This essay discusses about one particular aspect of Value Chain Management, which is Quality and Performance Management, relates this to the theories put forward by the major Theorists also known as the “Quality Gurus” and interprets it from both a customer and a business process perspective. The subject matter we are going to consider is firstly the dimensions of quality, for both service quality and quality for goods, the cost, and outlining the theories of selected “Quality Gurus” to relate it to the topic of this essay. This report also points out a lot of theories, views and ideas that we will relate to actual business cases and associate them together to determine whether they are in line with the principles and theories of Quality and performance Management. Considering Quality and Performance Management, it was emerged from the industrial revolution between 1820 and 1840, evolved throughout the years and since then; its public awareness has kept on increasing. Nowadays, most business still makes use of these theories and implements it in all its activities. Before we give further explanation on Quality and performance management, we will define and explain Value Chain Management and how quality is one of its most important features.
2.1 Value Chain Management
Value Chain management can be defined as the process of establishing and setting up of group of activities that creates and promotes Value by producing goods and services from raw materials for purchase by consumers, thus providing them with greatest value at lowest price( Harrold koontz and Heinz Weihrich, 2007). The aim of value chain management is to create an on-going and endless chain of activities from the supplier to the manufacturer and in turn to the customer, to comply with his or her expectations and surpass it. For this to be achieved, all activities and tasks from the management level, i.e. planning, coordinating, staffing, leading and managing must be carried out in the most effective and efficient way. To understand it in a better perspective, increasing the value of a product normally expand the margin between the cost price and the selling price (Harrold koontz and Heinz Weihrich, 2007). So if a consumer is willing to meet the selling price of a particular product from a company, the latter must make sure to keep this margin as large as possible to ensure maximum profitability to the company.
Now regarding, quality and performance management which is the main topic of the essay, it is one important aspect of value chain management as mentioned before since its proper and appropriate use will bring about a better quality of the product, therefore increasing its value which brings about value chain management.
2.2 Quality and Performance Management
To understand quality and performance management, we need first to comprehend what quality is all about. Quality is a concept that can be defined and described in various different ways, depending on a person’s personal opinion on how they perceive it. Considering the “Quality Gurus”, Juran defines quality as “fitness for use” (Tumamala and Tang, 1996), Crosby defines quality as the conformance to requirements (Crosby, 1979) while Deming’s relates quality to a product if it has a good and sustainable market and if it is enjoyed by customers (Deming, 1986). According to a study where 86 managers from different firms of eastern United States were asked to define Quality, the responses includes quality defined as perfection, consistency, speed of delivery, eliminating waste, compliance to policies and procedures, doing the right thing at the doing time, providing good and usable products and total customer service and satisfaction (James R. Evans, 2010). From this, quality and performance management will depend on how an organisation perceives quality. Quality can be characterized in two ways internally oriented, from the employees point of view and externally oriented which from the customer’s point of view.
2.3 Dimensions of Quality
The dimensions of quality can be categorised in two groups depending on whether the business is a service industry or a product industry, whereby the dimensions of quality differs in regards to the type of business. The two groups are namely: •Dimensions of service quality
•Dimensions of quality for goods
2.3.1 Dimensions of service quality
Service quality refers to the extent of difference and disparity between the customers’ expectations or desires and their perceptions (Valarie A. Zeithamal, 1990). Dimensions governing a service quality business are namely reliability, responsiveness, assurance, empathy and tangibles. The bar chart below shows the results of a research performed to determine which among the five dimensions of service quality is the most important from the customer’s point of view. Customers from five different companies were asked for their responses which are illustrated below.
Diagram 126.96.36.199 showing the percentage of respondent reflecting which dimensions in service quality they find the most important (Valarie A. Zeithamal, 1990).
This chart reflects that some dimensions are more important to customers than others. Based on this, the service provider can monitor its service so as to capitalise on the dimension the customers’ find the most prominent in order to achieve higher customer satisfaction.
We will now elaborate on the different dimensions of service quality, relates them to a service providing organisation and showing how the latter delivers its services so as to achieve greater customer satisfaction. For this case, we will take Barclays Bank as an example and demonstrate how it makes use of service quality in its day to day running of its business. Barclays Bank is the ideal case to reflect service quality since it has over 300 years of experience in serving people and expertise in banking, and has always excels in maintaining a better image towards people’s mind. Barclay’s offers financial services involved in personal, corporate and investment banking, credits cards and wealth and investment management on a worldwide scale.
