Quality issues in supply

chain management

Unit 4
 Learning Unit 4: Quality issues in supply management

 Theme 1: Quality management in supply chain

 Theme 2: Standardisation as an aid to

 quality decisions
 Theme 1: Quality management in supply chain

 Objectives/outcomes:
 Define quality as it relates to supply chain management;
 Explain the components of the definition;
 Explain how an organisation would define quality;
 Describe the dimensions of quality in supply management;
 Explain the eight principles of quality management in supply management ;
 Explain the concept and elements of total quality management (TQM) as it relates to
supply management.
 Explain the various contributions made by TQM Gurus;
 Describe the characteristics of TQM;
 Describe the relationship between TQM and Supply Management.
 Definitions of quality

International standards The totality of features and characteristics of

organisation (ISO) 8402 a product that bears the ability to satisfy
stated or implied needs.
Deming (1986) The degree of uniformity and
dependability at low costs and suited to
the market.
Juran & Godfrey (2000) Fitness for use.
Crosby (1987, 1984) Conformance to requirements.
 Approaches to defining quality

User-based approach
Products/ service should be
Fitness for use
Product fulfils its intended
functions
Transcendent approach
Comparison of product Value-based approach
attributes and characteristics Define quality in terms of
.Quality is synonymous with value to the customer or in
excellence QUALITY terms of Costs & Prices
APPROACHES

Manufacturing-based
Product-based approach approach
Views quality as having Quality is making or
Measurable characteristics providing Error-free
known as engineering products/services or
perspective conformance to
specifications
 Components of quality
 Quality and product policy-product is a combination of tangible and intangible
characteristics that customers want and willing to pay a price. Product planning
decides on market segment, level of performance expected, price to be charged,
expected sales volume, quality level.
 Quality and product design- This include meeting specification of the product, expected
performance, appearance, quality levels, materials to be used, dimensions, tolerance
product capability and price and volume for it to be acceptable in the market place
 Quality and manufacturing –Meeting specifications of the product design,
acceptable limits or tolerance and less variation, better quality, strive to produce
excellent products
 Quality and final use of products-for the user quality depends on expectations,
fitness for use, proper use of the product/service, safety feature, well made, well
designed ,well priced and well services then quality would have been achieved
 How an organization would define quality

• Quality means user satisfaction : that goods or

services satisfy the needs and expectations of the
user
 Dimensions of quality

 Various concepts and tools have

been developed to help companies
improve their operations.
 When companies design a
product/service, certain
performance characteristics need
to be handled carefully in order
to fulfil customer’s expectations
 Perceived quality
What is your perception about BMW cars?
 Perception is closely related to the reputation of the producer. And
includes personal evaluation(asses imagine, advertising, brand
names, reputation etc
 It is a subjective judgement based on image, advertising, brand
names and reputation.
 Total customer satisfaction(TCS) is based on the complete
experience with the organization not just the product and
intangibles like reputation or past performance influence perceived
quality
 Dimensions of quality
 Warranty: The organisation’s public promise to back up its products with a guarantee of
customer satisfaction.
 Features: Unique product specifications that supplement basic functions(little extras).
 Conformance: It is the manufacturer’s responsibility to ensure that the product meet the
standards and is the Degree to which product meets its design specifications and established
standards
 Service : Intangible ingredients made up of things like ease of repairing the item, speed of
service, courtesy and competence of personnel
 Aesthetics :Personal judgements about the physical appearance of a product, sounds, tastes or
smell e g exterior finish or product appearance
 Price: Customers pay for value! Value is the sum of the benefits derived from the product/ service
and can be more than the product itself
All dimensions listed are elements of value.
 Performance :Degree to which the product meets or exceeds certain operating characteristics e
 Principles of quality
management

 The eight (8) principles of quality management were

developed by the International Standards
Organisation (ISO) as a framework.

