THE COST OF A DISSATISFIED CUSTOMER (I) Average business doesn’t hear from 96% of unhappy customers. For every one complaint received, there are 24 people with unvoiced problems, six of which are serious. >= 90% who are dissatisfied with the service they receive will not buy again or come back.

THE COST OF A DISSATISFIED CUSTOMER (II) Of those who complain, 50% - 70% will do business again if complaint is resolved. 95% will return if resolved quickly. Average customer with a complaint tells 9 to 10 people, 13% tell more than 20 people. Those who have complained and had resolution tell five people.

Fourth Generation Management SOURCES OF CUSTOMER INFORMATION Basic or Reactive Sources Customer service Technical support Claims/refunds Sales force reporting Advanced or Proactive Sources Focused questioning of selected customers Observing customers using the product or service Monitoring customer satisfaction Monitoring of broad market trends

Result: quality improves and costs decline Total costs = Cost of producing goods or services + Cost of producing waste or errors + Cost of doing quality improvement SAVE HERESPEND HERE

Reduce Chronic Waste MATERIAL SCRAP EXCESS INVENTORY INSPECTION EQUIPMENT TEST EQUIPMENT POOR MACHINE UTILIZATION ENERGY LOST OR MISPLACED MATERIAL OVER AND UNDER SPECIFICATIONS EXCESSIVE EQUIPMENT PEOPLE’S TIME REWORK INSPECTION CHECKING CLARIFYING PRODUCING WASTE OR POOR QUALITY INEFFICIENT MEETINGS LOST SALES POOR QUALITY PRODUCTS/SERVICES NOT RESPONSIVE TO CUSTOMERS NEEDS POOR CUSTOMER SERVICE POOR ENGINEERING CAPITAL INVESTMENTS WARRANTY COST LIABILTIY COST IDLE EQUIPMENT DEPRECIATION CUMULATIVE $

Quality & Productivity: Cost savings Improved reliability or conformance Increased productivity Lower rework & scrap cost Lower warranty & liability costs Lower processing costs Lower service costs Increased financial performance!

Quality & Productivity: Market gains Improved performance features, reliability, etc. Improved reputation for quality Increased market share Higher prices Experience- based scale economics Increased financial performance!

Year Millions of dollars TQM savings Figure 8. Return on TQL investment at Naval Air Warfare Center Aircraft Division, Lakehurst, New Jersey.

Millions of dollars Figure 7. Savings associated with productivity gain sharing at the Naval Aviation Depot, Cherry Point, North Carolina. Total savings Employee share Fiscal year

Delighters More Is Better Must Be Neutral Delight Dissatisfaction AbsentFulfilled Presence of the Characteristic KANO’S MODEL OF CUSTOMER PERCEPTIONS Customer Satisfaction

A manager who fails to provide resources and time for prevention activities is practicing false economy Concentrate on Prevention, Not Correction PREVENTION CORRECTION QUALITY PREVENTION HAS MORE LEVERAGE WHEN IMPROVING QUALITY

The Trade-off Curve Between the Cost of Inspection and the Cost Due to Producing Defective Units Optimal inspection level Quality control activity level Cost due to defective units Inspection and control costs Total cost Cost ($)

TAGUCHI LOSS FUNCTION Target (Defined by Customer) Goal posts defined by supplier A lot Little Loss Experienced by Customer

(a) Quality Loss Function; (b) Distribution of Product Produced. Taguchi aims for the target, because products produced near the upper and lower acceptable specifications result in higher quality loss function. Fair Target oriented quality Conformance oriented quality Distribution of Products Produced (b) Quality Loss Function (a) Best Good Poor Unacceptable High loss Loss (to producing organization, customer and society Low loss Frequency Upper specification Target Lower specification