Global and Capable Quality Management

Table of Contents

List of Abbreviations

List of Figures

List of Tables

1 Introduction
1.1 Entrepreneurial challenges as a result of globalization
1.2 Problem definition and objectives
1.3 Methodical procedure and structure

2 Theoretical Basis
2.1 Globalization as a driver of global quality management
2.1.1 Definition of the term globalization
2.1.2 Definition of a global organization
2.1.3 Goals, motives, and risks of globalization
2.2 Quality management and operational excellence
2.2.1 Definition of the term quality
2.2.2 Total quality management and excellence models
2.2.3 From total quality management to global quality management
2.3 Quality management as basis of business success
2.3.1 Customer satisfaction through fulfillment of requirements
2.3.2 Strategic quality deployment
2.3.3 Financial effects of quality
2.4 Globalization requirements on quality management

3 Benchmarking in Context of Global Quality Management
3.1 Study of Fraunhofer Institute
3.1.1 Study design and results overview
3.1.2 Challenges of global organizations
3.1.3 Success factors
3.2 Benchmarking project of University St. Gallen
3.2.1 Benchmarking design and results overview
3.2.2 Success factors
3.2.3 Excerpt of the annual global quality benchmarking 2015
3.3 Comparison of the study and the benchmarking
3.3.1 Design
3.3.2 Success factors

4 Conclusion and Outlook

Appendix

Bibliography

List of Abbreviations

Abbildung in dieser Leseprobe nicht enthalten

List of Figures

Figure 1: Development of globalization in three phases

Figure 2: Components of the costs of poor quality

Figure 3: Return on quality

Figure 4: Strategies to open up new global markets

Figure 5: Results overview

Figure 6: Challenges in global corporations

Figure 7: Challenges of global QM compared with the degree of standardization

Figure 8: Generic trend of global quality organizations

Figure 9: Summary of the study results

Figure 10: Quality management evaluation model

Figure 11: Study comparison in a holistic approach

List of Tables

Table 1: Three dimensions of quality

Table 2: QM-aspects for different strategies of global market access

Table 3: Comparison of study design

1 Introduction

1.1 Entrepreneurial challenges as a result of globalization

The idea of globalization has been evolving for centuries and still has not stopped. Visionary enterprises have recognized that competitive advantages can be gained with an effective globalization strategy. Many companies have established recognizable competitive advantages in their industry, but to be part of the global arena they spent many years in learning and implementing their global business models. These global activities can include developing strategic alliances with overseas development and marketing partners, off shoring and outsourcing of their product and service development process, moving operations to other countries, and acquiring companies. (Martinelli, et al., 2010, pp. 17-29)

As a result of globalization the competition for global acting companies has changed markedly. The increasing complexity of products and processes, increased environmental and market dynamics, shorter product life cycles, and increasing customer expectations are just some of the current trends. These developments affect the entire organization with all its strategic and operational activities. Thus, the quality management (QM) of global acting companies faces new challenges where established methods and approaches often reach their limits. (Seghezzi, et al., 2013; Meentken, 2015)

1.2 Problem definition and objectives

Being a successful global player, companies face, in consequence of their worldwide activities, these new organizational challenges in a global context of quality management. Therefore companies install an own central department corporate quality management (CQM) that should create added value through enhancement of customer satisfaction, continuous improvement of quality (Q) work, and advancement of quality culture within the enterprise. As top management focuses more on global market entry and cost efficiency than on quality, some firms fail to define the meaning of globalization and a global strategy for corporate quality. However at first, CQM often concentrates mainly on working locally instead of globally. This means that production subsidiaries, located for example in Germany, are supported particularly and involved in diverse central organizational quality projects, whereas production or sales subsidiaries outside of Germany are less in focus of the corporate department QM. Thereby the awareness and acceptance of corporate quality management is disproportionately declining by the distance to the headquarters.

