Quality as a Factor in Manufacturing and Service Sectors of Business - Essay Example

?LEAN OPERATIONS Introduction Quality is a very important factor in both the manufacturing and service sectors of business. This need has resulted ina situation whereby business operatives of various backgrounds use different methods and approaches to ensure and guarantee quality to their customers and consumers. But one thing that remains an open secret is that most of these operatives have failed in their quest and efforts of ensuring and delivering quality (Buckley, 1967). This situation may somewhat be ironic to what Crosby (1979) points out that quality is free. This is because if quality was indeed free, it would be offered freely and be presented to customers and consumers at no extra cost. Indeed, there is no doubt that one reason why most companies and businesses have failed in their quest to deliver quality is due to the approaches they use in ensuring and delivering these quality assurance. Because of the use of wrong approaches also, several companies, businesses and institutional operatives have not been able to give the true account of the cost of quality they are supposed to deliver. Due to this, they have continued to live on the good old notion that the more quality manufacturing and service would become, the more costly production and labor could be. The present paper is therefore being written as a critical analysis of the topic of cost of quality by using the phenomenon of lean production or lean manufacturing to proof that quality does not always have to lead to increased cost of production and labor. The analysis shall be undertaken from the perspective from quality costing in regards to Philip B. Crosby. The essence of cost of quality When Crosby (1979) speaks of the cost of quality, he is referring to something more technical than what could easily come to mind for the literal meaning of ‘cost of quality’. Literally, cost of quality could be said to be the fiscal cost that quality adds to a product or service (Antoni, Nilsson-Witell and Dahlgaard, 2005). But this is not so from the perspective of Crosby (1979). Crosby actually sees cost of quality as the cost that a company or business outfit faces for refusing to produce according to quality standard (Peters and Austin, 1985). Total quality has been said to be “very considerable, typically between 10-40 percent of turnover. This is why these costs are also known as the "hidden factory" (Dahlgaard et al., 1999 as cited in Krishnan, 2006). This view is in direct relation to what is put forth by Crosby as the refusal to adhere to quality would actually take away from the company or business the percentage that quality is expected to add up to the overall turnover. As this cost is deducted from the general turnover, what happens is that the company records lowered rates of income and that difference becomes the actual cost of quality. The essence and cost of quality actually has to do with the cost that business operatives pay for refusing to stick to quality standards. Achieving quality with lean operation Quality could be costly in a number of ways. For example refusing to adhere to quality at the initial stages would demand that work is redone and this will certainly increase cost of quality. All the following instances are known to bring about increases in cost of quality and they include “the reworking of a manufactured item, the retesting of an assembly, the rebuilding of a tool, the correction of a bank statement, the reworking of a service, such as the reprocessing of a loan operation or the replacement of a food order in a restaurant” (ASQ, 2012). Invariably, it is always a good idea to reduce the cost of quality. But how should this take place done successfully? The use of lean production has been said to be an effective means of achieving quality and thus reducing the cost of quality (COQ). Plant Services (2013) notes that “'lean' is defined as the elimination of waste and things that do not add value as defined by the customer.” This means that lean operation “is based on finding efficiencies and removing wasteful steps that don't add value to the end product” (Mind Tools, 2013). This means that lean operation is directly rooted to the fundamental stage of manufacturing and thus ensures that quality conditions are adhered to in order to avoid waste (Nilsson-Witell, Antoni and Dahlgaard, 2005). As operations are made more and more lean, unwanted excesses and factors that would have compromised on value are taken care of (Conti, 1997). Ideally, quality becomes achieved in the long run. Types of Waste From the discussions on lean operation that has been laid bare above, it can be seen that waste is an important component of lean operation. This is because lean operation is achieved by avoiding all forms of waste (Morgan and Liker, 2006). In relation to the cost of quality also, it can be said that waste is instrumental. This is because all other forms or components of production that are not required and so demand re-production and re-manufacturing constitutes waste. The following forms of waste are therefore outlined and discussed as a means of identifying critical aspects of manufacturing that ought to be given attention in order to avoid waste. Transport: In the course of production, a lot of movements are done that involve products and people. The consequential effect of these movements has been increases in cost of transport. A plan to cut down on the movements would therefore