Rational Approach to Project Management in Organizations
The evolution of organization theories from mechanistic to people based ones has influenced the approaches taken by managers in organizations towards the firm as well as organizing people. While the earlier decades of the 20th century witnessed the rise of the mechanistic of the rational approaches, since the 1970’s and particularly in the last decade […]
Effects of FIFA World Cup on the Economy
The FIFA World Cup is an international sporting event. This event is held every four years. However, the host country changes every time. Countries have to bid against each other in order to win the rights to host the next World Cup. Many economists have questioned this practice. However, none have been able to find […]
Emerging Markets and International Business
International Businesses and the Opening up of Emerging Economies The previous articles in this module have discussed the contours of international business and the key drivers of the phenomenon. This article discusses how international businesses are affected by the rise of the emerging markets especially the BRICS (Brazil, Russia, India, China, and South Africa) and […]
Lessons for the Indian BPO Sector from the Standard Chartered and HSBC Scandals
The regulatory scandals involving HSBC and Standard Chartered (2013) have brought into focus the issue of how the outsourcing of business processes including oversight and compliance has meant that standards have been relaxed. Since both the scandals involved Indian back office operations looking the other way when they should have raised red flags, there are […]
Contract Logistics Solution Design Document
In any project involving outsourcing of warehousing operations, setting up a Distribution Center or Managing Plant logistics, if the project involves setting up a dedicated facility for the customer and the size of the project is huge; such project requires detailed attention and work from both parties. The buyer would have to detail the requirements […]
Prior to the introduction of Six Sigma philosophy, there was a debate as to whether Six Sigma is a goal worth pursuing. Many experts in the area of quality believed that wastage was a way of life. Trying to eliminate wastage would cause more wastage. They believed that it was possible to eliminate waste but the endeavour would cost too much and the benefits would not be worthwhile. Hence the then current state of affairs, according to them was the best state of affairs. However as Juran, who was to become a breakthrough quality leader later pointed out the costs of poorly performing processes (COPPP), the argument shifted heavily in favour of Six Sigma way of life.
Here is a representation of the typical costs that a poorly performing process incurs:
Appraisal costs are costs incurred to find out deficiencies before external customers are affected by them. These do not include routine quality checks that need to be carried, but to the excessive quality checks that lead in the wastage of resources. Examples of such costs would be:
Double checking our activities to ensure that there are no errors may be a good thing to do. However, Juran was of the opinion that it leads to considerable wastage of resources. Juran believed that there should be a mechanism which alerts in case of an error. Hence instead of double checking everything, resources will be used to make good the errors pointed out by the system. The idea was to develop a continuous measurement system and make quality checks process driven rather than people driven.
Internal process deficiency costs are the ones that are incurred to repair, replace or discard effective work. They are called internal deficiency costs because the customer will not know what has happened. However, more often than not, as one of these costs happen, the delivery time is also delayed. As a result customer service levels also take a beating. Examples of such costs include:
External process deficiency costs are the costs that are incurred on failures that happen when the product or services is being delivered to the final customer. These are the mistakes that occur in front of everyone and has a huge impact on the public opinion of the firm. Usually the firm has to spend an additional amount to regain the customers lost confidence. Examples of such costs include:
After Jurans analysis was well accepted by the management world at that time, Six Sigma became a rage. The costs of poorly performing processes were too high if all the hidden costs would be considered and hence organizations worldwide began implementing Six Sigma to become more cost effective and hence more competitive.
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