IBBusinessDPBusiness ManagementHLRevision Notes5. Operations Management5.3 Lean Production & Quality ManagementQuality Management

Quality Management (DP IB Business Management)

Revision Note

Flashcards
Lisa Eades

Written by: Lisa Eades

Reviewed by: Steve Vorster

An Introduction to Quality Management

  • Quality management involves a business carefully considering the characteristics and features of a product that satisfy the needs of customers and ensuring that it has effective systems and procedures to meet these

  • Businesses need to maintain a level of quality that continues to attract and retain customers if they want to remain successful

  • Customer perceptions of quality are related to a range of product or business features

Diagram: factors that influence quality perception

The perception of quality is influenced by appearance, durability and the quality of customer service
The perception of quality is influenced by appearance, durability and the quality of customer service

  • Customers may consider products or services to be of good quality if they

    • Look good and are sold by a reputable business or brand

    • Are reliable and durable

    • Are safe and fit for purpose

    • Receive good customer service, including after-sales service

Examiner Tip

High quality may provide justification to charge a premium price for products

However, it is not always the case that good quality leads to increased sales

For many customers as long as a product's quality is 'good enough' they will be reluctant to upgrade to a more prestigious brand, especially when their incomes are squeezed

Measuring Quality

  • Businesses can measure the quality of their output in a range of ways

Reject Rates

Product Returns

Product Recalls

  • The percentage of output considered not fit for sale 

  • The percentage of items returned by unsatisfied customers

  • Incidents of products brought back to be corrected

  • In addition factors such as customer satisfaction, customer loyalty and market share can provide useful indications of customer experiences and perceptions of quality

    • Customers satisfied with quality are less likely to make complaints and are likely to give positive feedback in surveys

    • High quality can drive repeat purchases

    • Increased market share may demonstrate satisfaction with quality over that offered by rival products/services

Categories of Quality Management

  •  A businesses approach to quality management falls into one of two categories

    • Quality control involves inspecting the quality of output at the end of the production process

      • Workers focus on maximising output

      • Products that do not meet standards are rejected before they are released for sale

    • Quality assurance involves inspecting the quality of production throughout the process

      • Workers check their own work and, sometimes, the work of others at various stages of production 

      • Some business take a whole business approach to quality assurance with systems such as quality circles, benchmarking and Total Quality Management (TQM)

An Evaluation of Approaches to Quality Management

Method

Benefits 

Drawbacks

Quality Control

  • Quality specialists are employed to check standards

  • An inexpensive and simple way to check that output is fit for purpose

  • The rejection of finished goods is a significant waste of resources 

  • There is little focus on the cause of defects

Quality Assurance

  • Quality issues are identified early so products may be reworked rather than rejected

  • The cause of defects is the focus so future quality issues may be prevented

  • Staff training and a skilled workforce is required so labour costs may be increased

  • Reworking may lengthen the production process

Quality Assurance Using Quality Circles

  • Quality circles involve  groups of workers meeting regularly to identify and solve quality problems in the production process

    • Groups are made up of volunteers from different departments

    • Meetings are typically chaired by a senior leader

    • Members work together to execute and manage solutions

An Evaluation of Quality Circles

Advantages

Disadvantages

  • Improved worker motivation as they are involved in decision making

  • Relevant and focused solutions are likely as workers are familiar with processes

  • Improved productivity as workers are engaged in solutions they have developed themselves

  • Management need to have trust in workers’ views and solutions 

  • Workers are likely to need ongoing training to be able to contribute most effectively

  • Meetings and structures must be organised regularly

Quality Assurance Using Benchmarking

  • Benchmarking involves a business comparing its quality and performance with market leaders within the same industry

  • Benchmarking can be internal or external

Internal benchmarking

  • Comparison of different functions within a business such as finance and marketing

    • Performance 

      • Comparison of key performance indicators such as labour productivity or labour turnover rates

    • Process

      • Comparison of business operations and processes such as call centre queue times or delivery times

External benchmarking

  • Comparison of key performance indicators (such as product recalls) against those of market leaders in an industry

  • International benchmarking compares key performance indicators against those of market leaders overseas

An Evaluation of Benchmarking

Advantages

Disadvantages

  • Helps identify areas where businesses can improve their performance by learning from the best practice of other successful companies

  • Can identify innovative practices and processes used by competitors

  • Can support the setting of realistic performance goals by comparing current performance with industry standards

