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Operations

4.2Qualityofgoodsandservices

Keyelementstothistopic

Methodsofensuringquality

Conceptofquality

Importanceofquality

Definitionofquality

Aproductisofgoodqualityifitmeetsthe

needs&expectationsofthecustomer

Considerthefollowing…

Asacustomer,whatwouldyourexpectationsofqualitybeforanewlyreleasedsmartphone?

Howdowejudgequality?

Design– looks,style,features

Functionality – itdoesthejobwell

Reliability– acceptablelevelofbreakdownsorfailure

Consistency– productsmeetthesamequalitystandardstimeandtimeagain

Durable– lastsaslongasitshould

Goodaftersalesservice– easeofgainingrefunds,guarantees,warranties

Price/valueformoney– thepricereflectsthequalityoftheproduct

Considerthefollowing…

Asacustomerofafastfoodrestaurant,identifyanyadditionalfeaturesthatyouwouldlookfortojudgethequalityofthisbusiness

Inthenews…

GlobalrecallIn2016,SamsungrecalledthousandsofitsnewlyreleasedNote7smartphonesbecauseoffaultybatteriesthatcouldexplodewhenbeingcharged!

StatethreepossibleconsequencesofpoorqualityissuestoSamsung

Importanceofquality:ConsequencesofqualityissuesLossofcustomers,ascustomersaredissatisfiedwiththeproductandthereforewillnotreturn

Reputationofthebusinessgoesdown;difficulttoattractnewcustomers

Costsofrecalling,scrappingorre-working/re-makingproductsthatarefaultyornotuptotherequiredstandard

Costsofreplacementsorrefunds

Costsofreducingthepriceofproductsthatno-onewishestobuy;theseproductsmaynotgenerateaprofit

Legalactionmightbetakenagainstthebusiness

Conceptlinks

Poorquality

Productrecall

Reputation

Sales

Canyoulinktheseconcepts?

Sentencestarter – ThequalityproblemswiththeGalaxyNote7willaffectSamsungbecause…

Conceptlinks

Poorquality

Productrecall

Reputation

Sales

Sentencestarter – ThequalityproblemswiththeGalaxyNote7willaffectSamsungbecause…

Samsunghadtorefunditscustomers.

Thepublicitysurroundingthisincidentledtoasignificantlossofconsumerconfidence.

Asaresult,Samsungmayfindsalesofitsnexthandsetarelowerthanpreviousmodels.Thismaymeanthatitsprofitlevelswillnotbeashighashopedforandwillthereforenotpayforalltheresearchanddevelopmentcostsofthenewphone.

phoneswhichcaughtonfiremeantthat…

Let’slookalittlecloserat:Whyqualityisimportanttobusinesses?

Marketsarehighlycompetitive

Whyqualityisimportanttobusinesses?

Customers,today,aremore…

• Knowledgeable &demanding

• Preparedtocomplainaboutpoorquality

• Abletoshareinformationaboutpoorquality(e.g.viaemail&socialnetworking)

Whyisqualityimportanttobusinesses?

Ifabusinesscandevelopareputationforhighquality,thenitmaybeabletocreateanadvantage overitscompetitors.

Task- Whichsupermarketsdoyoubelievehavethestrongestreputationforquality?Ranktheminorder.

Businessbenefitsofgreaterquality

Customersatisfaction

Repeatpurchase

Customerrecommendation

Lowermarketingcosts

Highercustomerloyalty

Qualityandcompetitiveness

• Today,fewerbusinessesarecompetingsolelyonprice• Atasimilarprice,thehigherqualityproductislikelytowin• Qualitycanenableabusinesstodifferentiate itsproductsfromthecompetition

Howcanwemeasurequality?

Failure/rejectrates

Levelofproductreturns

Customerloyalty

Mysteryshoppers

Customersatisfactionrates

Customercomplaints

Justaminute…

Youhave60secondstowritedownwhyitmaybedifficultforabusinessto

measurequality

Traditionalmethodofcheckingquality.Allorasampleofproductsarecheckedattheendoftheproductionprocess/afteraservicehasbeencompleted.

