Implementation of

Quality System in
Industry
UNIT 12 IMPLEMENTATION OF QUALITY
SYSTEM IN INDUSTRY
Structure
12.1 Introduction
Objectives

12.2 Product, Quality and Customer

12.3 The Customer
12.4 Some Examples
12.5 Customer’s Need
12.6 Customer Satisfaction and Quality Relationship – Customer Value
12.7 Information on Quality from Market
12.8 Impact on Marketability
12.9 Relationship with Vendor
12.10 Selection of a Supplier
12.11 Vendor Relations
12.12 Vendor Performance
12.13 Motivation
12.14 Summary
12.15 Key Words
12.16 Answers to SAQs

12.1 INTRODUCTION
Quality has now become the single most forceful factor that determines which way
the organization will move – towards success or failure. Success of the organization
and its growth on national and international level depends upon the quality of its
product. The companies that have demonstrated, through their product, consistent
adherence to quality programme and have evolved effective quality strategies have
shown good financial results and excellent returns on the investment. Contrarily,
those companies, which deal in half measures and firework display of concern for
quality, fail in favour of competition.
The comprehensive impact of quality on performance and profitability of an
organization has required that the quality in philosophy and practice pervades the
organization. The essence of quality is incorporated in the product from its
conception to design, manufacturing, in the manufacturing process or other
processes if product is intangible, through marketing and sales to service. One
would be convinced that the quality is required to be maintained at every step and in
every activity in an organization and hence it becomes a management function. For
this reason the quality has to be managed through planning, implementation,
measurement and maintenance. Such group of activities will be better known as
total quality management or TQM.
Objectives
After studying this unit, you should be able to
• know the total quality approach,
• understand the quality perception of customer,
Quality Management
• identify the quality and marketability relationship, and
• appreciate the role of a supplier in quality of a product.

12.2 PRODUCT, QUALITY AND CUSTOMER

It is imperative to understand that we think and talk of quality only in respect of a
product, which is outcome of a series of processes. It is the company or
organization, which organizes the series of processes to bring out certain product,
which is bought by a customer. The customer buys the product for specific purpose
of using the product in whatever manner.
The customer opts to buy a product for certain attributes or features. The attribute
or feature of a product is a property or a group of properties possessed by the
product with which the customer finds that his needs are satisfied. This provides
satisfaction to the customer. The features are sundry in nature. Most importantly
they may be tangible or intangible. For some product the weight, size, the colour
may be important features. For some other product such measurable quantities as
voltage, current, power, water flow or dimension may be important. Some customer
may require the product to last long without maintenance while others may prefer to
have easy maintainability. Promptness of service or courtesy of service could be
important in some other cases. Thus we can see that quality of product is better
understood than measured and greatly depends upon the customer. A costly product
which could be outcome of costly processes performed on costly material may not
win competition from a cheap product from cheap process and material. It is
because what sells is the quality and quality ends in satisfaction of needs of
customer. A quality product, therefore, is the one in which such features have been
incorporated which fully satisfy the needs of a customer. The objective of a quality
programme of company will always be to ascertain the needs in complete detail and
set the goals to satisfy the needs. The satisfaction of the customer will boost the sale
and the company will succeed.
Contrary to a successful product there is a deficient product which does not meet
the needs of a customer. The deficiency is absence of a desired feature or its
presence to a wrong extent. For example, a heavy steaming iron though may be
pressing clothes yet not acceptable. Certain colour of an automobile which may not
affect the performance yet not preferred by the customer. The power of an electric
motor may not be as rated though the voltage is stable and same amount of current
is passing. The service of a bank may not be liked by customer even though there is
not much waiting time but the clerk is discourteous. The deficient products result in
reduced sales, returned product or frequent servicing. Thus a company that brings
out such products loses in profit and return on investment may be very poor.
In the description of a quality apparently customer has become the focus since
quality is the satisfaction of the customer. Though it is a very short definition it
conveys and establishes a great deal of requirements. “Fitness for use” is yet
another short definition of quality which immediately draws the picture in mind that
a number of factors have to be carefully organised and featured in the product so
that it can be used to perform satisfactorily the function for which it is meant.
However, the central figure of the customer need to be understood carefully for
ascertaining the full and total requirements of quality.
A customer in a very general sense and practice is understood to be the person who
buys, uses or consumes the product. But the widening scopes of industry in the life
of people has required to broaden the definition of the customer. No industry
producing engineering goods can do so without using energy either from general
utility source or from fuels burnt in its own furnaces. Similarly, no industry can
work without producing waste and even if the industry is not indiscreet in its well
planned and scheduled disposal the waste is not going to be unnoticed by people in
general even if they do not buy the product. For location, consumption of power,
 Implementation of
Quality System in
Industry
industry is required to interact with government agencies and regulating bodies and
in some cases with public groups. None of these may be the user or consumer. As
an instance think about the public resistance which a fried chicken outlet had to face
in recent past. Very interestingly to note that within an organisation a partly
finished part has to be transferred from a machine or a shop to another machine or a
shop in which case different users of the part will come into picture. Imagine a
cheque you deposit in the bank may have to be routed through the counter clerk, to
the supervisor, to the manager and back to teller before money (service) is handed
over. The substance of the description is that the customer is not only the direct
buyer or the consumer of the product but anyone who is affected or impacted by
the product or the process of producing the product, is regarded as the customer.
Then think of the quality as the conglomerate of the features of the product to
provide full satisfaction to all the customers. The job at hand, that is incorporating
quality in the product, then assumes a great significance. Those products win the
market whose satisfaction level is very high and industry producing them can earn a
good return on investment.
For the reasons amplified thus far, it becomes very clear that the quality of a
product in real sense is a comprehensive management function requiring
synchronizing company’s efforts of all kinds and in all directions to a targeted goal
of quality of product, pooling all resources to keep all customers satisfied. This
effort will be viewed as total quality management.

