Quality, cost, delivery
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Quality, cost, delivery (QCD), sometimes expanded to quality, cost, delivery, morale, safety (QCDMS), is a
management Management (or managing) is the administration of an organization, whether it is a business, a nonprofit organization, or a government body. It is the art and science of managing resources of the business. Management includes the activitie ...
approach originally developed by the British automotive industry. QCD assess different components of the production process and provides
feedback Feedback occurs when outputs of a system are routed back as inputs as part of a chain of cause-and-effect that forms a circuit or loop. The system can then be said to ''feed back'' into itself. The notion of cause-and-effect has to be handled ...
in the form of facts and figures that help managers make logical decisions. By using the gathered data, it is easier for
organization An organization or organisation (Commonwealth English; see spelling differences), is an entity—such as a company, an institution, or an association—comprising one or more people and having a particular purpose. The word is derived f ...
s to prioritize their future
goal A goal is an idea of the future or desired result that a person or a group of people envision, plan and commit to achieve. People endeavour to reach goals within a finite time by setting deadlines. A goal is roughly similar to a purpose or ...
s. QCD helps break down processes to organize and prioritize efforts before they grow overwhelming. QCD is a "three-dimensional" approach. If there is a problem with even one dimension, the others will inevitably suffer as well. One dimension cannot be sacrificed for the sake of the other two.


Quality

Quality is the ability of a product or service to meet and exceed customer expectations. It is the result of the efficiency of the entire production process formed of men, material, and machinery. Customer requirements determine the quality scope. Quality is a
competitive advantage In business, a competitive advantage is an attribute that allows an organization to outperform its competitors. A competitive advantage may include access to natural resources, such as high-grade ores or a low-cost power source, highly skilled ...
; poor quality often results in bad business. The U.S. business organizations in the 1970s focused more on cost and
productivity Productivity is the efficiency of production of goods or services expressed by some measure. Measurements of productivity are often expressed as a ratio of an aggregate output to a single input or an aggregate input used in a production proces ...
. That approach led to Japanese businesses capturing a major share of the U.S. market. It was not until the late 1970s and the beginning of the 1980s that the quality factor drastically shifted and became a strategic approach, created by Harvard professor David Garvin. This approach focuses on preventing mistakes and puts a great emphasis on customer satisfaction.


Quality basis

David A. Garvin lists eight dimensions of quality: *
Performance A performance is an act of staging or presenting a play, concert, or other form of entertainment. It is also defined as the action or process of carrying out or accomplishing an action, task, or function. Management science In the work place ...
is a product's primary operating characteristics. For example, for a vehicle audio system, those characteristics include sound quality,
surround sound Surround sound is a technique for enriching the fidelity and depth of sound reproduction by using multiple audio channels from speakers that surround the listener (surround channels). Its first application was in movie theaters. Prior to s ...
, and
Wi-Fi Wi-Fi () is a family of wireless network protocols, based on the IEEE 802.11 family of standards, which are commonly used for local area networking of devices and Internet access, allowing nearby digital devices to exchange data by radio waves ...
connectivity. * Conformance refers to the degree to which a certain product meets the customer's expectations. * Special features or extras are additional features of a product or service. An example of extras could be free meals on an
airplane An airplane or aeroplane (informally plane) is a fixed-wing aircraft that is propelled forward by thrust from a jet engine, propeller, or rocket engine. Airplanes come in a variety of sizes, shapes, and wing configurations. The broad ...
or Internet access for a TV. *
Aesthetics Aesthetics, or esthetics, is a branch of philosophy that deals with the nature of beauty and taste, as well as the philosophy of art (its own area of philosophy that comes out of aesthetics). It examines aesthetic values, often expressed t ...
refer to a product's looks, sound, feel, smell, or taste. Aesthetics are subjective; thus, achieving total
customer satisfaction Customer satisfaction (often abbreviated as CSAT) is a term frequently used in marketing. It is a measure of how products and services supplied by a company meet or surpass customer expectation. Customer satisfaction is defined as "the number of ...
is impossible. For example, not all customers like the smell of a certain perfume. *
Durability Durability is the ability of a physical product to remain functional, without requiring excessive maintenance or repair, when faced with the challenges of normal operation over its design lifetime. There are several measures of durability in us ...
refers to how long the product lasts before it has to be replaced. Better raw materials and manufacturing processes can improve durability. For home appliances and automobiles, durability is a primary characteristic of quality. * Reliability refers to the time until a product breaks down and has to be repaired, but not replaced. This feature is very important for products that have expensive maintenance. * Serviceability is defined by speed, courtesy, competence and ease of repair." Customers want products that are quickly and easily serviceable. * Perceived quality, which may be affected by the high price or the good aesthetics of a product.


