IB Business and Management 5.4 Quality Assurance

What is Quality? Quality is achieving a standard for a product or service which meets customers expectations What attributes do we associate with good quality?

Key aspects of Quality Good design – looks and style Good functionality – it does the job well Reliable – acceptable level of breakdowns or failure Consistency Durable – lasts as long as it should Good after sales service Value for money

Why is good quality important? What benefits will it bring?

Benefits of a Quality Reputation Customer loyalty – they return, make repeat purchases and recommend the product or service to others. Retailers want to stock the product As the product is perceived to be better value for money, it may command a premium price and will become more price inelastic Fewer returns and replacements lead to reduced costs

Quality is becoming increasingly important because? Increasing consumer awareness Increasing Competition Government Legislation Increasing consumer incomes How have these factors driven the increasing importance of quality?

Task – Look at the following companies….. 1. What would be the indicators of good/bad quality 2. How can these businesses measure the level of quality of their goods/services? 3. What measures could these businesses put in place to ensure good quality?

How is Quality Measured? Failure or reject rates Level of product returns Customer complaints Customer satisfaction – usually measured by a survey Customer loyalty – evident from repeat purchases, or renewal rates Increasing market shares/increasing sales

However Quality is subjective Quality is always evolving because of things like improved technology, better materials, new manufacturing techniques and fresh competitors. Whilst controlling quality has benefits to the firm, it can also be costly to do, so it is important that the benefits outweigh the costs in the long term

Costs of Poor Quality Lost customers (expensive to replace – and they may tell others about their bad experience) Cost of reworking or remaking product Costs of replacements or refunds Wasted materials

Benefits of Improving Quality Improved image & reputation, which should result in: Higher demand, which may in turn mean Greater production volumes (possibly providing better economies of scale) Lower unit costs because of less waste and rejected output Fewer customer complaints (& more satisfied customers) Potentially higher selling prices (less need to discount)

QUALITY MANAGEMENT TECHNIQUES

Quality Management Techniques Quality Control Quality Assurance Total Quality Management/Total Quality Culture

Quality Control This is the traditional method used by firms to make sure goods are of the right quality Quality inspectors test products or samples of products at the end of the production process

Advantages of Quality Control Requires little staff training Suitable when staff are unskilled or temporary If all output is checked, faulty goods will not reach the consumer

Problems with Quality Control Sometimes only a sample is taken As faulty goods are often only detected at the end of the production process a lot of goods have to be scrapped or reworked Staff can feel demotivated

Quality Assurance This is an approach that aims to achieve quality by organising every process to get the product ‘right first time’. Every stage of the production process is examined for ways to improve quality Documents are produced at each stage to outline the way to do tasks Workers are responsible for ensuring quality at their stage of production

Advantages of Quality Assurance Costs are reduced because there is less wastage and re-working of faulty products as the product is checked at every stage.

Disadvantages Can be costly in terms of training Can create additional paperwork to implement Lack of flexibility Workers can’t use their initiative and so may become demotivated

TQM TQM is a philosophy introduced by W. Edwards Deming in the 1980’s Originated in Japanese firms TQM aims to develop a ‘quality culture’ in the organisation. There is a commitment to quality at every step of the production process and from all staff.

Total Quality Management (TQM) More and more businesses are moving towards TQM…. This means: Quality is part of every process Quality is everyone’s job This in turn: Can increase employee motivation as they have added responsibility and don’t feel they are being checked up on Can massively reduce costs of re- working/wastage

Features of TQM – Quality Circles – meetings of relevant workers to discuss issues relating to maintenance and improvement of quality in the business – may also double as a form of empowerment and motivation. – Statistical Process Control – statistical data generated to inform the evaluation of processes within the business. These Key Performance Indicators are closely monitored – Zero defects – systems in place to ensure that no product leaves the business with a defect – important in building supplier relationships, image, reputation.

Requirements of TQM Skilled workers Motivated workers Investment in training Creating a ‘Quality Culture’

Quality of Services Quality of service is more difficult to measure: Efficiency Speed Interaction with Staff Cleanliness How can quality of services be measured?

How can Quality be Improved? Watch the video ‘Gordon Ramsay eats at Guiseppes’ What are the problems with Quality What suggestions would you make to Guiseppes on how they can improve quality? How could they implement: Quality Control Quality Assurance TQM