 The aim is to guide organisations in improving

performance, resulting in the prevention of
nonconformities.
8 Principles of quality management
 Customer focus
 Leaderships
 Involvement of people
 Process approach
 System approach to management
 Continual improvement
 Factual approach to decision making
 Mutually beneficial supplier relationships
 8 Principles of quality management

 Customer focus: Organization depends on their customers and therefore it is

necessary to understand their customer needs, striving to exceed customer
expectations.
 Leadership: Leaders should create and maintain a conducive internal
environment and establishing direction and unity of purpose and support the
work environment.
 Involvement of people: All stakeholders in the organization should be
instrumental in achieving the organization’s goals and ensuring that all
employees at all levels are able to fully use their abilities for the organization’s
benefit.
 Process approach: Recognizing that all work is done through processes and
managed accordingly. A desired result is achieved more efficiently when
resources are managed well as a process.
8 Principles of quality management

 System approach to management: This involve understanding and managing

interrelated processes as a system contributes to organization efficiency and
effectiveness in attaining objectives. It should also be noted that achieving any
objective requires a system of interrelated process.
 Continual improvement: Continual improvement of organizational performance
should be viewed as a permanent organizational objective, recognizing and acting on
the fact that in all cases further improvement is possible.
 Factual approach to decision making: Acknowledging that sound decision must be
based on analysis of factual data and information. Applying the principle of factual
approach on decisions can direct to assurance that there is accuracy, reliability and
accessibility on the data and information used.
 Mutually beneficial supplier relationships: An organization and its suppliers are
independent and a mutual relationship promotes value addition to both parties and
synergy can be found in such relationships.
 Total Quality Management (TQM)

A way of managing an organisation so that every job and

process is conducted correctly, first and every time, and
applies a system approach were quality is managed in all
phases of the supply

 An integrative philosophy of management for continually

improving the quality of products and processes.

 It takes a holistic approach to long-term success that views

continuous improvement in all aspects of an organisation as a
process not as a short-term goal.
 Drivers of TQM

JIT Emphasises the concept of zero defects, conforming to

customer requirements and improving processes through
prevention activities to meet requirements.
DO IT RIGHT THE FIRST TIME(minimize costs)
Japanese Developing a culture of continuous improvement. Calls for
Kaizen concept everyone in an organisation to work for constant and gradual
improvement in every process.
Global Competition for sales and profits in private and public sectors
competition has led to world-class manufacturing and processing for
competitive advantage.
Quality Developing world-class quality processes and emphasising the
philosophies concept of do it right the first time. It also includes best
practice benchmarking.
 The development TQM Gurus
6–17

1. Edward Deming’s PDCA

quality assurance cycle.
• Define the objectives and methods to achieve or
Plan: identify problem by studying the current situation
to detect the gap and actions for improvement • It explains that business should
be placed in a continuous feedback loop
so that managers can identify and
• Create conditions for training to change the parts of the process that need
improvement
Do: achieve objectives and implement
formulated plan

• Decide whether the work is progressing

Check: according to plan. Use performance metrics
to Monitor results. Report the results to
decision makers

• Determine on the changes to improve the

Act: process and take corrective action and
 2. Philip Crosby’s five absolutes of quality

 Definition of quality is conformance to requirements: Adapt a do it right the first time.

 The performance standard must be Zero defects

 The measurement of quality is the price of non-conformance.

 There is no such thing as a quality problem.

3. Joseph Juran’s quality trilogy
• Quality planning: have a system that is
capable of meeting quality standards./goals.
Determine needs of customers and translate
the need into a product
• Quality control: Establish
measurements and standards for performance.
Measure the performance difference between
actual and the standard and take action if
necessary
• Quality improvement: Show the
need for improvement .Develop a
process able to produce better product
and have a culture of doing things
better and provide control to maintain
improvements
4. Masaaki Ima’s kaizen philosophy

 The key to Japan’s competitive success is the kaizen philosophy which

calls for everyone in an organisation to work for constant and gradual
improvement in every process .

 Kaizen steps include:

 Standardise an operation
 Measure the standardised operation
 Gauge measurements against requirements
 Innovate to meet requirements and increase productivity
 Standardize the new, improved operation
 Continue cycle ad infinitum
 Characteristics of TQM p 97

The following are characteristics of TQM

 It is a management philosophy that permeates the whole organisation and
its participants in the supply chain.
 It has continuous improvement as a cornerstone philosophy.
 All employees in the firm and of partners in the supply chain have quality
project responsibilities.
 Team problem solving on a cross-functional and inter-organisational basis
to ensure quality goals are shared and relationships established
 Feedback on customer satisfaction, value of products and services
 Theme 2 : Standardisation as an aid for quality decisions