Product components

The quality of a product depends almost entirely on the quality of its raw material. Suppliers and manufacturers must work together to eliminate defects and achieve higher quality.
Small and medium-sized enterprises Small and medium-sized enterprises (SMEs) or small and medium-sized businesses (SMBs) are businesses whose personnel and revenue numbers fall below certain limits. The abbreviation "SME" is used by international organizations such as the World Bank ...
(SMEs) should discuss with their suppliers how quality improvements can affect the overall performance of the supply chain.
Quality assurance Quality assurance (QA) is the term used in both manufacturing and service industries to describe the systematic efforts taken to ensure that the product(s) delivered to customer(s) meet with the contractual and other agreed upon performance, design ...
can reduce
testing An examination (exam or evaluation) or test is an educational assessment intended to measure a test-taker's knowledge, skill, aptitude, physical fitness, or classification in many other topics (e.g., beliefs). A test may be administered verba ...
, scrapping, reworks, and production costs.


Consequences of poor quality

* Business loss: Poor quality results in unsatisfied customers and business loss, especially where customers can easily switch to a competitor. * Reduced productivity: Poor-quality products must often be reworked or scrapped entirely, which diminishes usable output. * Higher operating costs: Harrington argued that poor quality affects costs. Counterintuitively, higher costs are attached to offering lower-quality products and services. A reduction of cost and scheduling problems is achievable by avoiding the production of poor quality goods and services.


Costs

The biggest costs in most businesses are the four basic types of manufacturing costs: #
Raw material A raw material, also known as a feedstock, unprocessed material, or primary commodity, is a basic material that is used to produce goods, finished goods, energy, or intermediate materials that are feedstock for future finished products. As feeds ...
s # Direct labour # Variable overhead – production costs that increase or decrease depending on the quantity produced. For example, electricity is a variable overhead. If a company increases production, it will also increase the usage of equipment, which will result in a higher electricity bill. # Fixed overhead In addition, there are business costs stay the same, regardless of the production output. Business costs include: # Salaries for employees that do not work directly on the production line (e.g. security guards or safety inspectors.) #
Depreciation In accountancy, depreciation is a term that refers to two aspects of the same concept: first, the actual decrease of fair value of an asset, such as the decrease in value of factory equipment each year as it is used and wear, and second, the ...
costs # Occupancy costs (e.g., property taxes and building insurance) Businesses desire to reduce costs to increase their revenue. Cost reduction strategies include: * Minimizing supplier costs * Adopting
lean manufacturing Lean manufacturing is a production method aimed primarily at reducing times within the production system as well as response times from suppliers and to customers. It is closely related to another concept called just-in-time manufacturing (J ...
* Eliminating waste


Delivery

Logistics Logistics is generally the detailed organization and implementation of a complex operation. In a general business sense, logistics manages the flow of goods between the point of origin and the point of consumption to meet the requirements of ...
are an essential part in providing good
customer service Customer service is the assistance and advice provided by a company to those people who buy or use its products or services. Each industry requires different levels of customer service, but in the end, the idea of a well-performed service is that ...
on time. Logistics customer service can be separated into three elements: * Pre-transaction elements (before delivery) * Transaction elements (during delivery) * Post-transaction elements (after delivery)


Benefits

QCD offers a method of measuring both simple and complicated
business process A business process, business method or business function is a collection of related, structured activities or tasks by people or equipment in which a specific sequence produces a service or product (serves a particular business goal) for a parti ...
es. It also represents a basis for comparing businesses: for example, a business measuring a supplier's delivery performance may compare its findings with the business's own performance.


