Module: Operations & Supply Chain Management

Lesson: Quality management

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Quality management

Introduction

By the end of this lesson, you will have a deeper understanding of some of the key features to
consider when looking at the issue of quality management in operations and supply chain
management. This is a very important part to consider as failure to manage the quality will not
lead to repeat business or indeed good brand reputation for the organisation. It is therefore
paramount to manage the quality of the supply chain for the short- and long-term goals. For
this lesson, please use chapter 17 of the core Slack et al. (2013) text.

Lesson Objectives

10.1 Discuss a range of definitions of quality

10.2 Consider and apply the concept of the cost of quality

10.3 Assess a range of quality management techniques.

As a result of these objectives, after completing the lesson you will have a much better
understanding of how to manage the supply chain in terms of quality and what aspects to look
out for. We hope that you enjoy your lesson and if you have any problems, please contact your
tutor at any time.

Reflections, REMINDER!

Before we progress, a quick reminder from us to ensure that you add your reflections to date
on the MyLearningSpace Blog. This will keep your thoughts up to date and help you track your
development from the previous lessons.

Narrated Presentation

Please now view the narrated presentation which will give you an overview of what is included
in this lesson, as well as an overview of the content, theories and activities.

https://vimeo.com/229276154/17b985fa41

Transcript

Word cloud

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 Figure 10.01 - Word cloud

Quality Management at BMW

https://www.youtube.com/watch?v=TiuaFwzJ4FU

Watch this short video about how BMW applies quality management to its supply chain and
manufacturing processes. Having watched the video, using a business you have knowledge of,
think about how a process similar to this could improve the performance of the organisation. In
what ways do you think quality standards would increase? Share your thoughts with your
tutor.

Quality Management at Toyota

https://www.youtube.com/watch?v=-hCUxXsUeb0

At the start of the video, there is mention of three supply chain improvement activities that
Toyota has undertaken. Write these down and then summarise them with your tutor.

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Introduction to supply chain quality management

As Slack (2013) comments, there is a convincing argument for raising quality to increase
turnover and profits. If you operate in the business world, there are very few people who would
disagree with this approach. Revenues can also be increased and costs brought down due to
new efficiencies. Therefore, from an operations perspective, failure to maintain or improve on
quality may be considered a business failure.

Via the use of social media, it is now easier than ever for people to rate goods or services in
an instant. From an HR perspective, for example, you can rate the place you work (or have
worked) using Glassdoor. You can also use things such as Trip Advisor to rate a recent stay
at a hotel, resort or apartment. And, of course, if the quality is not perceived to be high, then
this can dramatically impact on service immediately. From this angle, it is critical.

What is supply chain quality management?

‘Supply chain quality management is a systems-based approach to performance improvement

that integrates supply chain partners and leverages opportunities created by upstream and
downstream linkages with a focus on creating value and achieving satisfaction of intermediate
and final customers.’

Range of definitions

As you may expect, there is a range of definitions when it comes to supply chain quality
management. The two that we will focus on for this part of lesson and course are the views of
management/operations and the views of customers. The two definitions often have different
expectations attached to them, and for this reason bringing them together is not the easiest
thing to do. However, we will take each in turn to give you a full perspective of the issue.

Quality, view of operations

Operations tend to hold a perception that there is an element of conformity within their take on
quality. By this we mean that operations management must deliver a good or service which
meets the expectations of a certain specification. Unless it is a unique product being made,
there is also an element of standardisation within the operations viewpoint, often using past
customer feedback as a guide to what can be improved.

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Quality, views of customers

Naturally, the views of customers are often different, although there will inevitably be some
similarities. However, as Slack (2013) comments, often each different customer will hold a
viewpoint on quality. This makes the job of operations very difficult indeed, some may even say
impossible. To this end, it is the job of operations to reconcile the different dichotomies to the
best of their ability. Slack comments that the point at which these meet is the degree of fit
between the customer’s expectations and their perception of the goods or service. Here are a
number of parameters which affect the customer’s perception of quality:

Value

Fitness for use

Level of support available

General impressions

You will note from this that it would be virtually impossible to give an overarching definition of
customer views of quality - quality means different things to different people, but generally, the
perception they hold will fall within these four areas.

