‘There will be two kinds of companies in the future – companies which have implemented total quality and companies which are out of business’
Reputation of a company definitely matters if it wants to stay in business for a long while, and it is built by such factors as quality, reliability, delivery, and price. 20 years ago, a price might have been a strong candidate, but nowadays, quality now is the ‘major determining factor in industrial, service, hospitality, and many other markets’.
We can now assume that ‘quality’ has a major role in almost all organisations, but making sure that they are manufacturing a quality product, or doing a quality job – where the customer is highly satisfied – is not enough. My mum used to say nothing good ever comes free except love. Quality also has a price, and it isn’t cheap.
W.Deming stresses for the organisations to ‘Adopt the new philosophy’ of no longer living with the ‘commonly accepted levels of delays, mistakes, defective workmanship’ and to ‘Cease the dependence on mass inspection. Require, instead, statistical evidence that quality is built in.’
The cost of achieving/producing high quality output consistently is called the cost of quality (COQ) and this will have to be carefully managed, so that long term effect of quality costs are effective.
Armand Feigenbaum, the former-head of Quality at General Electric, classes COQ in three main categories in his P-A-F model as
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Prevention Costs
Cost of planning and getting it right the first time.
E.g. quality planning, training, quality assurance
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Appraisal Costs
Cost of evaluating your suppliers + Customers and seeking defects
Costs of ‘checking it is right’
E.g. Vendor rating, Inspection equipment maintenance, Verification
- Failure Costs
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Internal failure cost
Costs that occur when the results of work fail to reach designed quality standards and are detected before transfer to customer takes place
E.g. Waste, Time (re-inspecting, re-work), Failure analysis
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External failure cost
Costs that occur when products or services fail to reach design quality standards but are not detected until after transfer to the customer
E.g. Repair, servicing, returns (packaging costs), loss of goodwill
Costs of ‘getting it wrong’
P-A-F Model
Source : British Standard BS6143, 1991
Usually, the cost of failure (especially the external failure cost) is the biggest contributor to the COQ. The later you detect the fault, the more expensive it will be to correct it. For example, a defect product in a customer’s hands will either have to be shipped back for a new one, or repaired. Both of these options are not attractive to companies due to high costs of shipping, and scrapping products, let alone the initial cost to provide a system of where ‘complaints’ can be made.
But most importantly, the organisation will lose some of its goodwill. Goodwill simply means faith your customer/supplier have in your organisation. Losing reputation and image will have a direct negative impact on future sales. Happy customers will tell others of the good service they have recieved and a reputation will be earned. Poor service however will have a stronger negative effect, as most people are more willing to tell others about shortcomings than praise them. This will then inevitably lead to bad reputation that can be very difficult if not impossible to erase. The car manufacturer ‘Skoda’ is a good example of this. A decade ago, due to high number of accidents, they were the subject of all sorts of jokes about car-accidents. Now Skoda is using its past bad-reputation to promote a new range of cars which are meant to be safer still under the name Skoda. They decided that as the brand image was so strong, it would be worthwhile to revamp the image rather than start fresh.
The COQ shows us that in order for an organisation to improve its quality, traditional quality controls no longer work. We used to once think that increasing the quality meant increasing the number of inspections and inspectors throughout. But, experience has told us that this does not promote quality. A good system should be able to operate with virtually no final inspection, and no quality department. This is made possible by an approach called Total Quality Management (TQM).
J.Oakland states TQM as ‘a way of ridding people’s lives of wasted effort by bringing everyone into the processes of improvement, so that results are achieved in less time.’
In a nutshell TQM involves all members of the organisation working together to achieve a ‘company-wide quality improvement’. To me, it sounds like such an obvious thing not to have known.
Implementing TQM however is definitely far from simple as it has to be done throughout the whole organisation. For this to happen, it must start at the top with the Senior Directors, then move down to middle management, then down to the operational level.
TQM makes sure that the organisation takes a strategic overview of matters concerning quality. The organisation should develop its future business strategy with a focus on quality, and formulate strategic plans along with it consisting of details on concepts, approaches, and methods that will help the business achieve excellent results. The organisation will need to know where it’s going (vision), why it’s going there (mission), and hot to get there (strategy).
Once a strategy is in place, it is essential that there is continued readiness, and willingness to make changes towards the improvement throughout the organisation. Every change in attitude or a practice brings a combination of advantages and disadvantages. In order for people to accept changes easily, the advantages always have to be greater than the disadvantages. Therefore the middle management will need to market its advantages to the workers to promote the idea of change.
