Fundamentals of Total Quality Management (New Edition)

Author: Ma Lin et al. / Country:
Publisher:
Publish Date: 2001-07-01
Features:
2. Customer Satisfaction
Customer satisfaction refers to the degree of feeling that customers' requirements have been met. It is the result of comparing the actual value customers perceive from a company's products or services with their expected value. If the actual perceived value aligns with the expected value, customers will be satisfied. If the actual perceived value falls short of the expected value, customers will be dissatisfied. If the actual perceived value exceeds the expected value, customers will be highly satisfied. From a business perspective, customer satisfaction is the outcome of a company successfully understanding the preferences of certain customers or segments and making corresponding efforts to meet their needs. Customer satisfaction has the following basic characteristics:
(1) Subjectivity. The degree of customer satisfaction is based on their perception of products and services, where the object is objective, but the conclusion is subjective. Customer satisfaction is influenced by factors such as their own conditions, such as knowledge and experience, income status, lifestyle, and value systems, as well as media reports.
(2) Hierarchy. People with different levels of needs have different evaluation standards for products and services. Therefore, the evaluation of products or services by people in different regions, social strata, or under different conditions may vary.
(3) Relativity. Customers are usually unfamiliar with technical indicators and economic indicators such as costs of products. They tend to compare the purchased products with other similar products or their past consumption experiences, making the resulting satisfaction or dissatisfaction relative.
(4) Stage. Any product has a life cycle, and services also have practicality. Customer satisfaction with existing products and services comes from past usage experiences, gradually formed through repeated purchases and service provision, thus exhibiting a stage-like nature. Customer satisfaction is a quantitative description of customer satisfaction, representing the comparison between the actual experience of customers receiving products and services and their expected values. Customer satisfaction can be obtained through methods such as letters, interview calls, and statistical surveys. Customer satisfaction is a crucial indicator for measuring business performance. Companies should set customer satisfaction goals, develop plans to achieve these goals, and measure and monitor customer satisfaction quantitatively, collecting customer feedback. By continuously surveying customer satisfaction, measuring, and improving, companies can achieve continuous growth.
3. Improving Quality as the Guarantee of Customer Satisfaction
Product quality is the guarantee of human life and stability. With the development of science and technology, on one hand, new generations of products are continuously created to serve customers; on the other hand, more and more general users are unable to judge the quality of purchased products on their own. Additionally, the complexity and diversity of modern products also make the damage caused by quality defects and failures very significant and widespread. In this context, customers' demands for safe and reliable product quality are becoming increasingly urgent. As Dr. Joseph M. Juran said: "While people enjoy a richer and more diverse material civilization, they also need to place their safety, health, and even the continuous stability of daily life under the protection of a 'quality embankment.'" By strengthening quality management, improving product quality, and providing customers with further guarantees, companies can effectively protect customer interests. Currently, many companies actively engage in quality assurance activities and apply for ISO 9000 certification to gain customer trust. On the other hand, customer satisfaction is the main goal of quality management. By continuously meeting customer needs, companies can achieve long-term development. However, customer demands are constantly increasing, and to continuously meet these demands, product quality must be continuously improved. So, how can this goal be achieved? This requires analyzing the entire quality management system and continuously improving the system and processes to achieve this goal. The main goal of quality management is customer satisfaction, but customer satisfaction is the result of the system's output. To achieve good results, it is necessary to think and control from a systems perspective. In practical work, many companies often focus on managing results with results, which inevitably leads to conflicts between various management goals. When a company focuses on improving quality, the result may be that quality improves, but costs also rise. Conversely, when costs become the focus, they can negatively impact quality. Therefore, such a management method that only treats the "symptoms" is not advisable. The reason is that customer needs are multifaceted. Customers seek comprehensive satisfaction, and simply having high-quality products or low costs alone cannot meet their requirements. Therefore, it is necessary to change the incorrect approach of treating only the "symptoms" and not the "root cause," as the system itself is the root cause. Only by continuously improving the system can companies ensure that they can output products and services that meet customer satisfaction in all aspects, such as high quality, low costs, and short delivery times. Achieving substantial profits is crucial for every company that aspires to survive and develop, and this principle is well understood by any senior leadership. For this reason, all companies place great importance on profitability. To achieve better economic benefits, management departments often adopt various measures, such as expanding marketing and increasing sales; or, by. However, improving the quality of products and services to enhance economic benefits is often overlooked, even with the mistaken belief that improving quality will hinder economic benefits. Such misconceptions lead to incorrect behaviors, such as reluctance to invest in quality or the belief that maintaining a certain defect rate is reasonable. In reality, by more effectively addressing quality-related issues and improving quality, companies can make significant progress in enhancing economic benefits. Increasingly, more companies are recognizing this. For many companies, the cost of poor quality is substantial. This cost includes explicit costs such as inspection, testing activities, scrap, rework, and complaints, as well as implicit costs incurred by managers, designers, procurement personnel, supervisors, and sales personnel. This is because if quality fails, they still have to spend a lot of time and effort on re-planning, redesigning, and holding coordination meetings. When weighted, these costs account for a high proportion of sales. Statistics show that, generally, the cost of poor quality is about 10% to 30% of sales. Therefore, by continuously improving processes and the management system, companies can significantly enhance economic benefits without further investment. This is what we commonly refer to as the "quality-cost-benefit" path. To better improve a company's economic benefits, it is necessary to have a comprehensive understanding of the relationship between quality and benefits, quality and costs, and reveal the changing patterns of quality-cost-benefit. This inevitably requires quality economic analysis and quality cost analysis.