OUTCOMES/OBJECTIVES
 Define standardisation and its advantages;
 Explain the concept of specification and its importance to procurement
 Describe the purpose of specification in the supply chain;
 Differentiate between ISO9000 and ISO14000’s impact on the organisation;
 Describe DMAIC cycle;
 Define quality assurance and supplier certification in supply management.
 Describe the types of costs associated with quality.
Key thought in standardisation
 Standardisation defined

 The formally accepted, uniform, inherent characteristics of items in terms of

specific measurements: design, composition, performance, quality and
general use.
 It is based on accepted characteristics as developed by research, technology
and practical experience and its document
 Formal acceptance of Standard items are normally derived from three (3)
sources:
 International standards
 National/ industrial standards
 Business standards
Advantages of standardization
 The ISO is the International Organization for
Standardization.

 ISO develops voluntary technical standards, which

contribute to making industrial production and supply
more efficient, safer and cleaner, and
 Standards make trade between countries easier and faster.

 ISO standards also serve to safeguard consumers and

users of products and services –

 as well as making their lives simpler

 The role of standards in quality assurance
Advantages of standardization

 Uncertainty is removed as to what is required on the part of both buyer

and seller.
 Less stock needs to be kept when a standard item is suited to many
applications, thereby reducing inventory carrying costs.
 Larger quantities may be ordered at a time, with an opportunity to
negotiate quantity discounts.
 Time and money are saved by elimination the need to prepare company
specifications and reducing need for explanations
 The total cost of ownership (TCO) to the final customer will be reduced
due to standardized procedures, terminology and processes will increase
value delivered to the customer in the SC
 The role of standards in quality assurance…

 Inspection and quality control of incoming goods are facilitated even

eliminated due to standard products in the entire supply chain.
 There is accurate comparison of quotations from all suppliers
 The firm's competitive position may improve since standard items may
reduce the cost of the final product.
 Standardisation may ensure better labour relations as a result of faster and
less complicated training, increased productivity and higher income..
 Global logistics costs may be reduced since packaging sizes are also
standardised.
 International standards: ISO
 ISO 9000 is to ensure that operating processes are well documented, consistently
executed, monitored and improved for quality management.

 The ISO 9000:2000 is based on a need for greater emphasis on the process and systems
used for quality management and have as a basic point of departure the eight principles
of quality management.
The new ISO 9000: 2000 consists of three basic documents
 ISO 9000 – Fundamentals and vocabulary
 ISO 9001 – Requirements (defines minimum requirements)
 ISO 9004 – Guidelines for performance improvement (guidance for improvement
beyond minimum requirements (Continuous Quality Improvement [CQI]
ISO 14000 AND APPLICABLE AREAS
 ISO 14000 standards link up with the concept of
environmentally friendly manufacturing to ensure that all
participants in the supply chain are aware of environmental
sensitivity in terms of customer requirements.
IS0 14000 encompasses standards in the following areas:
 Environmental management systems
 Environmental auditing
 Environmental performance evaluation
 Environmental labeling
 Life cycle assessment
 Environmental aspects of product standards
 Terms and definitions
 The purpose of specifications in the supply chain

Specification can be defined as a detailed statement of particulars prescribing

materials, dimensions and quality of work for something to be built, installed and
manufactured.
Methods of specifying:
 Samples (colour, grading)
 Performance (speed, accuracy)
 Brands or trademarks (Tiger Brands)
 Qualified equipment (safety equipment)
 Market grades (beef, wheat, tobacco)
 The purpose of specifications in the supply chain

Some of the reasons for specifying correctly include:

 To verify and check the strength of materials involved in a project.
 To provide evidence in the event of a dispute between parties.
 To establish the intangible services to be provided.
 To describe the quality and quantity of materials for the project.
 To communicate the requirements of a user to the supplier.
 To specify the workmanship and method of doing the work.
 To establish the standards against which inspections, tests and quality checks
are made.
Supplier’s quality role in the supply chain

Activities in quality management involving suppliers:

