Cost Of Quality, Quality Gurus and Customer Service and Quality - Assignment Example

Question 1 Cost of Quality. The acceptable quality of any product is the desired level of customer satisfaction that the customer expects to get from the product. Quality management and improvement is an integral part of any organization’s need to ensure that the quality benchmarks are met and the customers are satisfied with their products. Cost of quality can be broadly classified into four major categories: prevention, appraisal, internal failure and external failure. Cost of quality or the cost of poor quality is said to affect the sales directly by 20 to 30 percent of gross sales. This is the result of defected products or unsatisfied clients and customers. These problems can be due to the fault at the manufacturer’s end or the retailer may also become the root cause of the problem. Prevention costs are the costs to proactively avoid any defects in the product. These costs are incurred in order to avoid any problems in the final product. Preventing anything before it happens is a better alternative as the corporate image is never put at stake. Prevention is better than cure. They can be present in the form of improvement programs, continuous improvement plans, reengineering and simplifying the processes, etc. Appraisal costs are those costs which are incurred in assessing the quality of the operations and systems in use. This helps in identifying problems and problem areas besides the intensity of the problem in the organizational design or processes. With increased preventive measures, the appraisal costs tend to decrease as fewer inspections and identifications will be required. Internal failure costs are the costs that are incurred due to defects identified during the production and manufacturing of the product. These costs either result in complete scrapping of the product or partial rework to bring the defective item to acceptable quality. In either case, the costs are incurred and they reduce the profits. External failure costs are the costs associated with defects that are identified or discovered after the product has left the production and reached the customer. These costs are not only limited to current losses, they may result in long term lost sales and may also lead to lost customer in extreme cases. Lost profits in future may be very hard to assess, intelligent guesses may solve the problem to some extent. External failure costs also include the costs of warranties and litigation costs. Warranty costs are the costs to provide repairs or replacements as necessary and the costs to bring back the defected item. Litigation costs covers for those costs that the company incurs to cover for legal fees, employees fighting for the company and the related charges that the company has to bear. The organizations must focus on quality of their products. Defects and customer dissatisfaction are the major drivers to lost sales and a bad corporate image in the market. Getting customers once is not the focus of modern organizations, they are, in fact, looking for lifetime customers and try to lock them in so that they don’t switch to other companies. To lock in customers, the company must fulfill their needs by providing the products which are beyond the customer’s expectations. This way, the companies can guarantee lifetime of customers. The measurement of cost of quality should be regularly and critically monitored as the companies can not afford to spend too much on areas which are not adding much value to the product. The quality focus should be there but the focus should be more on improvement and design modifications instead of incurring costs of replacing products under warranty and repairs. The costs can be allocated fairly easily in the case of current direct monetary costs and expenditures made. For future costs and expected loss in profits or sales, it is pretty hard to determine any particular amount. For this, past trends, industrial knowledge, consumer patterns and intelligent guesses by experts are important and may provide close to reality estimated of expectations. The industry is focusing on quality and the appropriate measures are already in place to avoid any bad name to the products of the company. These measures include proactively avoiding any defects that the product may develop in its lifetime so that the customer can get the value for what he pays. The certifications, that the companies are taking, focus heavily on quality and consistency in the products that are being manufactured by the company. They call for a superior quality of goods all the time with a consistent result. No doubt the requirements are ever changing and are going beyond imagination with the passage of time, but the companies are trying their level’s best to meet customer’s requirements and fulfilling their needs. Exceeding requirements must be given due consideration in quality consideration and cost calculation as they are intangible costs that the company has to face. Predicting and calculating them is not an easy task, but leaving and ignoring them is not a viable option either. The lost opportunities are loss to the company. The lost profit is as bad as a loss to the company. Its calculation and prediction is not easy, but nevertheless it is one of the major considerations for the cost of quality as poor quality may lead to lost lifetime of a customer. These costs are a complex mixture of various components that the company must carefully weigh and analyze. Their allocations may be done on the basis of past trends, future expectations, anticipated demand and or other factors but it should be made a consistent practice for a longer period of time. Quality should be considered early in the manufacturing and production so that the entire team is committed to produce quality goods and products. The production should not leave any possibility of defect so that the customers do not get a chance to raise fingers on the company’s products. This way, the company can keep its people motivated and at the same time can save a lot on its costs and improve its profits. The costs are not the only thing that the company is concerned about. On the other side of the mirror, the fulfillment of customer needs is equally important to the company. They should not be forgotten as the sole aim of the companies’ existence is to meet customer needs and keep them satisfied with their products. The companies use various motivation and control techniques to maintain a certain level of quality in its products. Some companies can not afford a minute deviation in their products, whereas for some other companies, the deviation can be slightly higher, depending upon the type of business they are in. quality can not be achieved by forcing employees to do so, in fact, there should be motivation and incentive techniques in place that keep the workforce motivated and empowered to