This situation leads to unused synergy effects of globalization through missing global communicated strategies, non-existent central contact persons, different organizational Q-structures, isolated applications and double efforts, as well as no common quality mindset that directly affect the effectiveness and efficiency of organizational performance, the quality of products, internal quality costs, certifications, customer satisfaction, and finally the profits of the company.

Therefore the main objective of this paper is to create a basis for companies or corporate quality management departments to develop a global and capable quality management. Hence this essay is designed to answer the most crucial questions in context of global quality management:

- Which impact does globalization have on quality management?
- How are industries evolving?
- What are the future challenges and opportunities?

The results should help managers to get benefit from these challenges and opportunities. They decide about the strategic relevance of global QM in business. Further steps are recommended at the end.

1.3 Methodical procedure and structure

Chapter 2 creates the theoretical coherence of globalization and quality management. Generally globalization as a driver for global quality management but also the importance of quality management for business success is outlined. The chapter shows the linkage of quality to customer satisfaction on the one hand and to cost efficiency on the other hand. Thus, specific globalization requirements on global quality management are identified. The question how industries are evolving today is answered in chapter 3 by analyzing the study of the Fraunhofer Institute and the industry benchmark of the University of St. Gallen. The benchmarking identifies challenges as well as the most important success potentials of a global and capable quality management. Further steps are explained in the last chapter.

2 Theoretical Basis

The ultimate objective of companies is to make profit. In order to reach that, however, they have to fulfill customer needs. From a manufacturing point of view this latter means they have to provide better quality, higher dependability, higher flexibility, and lower prices than their competitors. If companies satisfy their customers more, they have more profit to reinvest. So they can go abroad to satisfy new customers. Though if today’s global companies have already tremendous experience how to operate abroad, the field of global quality management is becoming more important. (Goldratt & Jeff, 2004, p. 41; De Meyer & Ferdows, 1990, p. 121; Schneider, 2015b, p. 5)

On this basis the following chapter introduces quality management in the context of globalization on a theoretical point of view. The objective is to outline the theoretical basis for later analysis. In a first step globalization as a driver for global quality management is described (2.1). Chapter 2.2 gives definitions of the most important quality issues and illustrates the importance of QM in context of global organizations. Because customer satisfaction, strategic planning, and financial security are essential for survival of a company, quality management in context of operational excellence is explicated (2.3). Moreover the interaction of different strategies of global market access and globalization requirements on QM is depicted (2.4).

2.1 Globalization as a driver of global quality management

The globalization process of organizations over the last 150 years can be illustrated in three phases (Figure 1). Originally, companies had the motive to find new markets for their products. Simultaneously mass production and its corresponding economies of scale paved the way to manufacture large unit volumes. Stock corporations used new opportunities in expanding customer and supply markets, intensifying international trade relationships, and setting up sales outlets abroad. Products were exported from the home facility to the target markets and customers. After World War I and the world economic crisis protectionism of nations, that means export activities, were restricted in many countries. Those made companies start to establish manufacturing activities in the protected markets to serve customers from inside. These manufacturing facilities were independent from their home facilities to a large extent. In the last three decades trade barriers fell, general agreement on tariffs and trade (GATT) rounds led to reductions in tariffs, and alliances (EU, ASIAN, NAFTA), that encouraged the free flow of products, had the effect of an increasing level of globalization. There was no need to locate manufacturing subsidiaries in each country but to use the economies of scale through producing and serving a whole region instead of one single market or country. This model is based on global networked production and cross-functional collaboration including international supply chains. (Abele, et al., 2008, pp. 3-7)

Abbildung in dieser Leseprobe nicht enthalten

Source: (Abele, et al., 2008, p. 4)

Figure 1: Development of globalization in three phases

Quality has always been an important topic for global acting companies. Nevertheless since the implementation of excellence models in the 90´s of the last century, almost no progress in quality has been achieved, neither in research nor in practical experience. Until today there has been no common approach which influences quality management due to globalization. Since today the current assumption has been that worldwide the same quality level should be ensured. But in reality the customer needs and requirements distinguish between particular markets.(Seghezzi, et al., 2013, pp. 281-282)

