and not create

contradictions. This results in a culture of trust and openness both inside and outside the

organization, ultimately improving corporate reputation. Juran spoke of a system of values,

beliefs and behaviours that are necessary for organizational success. He espoused the view

that quality is recognized for its focus on people through work life and employee satisfaction.

Ishikawa made a particularly strong statement on behalf of CSR when he said, “The first

concern of a company is the happiness of the people connected to it. If the people do not feel

happy, that company does not deserve to exist.”

CSR has attracted many of us to the quality profession. Practitioners and researchers

alike have built their careers around quality because of what March Laree Jacques calls the

tremendous appeal of quality as an “opportunity to do good—to improve the workplace, to

raise standards of living, to achieve excellence.”

As managing and controlling companies have become more complex and demanding,

boards are resorting to committees to assist them in the discharge of their duties and

responsibilities. As a responsible corporate citizen, they recognise the need to support the

development of local communities. They regularly contribute to medical, education, sports,

and other community development activities.

However, the existence of Board Committees does not diminish the Board’s

responsibility for the affairs of a company. Board can delegate powers to committees but

such delegation should be subject to the following :

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• Delegated authority in accordance with the Company’s Constitution

• Clearly established terms of reference, defining their responsibilities

and authority, which are approved by the Board

• The Board must supervise its delegation

• The Board must not merely adopt or rely on the committees’

recommendations without proper assessment and testing or

challenging the same.

They also contribute to the education of our youth. They run the Senheng Education

Assistance Program, which sponsors deserving students desiring to fulfil their dreams of

pursuing higher education. Since the program commenced in 2019, they have sponsored a

total of RM400,000 to support 20 students. In April 2022, they entered into a Memorandum

of Understanding with Tunku Abdul Rahman University College (TAR UC) to formalise an

academia-industry collaboration. They will share insights on retail industry and operations

with TAR UC educators and students, as they ll as jointly establish a Research and

Development Centre. Furthermore, they established a Senheng Scholarship with an allocation

of RM5 million over 10 years to eligible TAR UC students, and will offer internship and

employment opportunities. Moving forward, they are committed in better engaging the public

and our role in facilitating inclusive community growth.

4.6 Incentives

Incentives are used by employers to encourage their employees to provide the best

work they can. In TQM systems, incentives are paid to teams of employees when they

identity theyaknesses in quality (Chauhan, 2015).

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4.6.1 Monetary Incentives

Monetary incentives are those financial payments made to employees over and above

their normal salary. These are designed to encourage the employee, working in teams in the

TQM system to observe and report any problems in the quality of the organisation.

4.6.2 Non-monetary Incentives

Non-monetary incentives consist of training, flexible working hours, paid sabbaticals

and health savings (Chauhan, 2015). Base on the study, found that the employee might

perceive non-monetary incentives as an example of a caring and supporting organisation.

This was also found to increase job satisfaction and lead to improvements in the quality of the

service to customers. Thus the following hypothesis was formulated:

Incentives underlie the empowerment of employees, according to one of Bowen and

Lawler’s (1995) constructs of their empowerment model. Based on the aforementioned

review, the following hypotheses are formulated:

(i) Focusing on the customer has no significant effect on monetary incentives.

(ii) Continuous improvement has no significant effect on monetary incentives.

(iii) Top management commitment has no significant effect on monetary

incentives. Teamwork has no significant effect on monetary incentives.

(iv) Employee participation has no significant effect on monetary incentives

The Relationship between TQM and Monetary Incentives Investigated the impact of

Senheng were to retain and encourage optimal staff performance, Senheng offers an incentive

programme where store managers who meet certain performance metrics are given the

opportunity to receive commissions from sales generated at the store they manage. Store
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managers under the incentive programme receive a share of the net profit from the sales

generated at that physical store for an initial period of three years, which may be renewed at

the discretion of the company. Stores operated under the incentive programme are still owned

by the Company. At the end of the programme, these store managers will be evaluated to

ascertain if they are eligible to be a franchisee under its franchise programme. Compared to

the incentive programme, the franchise programme requires a capital investment from the

franchisee to operate the store. To be considered a franchisee candidate, one needs to be an

existing store manager who displays the necessary capabilities and entrepreneurial spirit.