12.3 THE CUSTOMER

We have understood that any person who is impacted or affected by the product or
its processes and use is the customer. It will include both situations when the
product performs its intended function satisfactorily or when it fails to perform. An
industry management has to face this questions as to who are the persons who will
be affected by the product and only by a detailed analysis of all the processes the
actual identification of the customer will become possible. It will be worthwhile at
this stage to identify two categories of the customers – the external and internal.
The external customers are not the members of the company which is producing
the product. They may be those who buy the product and are generally termed as
clients. No policy planner of quality should commit the mistake of assuming to
know all the customers if s/he knows the clients. The sections of society which are
affected by the product during manufacturing, transport or waste disposal are the
external customer. The government regulatory bodies responsible to overview the
processes, impact on environment and safety aspects are also the external
customers.
The internal customers are the members of the company engaged in bringing out
the product. The internal customers are not the buyers or clients but they are
affected by way of transaction of task which they are assigned to perform. As an
example consider a company producing rotors for steam turbines. The company
receives forged blanks and the manager of stores who receives the forging from
supplier becomes first internal customer. The manager of the machine centre who
receives the forging from store becomes the next internal customer. The production
department preparing schedules for machining and issuing them to machine centre
is yet another internal customer. Likewise there will be several departments of the
company through which the forged rotor will pass until it is either packed for
transportation to an outside customer or is placed in the turbine, the product called
rotor will meet a number of internal. A quality planner of the company will
essentially have to identify each customer and determine his needs for satisfying. A
failure or deficiency at any stage will affect the quality process. A flow chart of
activities will be greatly helpful in identifying the internal customer.
At the stage of quality planning a team comprising members of all relevant
disciplines will have to be organised and each member will help with his inputs to
Quality Management
steps through macro level and micro level flow charting which will be done by
experts in that particular area.
The exercise of locating or identifying the internal customer may seem to be more
technical but tedious. However, it will require involvement of large number of
experts which a company in all likelihood is capable of affording.
On the other hand identification of external customer other than the client himself,
will be a real difficult task. The moment the product reaches the first step of the
process the waste in form of solid, liquid and gas starts building up. The wastes
need proper disposal or else they attract the attention of many. At the end if the
product is to be transported, it comes on roads. The nuisance and traffic snarls
created by long trailers in metro cities is a common sight. The government agencies
related to particular product and its process are identified through a brainstorming
session. A builder building a tall building in the middle of a city has to obtain
permission from all government agencies local bodies and utility agencies. But he
cannot neglect the people living and working around the site who will be disturbed
by frequent noises of trucks arriving in the night and unloading the material of
construction at the site. He has not been permitted to bring the trucks during the
day. There is a large number of clients to a telephone company but they object at
digging of trenches along the roadside for cable laying. All such cases need careful
quality planning before the product starts rolling through the process. So the
external customer can become very important and need complete identification.
The mass media is prickly type of member of family of external clients. It has the
capacity to damage the reputation over night or even by breaking the news. It will
be a healthy practice to keep doors of information always open to media. They can
always report a fly in a food item or an insect in a drink. Their reliable sources are
ever ready to find fault in a construction or product. The right information at right
time is helpful and on the other hand lack of information or avoidance could prove
fatal.
The suppliers of materials, half finished parts or services may also be regarded as an
external customers since they can be affected by decisions made by the company
based upon experiences during processing. Feedback to supplier on performance of
his supplies and information to supplier on sundry aspects of product may help the
supplier to make proper raw material available at proper time. It has been
experienced that same supplier supplying same material to two different companies
may not satisfy both equally. The company which provides supplier with detailed
information about processes and even design and also feedback from time to time
keeps the supplier more satisfied.
An important aspect of customer identification is to realize that the famous Pareto
Principle of Economics applies. The Pareto principle establishes that huge wealth is
owned by a handful of persons that means large quantities are associated with small
numbers. Translated to the quality management and customer it means that a small
number of customers may attract greater or special attention while large number of
customer may attract lesser or normal attention. Juran has qualified the Pareto
Principle by coining yet another jargon of vital few and trivial many. It could be
explained in this way that in the office of air travel ticket booking individuals arrive
regularly and are treated with standard courtesy. But a tour operator who books a
block of ticket in one visit deserves better treatment and courtesy. There is a normal
practice to release cheques of commission amounts to the agents by the insurance
companies. The agents may collect such cheques from designated counters. But to
an agent who delivers an unprecedently high insurance business to the company, an
official of the company may deliver the cheque in his office. So when customers are
identified it will help the management greatly in forming strategies for quality to
separate the vital few from trivial many. However, at no stage one should conclude
that trivial is not useful. In fact trivial many are essentially useful many.
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Quality System in
Industry
12.4 SOME EXAMPLES
Possibilities always exist that one may fail to identify all the customers.
A gear manufacturing company receives orders from an automobile gear box
manufacturer on the conditions of design and drawing supplied to them and supplier
of the blank identified by the gear box manufacturers. The company planned gear
cutting and its shipment through a sequence as
Receive blanks → cut teeth → cut keyways on turned bores → heat treat
→grind teeth surfaces → test hardness → store → pack → ship.
All the departments for doing specified activities were identified as external
customer and the first consignment was out on due date. Yet the gear box
manufacturer cancelled further orders because the automobile manufacturer who
was the ultimate buyer did not accept the gear box. Their non-acceptance was
because hardness check was not certified by the independent agency. This failure
occurred because the gear manufacturer did not include automobile manufacturer in
their list of external customer. Had they done so, a business meeting would have
brought out the requirement of independent check of tooth hardness.
In a yet another example the outer desk of a hotel receives a party of 20 guests
through a tour operator. Since the tour operator was identified one of vital few and
therefore the outer desk busied for themselves in allotting rooms to the party.
Meanwhile four individual guests also arrived in the lobby and perceived total
absence of courtesy and care. They were the customers belonging to useful many
but could not be cared due to bad quality planning. They decided to go to other
hotel.
On the first day of his appointment, the chief executive of a pharmaceutical
company invites frontline executives and asks following questions :
• Who are our customers?
• What do we deliver to them?
• What are their needs?
• What is our current performance?
• What actions can we take to improve?
The first two questions bring out the importance of what has been discussed in
section before and incidentally in developing customer oriented strategies we will
move on to third question in the next section. However, to complete the story
during first meeting the CEO impressed upon the total identification of internal
customers. The next day the exhaustive list of customer was before him. He directed
Pareto analysis to be performed and five vital customers became identified.
Individually meeting with five vital customers and asking them what the company
could do to provide best, the executives were soon making plans for improving
quality. The company improved and redefined its focus on the customer.

