Read the bellow article, and answer the question :

(Explain in your own words the culture of quality management. What are the various types of costs of quality and which one is the most difficult to manage? Justify your reasoning. )

Article title: What is Quality Management and Why Does it Matter?

When people use the word Quality, its usually as a synonym for good. Many brands tout their products as high quality or superior quality in just this way without really defining what the characteristics of Quality are, and were more likely to see it in marketing material than in integral business process or policy documents.

Culture of Quality

Quality specialists use the term Total Quality Management (TQM) to describe the implementation of the fundamental principles of Quality at all levels of an organization. While TQM has traditionally suggested wide adoption of process tools and analytical methods, the definition has expanded to consider the wider cultural principles of the entire organization. Culture of Quality is the extension of TQM to include both explicit efforts by people to improve Quality and the underlying beliefs, philosophies, and behaviors on which those efforts rest. A successful Culture of Quality is one in which the core Quality values of the organization, such as a focus on responding to the needs of the customer and on the need for data-based decision-making, and the basic assumptions of workers regarding the nature of human relationships and their place in the world, such as the value of collaborative relationships among people with common goals and the importance of developing long-term personal connections, are closely integrated with one another.ⁱⁱⁱ Commitments to core values are relatively easy to measure, since they are overtly expressed and understood at all levels of the organization. Basic assumptions often resist explicit analysis, even to the people who hold them, which can make engagement at this level difficult.

When an organization adopts a Culture of Quality, the success of its implementation can depend on whether core principles and underlying assumptions already reflect Quality or can be effectively modified to embrace Quality through dedicated change management. The further away an organizations culture is from adhering to the principles of a Culture of Quality, the more difficult and failure-prone the implementation is likely to be, particularly if a commitment to core values clashes with underlying assumptions. What are the typical attributes of an organization with an integrated Culture of Quality? In exemplary cultures, leadership demonstrates its commitment to Quality by providing the necessary support to Quality initiatives and communicating about Quality values in clear and unambiguous language. Employees encourage sharing ideas and cross-functional work, while feeling that leadership trusts them to be pro-active and to apply their Quality and problem-solving skills according to their best judgement.vi A Culture of Quality is therefore only possible when leadership and workers share an aligned and comprehensive understanding of not only the core values and processes they use and espouse, but their fundamentally basic assumptions of the nature of work and human relationships on which those core values rest.

The People Responsible for Quality

W. Edwards Deming, one of the founders of the Quality movement in the United States, said that Quality is everyones responsibility. Most people have interpreted this as meaning that Quality is something that should be ubiquitous in an organization. In other words, Quality should be sewn into the very fabric of an organizations identity, not simply the responsibility of an isolated and siloed Quality Department. Yet we should consider what author and Quality expert Rafael Aguayo tells us was Demings in-person conclusion to his famous injunction:

Quality is everyones responsibility, but top management have more leverage in their decisions than anyone else.

The initiative for Quality must come from the top.vii While responsibility for implementation and execution will lie with a Quality leader in a dedicated Quality department with support from their counterparts in operations, engineering, sales, marketing, and IT, the desire to implement Quality standards throughout an organization must come from the leadership team. They must walk the talk for a Quality program to be successful. While there is certainly value in instilling the concept of Quality in every member of an organization, without direct and explicit initiative and methods for implementing those ideas, another way of saying Quality is everyones responsibility is Quality is no ones responsibility in particular. Everyone should strive for Quality, but defining how to do that in very specific terms is something that can come only from the initiative of organizational leadership and be entrusted to specific cross-functional stakeholders for implementation. This is further reinforced in the latest ISO 9001:2015 standard, which shifts responsibility and accountability from a Quality designate back to the leadership team where it belongs.

Business Case for Quality Management

Implementing Quality Management and investing in a QMS requires the initiative of executive sponsorship in any organization. Leadership typically doesnt spend money without a strong business case that highlights either the costs of not investing (COPQ) or the market advantage that can be gained by investing. Given the reality that the benefits of Quality Management are difficult to quantify in direct terms and have longer payback periods, executives with no experience in Quality Management often do not see the value of investing in it compared to investments in sales and engineering, where the direct benefits are easier to calculate.

