Business Management Articles / Quality
CHEAP, AND FAST
Rene T. Domingo
A product or service, can be thought of as
having three dimensions: quality, cost, delivery
or QCD. Product quality is the attribute desired
by the buyer and gives the product its primary
value and usefulness to him. Specifications,
tolerances, dimensions, durability, reliability,
features, and variety are examples of quality
indicators. Cost, the second dimension, refers
to the cost of producing and delivering the
product to the customer; it has an impact
on another cost: the cost to the buyer or
the "price" he pays for the good.
Cost affects the marketability of the product
and the profitability of the producer. High
price is often a consequence of inefficiencies,
low productivity, and high cost of producing
the product. Delivery involves bringing the
finished goods or services to the customer
at the right time, at the right quantity or
amount, at the right place. Delivery performance
includes service levels, product availability,
and order processing time
These three dimensions - QCD - are like the
three legs of a stool on which the customer
would sit. A problem in at least one of them
means 1) there will be no product 2) there
will be no buyer. One cannot be sacrificed
for the sake of the other two dimensions.
The buyer wants a three dimensional product
- not two, surely not one. He wants a good
quality product at the right cost, at the
right time and quantity. All are equally important
to him. A good quality, reasonably-priced
product which is delivered late is for practical
purposes useless to the customer and unsalable.
A quality product which is promptly delivered
but is outrageously priced because its manufacturing
cost is similarly outrageous cannot be sold.
The low competitive price and on time delivery
of any merchandise cannot offset its lack
of quality and change the decision of the
customer to reject it. To stay in business,
therefore, it is important for any company
to maintain the QCD balance and harmony of
its final output, be it a manufactured product
The QCD mission of production management is
not an easy task. The three factors are seldom
at acceptable or optimum levels simultaneously.
They are always in a state of flux - one factor
will be much more problematical or critical
than the other two at any one time. The production
manager is often subjected to tremendous pressure
from inside and outside the company to correct
and control just the runaway element. Unfortunately,
he cannot simply juggle the three and do some
trade-offs, for they are mutually interdependent
on each other. Some trade-offs or single factor
adjustments may be tolerable in the short
term; many are dangerous and may worsen the
problem by causing unexpected, undesirable
changes in the other two factors.
Let us look at some of the "expected"
repercussions of trade-off, "band-aid"
- A measure to solve a persistent quality
problem may be the introduction of new technology
and automation which may increase processing
cost. Product delivery may be delayed if installation
takes too long.
- The strong pressure from management to cut
costs may lead to the employment of less skilled,
cheaper labor and/or the substitution of inferior,
cheaper raw materials, both of which may cause
quality and delivery problems later on.
- The unbearable pressure to rush the delivery
of promised goods may tempt the production
manager to hasten, shorten, if not omit, some
critical, usually bottleneck, operations or
processes, resulting in serious quality problems
at the end of the line. Since the cost of
the resulting scrap and defects is spread
out over the good ones, manufacturing cost
likewise increases. Quality and after-sales
service problems await the production manager
who tries to solve delivery problems by shipping
old, unreliable inventory or stock.
Total Quality Management (TQM) defines "Quality"
as "what the customers says it is"
or "what the customer wants." This
Quality (Big Q) is very much different from
the conventional quality (small q) or generic
quality. What most customers want is not just
a high quality product, but one they could
have at a low price and delivered on time
or earlier. In a manner of saying, what the
customer wants is "good, cheap, and fast."
Having a high quality product does not make
a company a TQM practitioner, if the price
is high or uncompetitive and/or delivery is
The QCD (quality, cost, delivery) model, with
all its iterations as shown in Fig. 1 (QCD
Performance Matrix), is a useful framework
to find out where one company is situated
in the TQM process or journey. It will also
help the company benchmark with competitors
with reference to the Quality (Big Q).
1 QCD Performance Matrix
Expensive, and Fast
One of the most common management styles is
the "Cost Plus" approach characterized
by a high quality product delivered on time
or readily available, but sold at a high price.
The conventional wisdom here is that if the
customer wants high quality and fast service,
he should be willing and able to pay extra
or a premium for them. A vast majority of
companies are micromanaged this way: "Charge
the customer for everything he asks for!"
Expensive and Slow
The second model for uncompetitiveness is
the "Snob" approach: premium quality,
high price, and long delivery waiting period.
The logic here, to both producers and target
customers, is that a high quality product,
usually a luxury item, will have a "snob
appeal" if the price is exorbitant and
waiting time long enough to give an aura of
being "hard to get", "handcrafted"
or "customized", "not available
to common people". The reality however
is that the processes may be too wasteful
and inefficient or the profit margins too
high; customers may think that they are paying
extra or waiting extra for extra value to
the product they are purchasing. The truth
is that they are paying for the inefficienciesand
excessive margins of the seller.
Cheap, and Slow
The third model or "Sold Out" phenomenon
is commonly seen in very popular products
that are high quality, low priced, but nowhere
to be found by the frustrated consumer. The
item, or its most saleable model, is almost
always out of stock. The queue or reservation
list, or waiting line is eternally long and
may take months to serve. The seller does
not mind the long lines and the customers
lost in the queue, since the cash register
keeps on ringing.
Cheap, and Fast
The next type is the "Commodity"
product that has mediocre quality, low price,
and is readily available. Consumers buy these
products because they are necessities usually
provided by numerous suppliers. The market
is very price sensitive, but not particular
about quality and service, which are basically
the same from all suppliers. No one supplier
stands out from the rest. The industry in
effect lures the customers into lowering their
quality standards and expectation.
Expensive, and Slow
The quality nightmare or "Hopeless"
case occurs when the customer gets exactly
what he does not want: bad quality products,
expensive, and late. The only reason customers
have the patience and composure to get these
is when there is only one supplier (monopoly)
or the whole industry has the same mediocre
performance. "Bad, expensive, and slow"
companies are sure to self destruct.
Cheap, and Fast
TQM companies consistently show "World
Class" performance by coming out with
high quality, low priced products delivered
fast - the universal expectation of any customer
on any product or service anywhere. TQM has
shown that "good, cheap, fast" is
not only possible, doable, but also a "must"
for survival in very competitive markets.
TQM companies do not compromise any of the
QCD element for another. All efforts and systems
are focused into delivering the QCD expectations
of customers all the time at the same time.
TQM companies do not advertise, as one restaurant
did, "GOOD, CHEAP, AND FAST", and
then follows up with a disclaimer "Pick
Present efforts to improve customer satisfaction
and service are often myopic and tend to focus
on one QCD element or "Pick one only"
approach. Quality improvement programs and
projects often focus on quality (small q)
or product/process quality, with little or
no effort to cut costs (wastes) and cycle
time simultaneously. "Rightsizing",
"downsizing" and other cost-cutting
initiatives fail in that they focus solely
on cost, specifically labor costs, while sacrificing
quality, delivery, and employee morale in
the process. Meanwhile, current "reengineering"
efforts are heavily biased towards cycle time
reduction and speeding up delivery or customer
order processing time. Many "reengineering"
initiatives put little emphasis on improvement
of product and service quality (small q) ,
and focus on capital-intensive information
technology (IT) solutions that may drive costs
up. TQM combines and coordinates all improvement
efforts into one that will redound into the
same bottom line: customer satisfaction.