12.5 CUSTOMER’S NEEDS

The performance of the company would improve if needs of the customer are
satisfied. In devising strategies determining needs of customer will follow after
customers have been identified.
The needs can be classified as Hard Needs and Soft Needs. Hard Needs are basic
minimum expected from a product or service. These needs are often specified in the
contract and may comprise such features as size, weight, colour, texture, functions,
reliability, packaging, labelling, delivery deadline, cost and payment mode,
Quality Management
The Soft Needs are rather intangible and concern with good feeling when meeting
company personnel. The customers need a warm welcome and less waiting time.
The customer would like to walk into a good and comfortable reception area and
would welcome warm response on telephones. The customer needs to feel that he is
most important person to walk into the premises of the company.
Clients (buying customer) often express their needs in terms of a product. This is a
stated need. In fact they do not need the object but the service which the object can
provide. For example, a sleek good looking vacuum cleaner may be a thing which
the customer wants to buy but his need is cleaning. The customer wants to buy a car
but his need is transportation. Thus, the real need can be discerned from stated need
and if one fails to differentiate the consequences may be disastrous. The real need
of a customer can be assessed if he answers the question “what service is expected
from the product”?
Perceived Needs normally differ between the customer and the provider,
particularly in service industry. The customer and the supplier may perceive same
need differently. The effect in some cases may be advantageous to the business but
in others it may cut benefits. A customer intending to go on a tour may resent
paying higher cost which the travel agency would like to charge for providing a
comfortable office. Larger section of tourist would prefer to pay less even if they
are greeted in a modest office. In such cases, serving only to a few vital customer
may not be profitable. If alternative service providers are available, the customer
may choose the cheaper one. Many times wrapping and packaging a product in a
fancy box or container may enhance its price. Chocolates are sold in fancy boxes in
deluxe stores at much greater premium over the same chocolate packed in modest
cardboard boxes. This is the example where the supplier takes the advantage from
the perceived need. It is a matter of quality planning on part of the company if an
advantage from perception can be derived.
For internal customers many times cultural needs play important role and a
company ignoring such cultural need may have to face losses. For example, if a
company plans to introduce computer aided design, the design engineers feel
threatened and they resist such introduction. The company needs to take corrective
action through educating the employees. It is true that every human society evolves
a pattern of beliefs and traditions which is also true for an industry or a company.
Such beliefs and traditions are cultural in nature. Such cultural hiccups are
commonly met in industries among internal customer as stated in introduction of
new technology of computer aided design. This may be true for any new
introduction and managers may come across arguments disguised in many ways for
resisting the changes. It could be a real challenge to satisfy the cultural needs of
internal customer but a successful quality planning will have to consider it.
Need arising from unintended use may result in unexpectedly low performance,
unexpected failure or require maintenance at an earlier stage. The manufacturing
industry many times may find it difficult to trace anyone of the above occurrences
to unintended use. However, from experience they may incorporate safety devices
which may not permit the product to work under unintended conditions. The
farmers often overload their tractors by running them on terrain for which they are
not designed. The electric motors may be overloaded. The lathe machines may be
used to cut deeper than for which they are designed. Mechanical equipments are
often protected through higher factor of safety and electrical equipment by
providing fuse.
Design ideas may sometimes emerge from such applications. The designers may
include such use also in design consideration.
Both identification of customers and determination and distinction of their needs
thus become a great strategic tool in the hands of a quality planner. This tool can be
used for enhancing the performance of the company in terms of increased clientele
and profits. Concept of assigning three levels to the needs of the customer was
 Implementation of
Quality System in
Industry
the customer feels satisfied. And at level III, the customer feels delighted with the
service or product. The discussion on various forms of need can give a conclusion
that the needs may be clearly spelt out and identified as rational but at times they
may be disguised or lack rationality. The company’s objective in quality planning
should be to target level III of satisfaction.
Ramakrishna Bajaj National Quality award includes in its criteria, the following
statements on quality.
• Senior executives promote a customer-focused culture.
• Senior executives review customer satisfaction, employee satisfaction
and product/service quality data.
• Leadership styles of all senior executives are consistent with the
philosophies of Ramakrishna Bajaj (e.g. continuous improvement,
empowerment of employees, delighting customer, staying close to
business etc.).
ISO 9001:2000 as part of 9000 series contains the requirements that an organization
will have to address to management principles if it wishes to be certified against the
standard. It contains eight management principles. The first is stated as :
Customer Focus
Organizations depends on their customers and, therefore, should understand
current and future customer needs, should also meet customer needs and
strive to exceed customer expectations.
The second principle states :
Leadership
Leaders establish unity of purpose and direction of organization. They should
create and maintain the internal environment in which people can become
fully involved in achieving the organization’s objectives.
The third principle states :
Involvement of People
People at all levels are the essence of an organization and their full
involvement enables their abilities to be used for the organization’s benefit.
It may be pointed out that the terms employees and internal people used in these
statements are synonymous to internal customer which was the term used in earlier
part of this section. The term was suggested by Juran.

