Quality Management

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QUALITY MANAGEMENT

“Quality is never an accident; it is always the result of high intention, sincere effort, intelligent direction and skillful execution. It represents the wise choice of many alternatives.” – Willa Foster

EXECUTIVE SUMMARY

This research operations report provides an analysis of managing quality in operations with an application to the banking industry. The report defines quality and explores why quality is important by presenting some benefits associated with good quality and some costs of poor quality. The analysis then explores the pioneers of quality management through to modern ideas of quality management.

The aim of this report is to highlight the importance of managing quality for competitive advantage and profitability, through the provision of superior product/service quality. The banking industry was chosen as an industry to apply the concepts of managing quality due to the service nature of the industry as traditional quality management has its origins in product quality but can be extended to include service industries with some modifications.

The source of the materials in the report is various academic journals from varying disciplines about managing quality and academic textbooks.

DEFINING QUALITY

Sebastianelli & Tamimi (2002) define quality through different approaches including the transcendent definition, the products-based approach, the user-based approach, the manufacturing approach and the value based approach. They further state that the different approaches to defining quality are rooted in the varying disciplines; such as marketing assuming the user-based approach and the traditional economic models assuming the value based approach. This paper therefore takes the manufacturing approach, with its roots in operations and productions management approach to quality defined as ‘conformance to specifications’ (Crosby 1979 cited in Sebastianelli & Tamimi 2002). There are also dimensions of quality that consider customer expectations in regards to product or service quality (Stevenson 2009). Product quality is assessed on the 8 dimensions of performance, aesthetics, special features, conformance, reliability, durability, perceived quality and serviceability (Garvin 1987 cited in Stevenson 2009). Service quality on the other hand is often described by the more fitting dimensions of convenience, reliability, responsiveness, time, assurance, courtesy, tangibles and consistency (Zeithhaml, Parasuraman, & Leonard 1990 and Evans and Lindsey 1996 cited in Stevenson 2009).

BENEFITS OF GOOD QUALITY

Garvin (1984 cited in Zu, Robbins & Fredendall 2010), suggests that there is twofold effect of quality performance model on business performance; which are the manufacturing route and the marketing route (Sousa & Voss 2002 cited in Zu et al 2010). This resonates with the definition of quality as dependent on industry or purpose of definition. The manufacturing route benefits include fewer defects, lower liability costs, reduced wastage, and more reliable processes with the resulting effect of lower manufacturing costs and higher efficiency and productivity (Handfield et al. 1998 cited in Zu et al. 2010). On the other hand, the marketing route benefits of good quality include increased customer satisfaction which leads to increased customer loyalty, higher sales and increased market share (Ahire & Dreyfus 2000 cited in Zu et al. 2010). Indeed as will be discussed later, research has shown higher profits for organizations deemed to provide higher quality goods and service as recognized through the Baldrige award consistently outperform organizations in the same firm and outperform share index benchmark (Helton 1995 cited in Jacob, Madu and Tang 2012). Further research also shows that by delivering quality products and services, organizations can command higher prices resulting in better profits (Kaynak 2003 and Soussa & Voss 2002 as cited in Zu et al....
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