BA Quality Management Test

https://www.youtube.com/watch?v=ZKMVvKI87yw

Watch this short video by moving the cursor to the 16-min mark (the video lasts 1 hour). It is
about how BA use a certain quality test before launching a new plane. Having watched the
video for a few moments, note down any advantage or disadvantage you can see from using
this method. Is there anything you would do differently? Share your thoughts with your tutor.

The Costs of Quality

By reviewing the literature on this topic, there are four broad categories of the costs of quality.
Chapter 5 of Ritzman et al. (2013) has some excellent information associated with it and is
worth exploring in more detail. The four costs of quality are:

Prevention costs - these are costs which are associated with the product design stage,
i.e. being able to find the problems before the customer does.

Appraisal costs - the costs associated with the appraisal of the organisation’s processes.

Internal failure - the costs which are linked to having to redesign work, or stop altogether,
because of a problem that has been discovered.

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 External failure - the cost of problems being discovered after the product is launched. A
good example is the level of cover a car manufacturer gives a customer. Longer warranties
for cars often suggest that the manufacturer is very sure the car will not go wrong for longer
compared to other makes and models.

Cost of Quality

Based on the four categories of costs you have just read about; do you think there is anything
else a business can do to prevent problems externally? Write down your thoughts and share
them with your tutor.

Quality Management Techniques

Within this next section of the lesson, we will begin to review many of the quality management
techniques that can be used and utilised for maintaining the level of quality that management
and customers expect for a particular good or service. As there are so many, we will focus on
two core QMTs but will also add in a number of smaller ones to ensure that a good variety is
covered. The two main methods are Total Quality Management (TQM) and Value Chain
Analysis plus we will also mention things such as sampling, which is common throughout the
manufacturing and service world.

Extra Reading

Total Quality Management

Total Quality Management is a concept that suggests a business will use all parts of the
organisation to deliver quality to its customers. Broadly speaking, there are four core elements
of TQM - employee involvement, focus on the customer, benchmarking and innovative ways of
improving the service. Here are some of the activities associated with TQM in more detail:

Quality Circles - A problem-solving group whereby a number of employees (6-12) sit together
to discuss quality issues and resolve product/service-related problems.

Benchmarking - Officially created by Xerox in 1979, this process is a form of continuous

improvement that analyses procedures, policies, mission statements and internal activities
against other firms in the marketplace.

Six Sigma - A form of quality control that allows employees to relentlessly pursue high-quality
service for lower-cost products.

Balanced Scorecard

It is certainly difficult to set targets and measure performance. One approach that was

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developed by Kaplan and Norton (1992) is the balanced scorecard. This widens the scope of
measuring KPIs and focuses not only on quantitative measurements but also considers
qualitative and quality aspects too.

In addition, the balanced scorecard does not just look at the short-term achievement of targets
(which are often financially based). It also looks at the processes within an organisation which
underpin long-term success.

A balanced scorecard, therefore, looks at the organisation from four general perspectives:

Financial perspective

This perspective looks at whether the organisation’s activities and strategies are having a
positive impact on its financial performance. The targets set are not just about profit but also
about growth - and sometimes about survival.

Internal perspective

This perspective focuses on the processes that are in place within the organisation. The
processes look at operations management, customer management, innovation and
regulatory/social processes - which can impact on key relationships with stakeholders.

Customer perspective

This is an extremely important perspective and considers what is important to customers.

Hence, issues such as time, cost, quality, performance and service are likely to be part of this
perspective.

Learning and growth perspective

This is very difficult to measure but it focuses on the skills and talents within the organisation. It
is very important that organisations have the internal skills and talents to ensure their ongoing
growth and survival.

Using the Information

As you will have noticed, these types of analyses (as well as the PESTLE and SWOT analyses
that we looked at earlier) produce a lot of points. They are therefore useful tools to use when
planning an essay or a report. By using this sort of technique you will usually identify at least
one point under each heading, and this will start to give you a framework to develop.