•Reliability- this refers to the performance of the business in fulfilling their promised service with high quality and accuracy thereby meeting and exceeding the needs and demands of customers. Barclays bank offers reliability by always maintaining a trust-based relationship with its customers, always puts customers in the front line to get the most adequate and proper service they demand, offering facilities to ease their requirements and never fail to meet their expectations. •Responsiveness- for service quality, responsiveness relates to the ability of the organisation to provide its customers with the best service delivering highest quality in the shortest time limit. In providing the customers with a prompt service and helping them to attain satisfaction the fastest possible, this increases their trust on the company and they feel highly regarded. The responsiveness factor for Barclays bank will be the employees’ willingness to provide customers with the assistance required and communicate the exact and appropriate information they require.
Also Barclays bank offers 24 hours assistance, phone and internet banking available anytime and anywhere. To add to that, they also provides personal banking and consultancy for investment. •Assurance- employees’ knowledge, experienced acquired, their ability to deliver the correct information, their attitude, the way they present themselves to customers all converges to assurance service quality. Barclays has well-trained and knowledgeable employees who knows how to assist customers in the most friendly and polite way, for them to feel as comfortable as possible and be satisfied with the services offered. •Empathy- empathy concern to how a company cares and provides personalised attention to their client, by making them feel unique and highly-esteemed. Normally, empathy is a combination of reliability, responsiveness and assurance where all together makes the customer get quality attention and feels special. Barclays try to show empathy to its customers by maximising its number of staffs in order to individualise the attention given them, providing most customers with a personal banker where they receive more consideration and assistance and information on how their requirements can be fulfil for them to achieve a notable and expected satisfaction.
To add to that, Barclays always gives that special caring by sponsoring most of the main event world-wide as we all know and helping in charity funds. •Tangibles- make reference to the physical, material and visible surroundings and facilities, equipment and personnel. It is the tangible dimension that the business proposes to its customers in order to reflect the company’s background and it’s flourishing and prosperous image. This is put forward by the company to create a unique and unmatched first-hand impression in the customer’s mind that it would be more probable that will return for the same service in the future. Considering Barclays Bank, it has over 5000 well-equipped and air-conditioned branches in more than 50 countries among which 1600 are found in the United Kingdom. Around 95% of its branches consists of 24/7 ATMs of which non-Barclays customers can also use free of charge. Most of its branches are well-designed with the latest technology fitted for the ease and comfort of its customers.
Barclays Bank does put forward a strategy on its own, which is majorly linked to the dimensions of quality and emphasize on service quality considering it as its pillar to acquire the most customers possible and to be the organisation who delivers the best assistance and in financial banking services. To show its support and willingness to promote customers to a unique level, in 2011, Barclays has funded and helped over 2 million people, mainly in building their enterprise, employment and money management skills, allowing 3500 people to gain employment through a variety of programmes. Between the July and December 2011, Barclays had to face around 11,500 complaints arising from misuse of Payment Protection Insurance (PPI). But luckily, they have managed to solve 84% of the cases favouring their clients and bring about a reduction of 36% of new complain cases accompanied by a 30% year to year basis FSA-reportable banking complaints.
188.8.131.52 Dimensions of quality for goods
There are also dimensions of quality for goods i.e. the tangible part where some dimensions coincide and differs to the dimensions in service quality. During the early 1980s, David Garvin, one of the Quality Theorist, made analysis at every step of a manufacturing process, detailed examination and through lots of surveys and questioning points out 8 dimensions that defines quality for good. These dimensions refers to the tangible aspect of quality normally applied for good and later on, it can be noticed that the dimensions slightly resembles those for service quality to some extent( Garvin, 1988). David Garvin 8 dimensions of quality are:
•Performance- the way the product functions and operates according to the task or tasks it is supposed to perform involving measurable features and characteristics. •Features- supplement attribute that enhance the product basic’s functioning. •Reliability- the length of time the product will operate efficiently before it gets defective or simply fails. •Conformance- the extent a product’s configuration and shape, and its operating features match established standards such as ISO 9000. •Durability- it is a measure of the length of the product’s lifespan, or the capability of the product to operates when subject to hard and frequent use. •Serviceability- competence, ease and speed of repair the product can be put back into service or usage when broken or failure to perform desired task. •Aesthetic- this relates to the products appears, feels, sounds, tastes, or smells contributing to the manufacturer’s brand or identity. •Perceived Quality- refers to the brand or reputation of the company; its advertisement and how all this contribute in projecting the product’s image.
