Chapter 7

Chapter 7
Quality

Chapter Overview

Chapter 7 is devoted to the topic of quality. Quality is a critical component of value for the producers of all products and services because of its definition: meeting the expectations of the customer. Failure of any business to meet its customer's expectations, basically failing to do what it is being paid to do, will almost certainly result in lost customers. In addition to its direct impact on the customer's perception of value, which will affect demand, many other aspects of quality also influence profitability levels. Poor quality is associated with a variety of cost increases. In this chapter, a variety of techniques and tools are presented to assist in the management of quality.

Chapter Resources

Esources
Esource 7.1	J.D. Powers provides an annual quality analysis of automobiles that provides customers and producers with valuable information. Check out the 2002 J. D. Powers Initial Quality Study of automobiles.
Esource 7.2	There are many B2B suppliers of process control equipment. Many specialize in a certain industry. Omega is a major provider of process control, measurement, and data recording devices. For a hint of how broad this area is, check out Omega.com's process control products and services.
Esource 7.3	Motorola was a pioneer in the development of six-sigma quality processes. In their description of the Motorola Quality System, six-sigma still plays a critical role.

Reel Operations Video Clips
Reel Operations 7.1	Quality is defined by the customer. No company can create product or service quality without involving the customer in every stage of the product or service development process. Detroit Diesel: Designing and Producing Quality provides an overview of how Detroit Diesel links its product design and production to customer requirements.
Reel Operations 7.2	The cost of quality is often a motivating force in improving product and service quality. Failure costs, whether internal or external, add to product costs. In Honda: Proactive Quality Management to Reduce Failure Costs the advantage of prevention, rather than detection of quality failures is shown to substantially reduce costs.
Reel Operations 7.3	Statistical process control charts provide a means of detecting process problems that is limited only by our ability to measure process outputs. Statistical Process Control Extends to Monitoring Even Door Closing Speed at Honda provides an example of how a process that can be measured can be monitored using this tool.

Interactive Models
Interactive Model 7.1	The X-bar and R Chart Interactive Model provides an interactive environment for observing how process variability affects how 3-sigma and 6-sigma control limits in an X-bar chart and how that variability also affects an R chart.

Excel Tutors note: network users may see a dialog box requesting "Please enter your authorization information." Just click "cancel" and your browser will automatically load Excel.
Excel Tutor 7.1	Excel Tutor 7.1 Using Excel Spreadsheets for Pareto Analysis
Excel Tutor 7.2	Excel Tutor 7.2 Using Excel Spreadsheets to Calculate C_p Capability Index
Excel Tutor 7.3	Excel Tutor 7.3 Using Excel Spreadsheets to Calculate C_pk Capability Index
Excel Tutor 7.4	Excel Tutor 7.4 Using Excel Spreadsheets to Construct X-bar and R Charts

Supplementary Readings
Supplementary Reading 7.1	Website quality has received a significant amount of attention, but many businesses have backed off on expenditures for maintaining website quality because the sites don't make money. In Well-Designed Web Sites Drive Traffic to Automotive Showrooms, the results of J.D. Powers research show that the website does make money.
Supplementary Reading 7.2	In Great Expectations, Failed Promises, Fast Company, 5/20/00, several CEOs of successful firms discuss what customers want from online businesses and what these businesses will need to do to adapt or fail.
Supplementary Reading 7.3	In Boeing: Quality Starts with a Hole, Quality on Line, September 2000 an interesting overview of how the very small details are important in the manufacture of an airplane.

Links to Operations On Site Companies
Operations On Site 7.1	Toyota describes the company and its objectives.
Operations On Site 7.2	Wilson provides its official description of the U.S. Open Tennis Ball.

