Quality

Quality Management Principles For Small Business

There is a lot written about quality management for larger businesses, but much of those texts are overly complex for most small and medium size business owners.  What they need is a simple description of how to achieve quality in their business, without all the processes required in larger businesses, such as setting up quality teams, change management processes and quality departments.  While Deming, the “father” of the quality management movement sets out 14 principles of Total Quality Management (TQM), the main principles that apply in a small, owner operated business are:

  • Leadership
  • Customer Focus
  • Process Design
  • Process Control
  • Supplier Control
  • Analsyis and Continuous Improvement.

Leadership

Leadership is critical in quality management.  In an owner operated business, leadership of quality must come from the top.  The owner sets the standards that others will follow.  Effective quality management in a larger business is usually built into the culture of the organization.  In the smaller business, the culture is established by the attitudes of the owner.  Behaviour of employees is the result of the management style of the leader.  If quality is not high on the agenda for the owner, it will not be that important for the employees.  If the owner requires commitment to a standard, that is what will be achieved.

Customer Focus

Quality is essentially customer driven.  Quality is determined by the customers in what they demand.  A business that does not meet the customers’ demands for quality will not survive for long, as no one will buy products that don’t meet the required standards.  It is important that the small business is customer focused, so that they can identify what customers want and then set about to achieve those demands.  The business must learn, from contact with their customers, how to meet their needs.  The better companies also anticipate customer needs and surpass their immediate satisfaction requirements.

A TQM principle that applies equally in both large and small business is that customers can be both external and internal.  Internal customers are the next person or function in the production process; the ones who require the outputs of the previous process.  Quality and efficiency are enhanced greatly when internal customers’ needs are also met.  The concept of the value chain is useful to understand how this principle applies.  The whole process of production from the raw material state through to the stage where the customer is enjoying the output of production is called the “value chain.”  This can be seen in the following diagram.

At each stage of the value chain, a supplier provides a “customer” with the output of the process.  At each stage in the value chain there is an opportunity to enhance quality or for the quality process to break down.  At each point, there is a requirement for the output to be delivered according to specific specifications.  If these specifications are not met, quality suffers.

Process Design

It is critical that quality is designed into the process.  As seen in the value chain discussion above, each stage through the value chain requires inputs of specific standards.  Each stage in the process needs to be designed to achieve these standards.  In small businesses, often this design process is neglected, because typically, so much knowledge resides in the head of the owner and they can control outputs by their own prescence.  This process breaks down frequently when the business grows to the point where the owner cannot keep his or her eye on every process sufficiently to maintain control.  To avoid this break down in systems, processes need to be properly designed and documented to ensure everyone knows what is required regarding inputs, processing and output standards at each step of the value chain.

In many businesses, people are often blamed for poor quality.  However, if the processes are designed to specifically eliminate or reduce human error, quality can be built into the production process to a much greater degree.  In reality, most errors can be attributed far more to process faults than human error, so it makes sense to eliminate these from the system wherever possible.

Process Control

In earlier days, quality control was often achieved by inspecting the final output of a process to see if it met specifications, before sending it to the customer.  This step only came about because customers complained loudly enough about receiving poor quality products.  Many small businesses still manage quality in this manner.  However, this method of quality control is very expensive and wasteful.  Much of the cost of production is not in the raw materials themselves, but in the value added to the raw materials through the process.  If a product is allowed to be completed and rejected at the end of the process, all of this added value is lost, as well as the raw material if it cannot be reworked.

A better method of quality control is achieved by making everyone in the process responsible for quality.  If an input is not up to standard, the person must be given the authority to stop production when they receive the sub-standard input.  Then the shoddy product can either be rejected or reworked before all the additional costs are added into it.  This process also makes everyone more accountable for production as well, as the errors can be discovered at the cause, rather than having the problem disguised by all the added processes that have occurred if the fault is only discovered at final inspection.

Process control is achieved by implementing more frequent checks throughout the process, by way of pre-inspection, in-process inspection and final inspection.  You may think that this many inspections may triple the costs of inspection and make the process more inefficient.  In reality, it has the opposite effect.  Pre-inspections eliminate problems before they occur.  This results in savings.  Why do pilots always conduct a pre-take off inspection that is tightly controlled by a written procedure and checklist?  The small amount of time it takes to check that everything is OK before take-off is a small price to pay for the cost and anguish that would result if something went wrong during take-off and during the flight.  The same prinicple applies to any production process.  When all pre-process and in-process inspections are conducted properly, there is often a much reduced need for final inspection.  In fact, if all inspections are conducted according to plan, an output can often be verified as meeting quality standards, simply by verifying that all in-process inspections have been conducted properly.  This certainty means that non-physical production outputs, such as services and other processes that cannot have a typical final inspection can also be guaranteed to achieve required quality standards.

Supplier Control

A major factor in the quality process, as we have seen, is the quality of the inputs received.  In small businesses, this puts a major emphasis on the quality of inputs received from external suppliers, many of whom are large organizations.  Whether they are large or small suppliers, it is vital that small businesses work with their suppliers to achieve the required quality of their input materials.  This process of supplier control means that the emphasis on the cost of materials is not so heavily driven by the price of the suppliers’ products, but the cost of the value added aspects of the relationship with that supplier.

For example, if supplier A’s price for a specific product is 90% of the price of an alternative from supplier B, supplier A looks like an attractive proposition.  However, if supplier A’s product has a defect rate of 20%, the product actually becomes more expensive than supplier B’s product.  Even if you can send the faulty products back and get them replaced with new products, the cost of administration and transport still may make A’s product more expensive, especially if there have been some value added processes applied before the faults are discovered.  It is important to have a process in place to evaluate the performance of suppliers and to work with them to improve, not only product quality, but also service quality as well.  Many small business owners scoff at the concept of just-in-time supply processes, but working at achieving successful relationships with suppliers in areas such as this can achieve incredible competitive advantages in themselves.

Analysis and Continuous Improvement

What you can measure you can improve.  Simply put, if you analyze your performance in the achievement of quality, you will find ways to improve your performance.  In any process, there are value adding steps and non-value adding steps.  For example, value is added by transforming a product in some way. Value is not added simply by moving a product from one place to another to be ready for the next stage of production.  Analysis of your processes will help you identify how to eliminate or reduce non-value adding steps.  Over time, you will also discover new technology which enhances your value adding steps.  Continuous improvement of your processes will lead to increases in quality and efficiencies and reduction in costs, all of which add up to increased potential for greater competitiveness and more sales.

Conclusion

These are the vital steps in the quality management process for small and medium size businesses.  Don’t get bogged down with all the theory and detail in the texts written for large organizations.  If you are a small business owner, take charge of the improvement of quality management in your own business and focus on these areas.  It won’t take long until you achieve significant improvements that not only reduce your costs and increase your quality.  You will also be pleasantly surprised that the levels of stress you were under have been significantly reduced as well.

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