SHEGER COLLEGE MASTERS OF BUSINESS ADMNISTRATION(MBA)PROGRAM

OPERATIONAL MANAGEMENT GROPUP ASSIGNMENT TWO (2)

PREPARED BY: ID NO.

[Link] DEBELO …………………. SCMBA/477/15

[Link] ABABU……………………. SCMBA/507/15

[Link] TESHOME…………………SCMBA/434/15

[Link] LEMA…………………………. SCMBS/494/15

[Link] MIDEKSA………………. SCMBA/503/15

[Link] FEKEDA…………………. SCMBA/456/15

SUBM DATE: FEBRUARY/22 /2024

SUBM TO: Gebre S.(PHD)

Term Paper Gold Water
A quality product GOLD WATER is a product that meets the expectations of the customers.
The eight dimensions of quality help producers to meet these expectations.

It is a strategic management tool that can be used as a framework to analyses characteristics of

quality. The eight dimensions are performance, features, reliability, conformance, durability,
serviceability, aesthetics, and perceived quality.

[Link]
Performance has to do with the expected operating characteristics of a product or service. Does a
service or product do what it’s supposed to do? The primary operating characteristics involve
measurable elements, which makes it easier to objectively measure the performance.

Some of the performance requirements are related to subjective preferences, but when they are
the preference of almost every consumer they become as powerful as an objective requirement.

2. Features
What the dimension ‘performance’ doesn’t focus on are the features, the characteristics that
decide how appealing a product or service is to the consumer.

Such features are the extras of a product or service and complement its basic functioning. This
means that the ones designing a product or service should be familiar with the end-users and
should be updated on developments in consumer preferences.

Often it’s difficult to see a clear line between primary performance attributes and additional
features.

An example of features in service is offering free drinks on a plane. An example of features in

products is adding a drink cooler in the car.

3. Reliability
Reliability is usually closely related to performance. The focus of the dimension reliability is
more on how long a product will perform consistently according to the specifications of that
product. This is important to customers who need the product to work without any errors and
contributes to a brand or company’s image.

The dimension reliability shows the probability of the product having signs of error within a
specific time of period. For measuring reliability, you should measure the time to the first failure,
how much time there is between failures, and the failure rate per a specific time of period.

These measures are usually applied to products that are expected to last for a longer time and not
so much for products that are meant to be used directly and for a shorter time period.
Usually when the costs for maintenance or downtime increase, reliability as a dimension of
quality becomes more important to consumers.

Example
For example, for parents with children who depend on a car, the reliability of the car becomes an
important element. Also for most farmers, reliability is a key attribute.

This group of consumers is sensitive to downtime, especially during the shorter harvest seasons.
For a farmer, reliable equipment can be crucial in preventing spoiled crops. Also, the reliability
of computers is key for many consumers.

4. Conformance
This dimension is closely related to the dimension’s performance and features. The
dimension of conformance is about to what extent the product or service conforms to the
specifications.

Does it function and have all the features as specified? Every product and service has
some sort of specifications that comes with it.

Example
For example, the materials used or the dimensions of a product can be specified and set
as a target specification for the product.

Something that can also be defined in the specification is the tolerance, which states how
much a product is allowed to deviate from the target. Problematic with this approach is
that it makes it easier for producers to focus less on if the specifications have been met as
long as they’ve met the tolerance limits.

When it comes to service businesses, conformance is measured by focusing on the

accuracy, the number of processing errors, unexpected delays and other common
mistakes.

5. Durability
Out of the eight dimensions of quality, the dimension durability is about how long a
product will last or perform and under what conditions it will perform. Estimating the
length of a product’s life becomes complicated when it’s possible to repair the product.

For such products, the durability will be counted until it is no longer economically
beneficial to use it. This is when the repairs and the costs of repairing increase.
Customers then must weigh the costs for future repairs against the costs of investing in a
new one together with its operating expenses. In other cases, durability is measured by
the amount someone can use a product before it stops working and repair is impossible.

This, for example, is the case when a light bulb burns up and must be replaced by a new
one. In this case, repairing it is impossible.

6. Serviceability
Serviceability is one of the eight dimensions of quality that reflects on if the product is
relatively easy to maintain and repair. This becomes important for consumers who are
more focused on the total cost of ownership as criteria for selecting a product.

Serviceability reflects on how easy it is for the consumer to obtain repair service, how
responsive the service personnel is, and how reliable the service is. It also focuses on the
speed with which a product can be repaired and also the competence and behavior of the
personnel.

Customer’s concerns are mainly about the product getting defects, but also how long it
takes for the product to be repaired. It is not only important if a product can be fixed, but
also how satisfied the customer is about the company’s complaint handling procedures.

