Benefits of having a quality system:
A Quality System is the approach used by an organisation to achieve quality. Most quality systems can be classified as either quality control or quality assurance.
1. Impact on sales volume
- If the product/service meets customer needs --> Demand would increase --> Enable the business to increase the level of its profits.
- People become richer --> Desire for high quality goods increase rapidly --> Because of less constrained by level of income.
- Not achievable for all businesses, especially those trying to keep costs low
- Can use quality as a USP --> To increase demand.
- E.g. Often there is an 8-week waiting list for weekend bookings for afternoon tea at the Ritz Hotel in London. Potential customers see service as unique, a mix of:
- Tangible quality --> High quality of products and services provided.
- Intangible quality --> Image linked to the name of the hotel.
- The uniqueness of the service increases customers' desire to enjoy it, ensuring regular and high demand.
- Quality as a USP encourages consumers to pay a higher price for products/services.
- E.g. Food prices in M&S is higher than other supermarkets.
- Customers are willing to pay a higher price for better quality.
- Increases profit margins
- Note: Better quality materials and production needed to achieve high quality products.
- Quality as a USP is common in niche markets e.g. Harrods or Hotel Chocolat
- Greater perception of quality --> The higher the selling price the firm can charge
- E.g. Afternoon tea at the Ritz costs £36 pp.
4. Pricing Flexibility
- Reputation for quality gives business ability to be more flexible in its pricing.
- E.g. British airways charges higher prices to customers who value quality of service on flights. They also have flexibility to offer discounted prices in order to fill planes where necessary - the high price paid by customers would have already guaranteed the firm a profit.
5. Cost reductions
- It is costly to implement a quality system but can reduce business costs.
- No wastage of faulty goods or possible recall of many products already sold --> Expensive Process
- Costs of reworking products in a faulty manner or waste of materials.
- No quality system = Costly to business reputation.
- E.g. 2006 - Cadbury's reputation was damaged by negative publicity --> Salmonella scare and faulty labelling of products.
- Customers remember unfavourable publicity
- Good quality system --> Prevent problems --> Help business avoid any damage to reputation
Issues involved in introducing and managing a quality system:
1. Costs
- Administrative expense to set up
- Continual monitoring of production, materials and processes
- For an overall assessment of the value of a quality system --> Costs compared with financial benefits arising from high quality achieved EXCEED costs incurred to achieve it.
- Quality assurance relies on a well-trained workforce who can understand and implement the quality system.
- Training is quite expensive
- Create cultural changes e.g. more consultative style of management and greater willingness to give responsibility to workers.
- Short-run -Training programme disruptive to existing production methods.
- Training --> Staff will be taken off the current production line to undergo training.
- This would short term damage quality and quantity of production.
- After training complete --> Further disruption --> Workforce, managers and suppliers must adapt to new systems of quality.
- During this period, mistakes are more likely to happen + danger of company's reputation for quality may suffer.
- Yet once new system established --> Problems should disappear.
Quality Control
Quality Control: A system that uses inspection as a way of finding any faults in the good or service being provided.
- This is where there is inspection at the end (with the end product)
- Firms have now moved on from quality control onto quality assurance.
Quality Assurance
Quality assurance is a system that aims to achieve or improve quality by organising every process to get the product 'right first time' and prevent mistakes ever happening.
This involves self-checking, concentrating on the process of production.
Benefits of Quality Assurance:
- Ownership of the product rests with the workers, giving them greater responsibility.
- Herzberg argues that there are positive effects on motivation because of this sense of ownership and recognition of the worker's responsibility.
- Costs are reduced because there is less waste and less need for reworking of faulty products.
- With all staff responsible for quality, there should be a higher and more consistent level of quality, which can lead to marketing advantages for the firm.
Total Quality Management (TQM)
It is the most widely recognised quality assurance system.
Total Quality Management is a culture of quality that involves all employees of a firm.
It is based on the philosophy of 'right first time'.
Kaizen
Kaizen is a policy of implementing SMALL, incremental CHANGES in order to achieve better quality and/or greater efficiency.
Focussed on making 'continual improvement'.
Quality Standards
Quality Standard: A set of criteria for quality established by an organisation. The standard also requires an organisation to have systems for implementing and monitoring its standards.
BS 5750: A British standards award granted to organisations that possess quality assurance systems that meet the standards set.
ISO 9001: The international standard of quality assurance that is equivalent to BS 5750.
The benefits of these awards are:
- Marketing advantages from the acknowledgement of higher quality standards
- Assurance to customers that products meet certain standards
- Greater employee motivation from the sense of responsibility and recognition
- Financial benefits in the long term (due to elimination of waste and improved reputation of firm).
Quality Summary:
