CHAPTER-1-CONCEPT-OF-QUALITY (1).pdf

CHAPTER 1 CONCEPT OF QUALITY Broadly defined, quality refers to the ability of a product or service to consistently meet or exceed customer requirements or expectations. Different custom...

CHAPTER 1 CONCEPT OF QUALITY Broadly defined, quality refers to the ability of a product or service to consistently meet or exceed customer requirements or expectations. Different customers will have different requirements, so a working definition of quality is customer-dependent. For a decade or so, quality was an important focal point in business. But after a while, the emphasis on quality began to fade, and quality took a backseat to other concerns. However, there has been an upsurge recently in the need for attention to quality. Much of this has been driven by recent experience with costs and adverse publicity associated with wide-ranging recalls that have included automobiles, ground meat, toys, produce, dog food, and pharmaceuticals. Successful management of quality requires that managers have insights on various aspects of quality. These include defining quality in operational terms, understanding the costs and benefits of quality, recognizing the consequences of poor quality, and recognizing the need for ethical behavior. We begin with defining quality. Defining Quality: The Dimensions of Quality One way to think about quality is the degree to which performance of a product or service meets or exceeds customer expectations. The difference between these two, that is Performance – Expectations, is of great interest. If these two measures are equal, the difference is zero, and expectations have been met. If the difference is negative, expectations have not been met, whereas if the difference is positive, performance has exceeded customer expectations. Customer expectations can be broken down into a number of categories, or dimensions, that customers use to judge the quality of a product or service. Understanding these helps organizations in their efforts to meet or exceed customer expectations. The dimensions used for goods are somewhat different from those used for services. Product Quality. Product quality is often judged on eight dimensions of quality: Performance —main characteristics of the product. Aesthetics —appearance, feel, smell, taste. Special features —extra characteristics. Conformance —how well a product corresponds to design specifications. Reliability —dependable performance. Durability —ability to perform over time. Perceived quality —indirect evaluation of quality (e.g., reputation). Serviceability —handling of complaints or repairs. These dimensions are further described by the examples presented in Table 9.1. When referring to a product, a customer sometimes judges the first four dimensions by its fitness for use. Notice that price is not a dimension of quality. TABLE 9.1 Examples of product quality dimensions for a car Dimension Examples 1. Performance Everything works: fit and finish, ride, handling, acceleration 2. Aesthetics Exterior and interior design 3. Features Convenience: placement of gauges High tech: GPS system Safety: anti-skid, airbags 2 Quality Management Systems 4. Conformance Car matches manufacturer’s specifications 5. Reliability Infrequent need for repairs 6. Durability Useful life in miles, resistance to rust 7. Perceived quality Top-rated 8. Serviceability Ease of repair Service Quality. The dimensions of product quality do not adequately describe service quality. Instead, service quality is often described using the following dimensions: Convenience —the availability and accessibility of the service. Reliability —the ability to perform a service dependably, consistently, and accurately. Responsiveness —the willingness of service providers to help customers in unusual situations and to deal with problems. Time —the speed with which service is delivered. Assurance —the knowledge exhibited by personnel who come into contact with a customer and their ability to convey trust and confidence. Courtesy —the way customers are treated by employees who come into contact with them. Tangibles —the physical appearance of facilities, equipment, personnel, and communication materials. Consistency —The ability to provide the same level of good quality repeatedly. Table 9.2 illustrates how the dimensions of service quality might apply to having an automobile repaired. Dimension Examples 1. Convenience Was the service center conveniently located? 2. Reliability Was the problem fixed and will the “fix” last? 3. Responsiveness Were customer service personnel willing and able to answer questions? 4. Time How long did the customer have to wait? 5. Assurance Did the customer service personnel seem knowledgeable about the repair? 6. Courtesy Were customer service personnel and the cashier friendly and courteous? 7. Tangibles Were the facilities clean? Were personnel neat? 8. Consistency Was the service quality good, and was it consistent with previous visits? The dimensions of both product and service quality establish a conceptual framework for thinking about quality, but even they are too abstract to be applied operationally for purposes of product or service design, or producing a product or delivering a service. They must be stated in terms of specific, measurable characteristics. For example, when buying a car, a customer would naturally be interested in the car’s performance. But what does that mean? In more specific terms, it might refer to a car’s estimated miles per gallon, how quickly it can go from 0 to 60 miles per hour, or its stopping distance when traveling at 60 mph. Each of these can be stated in measurable terms (e.g., estimated miles per gallon: city _ 25, highway _ 30). Similar measurable characteristics can often be identified for each of the other product dimensions, as well as for the service dimensions. This is the sort of detailed information that is needed to both design and produce high-quality goods and services. Information on customer wants in service can sometimes be difficult to pin down, creating challenges for designing and managing service quality. For example, customers may use words such as friendly, considerate, and professional to describe what they expect from service providers. These and similar descriptors are often difficult to translate into exact service specifications. Moreover, in many instances, customer wants are often industry specific. 2 3 Quality Management Systems Thus, the expectations would be quite different for health care versus dry cleaning. Furthermore, customer complaints may be due in part to unrelated factors (e.g., customer’s mood or general health, the weather). Other challenges with service quality include the reality that customer expectations often change over time and that different customers tend to have different expectations, so what one customer might view as good service quality, another customer might not be satisfied with at all. Couple these with the fact that each contact with a customer is a “moment of truth” in which service quality is instantly judged, and you begin to understand some of the challenges of achieving a consistently high perception of service quality. If customers participate in a service system (i.e., self-service), there can be increased potential for a negative perception of quality. Consequently, adequate care must be taken to make the necessary customer acts simple and safe, especially since customers cannot be trained. So, error prevention must be designed into the system. It should also be noted that in most instances, some quality dimensions of a product or service will be more important than others, so it is important to identify customer priorities, especially when it is likely that trade-off decisions will be made at various points in design and production. IMPLICATIONS OF QUALITY In addition to being a critical element in operation, quality has other implications. Here are three other reasons why quality is important: 1. Company reputation: An organization can expect its reputation for quality – be it good or bad – to follow it. Quality will show up in perceptions about the firm’s new products, employment practices, and supplier relations. Self-promotion is not a substitute for quality products. 2. Product liability: The courts increasingly hold organizations that design, produce, or distribute faulty products or services for damages or injuries resulting from their use. Legislation such as the Consumer Product Safety Act sets and enforces product standards by banning products that do not reach those standards. Impure foods cause illness, nightgowns that burn, tires that fall apart, or auto fuel tanks that exploded on impact can all lead to huge legal expenses, large settlements or losses, and terrible publicity. 3. Global implications: In this technological age, quality is an international, as well as OM, concern. For both a company and a country to compete effectively in the global economy, products must meet global quality, design, and process expectations. Inferior products harm a firm’s profitability and a nation’s balance of payments. THE DETERMINANTS OF QUALITY The degree to which a product or a service successfully satisfies its intended purpose has four primary determinants: 1. Design. 2. How well the product or service conforms to the design. 3. Ease of use. 4. Service after delivery. Quality From the Customer’s Perspective A business organization produces goods and services to meet its customers’ needs. Customers want value and quality has become a major factor in the value of products and service. Customers know that certain companies produce better-quality products than others, and they buy accordingly. That means a firm must consider how the consumer defines quality. The customer can be a manufacturer purchasing raw materials or parts, a store owner or retailer purchasing products to sell, or someone who purchases retail products or services over the Internet. W. Edwards Deming, author and consultant on quality, says that “The consumer is the most important part of the production line. Quality should be aimed at the needs of the consumer, present and future.” From this perspective, product and service quality is determined by what the customer wants and is willing to pay for. Since customers 3 4 Quality Management Systems have different product needs, they will have different quality expectations. This results in a commonly used definition of quality as a service’s or product’s fitness for its intended use, or fitness for use; how well does it do what the customer or user thinks it is supposed to do and wants it to do? Products and services are designed with intentional differences in quality to meet the different wants and needs of individual consumers. A Mercedes and a Ford truck are equally “fit for use,” in the sense that they both provide automobile transportation for the consumer, and each may meet the quality standards of its individual purchaser. However, the two products have obviously been designed differently for different types of consumers. This is commonly referred to as the quality of design—the degree to which quality characteristics are designed into the product. Although designed for the same use, the Mercedes and Ford differ in their performance, features, size, and various other quality characteristics. Quality From the Producer’s Perspective Now we need to look at quality the way a producer or service provider sees it: how value is created. We already know that product development is a function of the quality characteristics (i.e., the product’s fitness for use) the customer wants, needs, and can afford. Product or service design results in design specifications that should achieve the desired quality. However, once the product design has been determined, the producer perceives quality to be how effectively the production process is able to conform to the specifications required by the design referred to as the quality of conformance. What this means is quality during production focuses on making sure that the product meets the specifications required by the design. Examples of the quality of conformance: If new tires do not conform to specifications, they wobble. If a hotel room is not clean when a guest checks in, the hotel is not functioning according to the specifications of its design; it is a faulty service. From this producer’s perspective, good quality products conform to specifications—they are well made; poor-quality products are not made well—they do not conform to specifications. Achieving quality of conformance depends on a number of factors, including the design of the production process (distinct from product design), the performance level of machinery, equipment and technology, the materials used, the training and supervision of employees, and the degree to which statistical quality-control