Franchisees are granted the rights by the Company to own and operate a physical store for a

fixed term of five years; the franchise agreement is renewal upon expiry.

4.7 Effective And Independent /Non Independent Audit Committee.

Periodic, independent, and documented examination and verification of activities,

records, processes, and other elements of a quality system to determine their conformity with

the requirements of a quality standard such as ISO 9001 : 2008, established quality

procedures and policies.

Any failure in their proper implementation may be published publicly and may lead to a

revocation of quality certification. Quality Audit is also called as conformity assessment or

quality system audit. A good quality audit shall ensure that the followings are followed;

i) The planned quality for the project will be met.

ii) The products are safe and fit for use.

iii) All pertinent laws and regulations are followed.

iv) Data collection and distribution system are accurate and adequate.

v) Proper corrective action is taken when required.

vi) Improvement opportunities are identified.

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The board is able to objectively review the Audit Committee’s findings and

recommendations. The company’s financial statement is a reliable source of information. The

Audit Committee has policies and procedures to assess the suitability, objectivity and

independence of the external auditor to safeguard the quality and reliability of audited

financial statements. The Audit and Risk Management Committee is formed to play a crucial

role in corporate governance process, a process that is one of the cornerstones of

shareholders’ protection. Board may delegate, but not abdicate its responsibilities to the Audit

and Risk Management Committee. The Audit and Risk Management Committee (ARMC) is

also responsible for overseeing risk management framework and policies often Company.

The Audit and Risk Management Committee should assume four fundamental

responsibilities:

• Assessing the risks and control environment;

• Overseeing financial reporting;

• Evaluating the internal and external audit process; and

• Reviewing conflict of interest situations and related party transactions.

The Company was listed on the Main Market of Bursa Securities on 25 January 2022

(“Listing”). Upon listing, the Company outsources its internal audit function to an

independent consulting firm Messrs. KPMG Management & Risk Consulting Sdn Bhd to

provide an independent review of internal control and to report to the ARMC directly on the

Company’s financial reporting process, internal controls, risk management and governance.

All reports from the internal audit reviews carried out by the internal auditor are to be

presented to the ARMC in the ARMC Meeting, with recommendation of corrective action to

be undertaken by the Management, if any. In performing the internal audit review, the
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Internal Auditors refer to and are guided by The International Professional Practices

Framework (“IPPF”) that includes the Definition of Internal Auditing, the Code of Ethics and

the International Standards for the Professional Practice of Internal Auditing issued by the

Institute of Internal Auditors.

The Board recognizes that the risk management and internal control system, however well-

designed, can only provide reasonable and not absolute assurance against the occurrence of

any material misstatement, loss or fraud. However, the Board and ARMC, are committed to

maintaining as far as is practical, a proper system of risk management and internal control

that is aligned to and reflective of current Company’s business needs and can support the

achievement of the Company’s strategic objectives. The Board has received assurance from

the Executive Director and Chief Financial Officer that the Company’s risk management and

internal control system is operating effectively, in all material respects for the financial year

under review and up to the date of approval of this Statement for inclusion in the Annual

Report. The statement has been approved by the Board on 25 April 2022.

