MODULE TEN: OUTBOUND INVENTORY

LESSON FIVE: PRINCIPLES OF QUALITY

LEARNERSHIP

5
STOCK
&
WAREHOUSE

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 Modules in this certification
Where are you in this certification?
LEARNERSHIP
STOCK
&
WAREHOUSE

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MODULE TEN: OUTBOUND INVENTORY
LESSON FIVE: PRINCIPLES OF QUALITY
MODULE TEN: OUTBOUND INVENTORY
These lessons focus on the distribution network model and its objectives, activities, and distribution
inventory management decisions and includes interactive exercises to present the fundamental con-
cepts associated with the distribution environment. Understanding all the process involved in out-
bound logistics including cross border, international and reverse logistics is important. Focusing on
quality at all times is also crucial for a successful supply chain

LESSON FIVE: PRINCIPLES OF QUALITY

Achieving and managing consistently high levels of quality means continually pursuing excellence:
ensuring that whatever your organisation does, it is always fit for purpose, and not only does it stay
that way, but also keeps improving. Understanding the principles and dimensions of quality goes a
long way in succeeding in applying quality.

CONTENTS
Introduction … 4
Total Quality Management … 4
The Principles of Total Quality Management … 5
What is Quality? … 5
Nine TQM Principles … 6
The role of total quality management in satisfying both internal and external customers … 10
Customers and suppliers … 10
Customers (Internal and external) … 11
Suppliers (internal and external) … 11
TQM Approach … 11
Dimensions and Absolutes of Quality … 13
Quality experts and their contributions … 13
The differences between Crosby's and Taguchi's concept of zero defects … 16
…
17
The dimensions of quality used in product quality design as proposed by David
Absolutes of quality … 19
Conclusion … 21

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 Introduction
Achieving and managing consistently high levels of quality means continual-
ly pursuing excellence: ensuring that whatever your organisation does, it is
always fit for purpose, and not only does it stay that way, but also keeps im-
proving. Understanding the principles and dimensions of quality goes a long
way in succeeding in applying quality.

Total Quality Management

Total Quality Management (TQM):
 Is a management approach focusing on the improvement of quality
and performance in all functions, departments, and processes across
the company to provide quality services which exceed customer ex-
pectations
 Expands the scope of quality of every department from top manage-
ment to lower level employees
 Enables management to adopt a strategic approach to quality and
put more effort on prevention rather than on inspection
 Requires all employees to be trained in a professional manner and en-
couraged to make decisions on their own to improve the overall quality
and attain higher standards. This is key to achieving the TQM results de-
sired, because without your employees on board and feeling empow-
ered, you might as well be swimming upstream
 Provides ways to increase customer satisfaction, reduce costs, foster
team work and gain higher returns on sales and investment
 Allows for higher prices to be charged
 Means better access to global markets, greater customer loyalty, and
wider recognition as a quality brand

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Total Quality
Management Definition: Total Quality Management (TQM)
(TQM)
TQM describes a structured, systematic and integrated
management approach to long–term success through
maximizing internal and external customer and supplier
satisfaction. It is where all managers and employees of an
organization use quantitative methods to participate
together as a team and actively work to support each other
in improving all the processes, products, services, and the
culture (ethos) in which they work.
It is a management philosophy that looks to integrate all the
organizational functions (marketing, finance, customer
service, etc.) to continually improve on the delivery of
customer needs and business objectives.
TQM is also referred to today as Business Excellence
SupplyChainSmart Glossary

The Principles of Total Quality Management

What is Quality?

Quality
Definition: Quality
To satisfy specific customer or user requirements, Quality is a
measure of excellence or a state of being that is free from
defects, deficiencies and significant variations. To achieve
the acceptable uniformity of quality in a product, a strict
and consistent commitment to the agreed standards is
necessary.
Some other popular definitions for quality, all of which are
right, as they each contain a key element of what quality
means to users of products and services, are listed below:
A degree of excellence;
 Conformance to requirements;
 Totality of characteristics which act to satisfy a need;
 Fitness for use;
 Fitness for purpose;
 Freedom from defects;
 Delighting customers SpplyChainSmart Glossary

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 There is much more to quality than just producing product without any de-
fects or, perhaps, getting busses to run on time – even though these things
are clearly a part of the picture. Achieving and managing consistently high
levels of quality means continually pursuing excellence: ensuring that what-
ever your organisation does, it is always fit for purpose, and not only does it
stay that way, but also keeps improving.