12.6 CUSTOMER SATISFACTION AND QUALITY

RELATIONSHIP – CUSTOMER VALUE
One can derive a great deal of encouragement and motivation for producing and
marketing a quality product (with all requirements of quality) from following
observation made by Robert Dehatnik in his book Keep the Customer.
• 96% of unhappy customers never complain about the rude or
discourteous treatment, but
• 90% or more who are dissatisfied with the service they receive, will
not buy again or will not come back. Worse still
• Each of these unhappy customers will tell his or her story to at least
nine other people. And
• 13% of those unhappy former customers will tell their stories to more
than
Quality Management
So there is no denying of the fact that quality and customer satisfaction is a live
reality. The difficulty arises when one settles for level of quality for quality is
neither good nor bad but it is matter of customer’s subjective perception. The
expectation of the buyer are well estimated, assessed, studied and then incorporated
in the product. Based upon the above the seller makes certain promises to the buyer.
If the customer finds that the promises made are reflected in the product he is more
likely to be satisfied and this satisfaction is not based upon very low or very high
price paid by the customer.
Customer finds value in the product only if the promises are fulfilled. There are
three aspects attached to the product before it reaches the customer. They are
promotion, package and price. The last two are often stated in the first one. Unless
the customer finds a harmonious blend of all four P’s, the customer value remains
unearned. Many times a well designed and well manufactured product may fail if
priced at a very high level, that means total customer value has not been
orchestrated. There is an example of failure of a strong, good looking suitcase
marketed by a company which could not attract customer besides the fact that it
could sustain impact of throw on hard pavement from second floor. The reason of
failure was the high cost which was due to high cost of the material in which the
suitcase was built.
The customer value demands a definite shift of focus in planning. Shift the focus
from product to customer by answering the question as to what he needs rather than
what you can offer. Shift the focus from price to cost by answering question at what
price the customer can afford to buy rather than what price will bring profit to you.
Shift focus from physical distribution to convenience by answering where and how
it will be convenient for customer to buy – store, mail, internet. Shift focus from
promotion to communication by asking how we can make customer our partner in
the product. The promotion often depends upon advertisement but experienced
people would say a wide, expensive and elaborate promise making through
advertisement campaign cannot make a bad product to succeed. In fact, an
expensive campaign will make a bad product fail faster.
Many times the seller or manufacturer tries to bring out a product differential as a
mark of quality but without really understanding if there is any customer value in
that perceived differential. The customer may not think much about such
differential and the product may not click. There are examples that stainless steel
pressure cookers and water purifiers could not pick up markets against aluminum
competitors. This happened besides attempts of branding aluminum injurious to
health, an assumption only made by manufacturer and in which the customer did
not believe.
The quality of the product has physical as well as behavioural aspects. The physical
properties like dimensions, weight, appearance and even tastes are measurable. But
the hidden aspects like the presentation, courtesy, service are not measured but felt.
Even if the quality as measured is satisfying, the behaviour of the sales staff, service
staff or delivery staff may dissuade a customer. In this text examples of such failure
will be given later.
Although it is not difficult to imagine that 100% customer satisfaction is
impossible, yet a wise customer-value analysis would entail sorting out attributes
that will increase cost to abnormal level and such customers who will create more
nuisance than enhance profit. In all efforts, the underlying reason of making
reasonable profit must exist. There is always 5% of market which is worth if kept
out of efforts. This market comprises people who can never be satisfied, those who
will always complain, those who would not pay on time or at all or those who
would ask for unreasonable discounts, packaging and payment terms. Such
customers are better not dealt with. And this may be more profitable.
It is concluded that customer satisfaction will be achieved through
• Product quality
 Implementation of
Quality System in
Industry
• Service quality
• Identifying customer
• Assessing customer needs and shifting focus on customer
• Creating participative culture among all employees and inviting their
participation
• Avoiding unimportant and false differential with the competition as
value booster
• Eliminating customer who cannot be satisfied.
SAQ 1

(a) Define Customer. Give types of customer and examples of each.

(b) What are needs of customer?
(c) What are customer values and how do they affect company’s
performance.
(d) Certain customers must be avoided. What are the attributes of such
customers?

12.7 INFORMATION ON QUALITY FROM MARKET

The sources for information on quality from market are
(i) Field Intelligence : Sales volumes, price changes, success rate on bids,
report from sales persons, rating from customers and consumer
journals, complaints, spare parts sale.
(ii) Quality Alarm Signals : Decline in sales, field failure reports,
customer complaints, claims, lawsuits etc.
Most alarms signals do not reflect quality truly. They are rather poor indicators.
They reflect product dissatisfaction, on the other hand a low level of alarm signal
does not necessarily indicate a high quality level. In most cases of inexpensive
products customer prefer to switch the brand rather complain. Switching of brand
may also occur due to similar quality being available in competitor’s product at
lower price.
Companies internally publish data on product which comprise information on sales
and Complaints. External sources such as magazines, consumer association
bulletins and in some cases government reports publish data related to sales and
product performance. Information may be collected from these sources which
should not be regarded as final to initiate policy change. They should be used to
initiate marketing research.
Marketing research consists in studying those aspects of quality which are
influenced by the forces in the market place. The field complaints are analyzed and
government research publications are thoroughly studied. Such market research will
explore unknown aspects of quality, customers and their needs, customer value and
create data on these aspects. The research will involve testing or devising
simulation for testing for use fitness of the product or the service. It will also
explore the product quality of competitor’s product. The research will also have
Quality Management
• To discover alarming situations for which no alarm signal was received
• To discover opportunities which were not disclosed by information
hitherto collected
• To test existing beliefs even if they are not supported by evidence or
are axiomatic in nature.
The above attempts are likely to provide answers to following questions :
• What is relative importance of product qualities as seen by the user?
The answers are typically different from beliefs held by the
manufacturer earlier. In some cases, the difference may be dramatic.
• How does the product compare with the product of competitors in the
area of more important qualities as seen by the user?
• How do the competing qualities influence the fitness for use (i.e. cost
paid by the user, well being of the user etc.)
• What problems does the user face which he does not complain, though
the complaint could be rectified by the manufacturer?
• What ideas do users have which the company may use for users’
benefit?