If you manage to identify a lot of points then you might need to identify the key points that you
will focus on. If you attempt to address too many points you risk writing a little about a lot and
not having a detailed analysis. Remember that intermediate styles of thinking require detail of
thought and not just listing a series of points.

Organisations use these sorts of tools for a variety of reasons. They might use them to:

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 Form the basis of a strategy

Check quality

Identify why a particular product or service is not selling well

Identify new products or services to develop

Determine major areas to work on, and hence identify training needs for employees within
the organisation.

Value Chain Analysis

The concept of the ‘value chain’ was developed by Michael Porter in 1985 to examine how
organisations gained competitive advantage. The value chain divides an organisation’s
operations into sectors. The primary activities are those that deliver either the service or the
product to the end user.

It should be noted that this model interlinks with Porter’s ‘Five Forces Model’ as it effectively
sits across the horizontal axis linking suppliers through to buyers and helps make sense of the
centre position as to how companies might deal with competitive rivalry. Michael Porter uses
this model to discuss the concept of achieving competitive advantage.

Students sometimes feel that the top part of the model is incorrectly annotated as ‘Support
Activities’. However, it should be noted that these functions support the production of the
products and services that takes place within the primary activities. The primary activities
within the model cover the topic of supply chain logistics.

Inbound Logistics

This is the resourcing of the goods needed to provide the service or manufacture the product.
Stock that is not being utilised and stored is an expensive use of money which has led to the
introduction of just-in-time systems. Stock that is not used quickly will degrade over time. The
core components also have to be of the required quality for the next stage of the process to be
effective. If the inbound part of the supply chain fails then anything that follows is not going to
achieve high standards.

Operations

This is quite simply the efficient welding together of the inbound components to efficiently
produce a product or service that will meet the customers’ desires.

Outbound Logistics

This is the delivery of the service or product to the distribution chain. Speed of supply here is
usually more critical than cost.

Sales and Marketing

The correct marketing emphasis should ensure that the promotional, distribution, pricing and
product/service features are in line with the image and customer expectations of the product.

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Sales staff should be realistic in their promises regarding delivery and performance ability
rather than just concentrating on achieving a sale.

Service

Service refers to the backup available to the customer to ensure the swift resolution of any
potential problems.

Michael Porter argues that if these five components are aligned correctly, then profit margins
will increase, as will customer satisfaction, thereby leading to competitive advantage.

The support activities are needed to ensure maximum efficiency.

5 ways to improve quality in supply chain management

Using the link below, write down 5 ways in which quality can be improved in supply chain
management.

References and journal articles

Essential reading

Slack, N., Brandon-Jones, A. and Johnston, R., 2013. Operations management. 7th edition.
Harlow: Pearson.

Journal articles

Krajewski, Lee J., Ritzman, Larry P. and Malhotra, Manoj K., 2013. Operations
Management: Processes and Supply Chains: Global Edition. [online]. Pearson Education.
Available from:< > 25 July 2017

Milner, C., 2016. Operations management: The interesting option, or ‘the pizza puzzle’.
Operations management, 42 (2), pp. 8-9. [Available from: Business Source Complete].

Piercy, N., 2012. Business history and operations management. Business History, 54 (2), pp.
154-178. DOI: 10.1080/00076791.2011.631121. [Available from: Business Source Complete].

BMW, 2013. BMW Quality Management. BMW 3 Series [video, online]. YouTube. Available
from:

https://www.youtube.com/watch?v=TiuaFwzJ4FU [Accessed 07 August 2017].

Toyota UK, 2011. New Toyota Yaris 2012. Quality throughout the supply chain [video, online].
YouTube. Available from: [Accessed 07 August 2017].

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BBC/Jonathan Thomas, 2013. A Very British Airline - British Airways Behind the Scenes -
Episode 1 [video, online]. YouTube. Available from: [Accessed 07 August 2017].

Further reading

Maketo. (2017).
http://marketo.spartasystems.com/rs/spartasystems2/images/eBook%20-%20Best%20Practic..
. [accessed on 09/08/2017]

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© 2017 Arden University Ltd. ALl rights reserved
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