OM Exploration

Check it out: Internet Reference Sites
Quality Management has evolved into a number of approaches and specific techniques designed to increase the businesses connection to customer needs. The "Check it Out" resources for this chapter are reference sites devoted to a variety of quality-oriented information.
Quality Resources Online	American Productivity and Quality Center
Online Quality Resource Guide	Isixsigma's Quality Dictionary and Glossary

OM in Action
OM in Action 7 .1	On-line retailers have frequently been criticized for their lack of service quality. This is particularly true when it comes to responding to email questions. An automated response comes immediately, but real responses sometimes never come. Select two on-line retailers of interest to you. Using their normal channels for handling customer questions, ask them a question about a product you are interested in. a. How long did it take to get an actual response? b. Is this response time acceptable to you?
OM in Action 7.2	Compare the capabilities of the websites you used in the previous exercise to those of Landsend.com. Lands End is considered to be one of the best at customer contact. a. How do the customer contact alternatives available compare? b. What advantages, if any, does the Lands End site offer? c. As a customer, is the Lands End approach valuable to you? In what way?
OM in Action 7.3	Operations Management International, a water treatment company, was a Baldrige Award winner in 2000. Read the company profile. OMI is considered a service, but has many manufacturing characteristics. a. In what ways are their quality management efforts like those of a typical service? In what ways are they more like those of a manufacturer? b. What OMI characteristics do you think are most important for its success?

Online Business Tour

Online Business Tour 7.1

The Ironworks manufactures high quality stainless steel grills for high-end outdoor cooking. As a small business, Ironworks has found the Internet to be very important in helping it reach customers. Ironworks has received numerous awards for quality. Visit the Ironworks website. After you are familiar with their products, visit the quick factory tour Ironworks provides.

a. Why does Ironworks pay such close attention to quality? How does it differentiate them from competitors?
b. What evidence is present in the tour to make a potential customer feel that they would provide a high quality product? How important is that impression?
c. Identify the tasks completed in the tour that are directly linked to quality.

Letters from the Top

Letter from the Top 7.1

In the 2000 letter to shareholders, Home Depot president and CEO Bob Nardelli describes the past year and lays out five business imperatives for 2001.

a. How are each of the five imperatives related to the service quality customers get from Home Depot?
b. If there is a Home Depot near you, visit it. Can you see the impact of these business imperatives? What evidence exists to show that they are having an impact?

Putting It All Together: A Virtual Case Study

Putting It all Together 7.1

In its 30-year history, Kinko's has become almost synonymous with printing for most of us. It's business provides an excellent example of one that must blend the characteristics of services and manufacturers to provide high-quality products and service. To get a sence of Kinko's priorities, read its philosophy. The privately held company recently completed the final piece of its 3-year strategy (see "Late to the Party" (BusinessWeek, August 28, 2000)): Print to Kinko's. Print to Kinkos offers online services to enable customers to print documents to any Kinko's, worldwide . This provides a significant increase in Kinko's service quality and targets several quality-related value attributes. It is clearly an example of improving the quality of the service process, rather than the quality of the output.
a. Which aspects of service quality are enhanced by Print to Kinko's? Will the service quality enhancements be different for consumers than for business customers?
b. How does Print to Kinko's differentiate itself from competitors like NowDocs and Mimeo.com?
c. How important do you think Kinko's name recognition is in making its on-line strategy a success?
d. Does the name recognition add to Kinko's quality? Explain your answer.

Additional Reading
Additional Reading 7.1	Do you know who your most profitable customers are?(Business Week, Sept. 14, 1998) provides an overview of the potential data mining holds for more focused marketing and service activity. Two years later, in Why Service Stinks, (Business Week, October 18, 2000), the other side of the coin appears. While profitable customers get quick response and excellent service, the masses get treated poorly or just ignored.
Additional Reading 7.2	Q&A: Pushing Carmakers to Rev Up Factories, Business Week Feb 18, 2002 discusses links between efficiency and quality in automotive manufacturing.
Additional Reading 7.3	A Supply Chain Wiz Comes Back Wiser,(Business Week, June 3, 2002)