give their best. This way the companies can achieve the highest level of quality in their goods and services. Only companies with a good rapport and quality of services and products can survive in today’s competitive world of business. Every company must aim at achieving a highest degree of quality in their products. Companies should periodically and frequently review various cost aspects. Failing to control one small cost may lead the company to incur a huge amount of another cost. The companies should try controlling costs by the prevention cost as the prevention costs may result in saving of other internal and external costs. Prevention is better than cure. Companies should aim at preventing problems and quality issues by using proactive approach to quality management and improvement rather than loosing their profits due to warranties and claims attributable to poor quality. Some companies continue to operate with high failure costs because they are keeping their customers in expectation to improve their operations in the future. Lost customers are hard to retain in the future. To avoid customer loss, companies may even sell at loss and continue producing until their operational position improves to a degree where they enter the profitable region. All these are applicable to any business in the country and the world which has a focus and desire to produce and maintain quality of its goods. Take, for example Unilever, a fast moving consumer goods company having operations in many countries. They focus on quality of their products. They have quality assurance and control departments to maintain quality and match their standards and benchmarks for each and every product category and line. 2 Quality gurus. They were quality experts with a different mind set. They worked in the fields where everyone worked, but then the y thought everything in a different manner. Instead of correcting errors after their occurrences, they considered prevention as a better alternative. They always considered training and educating as a better tool to improve and produce quality outcomes. Being known, their ideas were acceptable as they always focused on prevention and correcting thing beforehand instead of removing defects after they have taken place. Various quality related theories and concepts are attributed to these gurus. Zero defects concept was a unique concept in its own. Producing products with zero defects should be the aim and the organization should struggle for this. Quality councils for meeting and interacting with the supplier was considered vital by them as these create a close discussion between the vendor and the buyer. All these theories prove to be very much applicable to all forms of business in today’s modern business environment too. With little differences, most of the modern theories even evolved out of the basic concepts proposed by experts and gurus of that time. Their ideas not necessarily lead to inflated expectations as the idea is not to compress the expectations, but to produce the best and consistent quality of the products which will meet the customer’s demand every time throughout the lifetime of the product. All these theories are applicable to modern businesses too. They call for consistency in quality which the company considers as its benchmarks and acceptable ranges. 3 Customer service/satisfaction and quality. Customer is the major driving force for any organization. Companies work for their customers. Customers act as sponsors of the products as they are ultimately going to buy the product if it is of their choice. Customers are in power in today’s business. Customer is really the king. Customers dictate their needs to get their products and solutions made and developed. Companies today focus on individual customers rather than masses and treat every customer as an individual user and buyer of its services. With the increase in competition, the customers have now got more choices and variety to choose from. The companies, on the other hand, are facing difficulties selling their products in the market as the consumer is more aware of its needs and products available in the market. Quality can be better defined in terms of customer focus. As in ISO’s definition of quality, quality is all about meeting customer requirements. A quality product is that which meets and fulfills customer’s requirements and expectations. Sometimes there is market pressure to meet specific quality requirements and needs. Market may force companies to maintain and follow certain quality requirements besides their local and internal quality standards and norms. This makes the available products at least at par with each other in terms of quality and consistency. Quality in customer terms is meeting customer requirements and expectations from a product. Its not about giving him a product, but it is to do with meeting his requirement and providing him with a solution to his problem instead of simply a product. Enhancements in the system are crucial and difficult to implement; but once implemented, they are there for ever and often pays back very quickly. Improving just a part process can give the company savings of thousands and millions. If they are very costly and expensive, they may become a problem for the company and may become a do or die decision. On the other hand, they themselves may make the company out of business because of their costs and huge set of requirements. Companies must give it consideration before implementing if they are viable for the company given their current position or not. Planning the future is very important before taking any such step further as the survival of your business is more important than just implementing these quality and other business techniques. Customers want their needs fulfilled and their problems solved by the product they are buying or using. If the product is meeting their requirements, only then the customers will be satisfied. Providing them products of superior quality only will ensure that the customers are satisfied with what they are buying. Simply a drill is not what the customer wants; he wants a hole in the wall. Unless and until the hole is achieved, the product is of no use. The quality and consistency in quality is a key to success for businesses as the customers are more conscious about quality today than ever before. Customers can be given a satisfactory product which meets their demand. Providing them something beyond their expectations is where the company gets an edge. Companies should provide customers products that are not only fulfilling their needs, but going beyond their expectations. Success of new products is attributable, to a great degree, to the overall performance of the current products and performance of the company. Satisfied customer base tend to place repeat orders and convince others whereas unsatisfied customers can take away ten more customers. Read More