Operations management

Table of Contents

1. Topic pack - Operations management - introduction
2. Operations Management (OM) - Introduction
3. 5.1 Production methods notes
4. 5.1 Production methods - questions
5. 5.2 Costs and revenues - notes
6. 5.2 Costs and revenues - questions
7. 5.3 Break-even analysis - notes
8. 5.3 Break-even analysis - questions
9. 5.3 Break-even analysis - simulations and activities
10. 5.4 Quality assurance - notes
    1. Quality control and assurance
    2. The customer, the customer and the customer
    3. Case study - quality through your customer's eyes
    4. Case study - Portakabin
    5. Operations management and quality
    6. Quality control and quality assurance
    7. Classic quality control (QC)
    8. Quality Assurance (QA)
    9. Total quality culture (TQC)
    10. Total Quality Management (TQM)
    11. TQM planning process
    12. Case study - Six sigma
    13. Lean Production
    14. Continuous improvement
    15. Benchmarking
    16. Case study - Strategy: Benchmarking
    17. Case study - Cadillac benchmarks BMW
    18. Task - Benchmarking report
11. 5.4 Quality assurance - questions and activities
12. 5.5 Location - notes
13. Innovation - notes (HL only)
14. 5.6 Innovation - questions
15. 5.7 Production planning - notes
16. 5.7 Production planning - questions
17. 5.8 Project management - notes (HL only)
18. 5.8 Project management - questions (HL only)
19. Print View

The customer, the customer and the customer

Quality can be defined by specifications set out by the customer, or defined by legal standards; minimum quality standards laid out in the laws of the country.

There are a variety of perspectives that can be taken in defining quality. One view of quality is that it is defined entirely by the customer or end user, and is based upon that person's evaluation of his or her entire customer experience. So quality is a about the 'whole package' not just the product itself, starting with the first encounter with the firm, and extending to the delivery of the product and then to after purchase communications and service.

A more recent definition of quality deriving from Joseph Juran's 'fitness for intended use' says that quality is 'meeting or exceeding customer expectations'.

One measure of quality is the achievement of an ISO standard. The International Standards Organisation (ISO), a non-governmental organisation, is a federation of standards setting bodies with members representing some 163 countries. The ISO 9000 family of standards refers to quality management systems designed to help organisations ensure they meet the needs of customers and other stakeholders. The first principle of its quality management standards identifies a key focus on customers:

W Edward Deming, who we look at in greater detail later in this section, wrote that 'quality is defined by the customer'. Deming states that the customer's definition of quality is the only one that matters. The customer experience is defined as the aggregate of all the interactions that customers has with the organisation. However, this requires the firm to identify its customers. As we will see when we discuss the concept of Total Quality Management (TQM), there are, in fact two groupings of customers:

• External customers usually come to mind first. These are the people outside the organisation who receive goods and services. However, even this requires some clarification. If a firm sells products to a wholesaler, are they the only customer; what about the retailer and the ultimate consumer?
• Internal customers are often forgotten or taken for granted. In an assembly line operation, the next station downstream is an internal customer. Similarly, the production manager who receives a control report from the financial manager is the financial department's internal customer.

Rolls Royce, probably the most iconic luxury car manufacturer in the world, was founded on the basis of the utmost quality in all of its operations.

The modern Rolls Royce is no longer a car manufacturer, having sold its licence to the car brand to BMW, but the Rolls Royce web site shows the value of their brand. Central to their business is their continuing emphasis on quality in all aspects of its business.

This mission is reflected in this statement on their website:

There is little doubt that quality is a major ingredient in the purchasing decision, especially in highly competitive markets, where firms are looking to meet and possibly exceed the quality of their rival's products and services.

It is quite common for firms to attempt to differentiate their business by emphasising the importance of quality in its offering, but this is becoming increasingly difficult as more firms recognise its importance to the success of their business. A greater guarantee of success, however, is putting the commitment to quality as expressed in all marketing and corporate literature into practice at the point of delivery to customers; at this point, however, the reality can be somewhat removed from the idealised version expressed by senior management as we will see on the next page.