12.8 IMPACT ON MARKETABILITY

The meaning of quality in respect of customer satisfaction and delight has already
been brought out. It has also been explained that the customers are both internal and
external to organization which is bringing out a good or a service to put in the
market. The foundation of marketing is exchange in which one party provides
another party something of value in return of something else of value. In this
context, the company provides a good or a service in return of money which should
be more than invested by the company in presenting the good or service in market.
A successful organization will not regard this exchange as simply a sale but creation
of situation in which the person paying for the product (good or service) will be
delighted with the product. The measure of the satisfaction is through customer
returning to buy the product second, third and fourth time. Indeed a company
targetting the customer’s repeated purchases cannot afford waiting for it to happen,
it has to plan for it from the beginning and keep planning for it all through the life
of the product. It brings the company to a decision to have a quality policy which
will have considered all the customers, all of their needs and to produce goods or
services to satisfy the needs whereby the purchasers will keep returning. This will
ensure marketability of the product.
The company, which turns into a marketer when interacts with the market has to
ensure that all marketing activities contribute to creating reasonable expectations on
the part of the customer. The marketing activities include price of the product, the
claims made for it in advertising, the guarantees and warrantees promised and the
places in which sales are made. Further the marketer must eliminate the variations
in the experiences of customer from one purchase to next and variations in the
treatment extended to him from one visit to another. It means that if a customer
buys a Maruti car his driving experience should be same if he buys another car after
a lapse of say four to five years and same courtesy in the sales place be extended to
him on his subsequent visit. The variation to a lower level will affect the
marketability.
A quality policy on the marketing strategy for the purposes of improved
marketability can be summarized to have following included.
(i) Identification of customer. Distinction between internal and external
customers. Establishing needs of internal and external customers.
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Quality System in
Industry
(ii) All internal customer (management and workers) working together in
the atmosphere of complete understanding and cooperation for creating
customer value and improving quality.
(iii) All internal customer committed to constantly search for better ways of
performing functions.
(iv) Forming partnership with vendors and customers so that their inputs
for improvements become incorporated in the operation.
(v) Measurement of quality and dependent customer satisfaction.
(vi) Studying competitors and non competitors to identify highest standards
of performance in such areas as delivery schedules and delays and
eliminating defects. This is benchmarking.
The effective marketing in terms of increased, repeating and consistent buyers will
thus be an outcome of a successful quality planning. Out of the essential
components mentioned all have been discussed except those at iv and vi.
12.8.1 Benchmarking
In the recent development, benchmarking could be regarded as an old concept with
new name. The revised definition may be understood to be setting of goals of an
organization based on achievements of other organizations. The benchmarking
helps take care of changes in technology, competition, social structure, threats and
opportunities. The management of companies learn much to alter policy on quality
through frequent comparison with others. This benchmarking is done through
market research.
Over the years the benchmarking process has evolved into a scientific sophisticated
tools and its evolutionary path has been through
• First generation benchmarking consisting of reengineering or
competitive product analysis.
• Second generation benchmarking consisting of comparison of
processes of the competitor. It moved ahead of product comparison.
• Third generation benchmarking consisted in studying certain processes
applicable to other products, because they will not be competitors.
• Fourth generation benchmarking consist in forming partnership with
companies which have successful strategic performance record.
Strategic benchmarking helps adopt successful strategies from external
partners who form business alliance.
• A future generation of benchmarking is in the offing whereby
distinctions of trade, culture and business processes are likely to be
bridged. The results will be joint ventures on global level.

12.9 RELATIONSHIP WITH VENDOR

The supplier to the company, called vendor, should be of high quality so that s/he
becomes part of total quality programme. In general, a vendor should be well
informed and communicated about programme of the purchaser company, which
must agree to do the following :
(i) Inform vendor about all facts in connection with an order including all
quality requirements. Prefer to give understanding of quality
programme in form of a document.
(ii) Encourage exchange visits to promote understanding and solutions of
common problems.
Quality Management
(iv) Provide sufficient lead time for the supply.
(v) Arrive at an understanding in respect of supplies that do not meet the
requirements.
(vi) Maintain a consistent cost policy.
(vii) Develop with the vendor the conviction that the most significant
requirement is the quality of the end product.
(viii) Maintain a dignified relationship.
The vendor should be provided with a formal package which includes classification
of the quality characteristics so that s/he knows what is of critical, major, minor and
incidental importance. The criteria of acceptance and rejection must find mention in
the package. The inspection plan and maximum percentage of nonconformities that
will be permitted will be mentioned in the package. Under no circumstance
communication with the vendor should become delirious. It should be well
delineated. The purchaser organization should follow certain principles in dealing
with the vendors. Adherence to these principles may ensure quality policy
implementation. The principles are stated as:
• Choose only those vendors whose quality standards and quality results
meet with quality requirements.
• Provide vendors with adequate data on quality requirements, and
ensure that the requirements are understood by the vendor.
• The burden of proof of quality should be with the supplier and his
quality programme should be used to the fullest extent.
• Institute an integrated incoming material programme and subject the
vendors supplies to inspection under this programme.
• If any quality improvement in vendor supply is required, this should be
identified quickly.
• Audit or arrange to audit vendor quality programme, and assist the
vendor to develop and improve his quality control programme.
• The vendor’s quality should be checked as a matter of routine under a
consistent programme and should not be taken only if and when the
problem arises.
The wise vendors will immediately recognize the advantage of relationship with the
purchaser company if it is based on above principles. The contacts between the
purchaser company and the vendor may take many forms. There may be occasional
exchange of correspondence between two parties. This is one extreme whereas at
the other extreme there may be almost daily visits by purchase company quality
staff to the vendor’s plant to support efforts to develop a total quality control
programme. In some cases the purchaser may even place some of its quality
manager in the vendors plant permanently to help assure quality results. There is of
course no substitute to direct and close relationship between purchaser and the
vendor in respect of quality.
The vendor participation in total quality of the product need not be overemphasized.
It may be realized that in many cases purchased parts or material may account for
60% of sale value and may thus be responsible for half of the quality problems.
Poor quality of supplier items result in extra costs for the purchaser. Instances are
available where 75% warranty claims were against the supplier items in failed
appliances.
The emphasis on the vendor supplies being of required quality is further increased
in the new environ of just-in-time inventory concept. Goods are received from
vendor just in time when they are needed for production. If some received material
 Implementation of
Quality System in
Industry
breather in conventional production line but the same problems should not exist
with the JIT concept. This problem is definitely minimized by growing closeness in
management philosophies and also in physical sense. One very tangible result is
that in some cases the buyer company asks the vendor to design a part, produce it
and then supply.