2. Quality Economic Analysis
Quality economic analysis is the activity that studies the relationship between a company's economic benefits and quality. It primarily analyzes the relationship between quality and benefits, quality and costs, and reveals the changing patterns of quality-cost-benefit. Quality economic analysis inevitably involves the analysis of product quality. The matching of quality and economics also runs through the entire process of product quality generation, formation, and realization. By conducting economic analysis of product quality, companies can achieve production based on sales, quality based on needs, and provide customers with an economical quality level with minimal labor costs, thereby gaining or maintaining a competitive advantage in the market. Common methods of quality economic analysis include:
(1) Value Engineering, also known as Value Analysis. It is a systematic functional analysis of products and/or services, using value as the criterion for optimizing the balance between function and cost. The goal is to propose recommendations or measures to improve the value of products or services, thereby improving product quality, reducing costs, and shortening development and production cycles.
(2) Life Cycle Cost Analysis. It is a structured study of the estimation of life cycle costs and each cost component, aiming to identify the dominant influencing factors of life cycle costs, cost risk items, and cost efficiency influencing factors.
(3) Quality Cost Analysis. Quality cost refers to the total cost incurred to ensure satisfactory quality, as well as all losses caused by product quality not meeting expectations. Quality cost reflects the concept of quality economics. Through quality cost analysis, companies can promptly grasp the status of product quality, quality improvement efforts, and the impact of personnel work quality on economic benefits.
(4) Quality Improvement Analysis. The specific approach of quality improvement analysis is as follows: First, determine the quality characteristics of a product that customers are concerned about. Then, calculate the cost of improving each quality characteristic and compare it with customer evaluations to determine the cost-benefit ratio. Finally, based on the cost-benefit ratio, determine the order of improvement. In addition, other methods of quality economic analysis include quality level analysis, defect rate analysis, rework analysis, advertising cost analysis, warranty period analysis, packaging cost analysis, etc.
3. Quality Cost Analysis
Quality cost refers to the total cost incurred by a company to ensure satisfactory quality, as well as all losses caused by product quality not meeting expectations. Quality cost reflects the costs directly or indirectly incurred due to the production of defective products, i.e., the costs spent on manufacturing defective products, but the cost of manufacturing qualified products is not included in quality costs. Quality costs can be divided into direct quality costs and indirect quality costs.
(1) Direct Quality Costs. These are the quality costs incurred during the manufacturing and sales processes of products, generally consisting of internal failure costs, external failure costs, appraisal costs, and prevention costs. Internal failure costs refer to the total losses caused by quality defects within the company and the costs incurred to address these defects. This includes: scrap losses, rework costs, inspection and screening costs, downtime losses, and defect handling costs. External failure costs refer to the total costs paid by the company when customers discover product defects during use. This includes: warranty costs, claim costs, litigation costs, return costs, and price reduction costs. Appraisal costs refer to all costs incurred to inspect product quality under the condition of "first-pass acceptance." This typically includes: incoming inspection costs, process and finished product inspection costs, re-inspection costs of inventory materials, evaluation costs of testing equipment, and quality review costs. Prevention costs refer to all costs incurred to prevent quality defects, ensure and improve product quality, and reduce failure costs and appraisal costs. This typically includes: quality system program and quality plan development costs, quality management training and education costs, and product review costs.
(2) Indirect Quality Costs. These are further extensions and expansions of direct quality costs, involving corporate activities outside of manufacturing and sales, as well as external corporate activities. Generally, this includes: intangible quality costs, customer quality costs, supplier quality costs, and equipment quality costs. Intangible quality costs refer to the costs associated with losses in reputation caused by customers discovering quality issues. Customer quality costs refer to the costs incurred by users to maintain product quality during the product's service life, including maintenance, repairs, replacement of parts, and similar costs. Supplier quality costs refer to the quality costs included in the material selling price of suppliers. Equipment quality costs refer to the investment in testing and control equipment for products or services, as well as related installation costs and site occupancy costs.
Quality costs reflect the concept of quality economics. By statistically analyzing and evaluating quality costs, companies can promptly grasp the status of product quality, quality improvement efforts, and the impact of personnel work quality on economic benefits. At the same time, it can clarify the quality and economic responsibilities of each department within the quality system, thereby monitoring and evaluating the effectiveness of the quality system and promoting continuous improvement.