Nine TQM Principles

To exceed customer expectations, an organization must embrace the fol-
lowing nine principles:

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 1. Quality can and must be managed – Many companies have wallowed
in a repetitive cycle of chaos and cus-
tomer complaints, believing that their
operations are simply too large to man-
age the level of quality effectively. The
first step in the TQM process, then, is to
realize there is a problem and that it can
be controlled.
2. Producing quality work (the first time) means quality is built into the pro-
cesses for producing products or providing services, and continual im-
provement measures are taken to ensure the processes work every
time.
Everyone in the company, from the workers on the line to the upper
management, must realize that they have an important part to play in
ensuring high levels of quality in their products and services. Everyone
has a customer to delight, and they must all step up and take responsi-
bility for them.
3. Focusing on the customer (the Customer Centric Approach) involves
designing products or services that meet or exceed the customer's ex-
pectations. Consumers are the ultimate judge to determine whether
products or services are of superior quality or not.
No matter how many resources are pooled in
training employees, or incorporating quality
design process and standards, or upgrading
machines and computers, or installing new
technology … in the end, it is customers who
have the final say in judging your company.
Exceeding expectations of the customer in-
volves perfecting the attributes, convenience,
and functionality of the product as well as the
way that the information about that product is received by a client,
e.g. via social networking, email, even texting. Companies must re-
member to implement TQM across all fronts keeping customers in mind.
4. By adopting a strategic approach to improvement, processes can be
developed and tested to achieve the goals, vision, and mission of the
business and ensure the product or service's quality. A strategic plan is
very necessary to ensure that quality be-
comes a core aspect of all business pro-
cesses, which includes making sure that
suppliers offer quality supplies needed to
produce acceptable, first-run, quality
products
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 5. Continuous improvement means always analysing the way that work is
being performed – to review and determine if there are more effective
or efficient ways possible, striving for excellence and making improve-
ments all the time. This is a major component of TQM.
Improving continually will lead to better and higher quality processes. It
will ensure that companies find new ways and techniques to produce
better quality products, perhaps to be more competitive, as well as to
exceed customer expectations. An integrated system will often ensure
continual improvement and help companies to achieve a competitive
edge.
Total Quality Management is not something that is only done once, or
for a short, even intense period and then forgotten, nor is it a “phase”,
encouraged by management, that ends once a problem has been
corrected. Real improvements must occur continually and frequently,
to boost customer satisfaction and, even better, their loyalty.
6. Encouraging mutual respect and teamwork is important because it en-
courages a single-organizational culture of excellence, knowing that
every employee – from the top to the bottom of the hierarchy – cher-
ishes the same core principles. It is very important to promote a “quality
-based” work culture, because it helps to achieve excellence and sur-
pass customer expectations.
Businesses have a va-
riety of departments
with different func-
tional purposes –
sales, finance, engi-
neering, production
and logistics. These
functions are inter-
connected with vari-
ous horizontal pro-
cesses that TQM must
focus on, and everyone in the company should have a thorough un-
derstanding of the policies, standards, objectives, and important pro-
cesses that surround the quality requirements.
Standardised routines are an important element of TQM and good
communication plays a crucial role in helping to motivate employees
and improve their morale during routine daily operations. They need to
be involved, as much as possible, in the day to day operations and de-
cision-making process to really give them a sense of empowerment.
This creates the environment of success and unity and helps drive the
results that the TQM process are capable of achieving.