Their objectives are to obtain reasonable assurance about whether the financial

statements of the Group and of the Company as a whole are free from material misstatement,

whether due to fraud or error, and to issue an auditors’ report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit

conducted in accordance with approved standards on auditing in Malaysia and ISAs will

always detect a material misstatement when it exists. Misstatements can arise from fraud or

error and are considered material if, individually or in the aggregate, they could reasonably be

expected to influence the economic decision of users taken on the basis of these financial

statements. As part of an audit in accordance with approved standards on auditing in

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Malaysia and ISAs, they exercise professional judgement and maintain professional

scepticism throughout the audit. They also:

(a) Identify and assess the risks of material misstatement of the financial statements

of the Group and of the Company, whether due to fraud or error, design and perform

audit procedures responsive to those risks, and obtain audit evidence that is sufficient

and appropriate to provide a basis for our opinion. The risk of not detecting a material

misstatement resulting from fraud is higher than for one resulting from error, as fraud

may involve collusion, forgery, intentional omissions, misrepresentations, or the

override of internal control.

(b) Obtain an understanding of internal control relevant to the audit in order to

design audit procedures that are appropriate in the circumstances, but not for the

purpose of expressing an opinion on the effectiveness of internal control of the Group

and of the Company.

(c) Evaluate the appropriateness of accounting policies used and the reasonableness

of accounting estimates and related disclosures made by the Directors.

(d) Conclude on the appropriateness of the Directors’ use of the going concern basis

of accounting and, based on the audit evidence obtained, whether a material

uncertainty exists related to events or conditions that may cast significant doubt on the

ability of the Group or of the Company to continue as a going concern. They conclude

that a material uncertainty exists, they are required to draw attention in their auditors’

report to the related disclosures in the financial statements of the Group and of the

Company or, if such disclosures are inadequate, to modify our opinion. Conclusions

are based on the audit evidence obtained up to the date of our auditors’ report. Future
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events or conditions may cause the Group and the Company to cease to continue as a

going concern.

(e) Evaluate the overall presentation, structure and content of the financial statements

of the Group and of the Company, including the disclosures, and whether the financial

statements of the Group and of the Company represent the underlying transactions

and events in a manner that achieves fair presentation.

(f) Obtain sufficient appropriate audit evidence regarding the financial information of

the entities or business activities within the Group to express an opinion on the

financial statements of the Group. They are responsible for the direction, supervision

and performance of the group audit. They remain solely responsible for our audit

opinion.

4.8 Quality Assurance /Control of product and services

It is a process of evaluating the formal activities, managerial process and overall

project performance on a regular basis to ensure that the project will satisfy the required

quality standards. Quality assurance includes all the activities related to satisfying the

relevant quality standards for a project. Another goal of quality assurance is continuous

quality improvement. Benchmarking can be used to generate ideas for quality improvements.

Quality audits in the other hand helps to identify lessons learned that can improve

performance on current or future projects. It is the quality assurance function that tries to

manage for the project scope, cost and time are fully integrated. Quality assurance can be

effective, if these two things are assured;

i) Project Quality plan must be sufficient to achieve the required

quality standards expected by the organization. In this regard the

plan must not only be specific and detailed listing all quality
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requirements and standards, but also need to include all the steps to

be taken to ensure that those requirements and standards are met.

ii) Quality assurance (i.e. final product testing) should be independent

of the project itself (as well as the project manager). This comes

down from the project management guidelines for effective quality

assurance, and builds on a broad-based, organizational approach to

standards-based product testing.

The process of monitoring specific project results to determine if they are comply

with relevant quality standards and identifying ways to eliminate causes of unsatisfactory

performance. Such activities include continually monitoring process, identifying and

eliminating problem cause, use of statistically process control to reduce the variability and to

increase the efficiency of the process. Buy conducting the Quality Control it is demonstrate

that the organisation’s quality objectives are being met. A good quality control system shall;

i) Select what to control

ii) Set standards that provide the basis for decisions regarding

possible corrective action

iii) Establish the measurement method used

iv) Compare the actual results to the quality standards

v) Act to bring nonconforming process and material back to the

standard based on the information collected.

vi) Monitor and calibrate measuring devices

vii) Include detailed documentation for all process

Senheng place utmost emphasis on the quality, safety and reliability of products sold. The

products sold in our stores comply with all applicable regulations and policies, such as
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product labelling, and energy efficiency rating also known as Minimum Energy Performance

Standards (MEPS). Relevant regulations include Regulation 97 – 101 of the Electricity

Regulations 1994 by the Energy Commission, where all products are subject to inspection

and approval of the regulator. They continuously assess and conduct audits on product safety

and reliability, and ensure all products supplied to the Company comply with requirements of

the Energy Commission and other bodies. Their products carry Certification of Approval,

SIRIM Certification, MCMC Certification, as theyll as MEPS labelling for energy rating.

