TQM
Quality & Productivity
There is a direct relationship between quality and productivity. Better quality increases the productivity of an organization. To succeed in the market place, whether it is domestic or international, a company must be efficient at making high quality products. Many companies found that it pays to invest effort during development to assure a quality product. This avoids the high cost of repairing products in the hands of customer. Unhappy customers may not buy products from that company again.
Productivity is a key factor in the competitive advantage, long enjoyed by the United States. For nearly 100 years, gains in productivity in the United States were more than any other country in the world. During the 1960s, Japan and Europe started having larger increases in productivity than the U.S. This has eroded the lead in productivity that the U.S once had.
In the past, productivity gains resulted from better technology. Lately there is an increasing awareness that up to 80% of the gains of technology may be possible just through better attention to business basics. Productivity, in simplistic terms, can be defined as the value of the output of a company divided by the value of the input to produce that output. A manufacturing company may use revenue as the value of the output. Cost may be used as the value of the input.
Quality, for simplicity can be defined as the cost of product failures divided by revenue. Failure could be within the plant and include such things as rework, scrap, re-inspection and sorting. Other failures occur after shipping to the customer and may be due to warranty claims, customer complaint handling and field service. Failure costs are typically high for any firm and a high priority in a quality improvement program.
The potential gain in productivity through quality improvements is very attractive. The direct relationship between quality and productivity has important implications in maintaining a strong competitive position for a company.