guarantee reduction in cost of quality because there will be fiscal savings (Peters and Austin, 1985). Inventory: The inventory involves aspects of work in process and finished goods (Sztompka, 1991). As much as it is important to have a well stocked inventory, it is important to note that higher levels of inventory could constitute waste and may require a whole new dimensional shift to the focus of distribution. At waste, inventory will remain unsold and become liability (Scott, 1981). Inventory must therefore be proportionate to demand from users. Waiting: A lot of waste has often been recorded when waiting for next productions to start. Time wasted in waiting could actually be utilized for several important purposes including getting productions started early so that more time will be committed to the sale of the products (Tidd and Bessant, 2009). Once there is waste in the waiting period, what happens is that manufacturers may be forced to rush when production starts and this alone may compromise on the quality of production. Using quality as a competitive advantage in recession With the knowledge that "the average European manufacturing company operates with a cost of poor quality (CoPQ) of about 15 to 25 percent of turnover (Aktinson et,al. 1991 as citied in Krishnan, 2006), much can be said of the use of quality and for that matter the elimination of cost of quality to building a competitive advantage during recession. In the first place, it is important to note that having noted and recognized how many companies could save as fiscal cash by reducing cost of quality Toyota Company took up an initiative known as Toyota Production System that was focused on ensuring quality. Through this initiative, the company was able maintain high and stable revenue levels even in the wake of recession (Morgan and Liker, 2006). In a similar manner, companies that reduce cost of quality will survive recession because they would not have to spend more in remanufacturing and re-producing parts and goods that have already been completed. What is more, in times of recession, demand reduces with increase in supply. Ultimately therefore, competition increases. At such a time therefore, because customers have the luxury of choosing from as many products as possible, they are certainly sure to settle with nothing but high quality products. It is in light of this that those produce high quality products and services would survive in recession. Conclusion It can confidently be concluded that quality is free as Crosby (1979) put it. This is because once quality is pursued, there will be no other hidden charges for the company to bear. But as the discussions have indicated so far, quality is going to continue coming at a cost but not necessarily cost in terms of money. Rather, cost of being committed to the welfare of the end user. Though this first form of cost is going to be demanding, it is important to pursue and achieve because once it is disregarded, it brings about the second form of cost, which is rather unpalatable and unwelcoming to business growth. This is because quality denied will bring about several hidden fiscal cost to companies involved. In a very competitive global business environment that has been created by recession and fewer demand for more products and services, it is important that business and organizational operatives think of the use of quality for the creation of competitive advantage. If companies like Toyota have successfully ensured growth in the midst of turbulent economic climate by ensuring right from the onset (Cooper, 1993), it is time for all other competitive companies to adapt to quality as a mechanism for business development and growth. REFERENCE LIST Antoni, M. 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Sztompka, P. 1991, Society in Action – The Theory of Social Becoming. Oxford: Polity Press. Social Becoming Tidd, J. & Bessant, J. 2009, Managing Innovation – Integrating Technological, Market and Organizational Change, 4th ed., John Wiley & Sons Ltd., Chichester, UK. ASQ, 2012. Cost of Quality (COQ). [Online] http://asq.org/learn-about-quality/cost-of-quality/overview/overview.html [February 22, 2013] Buckley, W 1967, “Sociology and Modern Systems Theory”. Prentice Hall, Upper Saddle River, New Jersey, US. Conti, T. 1997, “Organizational Selff-Assessment”, Chapman & Hall, London, UK. Cooper, R.G. 1993, Winning at New products: Accelerating the Process from idea to Launch, Second Edition. Reading, Massachusetts: Addison-Wesley Publishing Company. Dahlgaard, J. J. & Eskildsen, J. 1999, “Scoring Business Excellence”, European Quality, Vol. 6, no. 1. Mind Tools, 2013, Lean Manufacturing: Working more efficiently. [Online] http://www.mindtools.com/pages/article/newSTR_44.htm [February 22, 2013] Morgan, J.M. & Liker, J.K. 2006, The Toyota Product Development System – Integrating People, Process, and Technology, Productivity Press, New York, US. Nilsson-Witell, L., Antoni, M. & Dahlgaard, J.J. 2005, “Continuous Improvement in Product Development: Improvement Programs and Quality Principles”, International Journal of Quality and Reliability Management, Vol. 22, Issue 8. Peters, T. J. & Austin, N 1985, A Passion for Excellence – The Leadership Difference. HarperCollins Publishers, London, UK. Wilson, E. 1990. Product definition factors for successful designs. Thesis, Stanford University, US. Plant Services, 2013, Lean Operations. [Online] http://www.plantservices.com/articles/2004/161.html [February 22, 2013] Read More