12.10 SELECTION OF A SUPPLIER

The purchaser company first makes the decision to buy rather than manufacture a
part based upon skills and facilities available and the capacity in the plant. Cost
comparison between made and bought parts has to be done accurately before such
decision is made.
The decision if made in favour of an external source the purchaser company has
another question to answer, whether to buy from multiple vendors or depend upon
one. The multiple vendor throws several of them in competition and each tries to
fulfil the quality requirement whereby the quality is assured. A single vendor on the
other hand may find the order big enough to pool all necessary resources for
assuring quality. He would attach greater importance to the fact of being the only
vendor to a bigger manufacturer. In a multi divisional company a division acts as a
supplier to other division. The single vendor offers the additional advantage of
reducing the efforts on buyers part as the buyers has to communicate with only one.
The trend of lesser number of supplier has emerged very clearly. Yet the supplier
selection is made on the basis of reputation, qualification test of vendor’s design,
survey of the manufacturing facility and information from data banks and other
sources on supplier’s quality.
The supplier is evaluated on the following :
(i) The product samples are evaluated for design.
(ii) The facilities and capabilities are evaluated to meet quality
requirements.
The product in proposed design is made in engineering model shop for full
manufacturing facility would be established only after confirmed contract. The
product sample may be handed over to the purchaser for testing who will make
decision. In some cases the vendor may be asked to do testing and submit the test
report to be evaluated by the purchaser. The qualification test may result in rejection
for which there may be following reasons :
(i) The design may not provide the desired function, and
(ii) The test procedure is not adequate to evaluate the performance.
The second reason will arise only if the testing has been entrusted to the vendors.
Such rejection may result in delaying the production by the purchaser and may be
avoided or much shortened with a rigorous definition and description of product
requirement by outlining the test procedure in all its details. One difficulty may still
arise in selection process that having a product conforming to required design
condition does not guarantee if facilities for its manufacture will be in place at
appropriate time.
The vendor’s capacity to manufacture will be ascertained through three approaches,
viz.
(i) past data on similar product,
(ii) process capability analysis, or
(iii) evaluation of supplier’s quality system through a quality survey.
The past data on similar product is the best way to select a vendor. Such data are
available from experience and reports from buyer’s organization.
The vendor’s process capability is often checked through statistical analysis and for
Quality Management
The supplier quality survey evaluates if the supplier can meet the quality
requirement on production lot. The survey may indicate the areas where purchaser
can help the vendor for achieving defined standard of quality. The survey may
consist in going through the answers provided by the vendor to a questionnaire or it
may take the form of a visit to supplier’s facility. The questionnaire will be
prepared by the purchaser company keeping in view the requirements of design of
the product, the processes to be undertaken and the ultimate customer. The survey
by visit will target specific in all details. The actual survey will include examining
financial, managerial and technological competence in general and depending upon
the product following may attract attention.
Management
Philosophy, quality policies and commitment.
Design
Organisation, orientation to latest techniques, reliability, laboratories.
Manufacture
Physical facilities, maintenance, process capability, production capacity,
caliber of planning.
Purchasing
Specification, procedure, relations with supplier.
Quality
Organisation, quality control and reliability expertise, quality planning, audit
of plan.
Inspection and Test
Laboratories, instruments, control of measurement.
Quality Coordination
Organisation, control over subcontractors, quality cost analysis, corrective
action loop.
Quality Results
Performance attained, prestigious customer and subcontractors.
Personnel
Indoctrination, training, motivation.
Data System
Facilities and procedure.
Based upon the survey a report is prepared with objective and subjective
judgements on facilities and effectiveness of operations and subjective prediction if
the vendor will be able to deliver.
The various quality activities are quantified by a scoring system. Each activity is
awarded a score, say out of 10 and also allotted a weightage, say between 1 and 4.
For example, if a survey of manufacturing capacity is considered, the quality
planning is given a score R = 8 and its weightage is W = 4, then the activity score is
R × W = 32. The purchaser will make his own decision (subjective) for approval.
Suppose there are 10 activities in each of three areas of survey, viz., receiving
10
inspection, manufacturing and final inspection. Then for each area ∑ Ri × Wi will
i =1
be obtained. If a minimum score is fixed then a subjective criterion is evolved on
the basis of which vendor is selected.
As an example assume that a vendor is examined in A, B and C areas. There are ten
activities in each area. The average weightage in each area is 2.5 and highest rating
for each activity is 10. Then
 Implementation of
Quality System in
10 Industry
S = ∑ Ri × Wi = 10 × 10 × 2.5 = 250
i =1

The criterion (subjective) can be made that if

S = 250 in each area – vendor is fully approved
200 < S < 250 in all areas – vendor is approved
180 < S < 200 in any one area – vendor is conditionally approved
S < 180 in any one area – vendor is not approved.
If more than one supplier is approved then scoring may be more complex and
stricter.