2.1.1 Definition of the term globalization

In the English language the earliest appearance of the term globalization can be traced back to the 1940s. Half a century later the concept of globalization took the public consciousness by storm. In the 90´s the increasingly interdependent nature of social life on earth was captured by globalization. Nowadays millions of references to globalization can be tracked in media. (Steger, 2013, p. 1)

Although there are differences of opinion in the definitions of globalization (Appendix 1), it is possible to determine some thematic overlap to identify the core qualities. Therefore in context of this thesis and concerning to companies, the following definition of globalization, in accordance to Errasti, is used: Globalization is closely related to the ability to develop and manufacture products not only in the organization´s country of origin but also in diverse regions. The goal is to achieve additional sales in the new markets by using advantages in terms of size, knowledge, and support functions. (Errasti, 2013, p. 5)

2.1.2 Definition of a global organization

As the term globalization can hardly be defined uniquely, there are also different approaches of a global organization. Different executives would argue that a global company pursues customers in all major economies or that it puts down roots in every relevant market in the form of developing, producing and selling locally. Others suggest that the real test of globalization lies in whether the top management team consists of individuals from different nationalities instead of the global dispersion of the business unit headquarters. (Gupta & Govindarajan, 2003, p. 3)

Corporate globality can neither be understood fully from just one perspective (market presence, production bases, or any other) nor is it a variable with only two extreme values (global and non-global). Nonetheless the concept of corporate globality^[1] should be viewed as a four-dimensional construct that includes four major characteristics an organization can be more or less global along. (Gupta & Govindarajan, 2003, p. 4)

The globalization of market presence as the first dimension refers to the degree an enterprise is targeting customers in major markets and industries around the globe. This can range from relatively low to very high, even within the same industry. (Errasti, 2013, p. 44; Gupta & Govindarajan, 2003, p. 4)

The extent of the assessment of the most optimal locations for the performance of several activities in the supply chain describes the second dimension of corporate globality, the globalization of supply chain. A company can have fairly local or regional market presence as well as a highly globalized value chain or vice versa. (Gupta & Govindarajan, 2003, p. 4)

The third dimension is the globalization of capital base. This dimension refers to the extent to which the organization is tapping into the most optimal sources of capital on a worldwide basis. There are many potential benefits for a Chinese company to get listed on the U.S. stock exchange (NASDAQ.A): less expensive capital, enhanced ability to use stock options for attracting to talent, and enhanced ability to make stock-based acquisitions. (Gupta & Govindarajan, 2003, p. 4)

The globalization of corporate mindset is seen as the corporation as a collectivity. Within this collectivity an understanding of cultural and market diversity is given with an ability to integrate across diversity. The mindset of individuals determines the state of any organization´s corporate mindset. Additionally important influence factors on corporate mindset are the decision-making, the processes, and the collection of information within the company. (Forbes Insight, n.d., p. 2; Gupta & Govindarajan, 2003, pp. 4-5)

2.1.3 Goals, motives, and risks of globalization

The main reasons why organizations globalize their business are market development and cost reduction. Further motives normally play a part in globalization decisions in conjunction with the main aims. These include the low-cost sourcing of supplied parts, establishing market-knowledge, high-grade knowledge and qualifications of employees, diversifying risks between different countries and compensate temporary losses in some regions with gains in others (such as exchange rate fluctuation), as well as acquiring prestige by continuing to grow globally and gaining competitiveness. One additional important motive is achieving economies of scale in different company functions like production through shifting production or direct investments, R&D through local know-how advance or parallel research, or marketing and sales through international market segmentation, market entry, or standardization respectively differentiation.^[2] (Abele, et al., 2008, p. 14; Errasti, 2013, p. 19; Pichl, et al., 2007)