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 7. Decision Making – Performance measurement data, from key selected
processes, must be collected, analyses and used to indicate the cur-
rent health of the company by improving product quality, decision
making accuracy, and forecasts.
The decision-making process must be statistical and based on actual
situations, to avoid any room for emotional based decisions. A quality
management system is only effective when quantifying the results.
You need to see how the process is implemented and if it is having the
desired effect, which will help to set goals for the future and ensure that
every department is working toward the same result
8. Processes, not people, are often the problem – If your process is causing
problems, it will not matter how many times new employees are hired,
or how many training sessions are run. First, review and correct the pro-
cess and then train the workforce on these amended procedures.
So, don’t treat the symptoms, look for the cure – Conduct Root Cause
Analysis (RCA) to find the cause of the problem – because by just
patching over the underlying problems in the process, the problem will
continue to re-occur. If, for example, the shipping department is be-
hind schedule, it may be because of holdups in manufacturing rather
than poor performance in the shipping area. Use RCA to establish the
cause, go to the source of the problem, correct it and permanently
eliminate the cause
9. Quality is a long-term investment – It is not a quick fix. Specific quality
management software is available that will help to get things started,
but it is important to understand that great results won‟t occur immedi-
ately. TQM is a long-term investment, and it is designed to help you find
long-term success.
Before looking for any type of quality management software, make
sure that your business is able to implement these nine fundamental
principles throughout the company. It requires immense effort, time,
courage, and patience to successfully implement an efficient TQM sys-
tem, but successfully implementing TQM can witness improved quality
across all major processes and departments, higher customer retention,
higher revenue due to improved sales, and global brand recognition.
This kind of management style can be a huge culture, or ethos change
in some companies, and sometimes the shift can come with some
growing pains, but if you build on a foundation of quality principles, you
will be equipped to make this change and start working toward real
long-term success.

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 The role of total quality management in satisfying both
internal and external customers
Customer Focus: With TQM, the organization must involve themselves in a lot
more detail regarding the needs of the customer and would engage in the
following areas to meet their needs:
- Focus groups
- Customer relations (Negotiations)
- Market research data
- Sales analysis
- Communication with the customer

Customers and suppliers

In every business, there exists a series of interfaces, or links, between custom-
ers, suppliers and customers within each department, each office and each
home.
These interfaces are “the quality chains”, which can be broken (a failure) at
any point by one person or one piece of equipment that does not meet the
requirements or standards of the customer - both internal or external.
These failures usually find their way to the interface that lies between the or-
ganisation and its external customer – where, hopefully, it is stopped – or, in a
worst-case scenario, they actually reach the external customer.
Failure to meet the requirements, in any part of a quality chain, has a way of
multiplying and failure in one part of the system creates problems elsewhere,
leading to yet more failure and problems, and so the situation is exacerbat-
ed. The ability to meet customers‟ (external and internal) requirements is vi-
tal.
To achieve quality throughout an
organisation, every person in the
quality chain must be trained to
ask the following questions about
every customer-supplier interface
that they encounter:

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 Customers (Internal and external)
? Who are my customers?
? What are their true needs and expectations?
? How do, or can, I find out what these are?
? How can I measure my ability to meet their needs and expectations?
? Do I have the capability to meet their needs and expectations? (If not,
what must I do to improve this capability?)
? Do I continually meet their needs and expectations? (If not, what pre-
vents this from happening when the capability exists?)
? How do I monitor changes in their needs and expectations?
As well as being fully aware of customers‟ needs and expectations, each
person must respect the needs and expectations of their suppliers. The ideal
situation is an open partnership-style relationship, where both parties share
and benefit.

Suppliers (internal and external)

? Who are my internal suppliers?
? What are my true needs and expectations?
? How do I communicate my needs and expectations to my suppliers?
? Do my suppliers have the capability to measure and meet these needs
and expectations?
? How do I inform them of changes in my needs and expectations?

TQM Approach
The TQM approach starts with identifying the customers and their require-
ments.
 Every function, and every individual within a function, has a set of cus-
tomers. Each of these customers has a set of spoken and/or latent
needs or requirements
 The focus on the customer-supplier relationship is crucial to any at-
tempt to improve quality. This recognizes that everyone in a process is
at some stage a customer or supplier of someone else, either inside or
outside the organization

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  At an enterprise level, TQM:
o Starts with the external customer requirements
o Identifies the internal customer-supplier relationship and require-
ments, and continues with the external suppliers. In a chain of op-
erations to produce a product or service, there are many internal
customer-supplier links
o Acknowledges that the ultimate, external customer is better served
if each internal customer is also served to the fullest – in terms of
timeliness, completeness, and accuracy.
Understanding and meeting these customer requirements completely is the
premise of TQM.
The implementation of TQM requires care because the various customer re-
quirements are not always translated properly. The traditional structure of
large organizations and the complexity of the product/service delivery pro-
cesses often stand in the way.