techniques are used. When equipment fails or is maladjusted, when employees make mistakes, when material and parts are defective, and when supervision is lax, design specifications are generally not met. Key personnel in achieving conformance to specifications include the engineering staff, supervisors and managers, and, most important, employees. An important consideration from the customer’s perspective of product quality is product or service price. From the producer’s perspective, an important consideration is achieving quality of conformance at an acceptable cost. Product cost is also an important design specification. If products or services cannot be produced at a cost that results in a competitive price, then the final product will not have acceptable value—the price is more than the consumer is willing to pay given the product’s quality characteristics. Thus, the quality characteristics included in the product design must be balanced against production costs. Ease of Use and Service after Delivery The determination of quality does not stop once the product or service has been sold or delivered. Ease of use and user instructions are important. They increase the chances, but do not guarantee, that a product will be used for its intended purposes and in such a way that it will continue to function properly and safely. (When faced with liability litigation, companies often argue that injuries and damages occurred because the user misused the product.) Much of the same reasoning can be applied to services. Customers, patients, clients, or other users must be clearly informed on what they should or should not do; otherwise, there is the danger that they will take some action that will adversely affect quality. Some examples include the doctor who fails to specify that a medication should be taken before meals and not with orange juice and the attorney who neglects to inform a client of a deadline for filing a claim. Much consumer education takes the form of printed instructions and labeling. Thus, manufacturers must ensure that directions for unpacking, assembling, using, maintaining, and adjusting the product—and what to do if something goes wrong (e.g., flush eyes with water, call a physician, induce vomiting, do not induce vomiting, disconnect set immediately)—are clearly visible and easily understood. 4 5 Quality Management Systems A Final Perspective on Quality We approached quality from two perspectives, the customer’s and the producer’s. These two perspectives are dependent on each other as shown in Figure 1.1. Although product design is customer-motivated, it cannot be achieved without the coordination and participation of the production process. When a product or service is designed without considering how it will be produced, it may be impossible for the production process to meet design specifications or it may be so costly to do so that the product or service must be priced prohibitively high. Figure 2.1 depicts the meaning of quality from the producer’s and consumer’s perspectives. The final determination of quality is fitness for use, which is the customer’s view of quality. It is the consumer who makes the final judgment regarding quality, and so it is the customer’s view that must dominate. Figure 1.1 The Meaning of Quality The determination of quality does not stop once the product or service has been sold or delivered. Ease of use and user instructions are important. They increase the chances, but do not guarantee, that a product will be used for its intended purposes and in such a way that it will continue to function properly and safely. (When faced with liability litigation, companies often argue that injuries and damages occurred because the user misused the product.) Much of the same reasoning can be applied to services. Customers, patients, clients, or other users must be clearly informed on what they should or should not do; otherwise, there is the danger that they will take some action that will adversely affect quality. Some examples include the doctor who fails to specify that a medication should be taken before meals and not with orange juice and the attorney who neglects to inform a client of a deadline for filing a claim. Much consumer education takes the form of printed instructions and labeling. Thus, manufacturers must ensure that directions for unpacking, assembling, using, maintaining, and adjusting the product—and what to do if something goes wrong (e.g., flush eyes with water, call a physician, induce vomiting, do not induce vomiting, disconnect set immediately)—are clearly visible and easily understood. For a variety of reasons, products do not always perform as expected, and services do not always yield the desired results. Whatever the reason, it is important from a quality standpoint to remedy the situation—through recall and repair of the product, adjustment, replacement or buyback, or reevaluation of a service—and do whatever is necessary to bring the product or service up to standard. 5 6 Quality Management Systems RESPONSIBILITY FOR QUALITY It is true that all members of an organization have some responsibility for quality, but certain parts of the organization are key areas of responsibility: Top management. Top management has the ultimate responsibility for quality. While establishing strategies for quality, top management must institute programs to improve quality; guide, direct, and motivate managers and workers; and set an example by being involved in quality initiatives. Examples include taking training in quality, issuing periodic reports on quality, and attending meetings on quality. Design. Quality products and services begin with design. This includes not only features of the product or service; it also includes attention to the processes that will be required to produce the products and/or the services that will be required to deliver the service to customers. Procurement. The procurement department has responsibility for obtaining goods and services that will not detract from the quality of the organization’s goods and services Production/operations. Production/operations has responsibility to ensure that processes yield products and services that conform to design specifications. Monitoring processes and finding and correcting root causes of problems are important aspects of this responsibility. Quality assurance. Quality assurance is responsible for gathering and analyzing data on problems