184.108.40.206 Lexus Quality for Goods
We will now reflect these dimensions of quality for goods on Lexus, which is a famous brand of car. Lexus is a luxury vehicle segment of the Japanese automobile manufacturer Toyota Motor Corporation. Introduced first in the United States in the early 1900s, Lexus is now becoming a global phenomenon being marketed in more than 70 countries and becoming the Japanese largest selling band of premium cars. Lexus produces its vehicles, mostly luxurious cars, in the Toyota plant in japan and target mostly the U.S. market. Regarding quality now, performance of Lexus cars will depend of the way they operates, the amount of fuel they consume per mile, the power and efficiency of its engine all put together according to the conformance to certain demand. Its features here refers to its assets i.e. the every little thing that makes Lexus a Luxury commodity, from its modernised and high-tech dashboard, relaxing and multi-adjustable seats, fitted-air bags for security to the comfort while driving the car and its look from contemporary and fresh look. Reliability of Lexus vehicles will be the extent of time they can be driven without the engine failing.
The main issue for reliability in cars is its engine though there are many components that can be affected with time like radiator, brake pads, suspensions and wheels. But the components mentioned do not really affect the car as such since they can be easily replaced when defective. Conformance is an essential aspect in manufacturing cars, because if any part of the car is made without respecting the international standards, something might go wrong when the driver is driving the vehicle and this could prove to be fatal for him. The durability of a Lexus car will be its total lifespan i.e. till the time it’s going to be out of usage. Also, it is the ability of the car to resists harsh driving conditions like excessive usage, driving in rough road or bad weather conditions, or even circumstances not in compliance to its usage. Serviceability here will depend on the company’s competency to repair any broken or damaged vehicle in the minimum lapse of time. T
he physical appearance of the car, its look, the sensation of being inside and driving it or simply the feeling of owing it touch on aesthetic. The branding of the car, its advertisements, its image and quality among the public represents the Perceives Quality dimension. Most of the eight dimensions give reflection in the product’s design. For instance, in creating the design for the first nexus car, Toyota has bought some of its competitor’s cars like Mercedes, BMW and Jaguar to assess their positive features and try to surpass them in performance, reliability, comfort and technology. They finally came up with the Lexus we all know now, lighter, lower noise and more fuel-efficient engine with a quick start as preferred by Americans. Even a competitor, the Ford’s director speaks of Lexus as a “work of art” (James R. Evans, 6th e, 2010).
3.1. Cost of Quality
Cost of quality (or quality cost) is the expenses related in achieving or missing the expected level of quality in a particular product, or service. They are viewed as the costs of avoiding quality issues and problems to occur, measuring, monitoring and/or examining quality levels, or having shortcoming in delivering the desired quality. It can defined from a different angle as the margin between the actual cost of a product or service and what the reduced cost would be if there was no possibility of inferior service, default and short-comings in product or imperfection in their production.
Throughout the years, quality has been subdivided into different categories. Cost of quality can be broken and categorised into four types, prevention costs, appraisal costs, internal and external failure costs.
•Prevention Costs- it is the costs of actions and process specially designed by the company to diminish and avoid poor and low quality on products or services. For instance, the costs of quality planning, product assessment, process efficiency and potentiality evaluations, quality development scheme and meetings, and promoting quality through education and training are examples of prevention costs.
•Appraisal Costs- this is the cost involved in assessing, evaluating, examining or inspecting products and services to guarantee conformance to pre-established standards for quality and performance specifications.
•Failure Costs- makes reference to costs issuing from products or services, from which customers are not satisfied and their requirements and demands were not fulfilled. Failure costs can be branched into internal and external failure costs. oInternal failure costs- failure cost resulting from the shipping or delivering of the goods, or by providing a service to customers. oExternal failure costs- costs occurring after the shipping or delivering of the products, or during or after the service is provided. The diagram below illustrates all these categories of Costs of Quality.
Diagram 3.1.1, showing Costs of Quality and its sub-divisions.
3.2. The failure of Microsoft with Windows Vista
Windows Vista is an operating system developed by Microsoft, predecessor of Windows XP, for personal computers, desktops, laptops and tablets. It was launched on January 2007, but soon became a failure in the eyes of the world due to various defects it possesses and dissatisfaction of its customers. They were never expecting Microsoft to launch such a poor quality product after the latter had made such big announcement on the product and exaggerated promises about its capabilities, which was undelivered by Vista. This operating system was created by Microsoft to solve the lack of security regarding personal computers and desktop, but instead proved to be not much better than the previous version. Even worst, Vista was incompatible with a large number of old computers, which restrict the users of windows XP to upgrade and have accessed to a so-called better service and furthermore, creating no incentive for Linux users to switch to Microsoft (Douglas A. McIntyre, 2009). Many experts claimed that Vista operates more slowly than XP, has many core file system missing, hardware drivers compatible with XP is not for Vista and has to be replaced which has proved to be true (John C. Dvorak, April 2008).