As an example companies move fast to China to develop markets via sales outlets because the country offers major growth potential. For tapping into these markets it is important not only to grow by expanding local sales and service capabilities but also to produce products in new markets. On one side the transaction costs for imported products are too expensive, whereas on the other side products cannot be adapted flexibly enough on local market needs. Other important arguments for manufacturing local are the gain in image and trust towards the customer, the elimination of state regulations (barriers of transport) executed on imported products, as well as the shortening of logistic lead times. By opening up production locations to support major markets, organizations have huge saving potentials from optimizing the entire value chain but they are often unable to cope with the complexity of global production networks. Considering that, trade dynamics and foreign investments in major regions decisively affect the performance of enterprises or enterprise networks. (Abele, et al., 2008, pp. 14-16; Errasti, 2013, p. 18)

Globalization may offer companies a lot of growth opportunities, but it can also introduce a complex array of operational risks and can become more business critical than ever before. An increased scale of globalization evokes an increased level of risk that ranges from unfavorable interest and exchange rates to supply chain piracy. A shifting risk profile claims companies to analyze different scenarios, model specific risks and costing options. Complexity is increased by globalization in a number of ways through outsourcing of businesses, a large number of geographic markets, or specific normative and customer requirements like traceability. Regulations and policies in external countries that change very fast can have a dramatic impact on the profitability of foreign investments. Creating transparency in procedures for overcoming regional barriers and developing suitable contingency plans can decrease this uncertainty in rapid-growth markets. (Centurion Lopes, 2013; Majta, 2012)

To cope with the challenges of international workforces like distance, international time zones, cultural and religious differences, the central organization has to create an infrastructure that maintains the diversity of international teams. Consequences could be changes in structures and processes at the headquarters or external sites. Further a higher level of risk exists when the organization does not have the right information (lack of data) to make informed decisions. For example manufacturers implement technologies that can increase visibility into the supply chain to be able to collaborate and communicate more easily with multiple suppliers across a number of regions. When competing on a global scale for customers, there is a need for greater quality, as well as being faster and cheaper. So competitors may bet the company to get specific orders in very aggressive biddings. Nevertheless to succeed in global markets, firms must manage challenges and risks at an executive management level. (Centurion Lopes, 2013; Majta, 2012)

2.2 Quality management and operational excellence

Nowadays impacts of different cultures and markets require stronger coordination and integration of global spread company activities. Therefore quality management has to adapt and develop to the challenges of global organizations to become operationally excellent. (Jochem & Menrath, 2015, p. 121)

2.2.1 Definition of the term quality

Within the ISO 9000:2005 the International Organization for Standardization (ISO) defined quality (of a unit) as the “degree to which a set of inherent characteristics fulfills requirements”. A unit could be a product, a service, a process, a system or an organization like a company or a state. As the term quality is to view in its entirety, it always means the collectivity (set) of inherent characteristics of the unit. (Seghezzi, et al., 2013, p. 34)

Before the ISO defined the term quality many companies were looking for their own interpretation. The definitions ‘Quality as conformance to specification’ or ‘quality means that the customer returns and not the goods’ are two examples. Employees could orient themselves on these own formulations and could imagine what quality means for them. As companies act in a globalized market, the term quality not only has to be defined plausibly and memorably but there has to be a globally valid as well as general understanding of quality. (Seghezzi, et al., 2013, p. 34)

Joseph M. Juran, one precursor of quality management and personal consultant of Mr. Kiichirō Toyoda^[3], depicts two meanings of quality that are of critical importance to managing for quality:

- Quality means those product features that meet customer needs and thereby provide customer satisfaction. The purpose of such higher quality is increasing customer satisfaction to raise income. In this sense higher quality enables companies to make products saleable, meet competition, increase market share, provide sales income, and secure premium prices. However, in conjunction with providing more and better quality features, quality usually costs more because of investments that usually increase costs. (Juran & Blanton, 1999, pp. 2.1-2.2)

