3.4.4 Making operational decisions to improve performance: improving quality


    The importance of quality

    Quality = a measure of the worth of a product, for example its durability, reliability, or reputation


    The importance of quality to a business:

    • Gaining a competitive advantage
    • Impact on sales volume
    • Impact on selling price
    • Cost reductions
    • Brand loyalty and reputation


    Methods of improving quality

    Quality Control = the process of inspecting products to ensure they meet the required quality standards (check the product at the end for any mistakes)

    • At its simplest, quality control is achieved through inspection. For example, in a manufacturing business, trained inspectors examine samples of work-in-progress and finished goods to ensure standards are being met.
    • For businesses that rely on a continuous process, the use of statistical process control (“SPC”) is common. SPC is the continuous monitoring and charting of a process while it is operating. Data collected is analysed to warn when the process is exceeding predetermined limits


    Quality Assurance = the processes that ensure production quality meets the requirements of customers (continuation of checking at each stage of production)


    Total Quality Management (TQM) = a specific approach to quality assurance that aims to develop a quality culture throughout the firm. In TQM, organisations consist of ‘quality chains’ in which each person or team treats the receiver of their work as if they were an external customer and adopts a target of ‘right first time’ or zero defects.


    Quality Benchmarking = a general approach to business improvement based on best practice in the industry, or in another similar industry. Benchmarking enables a business to identify where it falls short of current best practice and determine what action is needed to either match or exceed best practice. Done properly, benchmarking can provide a useful quality improvement target for a business.


    Kaizen = an approach of constantly introducing small incremental changes in a business in order to improve quality and/or efficiency. This approach assumes that employees are the best people to identify room for improvements, since they see the processes in action all the time. A firm that uses this approach therefore has to have a culture that encourages and rewards employees for their contribution to the process.


    The benefits and difficulties of improving quality

    Advantages of quality control:

    • With quality control, inspection is intended to prevent faulty products reaching the customer. This approach means having specially trained inspectors, rather than every individual being responsible for his or her own work.
    • Furthermore, it is thought that inspectors may be better placed to find widespread problems across an organisation.


    Disadvantages of quality control:

    • Individuals are not necessarily encouraged to take responsibility for the quality of their own work.
    • Rejected product is expensive for a firm as it has incurred the full costs of production but cannot be sold as the manufacturer does not want its name associated with substandard product. Some rejected product can be re-worked, but in many industries it has to be scrapped – either way rejects incur more costs,
    • A quality control approach can be highly effective at preventing defective products from reaching the customer. However, if defect levels are very high, the company’s profitability will suffer unless steps are taken to tackle the root causes of the failures


    Advantages of quality assurance:

    • Costs are reduced because there is less wastage and re-working of faulty products as the product is checked at every stage
    • It can help improve worker motivation as workers have more ownership and recognition for their work (see Herzberg)
    • It can help break down ‘us and them’ barriers between workers and managers as it eliminates the feeling of being checked up on
    • With all staff responsible for quality, this can help the firm gain marketing advantages arising from its consistent level of quality


    The consequences of poor quality

    Consequences of poor quality:

    • Reputation
    • Lower sales volume
    • Lower price
    • Lower profits
    • More waste
    • Increased costs

    All of these factors have a knock on effect on the others


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