12.11 VENDOR RELATIONS

The relationship with a vendor is determined more by philosophy of buyer-seller
contact than by techniques. General ethics of courteous business practice is the
essence of such relationship.
At the time of concluding the contract all conditions of business must be laid down
in clear terms. Particular attention should be paid to the conditions under which
material will be returned. Three categories of interaction at the time of the contract
conclusion appear to be unavoidable. These are:
Inspection
All forms of inspection of all incoming material.
Prevention
The quality will be built in by the vendor for which the purchaser will
provide all the support yet the responsibility of building the quality will be
with the supplier.
Partnership
Strong teamwork relationship between the purchaser and the vendor backed
by financial security for which the vendor would commit to maintain quality.
Partnership will also include other issues, e.g. training of vendor’s staff in
quality techniques, attending design meetings wherein suppliers product is
being discussed or even sharing of data on sales.
The vendor should be assured that the purchaser plant will test the supplied material
or product by methods and in equipment which are similar to vendor’s. Such
assurance must be well established before actual shipment begins and must continue
during the period of contract. The assurance must be given to the vendor that he is
informed of the acceptance procedure of the purchaser’s plant and such procedures
are developed in full cooperation and participation of both the parties. The quality
levels, types of tests, importance of these tests and character of inspection are all
well known to the vendor in advance of even the first shipment.
The variety of inconsistent and uncoordinated quality contacts from purchaser’s
plant may be source of great deal of confusion, hence should be avoided at all costs.
If at all required such contacts be made as part of overall plant quality-control
programme, and all such visits be properly coordinated. A well established and
respected vendor may resent occasional suggestions for quality improvement
because of progressively tightening quality demands from market. Such resentment
may be placed through convincing that the quality programme of the purchaser is a
readily available support to the vendor as well as to the purchaser organization. A
visit or series of visit by purchaser process-control engineer to the vendor’s plant
may come handy in making suggestions regarding technical quality control methods
that can be usefully applied.
Efforts to improve vendor relations should bear no effect in the direction of
reducing the responsibility of vendor in maintaining the quality and meeting the
Quality Management
regarded as tool of self-interest. The proportionate quality improvement of the
purchaser’s product will also occur.
Supplier may also be regarded as an external customer. The supplier while giving
input to a plant receives feedback from it hence is the part of total quality planning.
Following figure explains the relationship.

Input Input

Your Your
Supplier You Customer

Requirements Requirements
and Feedback and Feedback
12.12 VENDOR PERFORMANCE
All records are maintained on incoming materials from vendor. The records contain
date of shipment arrival, name of vendor, delivery date, lot sizes, inspection test,
reliability results and disposition of each lot examined. As soon as the shipments of
unsatisfactory quality are identified the vendors are informed. Through all activities
of incoming material control routine, the plant places close and direct attention to
clear vendor communication and well organized ongoing vendor relations. Under
the programme of vendor source control the purchaser places greater emphasis on
the vendor for control of quality at its end. Special attention is given to material
requiring corrective action from the vendor. The purchaser will require an assurance
from the vendor that while immediate action on correcting the discrepant material
will be taken, such correction will assume permanence. Records are prepared in
which not only the discrepancy, corrective action but also the effectiveness of
corrective actions are mentioned and signed by process quality engineer of vendor’s
plant.
In the vendor’s performance evaluation programme
(i) Vendors of high performance (HPV) are identified and informed, such
classification gets due recognition.
(ii) Vendor meetings are held, preferably in groups of vendors supplying
same or similar commodities (say paints, nuts and bolts, bearings).
(iii) The surveillance records of all suppliers are maintained and studied
regularly to find any help for promoting quality policy.
(iv) Suppliers of critical materials are audited.
(v) Assistance in any area of quality engineering where vendor lacks is
provided.
The incoming material inspection programme results in distinct advantages to
purchaser plant. They may be
(i) Ensuring quality at most economical cost of incoming material.
(ii) Overall quality cost reduction, reduction of overheads.
(iii) Cost reduction of testing and inspection of incoming material.
(iv) Improvement of supplier’s quality.
SAQ 2
(a) State the principles on which dealing with a vendor will be based.
(b) Discuss the procedure of selection of a supplier by a company. What
are the three approaches to ascertain the capability of vendor to
manufacture required part?
 Implementation of
Quality System in
Industry
(c) What are essential elements of evaluation of the performance of a
supplier during the execution of a contract? In what way the supplier
surveillance would benefit the purchaser company?
(d) A supplier is to be selected on the basis of three criteria, viz.,
Receiving inspection, Manufacturing and Final Inspection. Under each
area there are 10 activities whose ratings and weightages – R and (W)
– are also mentioned.
Quality management – 8 and (3), Quality planning – 8 and (4)
8 and (3), 8 and (3) 8 and (4), 10 and (4)
Inspection equipment − 10 and (3), Calibration – 8 and (3)
10 and (3), 10 and (3) 10 and (3), 5 and (3)
Drawing control – 5 and (3), Corrective action – 10 and (3)
10 and (2), 10 and (2) 8 and (3), 8 and (3)
Handling rejects – 10 and (2) Storage and shipping – 10 and (2)
8 and (2), 10 and (3) 10 and (2), 10 and (2)
Environment – 8 and (3), Personnel experience – 10 and (2)
8 and (3), 8 and (3) 10 and (3), 10 and (2)
If total score in each area is greater than 200, recommend as approved,
if it is less than 200 in one, recommend as conditional approved and if
it is less than 200 in two, then not approved. Find the overall status of
recommendation.
Make the given statements in form of a Table.
(e) As in last question the company evaluates two other vendors for
comparison with the I. Their scores in order of S. No. are : II vendor,
Area 1, 8, 8, 8, 8, 6, 10, 10, 8, 8, 8, Area 2 – 10, 10, 8, 8, 8, 8, 8, 8, 8,
10, Area 3 – 7, 8, 10, 2, 8, 6, 8, 10, 10, 10.
III Vendors- Area 1 – 8, 8, 10, 10, 5, 8, 10, 10, 8, 6, Area 2 – 8, 8, 8, 8,
10, 10, 6, 6, 6, 6, Area 3 – 8, 8, 8, 3, 8, 5, 8, 8, 8, 8.
Evaluate the Vendors.

