QualityPlanning_CostOfQuality

Assessment of Quality

Why Quality Assessment?

Quality assessment stimulates the upper management to take action on the quality of the products rolled out by their organization. A formal assessment of quality helps to develop a quality strategy by bringing into open (1) the size of the quality issue and (2) the areas that demand immediate attention. Quality assessment in general refers to a companywide review of the status of quality. Four elements constitute an assessment of quality: (1) Cost of poor Quality (2) Standing in the market place (3) Quality culture in the organization and (4) Assessment of Current Quality Activities.

Cost of Poor Quality (COPQ)

The cost of poor quality is defined as the annual monetary loss of products and processes that are not achieving their associated quality objectives. COPQ is also labeled as the Cost of Poorly Performing Processes (COP3). This emphasizes that COPQ is no longer limited to quality but also includes the cost of waste that accompanies poorly performing processes. Companies estimate COPQ for the following reasons:

  1. Expressing the size of the quality problem in terms of money improves the level of communication between middle and upper managers. It provides a translation of defects into dollars.

  2. Major opportunities for cost reduction can be identified.

  3. Opportunities to reduce customer dissatisfaction and the threats associated to salability of products can be identified.

  4. Measuring COPQ evaluates progress of quality improvement initiatives and throws light on obstacles to improvements.

  5. Knowing COPQ helps in formulation of a strategic quality plan consistent with organizational quality goals.

COPQ comprises three elements applicable to manufacturing and service sectors: (1) cost of nonconformities (2) cost of inefficient practices and (3) cost of lost opportunities for sales revenue.  Each organization must decide for itself which cost elements to include in identifying its COPQ.

Standing in the Market Place

Estimating COPQ although important for an organization is alone not sufficient in terms of overall assessment of quality. Assessment of standing in the market place provides the company where it stands in terms of quality relative to competition. This portion of assessment of quality is important for the company to increase its sales income.

Market study gives a snapshot of standing relative to competition and also identifies opportunities and threats. The approach to estimation of standing in the market place should be on the basis of a market research study. Ideally such studies should involve members from all departments such as marketing, product development, quality, operations and other areas as needed. The team must have a consensus on the type of questions that are to be put forth for the field survey.

Three questions must be broadly considered: (1) What is the relative importance of various products as seen by the consumer? (2) For each of the key attributes listed how does our product compare with our competitors? (3) How likely is the consumer to purchase again from us and also recommend us to others? Answers to these questions should be only from current customers, lost customers and non-customers. Opinions of company personnel notwithstanding their extensive experience should not have precedence over the voice of the customer.

Quality Culture in an Organization

Employees of all organizations have certain beliefs, opinions, traditions and practices with respect to quality. This is labeled as the “company quality culture”. An understanding of this culture for overall assessment of quality is essential for two reasons: (1) This culture has a major impact on quality results and (2) knowledge of the present culture can identify barriers for developing a strategy and implementing an action plan based on companywide assessment of quality.

Quality culture is assessed by preparing questionnaires to survey employees, by conducting focused discussions with groups of employees or by way of doing both. By putting forth an extensive array of questions, organizations can explore areas such as overall product quality, conformance to requirements, equipment, supplier quality, management commitment, work group performance, employee participation and training.

A focus group can be used to supplement a questionnaire. It typically consists of a group of 8 to 14 employees who would meet together to discuss quality culture. Such a group has the potential to be the melting pot of ideas. Generally supervisory and managerial people are excluded from a workforce focus group.

Focus groups collect extensive information by asking employees to express their frank opinions on various issues. To be effective the group must have a moderator who is skilled in people management and also has a clear view of the type of information needed along with a plan for conducting the discussion. Focus groups provide means for collecting a lot of information at a reasonable cost. The discussions are also candid because every member'’s view is reinforced by his peers.

In short quality culture has a huge bearing on the quality results of an organization. Being armed with employee perceptions on quality is essential to the success of an action plan for quality improvement.