and working with operations to solve problems. Packaging and shipping. This department must ensure that goods are not damaged in transit, that packages are clearly labeled, that instructions are included, that all parts are included, and that shipping occurs in a timely manner. Marketing and sales. This department has the responsibility to determine customer needs and to communicate them to appropriate areas of the organization. In addition, it has the responsibility to report any problems with products or services. Customer service. Customer service is often the first department to learn of problems. It has the responsibility to communicate that information to appropriate departments, deal in a reasonable manner with customers, work to resolve problems, and follow up to confirm that the situation has been effectively remedied. BENEFITS OF GOOD QUALITY Business organizations with good or excellent quality typically benefit in a variety of ways: an enhanced reputation for quality, the ability to command premium prices, an increased market share, greater customer loyalty, lower liability costs, and fewer production or service problems—which yields higher productivity, fewer complaints from customers, lower production costs, and higher profits. Annual studies by the National Institute of Standards indicate that winners of the Baldrige quality award, described later in the chapter, outperform the S&P 500 Index by a significant amount. THE CONSEQUENCES OF POOR QUALITY Some of the major areas affected by quality are 1. Loss of business 2. Liability 3. Productivity 6 7 Quality Management Systems 4. Costs Poor designs or defective products or services can result in loss of business. Failure to devote adequate attention to quality can damage a profit-oriented organization’s reputation and lead to a decreased share of the market, or it can lead to increased criticism and/or controls for a government agency or nonprofit organization. In the retail sector, managers might not be fully aware of poor product or service quality because customers do not always report their dissatisfaction. Even so, dissatisfied customers do tend to voice their dissatisfaction to friends and relatives, which can have negative implications for customer perceptions and future business. Organizations must pay special attention to their potential liability due to damages or injuries resulting from either faulty design or poor workmanship. This applies to both products and services. Thus, a poorly designed steering arm on a car might cause the driver to lose control of the car, but so could improper assembly of the steering arm. However, the net result is the same. Similarly, a tree surgeon might be called to cable a tree limb. If the limb later falls and causes damage to a neighbor’s car, the accident might be traced to a poorly designed procedure for cabling or to improper workmanship. Liability for poor quality has been well established in the courts. An organization’s liability costs can often be substantial, especially if large numbers of items are involved, as in the automobile industry, or if potentially widespread injury or damage is involved (e.g., an accident at a nuclear power plant). Express written warranties as well as implied warranties generally guarantee the product as safe when used as intended. The courts have tended to extend this to foreseeable uses, even if these uses were not intended by the producer. In the health care field, medical malpractice claims and insurance costs are contributing to skyrocketing costs and have become a major issue nationwide. Productivity and quality are often closely related. Poor quality can adversely affect productivity during the manufacturing process if parts are defective and have to be reworked or if an assembler has to try a number of parts before finding one that fits properly. Also, poor quality in tools and equipment can lead to injuries and defective output, which must be reworked or scrapped, thereby reducing the amount of usable output for a given amount of input. Similarly, poor service can mean having to redo the service and reduce service productivity. Cost to remedy a problem is a major consideration in quality management. The earlier a problem is identified in the process, the cheaper the cost to fix it. The cost to fix a problem at the customer end has been estimated at about five times the cost to fix a problem at the design or production stages. QUALITY AND PERSONAL VALUES Today, organizations are asking employees to take more responsibility for acting as the point of contact between the organization and the customer, to be team players, and to provide better customer service. Rath & Strong, a Lexington, Massachusetts-based management consulting firm, polled almost 200 executives from Fortune 500 companies about activities that foster superior performance results for an organization. The survey revealed that personal initiative, when combined with a customer orientation, resulted in a positive impact on business success and sales growth rate. Quality beings with individual attitudes and behavior. Robert Galvin, form CEO of Motorala, once told the Economic Club of Chicago, “Quality is a very personal obligation. If you cant’ talk about quality in the first person, then you have not moved to the level of involvement of quality that is absolutely essential.” Employees who embrace quality as a personal value often go beyond what they’re asked or normally expected to do in order to reach a difficult goal or provide extraordinary service to a customer. Nordstrom’s customer service stories are legendary, and include employees who have ironed a new shirt for a customer who needed it that afternoon, one who warned customers’ cars in winter while they shopped, and even one who refunded money for a set of tore chains, even though Nordstrom does not sell them! Personal quality is an essential ingredient to make quality happen in the workplace, yet most organizations have neglected it for a long time. Perhaps management, in particular, operates under the idea that promoting quality is something that organizations do to employees, rather that something they do with employees. 7 8 Quality Management Systems Unless quality is internalized at the personal level, it will never become rooted in the culture of an organization. Thus, quality must begin at a personal level (and that means you!) and practiced in all activities of daily life. 8