Finally, the workers have to be motivated if they are to work to the best of their capabilities. This is usually a huge task and only a clear leadership style and, clear organisational goals will help ensure this. Organisational goals will then have to be broken down into individual goals. In order to encourage the workers to meet these goals, the middle management has to understand and explain the principles of TQM to the operation level while ensuring that the efforts and achievements of their subordinates obtain the recognition, attention, and reward that they deserve.
It would be helpful, if we looked at this matter with an example. Ford is known world-wide to take quality matters seriously. Twenty years ago (1982), during a severe auto industry recession, Ford and UAW (United Automobile, Aerospace and Agricultural Implement Workers of America) negotiated an agreement which ‘envisioned a separate and distinct entity from Ford to provide a focal point education, development and Training Center’
This new entity was called UAW-Ford and it helped Ford plants gain recognition all around the world for being among the most productive in the world by developing a broad range of approaches.
They claim that they have ‘increased market share, improved economic performance, and enhanced employee development and work satisfaction’.
Below are brief summaries of some of the main points that they addressed in their quality plan.
-QualityTraining
To ensure quality training, the UAW Ford Operations/Division Quality Committees will be responsible for tracking and monitoring specific operations and local education and training programs. They will also review the division training status, funding, and expenditures for programs at each location..
–Make Management More Responsive to Quality Concerns
To make sure that top plant management is present respond to quality concerns, it will now be compulsory for the entire Plant Operating Committee to attend the monthly meetings of the UAW Ford Local Quality Committee.
-Suppliers
The National Quality Committees will establish teams of hourly and salaried employees, including the Local Unit Quality Representative, to visit outside suppliers to identify and resolve quality problems. The National Quality Committee will have the right to visit outside suppliers in conjunction with these teams.
-Advance Notice of Recalls
The UAW Ford National Quality Committee will receive advance notice of product recalls. This will enable the National Quality Committee to more quickly track the source of quality problems resulting in recalls.
-Employee Involvement Strengthened
UAW Ford laid the basis for involving all employees in key phases of the business including quality, continuous improvement, health and safety, and technology. Committees are to meet on a regular basis as mutually deemed necessary and additional alternative Employee Resource Coordinator(ERC) will be added for locations with four or more ERCs.
It is easy to see even from this that Ford takes the role of quality seriously. They have created a separate entity (UAW Ford) to deal with all ‘quality matters’. Not all companies go to this extent, but more and more companies are realising that Quality is the key to survival and so this has led to an increase in the number of companies gaining some sort of standard from a third party such as ISO (International organisation for Standardisation).
Standards were introduced to help assure a customer that they will receive what was specified. ISO is a worldwide federation of national standards bodies from more than 140 countries, one from each country.
The mission of ISO is to ‘promote the development of standardization and related activities in the world with a view to facilitating the international exchange of goods and services, and to developing cooperation in the spheres of intellectual, scientific, technological and economic activity.’
ISO9000 is a voluntary standard, in that there are no legal requirements to adopt it. But ‘we all know that the standard may as well be compulsory if buyers demand them’.
ISO's work results in international agreements, which are published as International Standards.
Main advantages are
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Worldwide progress in trade liberalization
Especially in technology market. Clearly defined common references that are recognized from one country to the next, and from one region to the other is needed to encourage competition, and cooperation
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Interpenetration of sectors
No industry in today's world can truly claim to be completely independent of components, products, rules of application, etc., that have been developed in other sectors.
- Assurance of customer
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Internal audit
The company will gain a better insight into which procedures are efficient and which are wasteful. More work is produced right the first time and therefore a cost saving is made.
Quality is to meet the needs/requirements of the customer over and over again.
The role of quality in organisations cannot be stressed enough. All members of the organisation need to work together because co-operation of everyone at every interface is required. Quality of the organisation has a direct impact on its reputation and also sales. It therefore needs to be implemented both in strategy planning, and the operational level to be effective.
Management must also understand that the improvement is never ending. It’s a continuous improvement. After a while, lack of full commitment by your staff, lack of integration, loss of focus, and so on might weigh you down while practicing TQM. It is therefore essential to ‘check’ progress in terms of commitment, strategy, and teamwork regularly.
Being a ‘quality organisation’ is hard. But it is the only way to survive.
Bibliography
Books used
Total Quality Management
J.Oakland (Butterworth Heinemann) 2nd
ISO 9000
Brian Rothery 2nd
Business Process Improvement
H. James Harrington
Web-Sites used
- ISO Official site
- UAW FORD
- Quality magazine online
Lecture Notes used
All past lecture notes
Deming’s 14 points for management – TQM Appx A
Brian Rothery – ISO9000 2nd pg3
