Quality management systems – Requirements

3 Terms and definitions

Value-based quality is defined in terms of costs and prices as well as a number of other attributes. Thus, the consumer’s purchase decision is based on quality (however it is defined) at the acceptable price.

Definition of Quality – Value-Based View

Building customer supplier relation

Supplier Customer

3. It looks like it’s possible to do business with this person.

1. We have a problem …2. We shall do our best

to help you solve your problem …

Requirements

The two parties have different value scales

Supplier Customer

C1

Specifications

In order to fulfill customer requirements, we have to provide a solution. Cost of

our solution is C1.

Supp

lier v

alue

sca

le

Cust

omer

val

ue s

cale

Value and cost are different to supplier and customer

Supplier Customer

C1

V1 C2

We estimate the value of our solution to be V1. If customer pays V1 then

our benefit will be V1 – C1.

Value and cost are different to supplier and customer

Supplier Customer

C1

V1 C2

V2

The price of our solution is V1.

The value of their solution to our problem is V2 which is

well above the price We will have to pay C2 for solution.

Win – win situation

Supplier Customer

C1

V1 C2

V2

We made a god deal since

(V2 – C2) >0

You provided a good solution.

We made a god profit since

(V1 – C1) >>0

Value definition of Quality

Supplier Customer

C1

V1 C2

V2

Our satisfaction will be higher in case

where (V2 – C2)>>0

To improve quality we should create steeper

arrow from left to right.

Q =

V2C1

Value definition of Quality

Supplier Customer

C1

V1 C2

V2

This supplier is providing us high quality solutions.

Q =

V2C1

We are looking forward to do business with

you.

For improvement we reduce cost on the left and to increase the value to

the right. Now we are even more competitive. If necessary we can even

reduce price.

Quality (Q), Ideality (I) and Return on Investmet (ROI)

Q = Vcustomer

Csupplier

There are similarities between these expressions!

I = ∑F useful

∑F harmful + ∑Costs

ROI of improvement = ∑Cost before – Cost after

Investment

V = ∑F useful

Ccustomer

Q = qualityV = valueC = cost

I = idealityF = functionROI = return on invesmentt