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PRINCIPES OPÉRATIONNELS - QUALITÉ EN ACTION

CRITERIA AND BUSINESS EN

The primary role of quality criteria is to identify dimensions of the product or service that appeal to consumers and to generate revenues from these criteria !

To do this, we give details about the connection between the value of the quality criteria and the customer expectations. In short, we link closely each quality criteria with its capacity to create revenue.

Then, we detail the process contribution to revenues and the role of the quality management system in this contribution.

After this, the process is detailled in his two major roles : to record the costs, on one side, and to catch the revenues, on the other side.

Then, we detail the connection between quality value and cost of poor quality.

To finish with, a link is established between the quality criteria and the quality benchmark.


Quality criteria in term of value :

The consumer is ready to pay for the quality criteria he thinks are useful. For example, he will buy a “bio” product at his grocery :

  • if he is convinced that biological agriculture is useful for his health,
  • if the product is really of a “bio” origin,
  • if the price is not to high compare to an standard product.

The value of a quality criterion is the amount of money the buyers are ready to pay for this criterion.

To evaluate the market price for a criterium, go to Quality/Price benchmark

In this way, each quality criterion can be “tested” on the market and have a market price. This value can be a percentage of the selling price.

Quality criteria and selling price (table 1)

 

Supply

   Production   

Packaging

   Retailer    

   % of Price   

Manufacturing

 

52

   Original product   

 

 

 

4

 

   Home made    

 

 

6

 

 

   Consumers informations   

 

8

Quality Management System (QMS)

22

IT Infrastructure

8

   Total

100

* numbers are given as examples.


Portfolio value of quality criteria :

This step is analysing the quality criteria contribution to the revenues. All quality criteria of each product (or service) have been groupes together and a table is established. At a final step, the products portfolio has been transformed into a quality criteria portfolio and one can evaluate the global impact of the criteria on the revenues.

                   


Quality criteria and quality management system :

A quality criteria has to be managed by a quality approach. This quality approach is either directly integrated in the practices of the business or managed by a Quality Management System. In all cases, quality criteria are added value items that generate income and profit.

                   


Several terms of value for the process:

The quality criteria that are delivered with the product (or service) to the customer are the output of the process. So from the quality criteria contribution to the revenues, one can establish the contribution of the process to these revenues. This is the first value term of the process.

But the process centralizes all costs involved for manufacturing the product (or service). By counting the expenses of each resource used in the process, one can establish the total cost of the output. This is the second value term of the process.

As a result, each quality criterion is evaluated with two numbers :

  • its revenue,
  • its cost.

Quality value and cost of poor quality :

Cost of poor quality is described in X50-126 standard. Four domains of costs of have being identify :

  1. cost of internal failure (the defective product is not delivered to the customer),
  2. cost of external failure (the defective product is delivered to the customer and might be returned to the producer),
  3. cost of appraisal (looking for defects),
  4. cost of preventive (looking for cause of defects and its elimination).

These costs have been translated in a sigma level and then, expressed as a percentage loss of revenues :

Level of Sigma and revenue loss

    Sigma level    

    DPMO    

    Cost of poor quality in % of revenue’s loss    

3

66 807   

25 à 40 %

4

6 210   

15 à 25 %

5

    233    

5 à 15 %

6

3,4   

< 1 %

This is a Six Sigma benchmark for cost of quality.

To summarize, the quality is evaluated by its different criteria and the cost of poor quality is an adding measure that give a view of the total benefit of quality.


Link with benchmark for quality :

Quality criteria are aligned with the quality benchmark which reflects the markets expectations on the quality level. For example, in the clothing business, a level of 4 sigma is considered has "good quality" for the packaging criteria or a level of 4,8 in the canning industry for its recycling criterion.

The point is to be at the market level, no more, no less.

See Benchmark for quality in different sectors