 Identification of key suppliers

 Increased coordination with key suppliers
 Teams formed with key suppliers to improve each other’s
work processes
 Goal of zero defects
 Developed cross-functional teams with key suppliers
 Reduced new product development time
 Quality assurance in the supply chain
 Quality assurance*QA) Embraces activities that provide confidence that the
organisation will fulfil quality requirements
 It refers to the planned systematic activities implemented in a quality
system so that quality requirements for a product/ service will be fulfilled
 The implications of mismanaged quality are: increased costs, breaks in
production; dissatisfied customers
 Increased costs result from: additional administration and inspection,
rejection of the incoming and final product and the trouble taken to
develop alternative suppliers
 Quality assurance(QA) is a process-centred approach that ensures a
company/ organisation is providing the best possible products/ services.
(confidence)
 Quality assurance in the supply chain
 it focuses on enhancing and improving the process that is used to create the
end result,
 or it is a means of which defects and problems are continuously identified
and particularly prevented in the supply chain.
 Therefore, quality assurance is a comprehensive “cradle-to-grave”
philosophy, and to prevent poor quality supplies from reaching the
procurement firm,
 buyers may take preventive action (control before the fact) and ensure that
suppliers deliver the right quality throughout.
 Approaches to Quality assurance

 Use of the PDCA/ Deming cycle.

 Design of lean manufacturing processes as a way of reducing/eliminating defects

 Supplier appraisal to ensure that suppliers who meet quality requirements are
approved

 Proof of ISO 9000 certification.

 New design control to ensure that the concept of doing it right first time is
respected
 Supplier certification
 An organization must be audited by an external authorized person
in order to attain ISO 9000 certification.
 Internal audit to determine whether he processes of the company
are consistent with the standard
 Supplier certification as part of supply base management and
quality assurance

3 basic steps of supplier certification:

 Qualifiication
 Supplier quality capacity development
 Certification and performance process.
 Quality control

Quality control is a process that is used to ensure that a

certain level of quality in products/ services is maintained.

It involves the detection of defects and relates to

determining the corrective action to be taken in resolving
the defects.
 Six sigma approach(DMAIC-define, measure, analyse,
improve and control
 Six sigma is a management strategy that seeks to improve the quality of
process output by identifying and removing the causes of defects and variation
in the various processes

 Six sigma is an evolution of TQM that was pioneered by Motorola in the

1980s.
 The six sigma does have the goal of value creation, customer satisfaction,
continuous improvement which resulted in Motorola winning the Malcolm
Baldrige National Quality award through quality improvement.

 Some of the examples of quality control technique under the six sigma is the
DMAIC (define, measure, analyse, improve and control) which is referred as
the improvement model and focuses on improving processes through process
reduction variation.
 Six Sigma DMAIC cycle
Technique Description
Define Define customers and priorities (quality and business
objectives)
Measure Determine how to measure the process, identify
internal processes that influence quality &defects
Analyse Determine the causes of defects and understand why
the defects are generated and reasons for variations.
Improve After identifying the defects, Work on improving the
process to remove the causes of the defects and modify
the process
Control Determine how to maintain the improvements and put
tools to take corrective action
 The cost of quality (COQ)
Conformance costs Non-conformance costs
Prevention costs Internal failure costs
Costs that relate to activities designed to Costs related to deficiencies before
prevent or reduce defects. shipment or delivery.
e.g. cost of quality training quality improvement e.g. cost of scrap & rework, returns to customers, re-
projects, new product reviews, process planning inspection costs
Appraisal costs External failure costs
Costs incurred when poor quality
Costs incurred to determine the degree of goods or services are passed to the
conformance to quality requirements. customer or costs that occur after
e.g. cost of product quality audits, inspection tests, delivery.
inspection tests report, data processing e.g. cost of customer complaints, warranty cost, customer
returns, customer service cost
 Assessment questions
1) List the components of quality;
2) Name the different dimensions of quality;
3) What are the principles of quality management;
4) Explain Total Quality Management (TQM) and the drivers
5) Explain the contribution by Demming 14 principles, PDCA Deming cycle, Crosby’s
five absolutes, Juran’ contribution and Imain to the evolution of quality
6) List the main characteristics of TQM
7) Define standardization;
8) Explain the role of standards in quality assurance;
9) What are the purpose of specification in the supply chain;
10) Name the different approaches to quality assurance;
11) What are the components of the six sigma DMAIC for improvement model
12) Explain supplier certification.
13) Discuss the cost of quality