Cost of Quality as a Measure of Process Performance - Essay Example

Cost of Quality as A measure of Process Performance This research paper explores ten published journal articles that report on the findings from research conducted on the better understanding of quality costing or cost of quality and its effects on the process improvement, improved financial performance, and enhanced customer satisfaction .The paper also brings into account or evaluates the statement; ‘Quality is Free’ which was made by Philip B Crosby who was one the quality Gurus of the 21stcentury (Crosby 1990). The examination of Crosby’s statement and its relevance in the current climate of recession is well outlined in this report management research essay. The concept of Total Quality management as defined in the paper illustrates how theoretical understanding of quality costing may help explain the actions of industries in practice. Keywords: cost of quality, Quality costing, Industrial practice Contents Abstract 2 3 Contents 3 1.Introduction 4 2. Quality costing as a driver to process improvement 5 2.1 Quality Management 5 2.2 TQM- Total Quality Management 6 3. Quality costing as driver for improved financial performance 6 3.1 Quality cost analysis 7 4. Quality costing as a driver to enhancing customers’satisfaction 7 4.1 Human resource: Champion of service climate 8 5. Conclusion 9 References 10 1. Introduction The fast growing economy of nations in different parts of the world has reached a point where quality becomes just as significant as quantity. Pike and Barnes (1996) argue that the low wages of the employees are shooting and at one particular point in time they will no longer be able to captivate foreign direct investments. To be well prepared, many companies from different nations should aim at the quality already prepared today. However, the quality knowhow is still somewhat not understood by many people and by many industries (Crosby 1990). One way to ensure that it’s more concrete is by calculating quality cost. Lighter and Fair (2004) define Quality cost as a measure of how expensive it is for the organization to lack in quality in any possible way. This however, contradicts the Crosby’s (1990) statement of free quality. This shows clearly that quality is never free but may be cheaper in the long run. The concept of free quality makes it possible to understand quality costing and to put into considerations which areas should be prioritized in the quality development work (Horch 2003). This research paper makes an attempt to bring out vividly the quality of cost of different companies. Based on the argument of the calculated quality costs areas of improvement are suggested to the management. This case study brings out clearly that the company’s improvement efforts can be channeled to where they make the best use. Experienced significance and obstacles when using quality cost calculations to define a quality development work in industries are then outlined (Thorpe 2005). Dale and Plunkett (1999) confirm that the company’s quality maturity is always relatively low. For this reason the development suggestion is focusing at stimulating a quality concentration and forming an organized way of working with quality development in the organization. The quality cost arithmetic thereby got the function as an eye opener with the reason to give the encouragement needed to carry out quality development efforts; in this case you need to implement the assumed values of total quality management(TQM). The particular suggestions are well elaborated within the framework of the author’s cornerstones (Potts 2008). By considering the values of TQM, Potts (2008) explains that the important amount of the company’s quality cost can be reduced. Considering the Wood’s (2013) vast experience from applying quality costing in several companies in different parts of the world are that it can be very helpful method to influence the administration of a company to give quality a greater attention. To use finances to describe which effect quality has on business has been a greater advantage to people who never worked with quality matters to grasp the concept of benefits of working preventive and not only considering problems that arise. To get a better understanding of the concept of cost analysis, Crosby (1990) in relation with other nine journal articles narrows down the content of this management essay into three sections that deals with the improvement of process control, improved financial performance and enhancement of the customers satisfaction and it’s from this that I now turn to. 2. Quality costing as a driver to process improvement This section will take into consideration of two subsections. The initial part will give a directive in quality management in general and the following subsection will pay attention on quality costing as a criterion to guide and support quality management. 