12.13 MOTIVATION
Enough has been said about total quality, its programming and weaving through the
activity of the company. Several reasons have been brought out for improving
outcome and they can be sufficient to answer “why should we go for total quality?”
Let us look for the sources of motivation for total quality to become the major plank
of TQM.
A number of sources can be identified who can propose introduction of TQM in a
company.
(i) Top management wanting to improve profit or greater return on
investment may propose TQM. Their perception of some other
companies doing better may prompt them.
(ii) The functional managers or middle management may propose TQM
seeing this as a means to bring out better product. Younger group of
middle level managers who are technical specialist may propose TQM
Quality Management
(iii) TQM may be a defence mechanism to ward off severe pressure on
company, especially if complaints and warranty claims are on the
increase. High manufacturing losses and inconclusive internal
differences on quality may also become the reason for TQM. Both
middle level management and lower echelon of the system (including
workers) may thus propose TQM.
The above statements are the motivating factors for initiating TQM planning in the
company whose various elements have so far been discussed. It may be noted that
motivation sets in either as a proactive or reactionary thought from within the
company at all levels. The TQM philosophy involves all internal and external
customers in the sense that their needs have to be satisfied. The vendor or supplier
is treated as an external customer and hence motivation for TQM must also
influence him. The consequences of TQM reach everybody.
This motivation may be distinguished from earlier concept of Taylorism in which
workers needed motivation in form of monetary benefits, recognition or reward for
improved productivity. This kind of motivation which came from the outside body
of workers did benefit but in a small way and only under circumstances when
competition did not exist. In present intensively competitive situation, motivation
from sources outside are not going to succeed and the motivation would not take the
direction of earning more or getting reward by doing better and feeling satisfied. As
an example, one can observe that in a university atmosphere if an office supervisor
is studying a file, he would close it when it is time to close the office. But if a
professor is reading a book he will not close it depending upon the clock but
depending upon the self-motivated satisfaction.

12.14 SUMMARY
Total quality is a concept emerging from an organization at all levels with every
person required to put up his best. The organization begins to realize that its
existence is for the purposes of satisfying needs of customers. It certainly does not
mean that the end product – be it a good or a service – should be exotic in any way.
But the end product must satisfy the needs of the customer. It emphasizes upon the
fact that each person alone or in a group working in an organization produces some
good or service which is passed on to other person or group who could be working
in the same organization or outside and would be receiving the good or service to
satisfy his needs. The quality is infused if needs are satisfied and in the final
interface the customer may be a buyer or client in the market who would pay the
cost in return which will constitute return on investment.
The concept is incomplete if there is no feedback on quality from the customer and
hence it becomes essential component of the total quality policy. The various tools
used for creating quality between a supplier and a customer take different forms
depending upon the activity of the supplier and the need of the customer.
The market phase where the customer is the buyer and when s/he obtains the
product s/he may not care much for addition of quality because s/he is at the end of
chain. S/he does not pass the product to other customer. Therefore, it becomes
imperative upon the company to clearly distinguish between internal activities and
market efforts. To fulfil the promises in the market which are either made through
advertisements, literature or direct contact, becomes greater responsibility of the
organization. A larger number of complaints, warranty demands and even return of
the product may reduce ROI considerably. The company must always be ready with
all information on similar product from any source which gives the idea of
benchmarking for the quality.
The TQM may emerge as a result of motivation to do better either proactively for
doing well and better or as a result of reaction to the quality produced by others.
 Implementation of
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Industry
12.15 KEY WORDS
Customer : A person who is affected or impacted by the
product or process.
Internal Customer : Persons belonging to company who are
impacted by the product or process.
External Customer : Persons outside the company who are
impacted by the product or process.
Need : What the customer wants from product or
service.
Hard Need : Basic minimum expected from the product or
service.
Soft Need : Good feeling when meeting with company
personnel.
Stated Need : Demand for a product.
Perceived Need : The suppliers perception of customer’s need.
Satisfaction : Fulfillment of need.
Delight : The feeling of happiness when need is
fulfilled.
Quality : The attributes and features of a product
which result in fulfilling the need.
Marketing : Taking quality of product to buyer and
getting feedback on quality from the buyer of
good.
Benchmarking : Finding product of same feature and
comparing quality.
Marketability : The ability of a product to find buyers.
Vendor : Supplier of parts or material.
Vendor Rating : Determining status of a supplier.
Inspection : Quality check of material received from a
supplier.
Rejects : Material rejected.

12.16 ANSWERS TO SAQs

SAQ 2
(d) Scoring of the Supplier
Sl. Activities Receiving Inspection Manufacturing Final Inspection
No.
R W R×W R W R×W R W R×W
1. Quality 8 3 24 8 3 24 8 3 24
management
2. Quality 8 4 32 8 4 32 10 4 40
planning
3. Inspection 10 3 30 10 3 30 10 3 30
equipment
Quality Management
control
6. Corrective 10 3 30 8 3 24 8 3 24
action
7. Handling 10 2 20 8 2 16 10 3 30
rejects
8. Storage and 10 2 20 10 2 20 10 2 20
shipping
9. Environmen 8 3 24 8 3 24 8 3 24
t
10. Personnel 10 2 20 10 3 30 10 2 20
experience
Area total 239 250 247

Since in no area the supplier’s score is less than 200, he is approved.

(e) You can make the table. However, we write area total
Vendor II
Area total 1
= 8 × 3 + 8 × 4 + 8 × 3 + 8 × 3 + 6 × 3 + 10 × 3
+ 10 × 2 + 8 × 2 + 8 × 3 + 8 × 2
= 24 + 32 + 24 + 24 + 18 + 30 + 20 + 16 + 24 + 16
= 228
Area total 2
= 10 × 3 + 10 × 4 + 8 × (3 + 3 + 3 + 3 + 2 + 2 + 3) + 10 × 2
=30 + 40 + 152 + 20
= 242
Area total 3
= 8 × (3 + 4 + 3 + 2 + 3 + 2 + 3 + 2) + 3 × (3 + 5)
= 176 + 24
= 200
Vendor III
Area total 1 = 8 × (3 + 4 + 3 + 3) + 10 × (3 + 3 + 2 + 2) + 5 × 3 + 6
×2
= 104 + 100 + 15 + 12
= 231
Area total 2 = 8 × (3 + 4 + 3 + 3) + 10 × (2 + 3) + 6 × (2 + 2 + 3 +
3)
= 104 + 50 + 60
= 214
Area total 3 = 8 × (3 + 4 + 3 + 2 + 3 + 2 + 3 + 2) + 3 × 3 + 5 × 3
= 176 + 9 + 15
= 200
Compare
Vendor Area total Total Excess of
score 600 (%)
1 2 3
 Implementation of
Quality System in
Industry
I 239 250 247 736 22.67
II 228 242 200 670 11.67
III 231 214 200 645 7.50

All three vendors can be chosen depending upon the size of material
required. Apparently the order of choice will be I, II, III.