þ Protectsthestandardoftheproductþ Customers,intheory,willnotreceive

asubstandardproduct,butdependsonwhether100%orasampleofproductsarechecked

þ Specialisttrainedinspectorsareusedtocheckquality,leavingoperativesfreetocompleteothertasks

þ Opportunitytoreceivefeedbackfromcustomersthathavereceivedaservice

Qualitycontrol

ý Wastefulapproach;productsthatdonotmeetthequalitycontrolrequirementsareoftenscrapped

ý Workerslesslikelytotakeresponsibilityforerrors

ý Highcostofinspectorsý Checkingofservicese.g.via

questionnaires,happensaftertheevent;thedamageofpoorqualityservicemayhavealreadybeendone!

Qualityassurancereferstotheprocessesthatensurequalitymeetstherequirementsofcustomers.Qualityassuranceaimstoachievequalitybyorganisingeveryprocesstomanufacturethegoodorprovideaservicetogetit'rightfirsttime' toensuremistakesneverhappen.Unlikequalitycontrol,everymemberofstaffwillberesponsibleforcontributingtowardsquality.

þ Costsreduced,lessneedforreworkingandlesswastage;therefore,averageunitcostsarereducedleadingtoincreasedefficiency

þ Betterrelationshipsbetweenemployeesandmanagementleadingtoapossibleincreaseinproductivity

þ Staffmotivationshouldincrease,asdirectlyresponsibleandinvolvedinthequalityprocess

þ Consistentlevelsofqualitycanresultinacompetitiveadvantage beinggainedoverrivalsresultinginincreasedsalesandincreasedcustomerloyalty,ascustomerexpectationsarecontinuallymet

Qualityassurance

ý Movingtoaqualityassurancesystemcanbetimeconsumingandstaffmayresistanychange

ý Trainingcostswillbehighý Reliantonstaffunderstanding

oftheimportanceofmeetingqualitystandards&havingthemotivationtoensurethesystemworks;somemayviewasatickboxexercise

Aquestionofquality

NissaninSunderlandisoneofthemostproductivecarplantsinEurope,producingonaverage1,200carsperday.Nissanhasanenviablereputationforvehiclereliability,butrecentlythecompanyhasnoticedthatthenumberofqualityissueswithitscarshasincreased.Nissancurrentlyusequalitycontrolinspectorswhocheckasampleofcarsattheendoftheprocess,however,theyareconsideringintroducingasystemofqualityassurancetohelpimprovethequalityofitsvehicles.

Question:NissanisconsideringintroducingQUALITYASSURANCEintoitsproductionprocess.EvaluatewhetherNissanislikelytobenefitfromthismove.Bepreparedtojustifyyourdecision.

Reasontosupporttheintroductionofqualityassurance

IntroducingasystemofqualityassuranceatNissanshouldleadtoimprovedquality.Thisisbecauseeveryemployeewillberesponsibleforensuringquality,ratherthancheckingasampleofcarsattheendoftheprocess.ThisisimportantforNissan ,whichmayresultincustomersbuyingcarsmanufacturedbyacompetitor,suchasFord,resultinginareductioninsales.

Ontheotherhand…

Introducingasystemofqualityassurancecouldresultinslowerproduction,asworkersgetusedtocheckingcarsduringproductiontopreventmistakeshappening.Thiscouldresultinareductioninthe1,200carsproducedperday,whichcouldmakeitdifficulttomeetdeliveryschedules.Failuretodeliverontimewillresultincustomerdissatisfactionandapoorreputation,whichisproblematicinthecompetitivecarmarket.

Makeadecision…

Overall,Ibelieve….Nissanshouldintroduceasystemofqualityassurance.Althoughintheshorttermitcouldslowdownproduction,thiswouldonlybeatemporaryproblemandinthelongtermitshouldimprovethequalityofthevehicles.AsNissanoperatesinafiercelycompetitivemarket,ensuringhighqualitycarsareconsistentlymanufacturedisessentialtoallowthemtoremaincompetitiveandmaintaintheirenviablereputationforreliability.