2.1 Quality Management As question of consideration; how much profit did you make from your quality development work last year? This question will leave numerous business managers puzzled. Russell and Regel (2000) argue that quality work should no longer be seen as costs but as investments. From this point of view, both external and internal quality is well illustrated. External quality in this point of view shows how well an industry manages to tackle the right issues, that is, ensures that the customers’ needs are fulfilled. On the other hand internal quality is related to tackling issues in the right order, which outlines that the company fulfills the customers’ needs in an effective and responsible manner. Basing your argument on the definition of quality costing used in the quality management will definitely respond to the quality to do the right things and to do things right (Dale 1999). The major aim of the idea is to increase customer satisfaction with the use of fewer resources. 2.2 TQM- Total Quality Management Total Quality Management (TQM) is considered to be the buzzwords among quality experts from the recent decades (Elhers 2006). TQM shows a complex and ever ongoing effort to uplift quality and customer satisfaction throughout the entire organization, while the management commitment is the most important basis for a successful result. Crosby (1990) takes it further when he argues that management concept of and behavior towards quality is not only important but also everything. Horch (2003) see TQM as based on five important values which they refer to as the cornerstones. The cornerstones are each of great significance separately, but a straight forward synergy will come into consideration when they are put together and regarded as a whole. The initial stages of TQM are management adherence. With no commitment of management an organization will never succeed in formulating the cornerstones. Another important idea of the TQM is basing your decisions on the fact. However in order to confirm the truthfulness of this idea, facts are needed to be gathered and thoroughly analyzed (Potts 2008). Part of the required data is about the customers and their needs and expectations. This information can be collected by using customers’ data collection. Potts (2008) also pays attention on the importance of being able to gather, analyze and get verbal information such as people’s feelings and how they view information. On the other hand internal information should also be gathered for managers to be able to argue from their point of thought regarding production quality. 3. Quality costing as driver for improved financial performance This section will take into account the major language of corporate management which was basically based on matters to do with money. From this idea, there emerged the concept of studying quality costing as a means of relaying information between the quality staff members and the company managerial staff (Pike 1996). Horch (2003) confirms that the TQM is a very powerful tool for software quality since it’s for product quality in general. In close view of the improved financial performance resulting from the quality of costing, the programming group in rare occasions will consider the interface errors as a minute priority, ignoring until the final end to fix. If not well handled, this can be the biggest mistake. To understand the improved financial performance, the analysis of quality of cost is well defined to bring out the reality of the aforementioned statement (Crosby 1990). Quality cost analysis comes out as a subsection of the improved financial performance. 3.1 Quality cost analysis Quality cost refers to cost that deals with prevention, findings and correction of defective work. These costs are extremely big, running at 20%-40% of turnovers. Most of these costs can be totally reduced or completely not taken into consideration. It’s also important to note that the key objective of the Quality costing is the reduction of a greater percentage of quality associated with the product, as it helps in boosting the financial performance of the business firm (Pike 1996). To get a better understanding of the quality of cost analysis, different types of costs are well defined. The first type of cost is the prevention costs. This cost refers to activities which are particularly designed to prevent poor quality like coding errors, design errors, as well as complex codes which in the long run lower the financial improvement of a company (Wood 2013). Another type of cost is the appraisal costs, this cost deals with the activities well documented for the purpose of finding quality problems such as code inspections and any other type of testing, as result the optimality is achieved as the business firm can easily determine its significance level following the series of statistical testing which ensures financial performance (Lighter 2004). Failure cost is another type of cost that comes as a result of poor quality such as the cost dealing with the nagging customers; this can be easily avoided through transparency and accountability in the quality management levels of an organization to better the financial performance (Thorpe 2005). 