Flexibility

The "quality, cost, delivery, and flexibility" (QCDF) approach, includes flexibility as the capacity to adapt to changes or modifications in the input quality, output quality, product specifications, and delivery schedules.


Profitability

There are seven measures used to increase profitability.


Not right first time (NRFT)

Not getting things right the first time means wasted resources, effort and time. This all leads to excessive costs for the company and poor-quality, high-priced products for the customer. NRFT measures the quality of a product and is expressed in “number of defective parts per million”. The number of defective products is divided by the total quantity of finished products. This figure is then multiplied by 10^6 to get the number of defective parts per million. NRFT can be measured internally (defective parts identified within the production process) or externally (defective parts identified outside the production process (e.g. by the supplier or the customer).


Delivery schedule achievement (DSA)

DSA analyses how well a supplier delivers what the customer wants and when they want it. The goal is to achieve 100% on-time delivery without any special deliveries or overtime payments, which only increase the delivery cost. DSA measures the actual delivery performance against the planned delivery schedule. Failed deliveries include: # "Not on time" deliveries – both late and early. # "Incorrect quantity deliveries". # Both "not on time" and "incorrect quantity deliveries".


People productivity (PP)

PP is measured by the time it takes (in staff hours) to produce a good-quality product. Obtaining high PP is only possible when: # Most employees' work adds value to the process. # Non-value added work is reduced as much as possible. # Waste is completely eliminated .


Stock turns (ST)

The ST ratio shows how quickly a company turns raw materials into finished, ready-to-be-sold products. The quicker the better. A low ST means that the money is tied up in stock, and the company has fewer funds to invest in other parts of its business. * Overall equipment effectiveness (OEE) The OEE shows how well a company uses its equipment and staff. OEE is calculated on the base of three elements: # Availability – compares the planned and the actual time of the process run. For example, if a machine is planned to run 100 hours a week, but in reality runs only 50, then the availability is 50%. # Performance – compares the ideal output and the actual output. For example, if a certain process is planned to take 10 minutes, but actually takes 20, then the productivity is 50%. # Quality – to show the quality of a product, a company has to compare the number of good parts produced with the total parts produced. If it produces 100 parts per hour but only 50 of them are of saleable standard, then quality is running at 50%.


Value added per person (VAPP)

VAPP shows how well people are used to turn raw materials into finished goods. In order to calculate VAPP, three things need to be taken into account: # The sales value of a unit after production (output value). # The
raw material A raw material, also known as a feedstock, unprocessed material, or primary commodity, is a basic material that is used to produce goods, finished goods, energy, or intermediate materials that are feedstock for future finished products. As feeds ...
value of a unit before production (input value). # The number of direct production process employees.


Floor space utilisation (FSU)

FSU measures the sales revenue generated by a square meter of factory floor space. Usually to achieve higher FSU the floor space has to be reduced. That means eliminating
inventory Inventory (American English) or stock (British English) refers to the goods and materials that a business holds for the ultimate goal of resale, production or utilisation. Inventory management is a discipline primarily about specifying the sha ...
and reducing the necessary space to a minimum.


See also

*
Project management triangle The project management triangle (called also the ''triple constraint'', ''iron triangle'' and ''project triangle'') is a model of the constraints of project management. While its origins are unclear, it has been used since at least the 1950s. It ...
* Trilemma


References

{{reflist


External links


Applying QCD to Supply Chain
Quality management Cost engineering