For example, Ford Motor Company utilized this concept to develop the
Ford Taurus and Mercury Sable. To bring these cars to market, a cross-
function "Team Taurus" was organized to strengthen internal linkages and
to ensure that quality was designed into the new cars at every stage.

An example of a TQM used in a manufacturing company is shown:

Identify Potential Customers

Translate these to supplier
specifications (as below) Identify Individual Customer
for each successive
customer
Design Requirements

Review Part Characteristics

Manufacturing Operations

Production and External Vendor

Selling Requirements

Customer Requirements

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 Dimensions and Absolutes of Quality
There have been many „quality‟ experts who have researched and written
about quality. Considering quality dimensions and absolutes. We will briefly
learn about some of these experts and focus our attention on 2 of them.

Quality experts and their contributions

There have been a number of people who have influenced the realm of To-
tal Quality Management:

The first notable effort, so to speak came from Walter A.

Shewhart, who after picking up that quality was variable in
the manufacturing process, created graphs to pick up
whether or not variability was random, or specific existing
process.

W Edwards Deming, thereafter, in the

1940‟s, came up with the concept that
improvements in quality were more pro-
cess related than worker error related,
and stressed the importance of creating
an environment where workers felt
comfortable in detecting and reporting
errors.

Joseph M Juran went a step further to start measuring

quality cost in objective, as opposed to subjective
terms. He also came across „fitness for use‟ which is
essentially focused on the products use to the end-
user/Customer as opposed to honing in only on the
technical specifications of the product.

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 What Armand V. Feigenbaum did thereafter was re-
emphasise the importance of ‘quality’ throughout the
organization as opposed to only considering quality to
only fall under manufacturing divisions and that quality
should be understood by other divisions within the or-
ganization with more impetus than previously consid-
ered.

The impact of Philip B Crosby largely revolved two

important phrases and concepts. The first “quality
is free” the second “zero defects”. Essentially what
he did was point out that by creating zero defects
in a process would have such a significant impact
on reducing costs, that the costs of associated
with creating an environment where this could oc-
cur would more than pay for itself.

Genichi Taguchi uncovered an important con-

cept relating to the cost of non-conformance. He
picked up that there was a parabolic cost rela-
tionship of quality non-conformance around the
target range rather than fixed one regardless of
variance from the target range, with the cost in-
creasing at a greater multiple the greater the var-
iance from the target range (see diagrams). He
also stressed that controlling product design was
easier than controlling the environment and
pointed out that robust product design could limit
defects in the production cycle.

Koara Ishikawa not only re-emphasised

Feignebaums concept of total quality control, but
came up with the means to do so. He was the first
notable protagonist of quality circles (which is a
team of people in the organization who focus on
quality specifically) and cause and effect diagrams.

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 Background (history) on Crosby and Taguchi:

1. Philip B. Crosby is another recognized guru in the world of TQM. He

worked in quality for many years, first at Martin Marietta and then, in the
1970s, as the vice president for quality at ITT. He developed the phrase
“Do it right the first time” and the notion of zero defects, arguing that no
number of defects should be considered acceptable. He scorned the
idea that a small number of defects is a normal part of the operating
process because systems and workers are imperfect. Instead, he
stressed the idea of prevention. To promote his concepts, Crosby wrote
a book titled “Quality Is Free”, which was published in 1979 and be-
came famous for coining the phrase “quality is free”.
He highlighted many costs of quality, which include not only the costs of
wasted labour, scrap, rework, equipment time, and lost sales, but also
organizational costs that are hard to quantify. Crosby stressed that ef-
forts to improve quality more than pay for themselves because these
costs are prevented. Therefore, quality is free.
Like Deming and Juran, Crosby stressed the role of management in the
quality improvement effort and the use of statistical control tools in
measuring and monitoring quality.

2. Dr. Genichi Taguchi is a Japanese quality expert known for his work on
product design. He has estimated that as much as 80 percent of all de-
fective items are caused by poor product design. Taguchi stresses that
companies should focus their quality efforts on the design stage, as it is
much cheaper and easier to make changes during the product design
stage than later during the production process.
Taguchi is known for applying a concept called „design of experiment‟
to product design. This method is an engineering approach that is
based on developing a robust design, a design that results in products
that can perform over a wide range of [environmental] conditions, as it
is easier to control the design than it is to control the environmental con-
ditions themselves.
Taguchi has also had a large impact on today‟s view of the costs of
quality. He pointed out that the traditional view of costs of conform-
ance to specifications is incorrect, and proposed a different way to
look at these costs.

