Hostile Assumptions #2 - Quality is not a major factor in customer decisions

D

Don Winton

#1
Hostile Assumptions #2

Hostile Assumptions #2

I did not want the #1 thread to get too long and others may still have comments on it, so:

Quality Hostile Assumption #2:

<FONT COLOR="BLUE"><BLOCKQUOTE>Quality is not a major factor in customer decisions, they usually can't tell the difference.</BLOCKQUOTE></FONT></P>

To which Kevin answered:

<FONT COLOR="RED"><BLOCKQUOTE>What are the key factors then? Again, must be born with this knowledge.</BLOCKQUOTE></FONT></P>

If one is to define quality as 'conformance to requirements' the manager above may be correct. But, as we have seen in the Challenger example from #1, quality is much more than that. It is giving the customer what he needs and wants when he needs and wants it (I want to get into space and need to survive doing it), among others.

So, while this manager may be guilty of shortsightedness, what else is there?

Back to an auto example. If the customer gets a good value at the purchase stage, he may be happy for a while. But, what about the after sale service? If this were poor, would the customer give repeat business? Long term reliability? Usage versus dollars spent? The list goes on.

If I supply my customer a product that satisfies the conformance to requirements part, does that mean the customer is going to be happy when the product is received? Perhaps, perhaps not.

Not only must a supplier be able to supply a product or service that will make a profit, they must be able to do this on a regular basis and the method of doing this is to keep current customers happy. They will then send new business and offer repeat business. There are many establishments in my community that I do not frequent and go to great lengths to tell others of my experiences. So, what does this do? The establishments do not have a clue how I feel. They have neither taken the time or energy to find out why I do not frequent their establishments. Why? They do not realize that I can tell the difference!

So my response to #2 would be that the manager in question sees quality as simply meeting some so-called specification and cannot see the system as a whole.

Regards,
Don

------------------
Just the ramblings of an Old Wizard Warrior.
 
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Kevin Mader

One of THE Original Covers!
Staff member
Admin
#2
Quality is not a major factor:

This makes me wonder what formula the manager chooses to use. I suppose the formula might look like this:

Price
------ = Profit
Cost

The Customer driven formula probably looks a bit different. Perhaps:

Quality
------- = Value
Price

I think that Customers want the best for the money they are willing to spend. Quality is determined by the Customer. Cost is controlled by the Producer. But Price is set by the rules of Supply & Demand, so this is set by mutual agreement.

In the first formula, the quickest way to increase profits would be to raise the price. What effect will this have on Supply & Demand (you might price yourself above what the Market will bear)? You could cut Costs, as this too will increase profit. Where should you start? If quality is not important, perhaps using substandard materials or manufacturing practices could achieve this. How long will the management practice succeed?

In the second formula, you could increase value by lowering the price. But this will reduce profit. An organization must still stay in business, so this solution can only be exercised with fixed limits and reduction of costs. You could increase quality and increase value. But many would argue that this would increase costs and raise the price. If you believe that quality is free, then this solution will appear correct. I tend to believe the second.

Now I am wondering what the correlation between Value and Profit are. In my estimation, I'm thinking that it is probably pretty strong. Quality is important to the Customer. It may be a varying degree for different products, needs, expectations. But you need to know this in order to know what to build and what to sell it for.

Back to the group.....
 

Randy

Super Moderator
#5
When I was flying in helicopters in the service we flight crew folks were constantly aware that the quality of what we flew was directly proportional to what the low bidder could afford to provide.

I've got 28 years of service and I can tell you about cost vs. quality
 
B

Batman

#6
I have been away, just started reading these posts. What a great place to vent!


Whithin the context of this post, Randy's equation is appropriate. I like it.

If I was a purchasing person, and saw this equation, I could simply find a cheaper (Cost) source. That would increase quality. Especially if I am being measured on my ability to reduce supplied product costs.

If I was a middle manager, the same thought applies. I can reduce head count (Cost) and increase quality. Especially if I am being graded on improving my budget, and the only thing I have that is flexible is my personnel.

Of course, just finding a cheaper supplier for the sake of price almost never works. We quality folks know this.

Of course just reducing head count is frought with dangers. Again we quality folks know this.

My point here is that it is probable that the equation needs to be more (I don't know what) to be understood by the entire business system. Maybe the Cost part should be [almost] untouchable, so we only improve Value, which improves the Quality?

It may actually have to change for each level of the business, to be appropriate. A business with "silos" will never understand any of this, and I think the entire system needs to comprehend all other aspects of the system. Maybe investors should be looking at "Value" instead of Profit, but that would require they understand that creating value, and increasing it, is the long road to profits.

The equation may have to be a circle -increase quality, increase value, increase customer satisfaction, something like that.

Getting back to the Hostile Assumption #2, I believe that Quality is not a major factor in customer decisions. But they can and will tell the difference, sooner or later. I think supplier quality is assumed to be there. At least it's expected to be there. That's why we are here...
 

Marc

Hunkered Down for the Duration with a Mask on...
Staff member
Admin
#7
Originally posted by Randy:

...the quality of what we flew was directly proportional to what the low bidder could afford to provide...
With manufacturing of military / DoD equipment in my background, I remember the contracts end. They were the limiting factor, and being as the contracts were originated in a DoD organization, the DoD has a lot of the responsibility in specing out what they want. We would typically say "We can do that..." or "We can't do that..." and what it would 'probably' cost. Sometimes the DoD would decide things like "They (military personnel) do not need padding on those seats. They've got tough asses and we need another XXXXX..."



[This message has been edited by Marc Smith (edited 24 February 2000).]
 

Kevin Mader

One of THE Original Covers!
Staff member
Admin
#8
Marc,

I suppose I am glad they weren't thinking that way when it came to helmets and hard heads! Who knows where we'd be today?

Kevin
 

Marc

Hunkered Down for the Duration with a Mask on...
Staff member
Admin
#9
I guess my point is/was there are always trade offs. If Alan replies to this thread I suspect we'll get some RISK commentary.
 
A

Alan Cotterell

#10
Dear Marc - here is the comment. You might have gathered I used to work in a defence manufacturing area, so the comments made already are familiar. I suspect originally the Acceptable Quality Levels (AQL's) used in Mil - Std -131B Sampling by attributes and the corresponding Australian Standard, were based on risk to the end user. For example what level of sampling is required to assure that a soldier confronted with the enemy doesn't have the rifle go 'click', and not fire. Or similarly what risk of a grenade going 'instantaneous' is tolerable.
One hundred percent inspection is not practicable for ammunition as the critical defects are not detectable except by firing the ammo. Inspections are performed at component level and the probabilities multiplied.
I don't believe there is anyone left in the Australian Defence Forces with the knowledge required to estimate an AQL, and most serving officers probably don't even know the concept.
There are two risks considered in Mil-Std 131B, user risk (above)and manufacturer's risk (the risk of the supplier finding a defect).
Where a major problem comes in, is with 'organisational culture'. Would you like to use a grenade or a bullet of which the functionality (safety) depends on 100 percent inspection of components, when the operators in the manufacturing establishment are disgruntled and possibly careless?
 
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