The reality is that the typical catalyst for garnering executive sponsorship for Quality is often a negative compelling event, such as a recall or significant loss of market share.xi While negative compelling events can indeed be powerful catalysts for change and help focus executive attention on Quality Management, it may also come at tremendous cost: lives may be lost, ecosystems may be destroyed, and the organization may suffer significant brand and financial damage as these external failures increase costs by an order of magnitude.

Gaining executive support starts with presenting a strong business case supported by qualitative and quantitative data that tell the story of positive compelling events and financial return such as reduced waste, increased efficiency, and increased customer satisfaction. By making a strong case for proactively investing in Quality, organizations can avoid situations in which they only see value in Quality by responding to negative events that have a destructive and irreversible impact on the organization, the marketplace, and the environment.

Cost of Quality

Cost of Quality (COQ) is a way of measuring the costs associated with ensuring that a Culture of Quality thrives in an organization, as well as the costs associated with Quality failures.^xii There are four types of Quality-related costs:

1. Prevention costs. These planned costs are the result of designing and implementing a QMS and preventing Quality problems from arising. These costs include Quality planning, training, and Quality assurance.
2. Appraisal costs. These costs are the result of measuring the effectiveness of a Quality Management System and apply to both manufacturers and the supply chain. These costs include verification, Quality audits, and supplier assessment.
3. Internal failure costs. These costs arise when the manufacturer discovers Quality failures before products or services are delivered to customers. They include waste from poor processes, excessive scrap, rework to correct errors, and the activity required to diagnose the cause of Quality failures.
4. External failure costs. These are the most expensive costs and are usually apparent only after the products or services have reached the customer. These costs include repairs, warranty claims, returns, and dealing with customer complaints.

The Cost of Poor Quality (COPQ) and its consequences can be difficult for organizations to measure, and it can be a struggle to convince executive stakeholders that Quality improvement projects to mitigate COPQ have real value and are not simply cost centers. The primary consequences of COPQ are the most obvious. Costs associated with process failures inside the organization include:

• Excess scrap and waste material created by inefficient manufacturing processes,
• Rework on defective or damaged products before they ship to market, and,
• Retesting and analyzing processes and procedures to determine point of failure. If poor Quality is not caught before products or services make their way to end customers, the external costs can include those associated with:
• Lawsuits,
• Recalls,
• Warranties,
• Complaints,
• Returns,
• Repairs, and,
• Field support.

The traditional Cost of Poor Quality has usually been assumed to be between 4 percent and 5 percent of an organizations annual revenue.^xiii In other words, a business with $100 million in annual revenue is throwing away between $4 million and $5 million by failing to mitigate the impact of preventable process failures.

Yet, like an iceberg, the visible surface of the problem masks something far deeper.xiv Hidden costs associated with COPQ can include:

• Decreased employee engagement,
• Higher employee turnover and attrition,
• Employees addressing Quality failures instead of focusing on Quality improvement through innovation,
• Overtime costs,
• Machine downtime,
• Long-term customer dissatisfaction,
• Brand damage,
• Poor inventory turnover, and,
• Decreased customer lifetime value.

When we account for these hidden and long-term costs, COPQ is more like 10 percent to 25 percent of an organizations annual revenue. To put that into perspective again, that would mean a company with $10 million in annual revenue is throwing away $1 million to $2.5 million every year on failures that are predictable and preventable. These costs are often passed on to customers in the form of a higher price tag, which leads to additional customer dissatisfaction and brand damage. Investing in Quality is therefore the most effective way of reducing these staggering costs.

Conclusion

This brief introduction to Quality has provided some background into its history, principles, and value for all organizations. Of course, its not just an origin story, but also the groundwork for a plan of action to get leadership on board and address the startling figures relating to Cost of Quality. What is your next step? Start looking at your own processes with Quality principles in mind and think about all the ways Total Quality Management can bring positive change to your organization.