4. Quality costing as a driver to enhancing customers’satisfaction Service businesses in which employees have a good service climate definitely have customers who are more satisfied. As a result of this, there is positive competitive financial improvement and market value. Improved service climate exist in business firms where the principles, practices and procedures are well laid down for the purpose of emphasizing service excellence (Crosby 1990). Human resource is well put in place to encourage, foster and influence a positive service climate through the work place tradition. For the better understanding of the quality of cost for improved customer satisfaction, Human resource (HR) as a champion of the service climate is well outlined as subsections to achieve the goal of customer satisfaction. 4.1 Human resource: Champion of service climate Considering today’s most competitive business firms, experience HR leaders continually check at how the organization is engaging its employees and how they can better the performance of the organization. Human resource management procedures and principles are very important to creating and maintaining a better work culture, one that encourages, rewards and anticipates workforce to consistently and thoughtfully pay attention on the excellence of their work and service (Wood 2013). The goal is definitely optimal when customer satisfaction is achieved. Implementation of the aforementioned total quality management needs vast and sweeping transformations throughout the company. It also interferes with each and every decision made in the entire company (Lighter 2004). The plan to implement total quality management within the operations of the management is strategic in context. TQM gives the firm a sense of direction and commitment. As a matter of consideration, some companies may want to directly compete with quality while others may just opt to be as good as competition. It’s therefor confirmed that the operations strategy dictates how all other sections of operations management will support the commitment to improved quality performance (Thorpe 2005). TQM plays a very important role as a relevant example to quality costing since it affects various areas such as product designed which incorporates customer- defined quality. Processes are then redesigned with the purpose of producing products with the highest quality standards (Horch 2003). Job design will definitely be interfered with, as the workforce needs to be trained in quality work tools and become responsible for solving problems. Supply chain management will also bear the risk since the commitment of a firm to quality development involves partnering with the suppliers. It’s therefor confirmed beyond any reasonable doubt that every aspect of any operation function must transform to support the commitment toward total quality management (Ehlers 2006). 5. Conclusion Dale (1999) emphasizes how the quality costing may not be the solution to quality shortages. The measure of quality costs must be supported by methods of quality improvement in order to be beneficial. Thorpe (2005) mentions three important areas which are able to sum up the diverse functions of quality costing. The first area of consideration is that it changes several times hence confusing the aspect of quality management into a dimension that everyone understands the concept of money. As a result of this, it ensures that quality concept is more realistic and helps in changing the behavior towards quality management on all status of the company. Secondly, with the application of quality costing, the firm can show the areas of improved performance (Russell 2000). As a result of these, the quality management is in a position to allocate resources to where they are best suited. The third area of concerned that is mentioned from the Crosby (1990) journal articles is that quality costing ensures the evaluation and follow-up the quality strategies that are being made. This makes the computation of returns from quality investment very easy and straightforward. To conclude, Wood (2013) in relation with other eight journal articlescontradicts the aforementioned statement, ‘Quality is Free’ and further argues that the statement should be, ‘Quality is not free’ but cheaper in the long run since Total Quality Management (TQM) goes hand in hand with the cost of quality. References Crosby, P. B. (1990). Leading: the art of becoming an executive. New York, Ny, McGraw-Hill. Dale, B. G., & Plunkett, J. J. (1999).Quality costing.Aldershot, Hampshire, England, Gower. Ehlers, U.-D., & Pawlowskl, J. M. (2006).Handbook on quality and standardisation in e-learning. Berlin, Springer. http://site.ebrary.com/id/10229305. Horch, J. (2003). Practical Guide to Software Quality Management. Norwood, Artech House. http://public.eblib.com/EBLPublic/PublicView.do?ptiID=227656. Lighter, D. E., & Fair, D. C. (2004).Quality management in health care: principles and methods. Sudbury, Jones and Bartlett. Pike, J., & Barnes, R. (1996).TQM in action: a practical approach to continuous performance improvement. London, Chapman & Hall. Potts, K. F. (2008). Construction cost management: learning from case studies. London, Taylor & Francis. Russell, J. P., & Regel, T. (2000).After the quality audit: closing the loop on the audit process. Milwaukee, Wis, ASQ Quality Press. Thorpe, B., & Sumner, P. (2005).Quality management in construction. Aldershot, Gower Pub. Wood, D. C. (2013).Principles of quality costs: financial measures for strategic implementation of quality management. Read More