Assessment of Current Quality Activities

Assessment of current quality activities can take two forms: (1) assessments that focus on customer satisfaction results but also include evaluation of current quality-related activities and (2) assessments that focus only on current quality related issues by excluding customer satisfaction results.

Both types of assessments identify opportunities for improvement by comparing current quality activities with an accepted model such as the Baldrige Award or ISO 9000. Often an organization starts by bringing in an outsider to conduct a three to five day assessment on the current status of quality. Questions include companywide issues of quality management. Additional questions relating to functional areas are also raised during this assessment.

National Quality Award

The Malcolm Baldrige National Quality Award is managed by the National Institute of Standards and Technology (NIST), a non-regulatory federal agency and is based on comparative studies of company stock made by NIST. The award is presented annually in the United States. Three organizations from five categories namely manufacturing, service, small business, education and health care are selected each year for the award. Exhaustive evaluation on the basis of submitted written documents and site visits to qualifying organizations form the basis of selection.

The award was first instituted in 1988 and since then the emphasis has changed from just quality to overall company performance. The seven Baldrige criteria can viewed as a system as shown in Figure 1. Categories 1, 2 and 3 form a leadership triad and categories 5, 6 and 7 represent results triad. Category 4 provides the foundation for fact based information.

Figure 1: Baldrige Criteria (source: http://www.bexcellence.org/Malcolm-Baldrige-National-Quality-Award.html)

Baldrige award criteria are used by many organizations for self-assessments without submitting applications to compete for the award. Winning the Balridge award is extremely difficult and most organizations after conducting a self-assessment realize that the knowledge gained from the process is more significant.

Knowledge of what alignments and linkages are furthers a better understanding of Baldrige criteria. Alignment is the translation of key organizational goals into goals, sub-goals and standards at all levels- organization, key processes and work unit levels. Linkages are the interrelationships or connections between specific quality-related management activities so that the activities are mutually reinforcing to produce the desired results. Baldrige criteria provide direction to achieve excellence but alignments and linkages serve as driving forces to achieve exceptional results.

Eleven core values and concepts are embedded in the award criteria: visionary leadership, customer driven, organizational and personal learning, valuing employees and partners, agility, focus on the future, managing for innovation, management by fact, public responsibility and citizenship, focus on results and creating value and systems perspective.

Other nations have created quality awards too. Japan awards the Deming Prize for Japanese organizations that excel in quality improvement. The European Foundation for Quality Management has created the European Quality Award.

Quality Standards ISO 9000

A series of quality standards was put in place to identify the key elements of a quality system in both manufacturing and service organizations. The establishment of these quality standards is to facilitate international trade on the basis of common standards.  The International Organization for Standardization (ISO) came up with ISO 9000 series quality standards. ISO 9000 family of standards relates to quality management systems and is designed to help organizations to meet the needs of customers and other stakeholders.

These standards are in use in more than 100 countries. Companies today strive to achieve ISO 9000 certification to compete domestically as well as internationally. Evaluation of quality systems is made by an independent organization. The process comprises on site visits once or twice a year to check if demonstrated quality systems are indeed in place.

ISO 9000 series should be viewed as the minimum elements of a quality system. ISO places emphasis on the existence and conformance to elements in the quality system and not on the results. While Baldridge criteria focus on customer satisfaction; ISO 9000 turns its attention to elements within the quality system.

Advantages:

  1. Creates a more efficient, effective operation
  2. Increases customer satisfaction and retention
  3. Reduces audits
  4. Enhances marketing
  5. Improves employee motivation, awareness, and morale
  6. Promotes international trade
  7. Increases profit
  8. Reduces waste and increases productivity

 Problems associated with ISO 9000:

  1. A common criticism of ISO 9000 is on the amount of money, time and paperwork needed to obtain it.
  2. The standard is seen as failure when companies show interest in certification before achieving the required quality.
  3. Competition between numerous certifying bodies leads to a softer approach in dealing with deficiencies noticed in the functioning of the quality system.