This can affect how the customer evaluates the service quality and eventually the
company’s reputation. Each company has a different way of dealing with complaint
handling and not every company attaches the same level of importance to serviceability.

Example
For example, there are companies that do their best to resolve the complaints they
receive, while others don’t offer any service when it comes to complaints. An example of
improving a company’s serviceability is by installing a cost-free phone number to reach
the helplines.

7. Aesthetics
The aesthetics dimension is all about the way a product looks and contributes to the
company’s identity or a brand. Aesthetics is not only about how a product looks but also
about how it feels, tastes, smells or sounds.

This is clearly determined by individual preference and personal judgement, however,

there is a way to measure this dimension. There are some clear patterns found in the way
consumers rank products based on personal taste. Still, the aesthetics of a product is not
as universal as the dimension ‘performance’.
Not all people prefer the same taste or smell, which makes it impossible to please every
single customer. For this reason, companies end up searching for a niche.

8. Perceived Quality, the last of the eight Dimensions of quality

The perception of something is not always reality. Meaning that a product or service can
have high scores on each of the seven dimensions of quality, but still receive a bad rating
from customers as a result of negative perceptions from customers or the public.

Customers sometimes lack information about a service or product and for comparing
brands will rely on indirect reviews. This is usually the case when it comes to a product’s
durability because in most cases it can’t be observed directly.

Also, reputation plays a significant role when it comes to perceived quality. It’s easier for
a customer to trust the quality of a company’s new product when the established products
received positive reviews.

Cost of Quality
Cost of quality is a method for calculating the costs companies incur ensuring that
products meet quality standards, as well as the costs of producing goods that fail to
meet quality standards.
The goal of calculating the cost of quality is to create an understanding of how
quality impacts the bottom line. Whether it’s the cost of scrap and rework
associated with poor quality, or the expense of audits and maintenance associated
with good quality, both count. Cost of quality gives manufacturers an opportunity
to analyze, and thus improve their quality operations.

Four Types of Cost of Quality Which Gold Water Follow

1. Appraisal Costs:

Measurement and inspection activities during operations to determine

conformance to quality requirements.

Examples include inspection, testing, process or service audits, calibration of

measuring and test equipment.
2. Prevention Costs:

Activities planned and designed before operations to guarantee good quality and
prevent bad quality products or services.
 Examples include new product review, quality planning, supplier surveys,
process reviews, quality improvement teams, education and training.
3. Internal Failure Costs:

Expenses incurred to remedy defects discovered before the delivery of a product

or service.

Examples include scrap, rework, re-inspection, re-testing, material review,

material downgrades.
[Link] Failure Costs:

Expenses incurred to remedy defects discovered by customers after the

customer receives the product or service.

Examples include processing customer complaints, customer returns, warranty

claims, product recalls.

Gold Water Quality Certified

We have been awarded the Ethiopian Standard Authority Certificate (CER No.:
BPCU10020), ISO 22000-Food Safety System, ISO-9001 Quality Management
System, and the 2022 Abyssinia Award for our consistency in quality production.
Total quality management (TQM)
Describes a management approach to long-term success through customer
satisfaction. In a TQM effort, all members of an organization participate in
improving processes, products, services, and the culture in which they work.

PRIMARY ELEMENTS OF TQM

TQM can be summarized as a management system for a customer-focused
organization that involves all employees in continual improvement. It uses
strategy, data, and effective communications to integrate the quality discipline into
the culture and activities of the organization. Many of these concepts are present in
modern quality management systems, the successor to TQM. Here are the 8
principles of total quality management:

1. Customer-focused: The customer ultimately determines the level of quality. No

matter what an organization does to foster quality improvement—
 training employees, integrating quality into the design process, or upgrading
computers or software—the customer determines whether the efforts were
worthwhile.
2. Total employee involvement: All employees participate in working toward
common goals. Total employee commitment can only be obtained after fear has
been driven from the workplace, when empowerment has occurred, and when
management has provided the proper environment. High-performance work
systems integrate continuous improvement efforts with normal business
operations. Self-managed work teams are one form of empowerment.
3. Process-centered: A fundamental part of TQM is a focus on process thinking. A
process is a series of steps that take inputs from suppliers (internal or external)
and transforms them into outputs that are delivered to customers (internal or
external). The steps required to carry out the process are defined, and
performance measures are continuously monitored in order to detect unexpected
variation.
4. Integrated system: Although an organization may consist of many different
functional specialties often organized into vertically structured departments, it is
the horizontal processes interconnecting these functions that are the focus of
TQM.
 Micro-processes add up to larger processes, and all processes aggregate into the
business processes required for defining and implementing strategy. Everyone
must understand the vision, mission, and guiding principles as well as the quality
policies, objectives, and critical processes of the organization. Business
performance must be monitored and communicated continuously.
 An integrated business system may be modeled after the Baldrige Award criteria
and/or incorporate the ISO 9000 standards. Every organization has a unique
work culture, and it is virtually impossible to achieve excellence in its products
and services unless a good quality culture has been fostered. Thus, an integrated
system connects business improvement elements in an attempt to continually
improve and exceed the expectations of customers, employees, and other
stakeholders.
5. Strategic and systematic approach: A critical part of the management of
quality is the strategic and systematic approach to achieving an organization’s
vision, mission, and goals. This process, called strategic planning or strategic
management, includes the formulation of a strategic plan that integrates quality
as a core component.
6. Continual improvement: A large aspect of TQM is continual process
improvement. Continual improvement drives an organization to be both
analytical and creative in finding ways to become more competitive and more
effective at meeting stakeholder expectations.
7. Fact-based decision making: In order to know how well an organization is
performing, data on performance measures are necessary. TQM requires that an
organization continually collect and analyze data in order to improve decision
making accuracy, achieve consensus, and allow prediction based on past history.
8. Communications: During times of organizational change, as well as part of day-
to-day operation, effective communications play a large part in maintaining
morale and in motivating employees at all levels. Communications involve
strategies, method, and timeliness.

JIT manufacturing is a production method that aims to minimize inventory

levels and waste by producing and delivering goods only when they are
needed by customers. This can result in lower costs, higher quality, and faster
responsiveness, but also requires careful coordination and synchronization of
supply and demand,
What is Just-in-Time Inventory Control?

Just-in-time (JIT) inventory control reduces the amount of inventory

that a company maintains. The concept is based on a cluster of lean
manufacturing activities that are designed to only manufacture
enough products to meet customer demand. This control system does
so by pulling demand through a production facility, where each step
in the production process is only authorized to produce a limited
amount of inventory. Just-in-time inventory control involves
implementation of the following concepts:

The Pull Concept

Under JIT, each step in the production process is triggered by a

notification, or Kanban, that is provided to it by the downstream
workstation that is a request for a specific quantity of an item. A
workstation is only allowed to produce the exact amount of the
authorization. If the downstream workstation issues no Kanban, then
the workstation will remain idle until notified. Thus, the pull concept
massively reduces the amount of work-in-process inventory. By
comparison, a traditional push manufacturing system runs work
orders through the production system that are based on forecasts, and
which typically result in much larger quantities of inventory in the
production system at any given time.

Smaller Lot Sizing

Wherever possible, JIT advocates very small production lot sizes,

preferably of just one unit. This means that inventory moves through
the production process in very small, discrete batches. As each lot is
completed, it is immediately passed along to the next downstream
workstation, where the production staff inspects it, and can reject it at
once if quality standards are not met. This immediate feedback loop
greatly limits the amount of scrap generated within the production
system.

Quicker Machine Setups

JIT advocates small lot sizes, but this is impossible when it takes a
long time to set up a machine for each production run. Consequently,
there are a number of tools and concepts available for greatly
shortening machine setup times. By doing so, it becomes cost-
effective to rapidly re-set a machine to manufacture even a single
unit. This, in turn, tends to reduce inventory levels, since there is no
longer a need to spread the cost of a machine setup over a very long
production run.

Minimize Inventory Movements

When inventory lot sizes are so small (as just noted), it makes more
sense to place them in very small transport containers and move them
to the next workstation by a conveyor belt. This eliminates a great
deal of material handling personnel and equipment. In addition,
management is more likely to move the workstations closer together,
to reduce the amount of travel time on the conveyors. This, in turn,
reduces the amount of work-in-process inventory traveling between
the work stations.

Quicker Raw Material Deliveries

A JIT system does not require a massive amount of on-site inventory.

In fact, there may be no on-site inventory at all. Instead, a company
requires its suppliers to submit to a quality certification process (so
that it can avoid any time-consuming receiving inspections), and then
has them make a large number of small deliveries, sometimes directly
to wherever the parts are needed in the production process. This
approach requires a business to use the services of a cluster of highly-
efficient local suppliers. This can nearly eliminate a company's
investment in raw materials inventory.

Summary

Thus, just-in-time inventory control is a set of systems that are

designed to squeeze a large amount of inventory out of a company.
The weak spot of inventory control is any possible fluctuations in
just-in-time deliveries; if they are interrupted, then a company has no
inventory buffer, and so must shut down its production operations.
Thus, a considerable amount of supply chain management is needed
to make just-in-time inventory control work properly.