Does Quality Pay

Abstract

An empirical study of the automotive supplier industry in Europe and Japan uncovers wide differences in management practice -- and in results DESPITE FREQUENT EFFORTS to estimate the general effect of quality programs on corporate performance, managers have rarely tried to document the connection between specific actions and specific results. That attention to quality pays has become, for the most part, an article of nearly scriptural faith. What exact kind of attention, however, and what exact form and magnitude of payment -- questions of this sort have usually been left among the apocrypha. To help answer such questions as these, McKinsey, together with the Technical University of Darmstadt in Germany, undertook a detailed study of the quality practices of automotive industry suppliers in both Europe and Japan. A breakdown of the companies studied follows. To identify the key success factors of quality management, we grouped the companies in our sample by two measures: a quality indicator (PQI) and a quality indicator (DQI). We defined process quality according to industry-wide, clearly quantifiable measures, both internal and external, which we calculated for each company so as to take into account the complexities of different processes and products. Because no corresponding measures exist for design quality, we developed a scoring system to assess each company's quality goals, as well as the tools that it used in the design phase. This helped us understand its ability to design products that meet customer needs and to produce them with low defect rates. We then used PQI and DQI to arrive at a comprehensive view of total quality. The combination of these rankings resulted in four different performance clusters, which we refer to as the phases of quality management. Impact of quality By analyzing these performance clusters, we discovered four different -- and progressive -- levels of quality management, each of which has a corresponding management approach: Phase I: Inspection. An inspection department is responsible for product control, mainly at the end of the process. Phase II: Assurance. The production department strives for better understanding of -- and control over -- the production process, using tools such as statistical process control (SPC). These companies have begun to orient themselves toward zero defects. Phase III: Prevention. Trying to to zero defects, Phase III companies encourage intense cross-functional cooperation, especially between RD design quality, sales growth. …

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