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Summary Operations Management Chapter 9
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Summary of Chapter 9. All important aspects of the chapter explained in just enough detail, easy to understand.
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9. Managing qualityQuality: all the features/characteristics of a product/service that allow it to satisfy sated/implied
needs
Is relative, you should compare a thing with other similar things
Fitness for purpose
Doing what it is supposed to do (how long will a product/service perform at the standard it
is expected to?)
Idea of reliability (how long will something work for at the desired quality level?)
Product/service free of deficiencies (Crosby), based on the Japanese of ‘zero defects’ –
doing it right first time.
Operations managers need to do two things:
Design products/services in such a way that they meet customer expectations (be fit for
purpose) and to do so consistently over time (be reliable)
Make products/deliver service in such a way that meets these design criteria.
Two types of conformance criteria
Variables: features that can be measured on a scale of some kind.
Attributes: features that are either present or not present.
» A light bulb may have a bayonet fitting or not (attribute) and give out a specified amount of light
in lumens (variable).
Challenges of quality
Quality is also rated by customers themselves – due to the growth of the internet customers
can go online and rate products/services.
Conformance – in assembly line operations, many thousands of parts may be produced to
make hundreds of finished products in a day, every single component has to work. And in
mass service operations, there can be thousands of service encounters every day, each of
which also has to meet customer expectations.
Quality gap model
Model that identifies five main ways in which quality may be lower than desired.
How an organization ‘designs’ it
Gap 1. Positioning: develops if the product/service concept diverges from customer
requirements.
Gap 2. Specification: the difference between actual standards set by management
compared with
manager’s understanding of customer needs (managers specify a standard lower
than that
expected by customers).
Belief that customers’ expectations are unrealistic/unachievable
View that failure to deliver of one feature of a product/service can be more
than compensated by other features
Concern that over-delivery of features will erode margins and reduce the
return on investment
How employees ‘handle’ it
Gap 3. Delivery: develops where employees don’t or can’t make a product or deliver a
service to the
standard required.
Gap 4. Communication: the basis on which the customers build their expectations,
therefore
organizations need to ensure that marketing, advertising and promotion doesn’t
make a
promise that they can’t keep.
Gap 5. Perception: difference between what the customer expected and what they
perceived they got;
manager has no/little direct control.
Ga Name Definition
p
1 Positioning Between management perceptions of customer expectations and the
expectations themselves (management perceptions of expectations)
, 2 Specification Between management perceptions of customer expectations and the
actual product/service specified
3 Delivery Between the product/service promised and that actually delivered
4 Communicati Between the product/service actually delivered and that externally
on communicated to customers (e.g. through advertising)
5 Perception Between the product/service quality perceived and that expected by the
customer
Cost of quality – the PAF model
If an organization tries to ensure quality but fails to do so, this may lead to extra cost; quality cost.
There are four categories:
Prevention: cots of setting up standards and a system to maintain them (training staff,
preparing purchase specifications, developing standards, monitoring and documentation
procedures); preventing defects before they happen.
Assurance/appraisal: cost of actually maintain standards (resources required for inspection,
measurement and documentation cost of surveys and audits); identifying defects before
guests do.
Failure:
o Internal failure: cost due to waste/losses before the product reaches the customer
(rejection of raw materials, losses due to faulty storage, downtime, scrap, rework).
Rework: some aspects of a service/products must be performed again
Scrap: defective item is unfit for further processing.
o External failure: costs due to defective items reaching the customer (warranty
costs, poor word-to-mouth, ultimately marketing costs and loss of repeat business).
If greater emphasis is placed on prevention and assurance, total cost falls because internal and
external failure costs decline.
Price of non-conformance (PONC - Crosby): the cost to management of not getting it right first time
and every time; the cost of internal and external failure.
» Calculating this cost is difficult, because the value of lost repeat business and customer
dissatisfaction is not easy to assess.
Standard costs (for specific failure events) x the number of such failure events.
Alternative strategies for managing quality
Quality inspection (QI): inspect product before it is sold to the customer (housekeeping); after it is
being produced.
Set up a specification for product
Cost it
Detect any defects before delivering/selling it to the end user
» Problems:
In MPOs are the costs of rework and scrap – once a fault/error is detected it is too late to do
anything about it.
Not workable in CPOs, because product and consumption happen at the same time
(customer=inspector).
Decreases staff motivation, as it tends to accentuate negative feedback in terms of
performance.
System can only be improved by increased inspection (creating cost), therefore often a
trade-off between quality and cost occur.
Quality control (QC): after designing the quality level and setting standards, the manager will check
on conformance, at several stages in the total process; processes designed to monitor
production/operations in order to maintain quality.
Quality inspecots (internally)
Quality audits (management)
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