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 The differences between Crosby's and Taguchi's concept
of zero defects
Crosby‟s view is one which emphasized the idea of zero
defects during the inspection phase of the production
process and considered quality to be “free” because, in
his view, if you have no defects during the production
phase, then you are more likely to reduce all the other
costs that are incurred when correcting those defects,
like additional labour and scrapping costs. He focussed
on controlling the production environment during the
production process to limit defects.

Taguchi‟s view differed in that, although he naturally would agree with the
concept of zero defects, he was more concerned with improving the design
of the product prior to manufacturing, so that there are fewer defects to con-
trol. It is likely that good product design will still have some defects to con-
tend with in the production process, but they should be fewer. It is important
not to discard the view of control by Crosby, because controlling defects is
still required, even if there are low numbers of defective products in the pro-
duction process due to robust product design.
According to Taguchi, however, it is easier to achieve zero defects if the
product is designed better.

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 The dimensions of quality used in product quality design
as proposed by David Garvin
The late Dr. Garvin (1952 – 2017) identified 8 important dimensions as a
framework for thinking about the basic elements of product quality. Each di-
mension is self-contained and distinct; a product can be ranked high on one
dimension while being low on another.
The following diagram shows the 8 dimensions; they are put in order from
basic/essential to additional but not less important characteristics:

1. Performance

Performance refers to a product's primary operating characteristics. For an

automobile, [this] performance would include traits like acceleration, han-
dling, cruising speed, and comfort. Because this dimension of quality involves
measurable attributes, brands can usually be ranked objectively on individu-
al aspects of performance. Overall performance rankings, however, are
more difficult to develop, especially when they involve benefits that not eve-
ry customer needs.
2. Features

Features are usually the secondary aspects of performance, the "bells and
whistles" of products and services, those characteristics that supplement
their basic functioning. The line separating primary performance characteris-
tics from secondary features is often difficult to draw. What is crucial is that
features involve objective and measurable attributes; objective individual
needs, not prejudices, affect their translation into quality differences.

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 3. Reliability

This dimension reflects the probability of a product malfunctioning or failing

within a specified time. Among the most com-
mon measures of reliability are the mean time
to first failure, the mean time between failures,
and the failure rate per unit time. Because the-
se measures require a product to be in use for a
specified period, they are more relevant to du-
rable goods than to products or services that
are consumed instantly.
4. Conformance

Conformance is the degree to which a product's design and operating

characteristics meet established standards. The two most common measures
of failure in conformance are defect rates in the factory and, once a prod-
uct is in the hands of the customer, the incidence of service calls. These
measures neglect other deviations from standard, like misspelled labels or
shoddy construction that do not lead to service or repair.
5. Durability

A measure of product life, durability has both economic and technical di-
mensions. Technically, durability can be defined as the amount of use one
gets from a product before it deteriorates. Alternatively, it may be defined as
the amount of use one gets from a product before it breaks down and re-
placement is preferable to continued repair.
6. Serviceability

Serviceability is the speed, courtesy, competence, and ease of repair. Con-

sumers are concerned not only about a product breaking down but also
about the time before service is restored, the timeliness with which service
appointments are kept, the nature of dealings with service personnel, and
the frequency with which service calls or repairs fail to correct outstanding
problems. In those cases where problems are not immediately resolved and
complaints are filed, a company's complaints handling procedures are also
likely to affect customers' ultimate evaluation of product and service quality.
7. Aesthetics

Aesthetics is a subjective dimension of quality. How a product looks, feels,

sounds, tastes, or smells is a matter of personal
opinion and a reflection of individual prefer-
ence.
On this dimension of quality, it is difficult to
please everyone. “sleekness” is an aesthetic
look and feel.

