9/14/2017

IP211
Quality, Strategy, and
Value Creation
Lesson 1
Quality, Strategy, and Value Creation

Quality

1. Quality and Strategy

2. Defining Quality
3. Dimensions of Quality
4. Implications of Quality

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Quality and Strategy

Managing quality helps organizations build

successful strategies of differentiation, low cost,
and response
Defining customer quality expectations has helped Bose
Corp. successfully differentiate its stereo speakers as the
best in the world.
Nucor has learned to produce quality steel at low cost by
developing efficient processes that produce consistent
quality.
Dell Computers rapidly responds to customer orders
because quality systems, with little rework, have allowed
it to achieve rapid throughput in its plants.
Quality may be a critical success factor in these firms!

Quality and Strategy

Improvements in quality help firms increase sales

and reduce costs, both of which can increase
profitability
Companies with highest quality are 5 times as productive
Two Ways Quality
Improves Profitablity

Sales Gains via

-improved response
-flexible pricing
-improved reputation
Improved Quality Increased Profits

Reduce Costs via

-increased productivity
-lower rework and scrap
-lower warranty costs

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Quality and Strategy

Flow of activities for an organization to achieve

TQM (Total Quality Management)
Building an organization that can achieve quality, affects
the entire organization
Organizational practices
Leadership, Mission Statement, Effective operations
procedures, Staff support, Training
Yields: What is important and what is to be accomplished

Quailty principles
Customer focus, continuous improvement, Benchmarking
Just-in-time, Tolls of TQM
Yields: How to do what is important and to be accomplished

Employee fulfillment
Empowerment, Organizational commitment

Yields: Employee attitudes that can accomplish what is important

Customer satisfaction
Winning orders, Repeat customers

Yields: An effective organization with a competitive advantage

What is Quality?

Definition
(American Society of Quality)
The totality of features and characteristics of a product
or service that bears on its ability to satisfy stated or
implied needs.

Quality is difficult to define precisely

Generally defined as a products fitness for use

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What is Quality?

Quality can be defined in 3 Categories

1. User based quality
2. Manufacturing based quality
3. Product based quality

What is Quality?

User based quality (perceived quality)

quality lies in the eyes of the beholder
Marketing people and consumers like this approach
Higher quality means:
Better performance
Nicer features
Other improvements

Limitations
Consumer preferences vary widely
Difficult to incorporate these preferences into products
with wide appeal.

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What is Quality?

Manufacturing based quality

quality is conforming to standards and making it right
the first time.
Production Managers approach
Conformance to drawing requirements
Conformance to quality workmanship standards
Excellence in quality is not necessarily in the eye of
the beholder, but rather in the standards set by the
organization
Serious weakness since it is not customer focused

What is Quality?

Product based quality

views quality as a precise and measurable variable
Quality is viewed as quantifiable and measurable
characteristics or attributes.
For example durability or reliability can be
measured
Engineering can design to a benchmark
Quality is determined objectively

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Dimensions of Quality
8 Dimensions of Quality
1. Performance
2. Features
3. Reliability
4. Conformance
5. Durability
6. Serviceability
7. Aesthetics
8. Perceived quality

Dimensions of Quality

1. Performance
Performance refers to a products primary
operating characteristics.
Involves measureable attributes
Can be ranked objectively on individual
aspects of performance.
Example: automobile performance (speed,
handling, comfort)

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Dimensions of Quality

2. Features
Additionalcharacteristics that enhance the
appeal of the product or service to the user
(bells and whistles)
example: automatic tuner on TV, free
drinks on airplane

Dimensions of Quality

3. Reliability
Likelihoodthat the product will not fail
within a specified time period
Mean time to first failure, mean time
between failures, failure rate per unit
time.
Keyelement for users who need the
product to work without fail.
Examples; farm equipment, photo copiers,
computers

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Dimensions of Quality

4. Conformance
The precision with which the product or
service meets the specified standards.
Examples;defect rates in the factory,
incidence of service calls

Dimensions of Quality

5. Durability
Measures the length of a products life.
When the product can be repaired,
estimating durability is more complicated
The item will be used until it is no longer
economical to operate it.
Thishappens when the repair rate and
associated costs increase significantly.
Examples; home appliances, light bulbs,
automobiles

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Dimensions of Quality

6. Serviceability
The speed at which a product can be put
into service when it breaks down as well as
the competence and behavior of the
serviceperson.
Examples; industrial equipment

Dimensions of Quality

7. Aesthetics
The subjective dimension indicating the
kind of response a user has to a product.
Represents the individuals personal
preference

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Dimensions of Quality

8. Perceived Quality
The quality attributed to a good or service
based on indirect measures
Based on brand reputation
Assumptions that quality today is same as
yesterday
examples; Maytag appliances

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