Product quality and cost affect every firm's reputation and profitability, as well as the satisfaction of...

 

  

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Product quality and cost affect every firm's reputation and profitability, as well as the satisfaction of customers. This exercise exposes you to some ethical considerations that pertain to certain cost and service decisions that must be made by operations managers. The Dilemma As director of quality for a major appliance manufacturer, Ruth was reporting to the executive committee about the results of a program for correcting problems with a newly redesigned compressor that the company had recently begun putting in its refrigerators. Following several customer complaints, the quality lab had determined that some of the new compressor units ran more loudly than expected. One option for correcting the problem was simply to wait until customers complained and then respond to each complaint if and when it occurred. Ruth, however, decided that this approach was inconsistent with the company's policy of being the high-quality leader in the industry. Insisting on a proactive, "pro-quality" approach, Ruth initiated a program for contacting all customers who had purchased refrigerators containing the new compressor. Unfortunately, her "quality and customers first" policy was expensive. Service representatives across Canada had to phone every customer, make appointments for home visits, and replace original compressors with a newer model. Because replacement time was only 30 minutes, customers were hardly inconvenienced and food stayed refrigerated without interruption. Customer response to the replacement program was overwhelmingly favourable. Near the end of Ruth's report, an executive vice president was overheard to comment, "Ruth's program has cost this company $400 million in service expenses." Two weeks later, Ruth was fired. Questions 1. In the chapter, the term quality is defined as "fitness for use." Explain how that applies in each of the examples given in the case. 2. Most of the quality problems described in the case occurred in tangible physical products. Are quality problems different when intangible services are involved, or are they the same? When answering this question, address the issues of intangibility, customization, and unstorability as key characteristics of services. Give examples to support your conclusions about the similarities and differences in quality problems for tangible physical products and intangible services. Product quality and cost affect every firm's reputation and profitability, as well as the satisfaction of customers. This exercise exposes you to some ethical considerations that pertain to certain cost and service decisions that must be made by operations managers. The Dilemma As director of quality for a major appliance manufacturer, Ruth was reporting to the executive committee about the results of a program for correcting problems with a newly redesigned compressor that the company had recently begun putting in its refrigerators. Following several customer complaints, the quality lab had determined that some of the new compressor units ran more loudly than expected. One option for correcting the problem was simply to wait until customers complained and then respond to each complaint if and when it occurred. Ruth, however, decided that this approach was inconsistent with the company's policy of being the high-quality leader in the industry. Insisting on a proactive, "pro-quality" approach, Ruth initiated a program for contacting all customers who had purchased refrigerators containing the new compressor. Unfortunately, her "quality and customers first" policy was expensive. Service representatives across Canada had to phone every customer, make appointments for home visits, and replace original compressors with a newer model. Because replacement time was only 30 minutes, customers were hardly inconvenienced and food stayed refrigerated without interruption. Customer response to the replacement program was overwhelmingly favourable. Near the end of Ruth's report, an executive vice president was overheard to comment, "Ruth's program has cost this company $400 million in service expenses." Two weeks later, Ruth was fired. Questions 1. In the chapter, the term quality is defined as "fitness for use." Explain how that applies in each of the examples given in the case. 2. Most of the quality problems described in the case occurred in tangible physical products. Are quality problems different when intangible services are involved, or are they the same? When answering this question, address the issues of intangibility, customization, and unstorability as key characteristics of services. Give examples to support your conclusions about the similarities and differences in quality problems for tangible physical products and intangible services.