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 8. Perceived Quality

Consumers do not always have complete information about a product's or

service's attributes; indirect measures may be their only basis for comparing
brands. A product's durability for example can seldom be observed directly;
it must usually be inferred from various tangible and intangible aspects of the
product. In such circumstances, images, advertising, and brand names - in-
ferences about quality rather than the reality itself - can be critical”

Customers do not often talk about all eight dimensions. Usually they are talk-
ing about one or two, which are the most applicable to them. For example,
when customers say, "I want higher quality health care", they may be talking
about:
 Performance, where, they may ask “has the operation been performed
effectively so that the problem is corrected, the patient is up and out
quickly, and there is no infection or complication
 Features, which are add-ons, bells and whistles – how they're treated by
the staff, or whether there is a television with multiple channels in the
room that they don't have to pay for
 Reliability - the frequency with which the service works well
 Conformance - getting exactly what they expect to get, at the price
they expect to pay
So, the manager who is trying to improve quality must develop the ability to
listen with more precision.

Absolutes of quality
The 4 Absolutes are (according to Crosby):
1. Quality is defined as conformance to requirements

For Garvin [1988], conformance is one of

the eight dimensions of quality manage-
ment. The finished product or service sup-
plied must be the closest possible to the
original design, according to pre-
established specifications or standards
and so in other words must conform to
these specs and standards. The key term is
„pre-established‟, as the term specifies
one cannot, particularly during the in-
spection process use intuition or decisions
without reference to what was established
for that plan.

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 Example: A company designing and manufacturing surf-
boards, brings out a new line of surfboard, which needs to
weigh 2.68kg exactly prior to despatch. Even though the in-
creased weight may make the board slightly better, it should
not be possible for the quality assurance manager to let it slip
through into despatch based on those grounds.

2. The system for causing quality is prevention, not appraisal

Get it right first time, and that touches back on Taguchi‟s design princi-
ples as well. Get the design right and the system you‟ll reduce the num-
ber of possible defects.

Example: A company requires a product to have a height

USL of 5mm and LSL of 4.99mm in order to be considered
good quality. The goods pass through a machine, which cuts
the product within these tolerance limits. On the occasion
where products moving through this machine do not fall within
these tolerance limits, the inspector (appraiser) will be in a po-
sition to re-move these defects from the line. These defects
however will continue, provided the machine is re-configured
correctly in order to prevent the defects from moving to the
inspector. By doing this, the system runs less risk of the inspec-
tor failing to observe the defects should they slip through.

3. The performance standard must be Zero Defects, NOT "that's close

enough"
In the book "Quality is Free" [Crosby, 1979] Crosby defended the princi-
ple that by incurring „zero defects‟ you reduce the cost of having to re-
move them. With that principle one can see that considering the cost
of quality is very different to considering to “Cost Reduction”, in that
one would need to make decisions, like employing competent personal
to increase the likelihood of zero defects, rather than employing ill-
equipped personnel at a lower cost, all the time. The key decision here
is, will the costs of non-conformance (failure costs) exceed the costs of
conformance (cheaper personnel). If they do then it would be sensible
to improve the quality of personnel. The concept essentially being in-
stilled in this „absolute‟ is not so much related to cost as it is related to
the organizational „approach‟ to quality. Management should aim for
zero defects and not settle for “that‟s close enough.”

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 4. The measurement of quality is the Price of Non-conformance

This is essentially highlighting an approach to costing on this issue. Cros-

by‟s model (Crosby, 1979), in which CoQ is expressed as the sum of cost
of conformance and cost of non-conformance, is documented to have
been successfully used for quality improvement programs at several
companies……. They use marginal analysis of non-conformance costs
to identify the greatest cost impacts of defect reduction during their
quality initiatives and present their successful results.

Example: A T-shirt company is launching a new product, and

they need to ensure that the T-shirts meet the quality criterion,
one of which is colour. Should the item not meet the colour cri-
terion at the first inspection station, but is missed at this stage,
at a subsequent station it is uncovered as not having met the
colour requirements, the t-shirt would need to be removed
from the batch, the batch size adjusted in the system and test-
ed from scratch. Thus the cost attributed to testing 1 T-shirt for
quality would need to be re-applied to this item and thus item
would cost the company more.

Conclusion
Quality has been a focus for many companies for years and thanks to quali-
ty experts we have a better understanding of the principles, dimensions and
absolutes of quality.

Moving on….
To move onto the next lesson, you need to achieve 100% on your assessment. But
don’t worry, if you have understood all the points in this lesson, you will ace it. You
also have multiple chances to pass this assessment.

To view this video online please go to:

https://vimeo.com/337684605/1dfa78b87e

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