4.9 Proposed Project Quality Plan

A good quality plan shall identify all of the organization external and internal

customers, cause the design of a process that produce the features desired by the customers,

bring in suppliers early in the process, cause the organization to be responsive to changing

customers need and prove that the process is working and that quality goals are being met.

Project Quality Plan should be written with the objective to provide project management with

easy access to quality requirements and should have ready availability of the procedures and

standards thus mentioned. The following list provides you the various Quality Elements that

should be included but not limited in a Project Quality Plan;

• Management Responsibility. Describes the quality responsibilities of all

stakeholders. •

• Project quality objectives. Objectives of the project quality plan. •

• Site organization chart, with named personnel if known. •

• Responsibilities and authorities of project staff. Staff job delineation. •

• Site layout plan. Site map showing the location of the project site. •

• Documented Quality Management System. This refers to the existing Quality

Procedures that have been standardized and used within the organization.
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• Design Control. This specifies the procedures for Design Review, SignOff,

Design Changes and Design Waivers of requirements.

• Document Control. This defines the process to control Project Documents at

each Project Phase.

• Purchasing. list(s) of materials and appliances used for the project, showing the

verification requirement of each and defines Quality Control and Quality

Requirements for sub-contracting any part / whole part of the project.

• Corrective Actions. This describes the procedures for taking Corrective Actions

for the problems encountered during project execution.

• Quality Records. This describes the procedures for maintaining the Quality

Records (metrics, variance reports, executed checklists etc) during project

execution as well as after the project completion.

• Quality Audits. An internal audit should be planned and implemented during

each phase of the project.

• Frequency (or provisional dates if possible) of internal quality audits.

• Training. This should specify any training requirements for the project team.

4.10 Supplier Partnership

Senheng is committed to open communication and development of true partnership

with its suppliers. suppliers not only provide with raw materials but also the technology and

processes, design service, capacity improvement layouts which can help in reducing costs,

quick marketing, reduced production time and improved quality, which can provide a long

and sustainably business for the company, thus also for the supplier. Suppliers help the

company with the design process, due to which Senheng finds out about new materials,

technologies and parts before its automakers. Over the years, suppliers are termed as partners
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and companies have a co-dependent relation with them as suppliers would not exist without

the companies and the companies would fall without the suppliers. As the company and its

suppliers are now working as partners, there are values and norms they need to follow which

would help them cultivate their relation for better returns. Company achieves high quality

levels with profit, aim for supplier partnerships.

In 1989, he co-founded Senheng Electric, a partnership business together with their Chairman

and President (our business was transferred to Senheng KL in 1994). Initially, he worked

part-time and handled the delivery of goods to customers and bill collections. Three years

later, he joined full time as our administration manager where he managed the human

resource and administrative matters as theyll as billings and collections. He holds other

directorships in Senheng Company of Companies and various private limited companies. His

siblings, Lim Kim Heng and Lim Kim Chieng are also members of the Board. He has a direct

shareholding in the Company’s substantial shareholder, SQ Digital Sdn Bhd.

4.11 Customer Satisfaction

A Deming based organization uses evidence based management practices to

understand the value customers receive and the variation in the delivery of that value.

Internally the organization uses in process measures to monitor and improve (through

experimentation – PDSA cycle) internal processes.

The focus goes beyond pleasing the customer you are faced with at any one time in the

Deming context. The Deming management system is designed to learn all they can from

every customer interaction to improve the process of delivering value to all future customers.