  • Workers may feel a sense of pride and motivation when they see their employer striving to be a leader in the industry

  • Differences in metrics used to measure performance can affect the accuracy and comparability of benchmarking data

  • Best practices from market leaders may not always be directly applicable to the unique needs of a specific business

  • Small businesses may struggle to find the time and resources for data collection, analysis and implementation required for benchmarking

  • Focusing too much on benchmarking against competitors may lead to a narrow view of success that ignores ideas for improvements that come from other sources

Quality Assurance Using Total Quality Management (TQM)

  • Total Quality Management (TQM) places quality at its core and makes every worker responsible for quality throughout the business

    • Quality is considered from the customer's perspective

    • Inefficiency and wastage is removed from every business activity or function - including those that are not directly related to production

An Evaluation of TQM

Advantages

Disadvantages

  • Quality in all aspects of the business improves efficiency which should lead to improved profitability

  • A positive culture of constant improvement and high standards exists throughout the business

  • All workers must be committed and receive significant continued training

  • Careful monitoring and control is required by managers capable of setting a good example

The Benefits of Lean Production & TQM

  • Implementing lean production and TQM can have a positive impact on various aspects of a business

    • It can lead to higher profits as a result of greater efficiency, less waste and lower costs

    • Fewer errors can lead to improved customer satisfaction and greater customer loyalty

Positive Impacts of Lean Production and TQM

Benefit

Explanation

Waste reduction

  • By eliminating all forms of waste costs are reduced and overall profitability is likely to be improved

Streamlined processes

  • Removing unnecessary steps from business processes leads to faster production and improved efficiency

Improved quality

  • The strong emphasis on detecting and eliminating defects early in the production process improves product quality and customer satisfaction

  • This focus on customer satisfaction can lead to increased loyalty and repeat business

Employee empowerment

  • Taking ownership of quality can lead to increased employee morale and engagement

Environmental Impact

  • The focus on waste reduction often results in a lower environmental impact through lower energy consumption, reduced emissions and minimal resource usage

  • However, successful implementation of lean production is likely to require a cultural shift and ongoing efforts to sustain improvements

    • Commitment to careful recruitment, training and engagement of employees 

    • 'Getting it right first time' should be at the heart of all processes

  • It also needs strong relationships with suppliers

    • Defect-free components must be delivered on-time, in the right quantities

    • Trust needs to be developed with a small number of suppliers, emphasising quality rather than cost alone

Examiner Tip

When developing a longer response that requires a justified decision, make sure that you consider the advantages and disadvantages of both options

This analysis should be wide ranging - that is, you should consider the impact on a variety of business functions, stakeholders, aims and objectives. Try to avoid focusing too much on financial aspects - though these should be covered.

National & international Quality Standards

  • Quality standards include national and international benchmarks that demonstrate a businesses commitment to quality

    • They are administered by independent bodies that carry out stringent tests to ensure standards are met or exceeded

    • Businesses awarded these standards are revisited regularly to ensure that standards are maintained

Diagram with a Selection of Quality Standard Accreditations

Meeting strict international quality standards helps businesses to enter new markets more effectively
Meeting strict international quality standards helps businesses to enter new markets more effectively

The Importance of Quality Standards

  • Achieving accreditation reassures customers of their commitment to quality

  • Accreditation also provides a range of further benefits

  • Having quality accreditation can set a business apart from competitors

  • Obtaining quality accreditation can allow a business to enter these markets 

  • They reduce the risk of legal issues and penalties

Examiner Tip

You will not need to write about specific quality standards - it is enough to demonstrate an understanding of the types of protection they provide to consumers

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    Lisa Eades

    Author: Lisa Eades

    Expertise: Business Content Creator

    Lisa has taught A Level, GCSE, BTEC and IBDP Business for over 20 years and is a senior Examiner for Edexcel. Lisa has been a successful Head of Department in Kent and has offered private Business tuition to students across the UK. Lisa loves to create imaginative and accessible resources which engage learners and build their passion for the subject.

    Steve Vorster

    Author: Steve Vorster

    Expertise: Economics & Business Subject Lead

    Steve has taught A Level, GCSE, IGCSE Business and Economics - as well as IBDP Economics and Business Management. He is an IBDP Examiner and IGCSE textbook author. His students regularly achieve 90-100% in their final exams. Steve has been the Assistant Head of Sixth Form for a school in Devon, and Head of Economics at the world's largest International school in Singapore. He loves to create resources which speed up student learning and are easily accessible by all.