AS Operations Management Unit 2a) Managing the Business Managing Quality

Quality Quality is those features of a product/service that allow it to satisfy (or delight) customers. Task: What features make a product/service of high quality? (5 mins)

Tangible features of quality… Appearance Reliability Durability Speed Functions After-sales service Repair and maintenance needs

Intangible features of quality Image and brand Reputation Exclusiveness

Quality Quality is defined by the customer. They may insist on certain specifications or demand exceptional levels of comfort. Customers will except a trade off between price and quality. However there is a minimal level of quality that is acceptable and the customer wants the product to be fit for use. The importance of quality is related to the level of competitiveness in the market. When competition is fierce, the quality of the product can tip the balance in the customers decision making. For all customers quality is about satisfying their expectations.

Quality Quality is a moving target. A quality standard that is acceptable today may not be in the future. Customer expectations of quality are constantly changing. As quality improves, customer demands also increase. Quality: Is satisfying (preferably beating) customer expectations It applies to services as well as products Involves the whole business process, not just the manufacturing of the product Is an ever-rising target

Student Task: Name a product that has suffered quality issues. How has it affected the product/company?

Quality Management Quality is an important competitive issue. Where the consumer has choice quality is vital. For a new business, effective quality management may mean the difference between success and failure. If the product or service cannot get a good reputation the business will not last long. A reputation for good quality brings marketing advantages. A good quality product will: Generate a high level of repeat purchase, and therefore a longer lifecycle Allow brand building and cross marketing Allow a premium price to be charged. This is often greater than added costs of quality improvements; in other words quality adds value – it generates additional profit. Makes products easier to place as retailers are more likely to stock products with a good reputation.

Implications of Poor Quality Marketing CostsBusiness Costs Loss of SalesScrapping of Unsuitable goods Loss of Reputation Reworking of unsatisfactory goods – cost of labour and materials May have to price discountLower prices for ‘seconds’ May have an impact on other products in the range Handling complaints / warranty claims Retailers may be unwilling to stock goods. Loss of consumer goodwill and repeat purchase

Quality systems The methods by which a firm seek to provide and manage their quality are: 1. Quality Control 2. Quality Assurance 3. Total Quality Management (TQM)

Quality Control A system that uses inspection to detect faults Benefits: Prevents defects reaching the customer More secure system than trusting every individual to do their job properly Specialised inspectors can detect common mistakes and so workforce can be trained effectively Television Production Line Quality Control Department Quality checked

Quality Control Problems: Responsibility for quality failure on the inspector, so it does not make the worker change their methods. It can be expensive to employ a separate inspection team. Expensive as whole batch has been wasted and the problem not caught earlier in production Giving workers responsibility to check their own work can be motivating

Quality Assurance A system that aims to achieve quality by organising every process to get the product ‘right first time’. (E.g. ‘Self Checking’) Television Production Line Quality checked after each stage of production by staff Quality checked

Quality Assurance Benefits Ownership of the product rests with workers giving them more responsibility. (Herzberg motivator) Costs are reduced as less waste and less reworking as faults are spotted earlier. More consistent level of quality as all staff are responsible. The most widely recognised Quality Assurance system is Total Quality Management.

Total Quality Management (TQM) TQM is a culture of quality that involves all employees of a firm. Each person treats the receiver of their work as if they were an external customer and adopts a target of ‘right first time’ The aim is defect prevention rather than detection Workers must be trained and the fear of failure must be removed and they are encouraged to take pride in their work Commitment from all and a clear company wide policy and standard are essential

Dr Edward Deming produce a 14 point plan for management that focussed on the improvement of quality in the production process: 1. ‘Right first time’ – aim for detect prevention rather than detection 2. Provide a contest clear message on quality 3. All staff must share a commitment to continuous improvement and change 4. Build partnership with suppliers (many companies have extended this to apply to the supply chain within an organisation.) 5. Constant Improvement 6. Educate and train staff to take responsibility for their own quality 7. Supervisors should encourage and help 8. Encourage change by eliminating the ‘fear of failure’ factor when introducing improvements 9. Integrate departments and share problem solving 10. Set clear achievable goals 11. Avoid setting global standard of work 12. Help employees take pride in their work 13. Train and educate 14. Establish a structure and culture to support these aims Total Quality Management (TQM)

Student Task 1: Quality Systems Questions Based on what we have discussed so far complete the following questions: 1. What is the difference between quality control and quality assurance? (4 marks) 2. What is TQM? (2 marks) 3. State 5 features of a TQM system. (5 marks) 4. Discuss 2 advantages of controlling quality. (6 marks) 5. Evaluate the benefits of CLN adopting a TQM system. (10 marks)

Quality Circles This is a group of workers that meets at regular intervals during the working week. They meet to identify any problems with quality within production, to consider the alternative solutions to these problems, and to then recommend to management the solution that they believe will be the most successful. The members of the quality circle are also involved in the implementation and monitoring of the solution. This should help to improve the level of motivation amongst the workers because it makes each person in the group feel valued and that they are making a significant contribution to the improvements on the factory-floor.

Benchmarking This is the process of setting competitive standards, based on the achievements of other firms, against which an organisation will monitor its progress. Benchmarking usually focuses on the best company in the industry.

Benchmarking Process 1. Select the processes and/or activities to be benchmarked 2. Identify the best in class, against which to benchmark 3. Gather data from both organisations and analyse any performance gaps 4. Establish reasons for these gaps and set targets for improvement 5. Agree and implement new strategies and review the results 6. Continue the process. Benchmarking should be seen as a never-ending process.

Benefits of benchmarking Data from others can provide ideas and inspiration to improve quality and efficiency Cost advantages from improved efficiency and less waste Quicker solution Can gauge performance against other firms and spot potential improvement levels

Drawbacks of Benchmarking A successful approach in one firm may not work in another The new targets may demoralise staff if not agreed upon and based purely on the best competitor and therefore unrealistic Difficult to gather reliable information as firms may be reluctant to share May not help firms to discover their own problems by just copying

Student Task 2: 1. What is meant by the term Quality Circles. (2 marks) 2. Quality Circles would only benefit CLN. To what extent is this statement true? (10 marks) 3. Analyse one benefit and one drawback of CLN using benchmarking. (6 marks)

Student Task 3: Page 297 of the text book. Task 3: PcNow Case Study Read the case study. Complete questions 1-6. (50 minutes) Remember to use the assessment objectives to achieve FULL marks. AO1: Knowledge AO2: Application AO3: Analysis AO4: Evaluation