This mind set is a fundamentally different mind-set from that of most companies.
 35

The Senheng Company future growth depends on their ability to continue attracting existing

and new customers to shop at their physical and online stores. As consumer shopping

behaviour continuously evolves, there can be no assurance that changes in customer

preference in the future will not have an impact to the Company’s business operations,

financial performance and prospects. Backed by a robust database of 3.28 million and

growing loyalty members and data from our e-commerce channels, they are able to gain

insights through data analytics on Latest consumer trends to tailor our business strategies

accordingly.

The Company recognises revenue from contracts with customers for the sale of goods

based on the five-step model as set out below:

(a) Sales of goods

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(ii) Identify performance obligations in the contract. A performance obligation

is a promise in a contract with a customer to transfer a good or service to

the customer.

(iii) Determine the transaction price. The transaction price is the amount of

consideration to which the Company expects to be entitled in exchange for

transferring promised goods or services to a customer, excluding amounts

collected on behalf of third parties.

(iv) Allocate the transaction price to the performance obligations in the

contract. For a contract that has more than one performance obligation, the

Company allocates the transaction price to each performance obligation in

an amount that depicts the amount of consideration to which the Company

expects to be entitled in exchange for satisfying each performance

obligation.

(v) Recognise revenue when the Company satisfies a performance obligation.

The Company satisfies a performance obligation and recognises revenue over time

if the performance of the Company:

(i) Does not create an asset with an alternative use to the Company has an

enforceable right to payment for performance completed to-date; or

(ii) Creates or enhances an asset that the customer controls as the asset is

created or enhanced; or

(iii) Provides benefits that the customer simultaneously receives and

consumes as the Company performs. For performance obligations where

any one of the above conditions is not met, revenue is recognised at the

point in time at which the performance obligation is satisfied.

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(b) Sales of services

Warranty The Company provides a warranty beyond fixing defects that existed at the

time of sale. These service-type warranties are sold together with the sale of goods.

Contracts for bundled sales of goods and service-type warranty comprise two

performance obligations because the goods and service-type warranty are both sold on

a stand-alone basis and are distinct within the context of the contract. Using the

relative stand-alone selling price method, a portion of the transaction price is allocated

to the service-type warranty and recognised as a liability (deferred income) in the

statement of financial position. Revenue for service-type warranties is recognised

over the period in which the service is provided based on the time elapsed.

Membership income Membership income is recognised in profit or loss when the

payment is received and proportion to the membership tenure.

(c) Customer loyalty awards

The Company operate the customer loyalty programme, which allows customers to

accumulate points for future redemption when they purchase products at the

Company’s stores. The consideration received from the sale of goods is allocated to

the goods sold and the points issued that are expected to be redeemed. The

consideration allocated to the points issued is measured at fair value of the points. It is

recognised as a liability (deferred income) in the statement of financial position and

recognised as revenue when the points are redeemed, have expired or are no longer

expected to be redeemed. The amount of revenue recognised is based on the number

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of points that have been redeemed, relative to the total number of points expected to

be redeemed.

5.0 Evidence Of Implementations Of The Quality Philosophies In The Perspectives Of

Quality Evident Over Time

5.1 Company Financial

Driving sales and future-proofing its business by implementing a seamless retail

business model Senheng’s key strength lies in its seamless business model which began in

2017. Under this business model, it focuses on investing in its capabilities to build and

integrate both its online and offline retail presence. This is to provide customers with a

consistent, convenient and comfortable shopping experience across all of its sales channels

(including digital). For example, all product sales (available items for sale, selling prices etc.)

and promotional activities are conducted universal across all its sales platforms. This business

model has shown positive results, as Senheng was able to grow its revenue base at a CAGR

of 10.1% over 2016-2021 despite gradually closing physical outlets during the period (it had

105 outlets as at end-FY21 vs. 125 outlets as at end-FY16). They also note that Senheng

recorded an improvement in average annual revenue per outlet from RM7.6m in 2016 to

RM12.3m in 2021. Going forward, Senheng has stated its plans to continue building on its

position of strength by enhancing its shopping experience via

i) upgrading/expanding its physical retail stores,

ii) improving its online touch points (website and app), and

iii) Expanding its exclusive brand and SKU portfolios.