On a report done by the research site Net Applications, in May 2009, i.e. 29 months after the launching, Vista overall share of operating system for personal computers was less than 24% while for Windows XP was still 62%. Also, compared to the previous quarter after its release in the market, sales of Vista has fallen by 16% showing how underwhelming and dissatisfied the customers were (Douglas A. McIntyre, 2009). But after this downfall with vista, Microsoft soon retaliates with the launching of Windows 7, following the Shewhart Plan Do Check Act cycle. First, they analysed the problems with windows Vista , pointed out its defects and shortages, devised a new operating system which is Windows 7, assessed its capabilities, competency, adaptation to new and old desktops and PCs, conformance to the desired specifications the customer’s desired and finally launched it when its profitability was acknowledged by Microsoft.
4.1. Major Theorists, the “Quality Gurus”
Over the past years, people are becoming more and more demanding concerning quality in products they buy, services they require or even everything they perceive. As a result, only business which can match that level of expected quality and improve that to the global standards will sustain in the market. To make sure that the highest level of quality is being matched in their products or delivered in their services, companies often make use of the Quality Management Principles set by the quality experts, known nowadays as the “Quality Gurus”. In the 1920s, a major theorist, Walter Shewhart, define quality in terms of objective and subjective perspective, where objective quality is independent of people’s insight while subjective quality is based on how people perceive it.
According to Shewhart, although though it is the objective aspect of quality that we tend to measure, it is the subjective aspect that is of business interest. Moreover, implementing statistical theory to quality management, Shewhart came out with the first up-to-date control chart and made clear that by elimination of variations in a process contribute to a far much better quality of the finished product. With his belief in constant evolution in management practices and adaptation of it in a more methodological way, he created the Plan-Do-Check-Act cycle which was later adapted and modernized by another Quality Gurus, Edwards Deming who worked alongside with Shewart.
Diagram 4.1 illustrates the Shewhart revised Plan Do Check Act Cycle
Richards Deming applied Shewhart ideology in statistical process control in the rebuilding of the Japanese industry after the World War II. He pointed out that it is the management section of a business that controls around 80-90% of problems concerning quality and it is their role both at an individual and company level, to adopt appropriate measures resulting from the PDCA cycle to enhance high quality prevailing is every aspect of the company, from its organisation to its resulting end product. Deming also develop various theories of diversification, optimisation, innovation, knowledge and behaviourism, which gave rise to the Deming’s 14 points of quality, a thesis that he believes is engaged to any type of business and is a key aspect to maximise quality resulting to profitability in a company.
On the overall, Deming identify quality as a management responsibility, pointing that it is the management that establish the systems and processes that generate quality. According to him, good product design, effective production methods combine with his principles will ensure Quality in a product. .Deming’s 14 rule to quality if shown and illustrated in appendix 1. Dr Joseph Juran is also an important contributor in defining quality by characterising it through human dimensions to quality. He described quality from a customer’s point of view where the features of a product that matched customers’ needs define the level of quality achieved. He developed the Quality Trilogy for managing quality- quality planning, quality control and quality improvement. Proper quality management depends upon well-planned, modified and piloted quality actions.
•Quality planning- points out needs and requirements of customers (be it internal or external), and develops characteristics and features in their products to meet those specifications. •Quality control- perform inspections to measure actual performance, evaluate established standard, understand the difference between the actual and the required standard and find proper and optimised actions to minimise the difference gap. •Quality Improvement- Focuses on long-term commitment of seeking quality and applying it on a day-to-day to attain higher level. Many Quality Gurus namely Philip B. Crosby, Ishikawa, Genichi Taguchi, among many others identify many ways, methods and principles where Quality levels can be heightened to increase the profitability of the business. 6.1. Conclusion
Considering Quality and Performance management which branches to service quality, quality of products, dimensions of quality, cost of quality and theories pointed out by “Quality Gurus”, I can conclude that quality is one of the most essential element in any organisation, and as seen throughout this report, and business which focuses on maintaining high quality standards and maximise quality in their day-to-day business activities, is bound to sustain and take leading positions in the market. Theories and practices of the Quality Gurus have proved to be existing in any business, where nowadays most of them are emphasizing on these principles to meet the quality requirements the customers demand.