Summary…theimportanceofqualityassurancetoabusinessIncreasedcustomerloyaltyleadingtoadditionalsales

Strongbrandimageandreputationforquality;mayattractnewcustomers

Maybepossibletochargeahigherprice

Fewerreturns,productrecallsandreplacementsloweringcosts

Canhelptoattractandretainhighcalibrestaff

Reducesinspectioncosts

Overall,acompetitiveadvantagecanbegained

Whichevermethodofimprovingormaintainingqualityabusinesschoosestoadopt,itwillhaveacost.

Abusinesswouldhavetobalancethesecostsagainstthebenefits,toensurethequalitymethodchosenisappropriatetothebusinessneeds.

Thebalanceofquality

DJKoh,presidentofSamsungmobile,said:theGalaxyNote8“letspeopledothingstheyneverthoughtwerepossible.”TheNote8sgreatestchallengeistorestoreconsumerconfidenceanddisplacethememoriesoftheNote7thatendedinaglobalrecall.

Samsungisusingasafetytestingfirm,ULInternationalforitsqualitychecking.ArepresentativeofULInternational,saidthattheNote8passedarigorousseriesofdeviceandbatterysafetycompatibilitytestprotocols.WithApple’sreleaseofthenewiPhone,Samsungsimplycannotaffordanymistakes.

SamsungislaunchingtheGalaxyNote8withadualcamerasystemandlargeinfinityscreentomakeamendsforthefire-proneNote7.

DataDrop:• ThecostoftheoldSamsungNote7

was£700-£750(UKR.R.P.,Jan,2017)

• ThecostofanewNote8is£869• SamsungofferedNote7customers

arefundor$100toexchangeforanotherSamsungphone

• TheproductrecallcostSamsung$3billion

Inthenews- Samsungfacesrigorousqualitychecks

Tasks– applyingyourknowledge…

Task4Usingthedatadrop,calculatethepercentagepriceincreasefromtheoldNote7(usethemeanpriceof£725)tothenewNote8priceof£869

Task3Samsunghasintroducedimprovedsystemsofmaintainingconsistentlevelsofquality.ExplainthebenefittoSamsungofthisdecision.

Task1Whatismeantbythetermqualityassurance?Task2Statethreebenefitsofqualityassurance

Task1Whatismeantbytheterm,qualityassurance?

Qualityassuranceiswhereallemployeeshaveatargetof‘zero

defects’or‘gettingitrightfirsttime’andareresponsibleforquality.Itreferstotheprocessesthatensurethatcustomerrequirementsare

consistentlymet.

þAverageunitcostsarereduced,becausethereislesswastageandre-workingoffaultyproducts,whichmakesthebusinessmoreefficient

þItcanhelpimproveworkermotivation,asworkershavemoreownershipandrecognitionfortheirwork

þWithallstaffresponsibleforquality,thiscanhelpthefirmgainacompetitiveadvantageoverrivalsarisingfromitsconsistentlevelofquality

Task2Statethreebenefitsofqualityassurance

Task3Samsunghasintroducedimprovedsystemsofmaintainingconsistentlevelsofquality.ExplainthebenefittoSamsungofthisdecision.

Samsung’sreputationtookquiteaknockwhenitsNote7wasrecalled.Inacompetitivemarketplace,Samsungneedstoestablishastrongandtrustedbrand.Therefore,SamsunghavingastrongerfocusonqualitywillhelptopreventanyfurtherdefectiveproductsgettingontotheshelvesandwillenableSamsungtocompetemoreeffectivelywithmarketleaders,Apple.

Task4Usingthedatadrop,calculatethepercentagepriceincreasefromtheoldNote7(usethemeanpriceof£725)tothenewNote8priceof£869

DataDrop:• ThecostoftheoldSamsungNote7was£700-£750(UKR.R.P.,Jan,2017)

• ThecostofanewNote8is£869• SamsungofferedNote7customersarefundor$100toexchangeforanotherSamsungphone

• TheproductrecallcostSamsung$3billion

Tocalculatethepercentageincrease:£869- £725=£144.Dividethe increase bytheoriginalnumber(144/725)andmultiplyby100=19.86%ora20%increaseinprice.