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Led by a leader with visionary leadership takes over the Company through various phases

of transformation. And The business model with new good quality management then

supported by the team has undergone significant was changed from 2000 to 2021.

5.2. Innovation System In Organization

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The transfer loop of innovation system in order to effectively implement the

innovation system, a transfer loop of the innovation system has been developed, as shown in

Figure 5. It constitutes of four constructs:

Figure 2. The transfer loop of the innovation system in Senheng Retail Sdn Bhd since 2016-

2021.

Input includes: work results, Quality Management Plan, operational definitions,

experience, and checklists.

Methods used include: inspection, quality control charts, and compare to diagrams,

statistical sampling, flowcharting, Six Sigma, Pareto analysis and trend analysis.

Output includes: quality improvements, acceptance decisions, rework, completed

checklists, and process adjustments, customer satisfaction,

Senheng involves innovation system in its management setting and achieving the

company’s quality objectives. By using the innovation system , based on previous annual

report studies, for example the impact of the pandemic in 2020 caused a change behaviour in
 41

the way customers buy toward digital platforms. Along with the changing behaviour of

customers, Senheng has increased the need for technology platform in using online systems

instead of focusing on comfort in business premises.

Employee involvement refers to the regular participation of employees in the work process,

suggestions for improvement, setting goals and monitoring the performance. So the

organization makes a positive work environment that is based on trust, good customer

service, teamwork and operational excellence, the Senheng leadership team has understand

and invest in the needs of the most important stakeholders of the organization, and the

employees. The return of this it makes high levels of employee motivation, productivity,

creativity and commitment that will help in the sustainable growth of the organization. Here

is the evidence improvement that had been applied to the Senheng :-

 Enhance the customers’ shopping experience and strengthen the market presence by

upgrading the chain of physical stores.

 Expanding product portfolio through the development of a new brand distribution

business which include international brands and the own house brand

 Increase the warehouse storage space and strengthen the logistic network in East

Malaysia.

 Boost the digital infrastructure.

 Enhancement of the PlusOne loyalty programme

In 2021, the consumer E&E retail industry was expected to recover. Based on the latest

available data, as of September 2021, E&E retail sales were recorded at RM43.76 billion.

During the 9 months of RM4.86 billion, the average monthly sales improved by 6.81% from

the average monthly sales in 2020 of RM4.55 billion. Following the government's recent

upliftment of movement restriction measures on 10 October 2021, economic activities will

 42

gradually normalize, and BNM expects Malaysia's GDP to grow within the range of 3.00% to

4.00% in 2021. According to the latest economic outlook published along with Budget 2022,

Malaysia's GDP is expected to strengthen and grow between 5.50% to 6.50% in 2022,

supported by significant improvement in global trade, stabilized commodity prices,

containment of the pandemic, and gradual improvement in consumer and business

sentiments. This is anticipated to drive the growth of disposable income and consumer

purchasing power, thereby spurring the demand for E&E products moving forward. Further,

the consumer E&E retail industry will continue to be supported by several financial aids and

incentives provided by the Government, including the extraordinary individual income tax

relief on the purchase of hand phones, laptops, and tablets, until 31 December 2022.

In the longer term, the demand for consumer E&E products in Malaysia is expected to

remain strong as consumer E&E products are essential items for comfort and functional

purposes to ease, simplify and improve daily lives. The demand for consumer E&E products

will also continue to be driven by the introduction of innovative consumer E&E products

with enhanced functionality and features and the availability of multiple sales platforms that

provide convenience and flexibility for the purchase of consumer E&E products.