- The second meaning of quality is oriented on costs and is defined as the freedom from deficiencies. The freedom from errors enables companies to reduce error rates, rework, and waste that result in field failures, warranty charges, and customer dissatisfaction. Additionally it reduces inspection, shortens time to put new products on the market, increases yield and capacity, as well as improves delivery performance. In this sense, higher quality usually costs less. (Juran & Blanton, 1999, p. 2.2) Hereby the rule of ten^[4] illustrates the importance of fault prevention. It says that if one failure costs 1 € when it is detected in the phase of developing and planning the product, the expenses rise ten times higher to 10 € if it is detected in the phase of engineering, to 100 € in production, and up to 1.000 € if the fault is detected after the product launch process. In the 1960´s the rule of ten was published by the Japanese Tashiaki Taguchi that helped the Japanese economy to remain competitive. (Schillinger, 2015, p. 8)

2.2.2 Total quality management and excellence models

By progressing globalization of economy, national standards could only be an intermediate step because they inescapably had to act like non-tariff barriers to trade. For globalized markets it is important to define uniform requirements of quality management systems that are accepted around the globe. Therefore in 1987 the ISO published the first series of standards that contain various models of organizing quality management systems. These standards provide tools and guidance for organizations that want to ensure that their products and services consistently meet customers` requirements and the continual improvement of quality. In the meantime the ISO 9000 family^[5] is the most anchored and spread standard of the world. (ISO.org, 2015b; Seghezzi, et al., 2013, pp. 193-194) This quality system model becomes binding wherever it is explicitly called up in a contract between a company and its customer or the organization seeks and earns third-party^[6] certification. In fact the ISO 9001:2008 is implemented by over one million companies and organizations in over 170 countries. (ISO.org, 2015b; Juran & Blanton, 1999, p. 11.5) Whereas the ISO 9001 describes a ‘good enough’ model in content of quality management, henceforth they are referred to as so called ‘better and better’ models (Pfeifer & Robert, 2007, p. 157).

In the past 30 years a few companies have radically transformed their business performance. The approaches they used are called total quality or total quality management (TQM) as well as many others like business transformation, performance excellence, business excellence, and six sigma. The companies dramatically changed how they and others see both quality and business management today because of their successes. (Juran & Blanton, 1999, p. 14.1; Pfeifer & Robert, 2007, p. 157)

The concept of TQM^[7], as the most comprehensive quality management concept, stands for an ambitious corporate philosophy and has the almost universally accepted goals of lower costs, higher revenues, delighted customers, and empowered employees. (Juran & Blanton, 1999, p. 14.4) It could be characterized by the following five articles:

- Heavyweight focus on the customer, but reasonable consideration on the needs of all stakeholders
- Better use of the knowledge of employees, tap into the available sources of knowledge and connect these effort with personalized and organizational learning
- Continuous improvement both in small steps as well as radically in larger jumps
- Quality responsibility of each individual, alone and in a team
- Work in processes. (Pfeifer & Robert, 2007, p. 164)

These five articles are globally applicable, independent of the culture or type of company. There is the need that the executive management supports TQM to lead activities and motivate employees. These employees, being a leader or not, are extremely important in context of TQM because they are responsible for the process-quality. Especially the soft factors as culture, style, common values, and quality mindset are essential. The concept of TQM acts multidimensional by considering quality, time, amounts, and costs simultaneously. Hereby TQM stands for more than quality, as the ISO 9001 requires. (Seghezzi, et al., 2013, pp. 238-239)

Concerning the success of TQM in economy a huge number of models were practiced not only in quality management but also in general management. The original models, focused on the TQM-philosophy were transferred to general business management models with the focus on achieving excellence. The models of the European Excellence Award (Europe) or the Malcolm Baldrige Quality Award (America) as well as further models in Asia, Australia, or Africa were applied in all areas of management and organization. (Seghezzi, et al., 2013, p. 240)

