Business Management Articles / Quality Management

GOOD, CHEAP, AND FAST

By 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 or service.

QCD Interaction

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" solutions:

- 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

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 always late.

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).

Good, 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!"

Good, 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.

Good, 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.

Bad, 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.

Bad, 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.

Good, 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 Two Only"

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.