To measure the success of award winners Hendricks and Singhal as well as the University of Leicester conducted studies. The research of Singhal and Hendricks was carried out in the US and looked at more than 600 award winners, many of them using the Baldrige framework. The results depict the annual changes in performance over a five-year post-implementation period that starts one-year prior and ends four years after the date of winners receiving their first quality award. It showed that in comparison with a carefully selected control group, the award winners enjoyed in average 48% higher growth in operating income, 37% higher growth in sales, and 8% better return on sales. The study of the University of Leicester concentrated on organizations using the European EFQM Excellence Model. 120 winners of awards showed similar positive results over the five years after winning the award. They achieved a 77% higher growth in total sales, an 18% higher growth in operating income, and 4.4% greater reduction in total costs as percentage of sales. (Boulter, et al., 2005, p. 9; Hendricks & Singhal, 2002, p. 3)

2.2.3 From total quality management to global quality management

The origins of quality management started with a limited scope and an almost exclusive consideration of the product. At this time quality management was closely related to statistics and process quality was rather ignored. In the context of limited scope the term statistical quality control (SQC) seemed reasonable. When the shortcomings of SQC became obvious the next level in the development (1980-2000) of quality management was taken. TQM tried to overcome the shortcomings of SQC and to extend product quality to quality related to the process. The approach was to establish quality as a cultural thinking and to integrate all stakeholders (see Chapter 2.2.2). For more than 30 years the term TQM never lost its validity. Through progresses in telecommunication and information technologies (IT) in recent years, companies find themselves in fortunate and hazardous positions. They can not only conquer new markets in record and easily coordinate global production but also quality issues may result in catastrophic consequences more than ever, since transparency increases. Hence, a next evolutionary leap in quality management from TQM to global quality management (GQM) has to be taken. Market orientation, product orientation and information system & technology network are the dimensions in GQM. All of these dimensions are emphasized particularly within GQM compared to SQC and TQM^[8]. (Schneider, 2015b, p. 5)

2.3 Quality management as basis of business success

This subchapter is about quality management as basis of business success. At that point it is important to clarify the three competences and their content of quality, as highlighted in Table 1. Strategy quality, product and process quality, as well as quality of structure must be considered by organizations to be successful on the market. (Jochem, 2015, p. 2)

Table 1: Three dimensions of quality

Abbildung in dieser Leseprobe nicht enthalten

Source: (Jochem, 2015, p. 1)

How these dimensions of quality affect business performance resulting in lower costs, higher revenues, delighted customers, empowered employees is demonstrated on the next pages. (Juran & Blanton, 1999, p. 14.5)

2.3.1 Customer satisfaction through fulfillment of requirements

In general it is assumed that customer satisfaction increases by the extent of fulfilling their requirements. If the customer expectations are exceeded and price, delivery time, and quantity are correct, customer satisfaction is very high or could even change into enthusiasm. However, if the quotation does not fulfill the expectations the customer is dissatisfied, upset, is not going to buy or, if the customer buys, he will complain about the goods. This general approach of customer requirements relating to customer satisfaction is not always the case. (Seghezzi, et al., 2013, pp. 37-38)

The Kano model^[9] shows that only certain characteristics follow this linear conjunction. Kano names it the fulfillment of performance attributes. Besides that there are basic attributes as well as delight attributes. Customers are dissatisfied if basic attributes are not fulfilled. Over fulfillment of these attributes does not result in enhancement of customer satisfaction. The groups of delight attributes are features the customer does not expect. There are no negative reactions if they are missing but positive once available. (Seghezzi, et al., 2013, pp. 37-38) In course of time attributes can change its position in the model: In the 60´s the introduction of the servo-assisted steering was a delight attribute. In the 70´s and 80´s customers asked for it and today the servo-assisted steering is an implicit presupposition in all cars. If more and more competitors fulfill delight attributes, these attributes move to performance attributes. If they move further to basic attributes they cannot contribute to customer satisfaction at all. The conclusion of the Kano-model is that quality with continuous customer satisfaction is only possible if unspoken desires and unexpected benefit is considered constantly. (Schillinger, 2015, p. 4; Jochem & Menrath, 2015, pp. 83-84)

2.3.2 Strategic quality deployment

Within the systematic approach of strategic (quality) planning, organizations define long-term business goals and identify the means to achieve them. Effective strategic planning enables companies, year by year, to create annual business plans that include necessary goals, resources, and actions, which are needed to move toward the future. The term strategic planning is often misunderstood to be the creation of the strategic plan and not the careful deployment of strategic goals, sub goals, and the assignment of the resources and actions to achieve them. Therefore the term strategic deployment is used as the approach to integrate customer-focused organization-wide improvement efforts with the strategic plan of an enterprise. To be more specific, strategic deployment is a systematic process by which long-term goals with respect to quality are defined and integrated with financial, human resources (HR), marketing, as well as research and development goals into one interconnected business plan. (Juran & Blanton, 1999, pp. 13.1-13.2)

Questions referring the benefits of strategic deployment to compete globally can be answered by the reports of organizations. They emphasize that strategic deployment focuses the organization’s resources on the activities that are necessary to increase customer satisfaction, to decrease costs, and to raise shareholder value. It creates a planning and implementation system that is responsive, flexible, and disciplined. Strategic deployment encourages not only interdepartmental cooperation but provides a process to execute breakthroughs year after year. Companies answered that it empowers managers and employees by providing them with the authority to carry out the planned activities and eliminates unnecessary and wasteful team activities that are not in the plan as well as the existence of many potentially conflicting plans concerning finance, marketing, technology, and improvement. Last but not least strategic deployment focuses resources to ensure that financial plans are achievable. (Juran & Blanton, 1999, p. 13.5)

2.3.3 Financial effects of quality

The knowledge of costs and prosperity is indispensable for the executive management of an organization. Company economics is affected in two fundamental ways by quality. On the one hand quality has an effect on income. At this, quality has the meaning of those features of the product that respond to customer needs. These features make the product saleable and provide product satisfaction to customers. In this case higher quality stands for better respectively more features, which provide greater customer satisfaction. On the other hand quality has – in case of freedom from troubles traceable to office errors, factory defects, field failures, etc. – an effect on costs. Higher quality means fewer errors, fewer defects, and fewer field failures. To reduce the numbers of such deficiencies it takes effort, but in the majority of cases, the end result is cost reduction. (Juran & Blanton, 1999, p. 7.2)

Figure 2 concentrates on Q-related costs associated with poor quality (mainly the costs of finding and correcting defective work) instead of the costs of running the quality department or to attain quality. This is crucial because it quantifies the size of quality problem in a language that has an impact on upper management. One objective of the concept of poor quality is the identification of major opportunities to reduce the cost of poor quality throughout all activities in an organization. Further goals are the identification of opportunities for reducing customer dissatisfaction and threats to sales revenues, to provide a meaning of measurement the results of quality improvement, and to align quality goals with company goals. These objectives contribute to the enhancement of the value of product and process output as well as the customer satisfaction. (Juran & Blanton, 1999, pp. 8.3-8.4)

Abbildung in dieser Leseprobe nicht enthalten

Source: (Juran & Blanton, 1999, p. 8.4)

Figure 2: Components of the costs of poor quality

There is a long-term effect of applying the cost of the concept of poor quality. The expanded scope of this concept involves reductions in cost and increase in sales revenue. The comparison of benefits and investments of quality is called the return on quality (ROQ). In the same sense as other investments such as equipment or an advertising program the ROQ really is a return of investment (ROI). (Juran & Blanton, 1999, pp. 8.15-8.16) Figure 3 illustrates the benefit (reduction of work/cost of quality) of the poor quality concept over the time from the current environment.

[...]

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^[1] See Appendix 2.

^[2] Supplementary reasons can be seen in Appendix 3.

^[3] Founder of Toyota.

^[4] See Appendix 4.

^[5] See Appendix 5.

^[6] Certification body or registrator.

^[7] See Appendix 6.

^[8] See Appendix 7.

^[9] See Appendix 8.