Thursday, July 01, 2004

Conformant Quality in the Value Chain

Yesterday’s post should have gotten a few readers wondering about the constraints in a value chain. For example, if the first process in the value chain is in the Chaos state - say Requirements, because the customer doesn’t know what they want - then how could it be possible for any other process to be in any other state than Chaos. Surely, if the input is chaotic then there can be no improvement at the output?

And yes, this would be true if the definition of conformant quality remained the same along the whole value chain. However, it rarely does and often the self-imposed definition of conformant quality is tighter than the customer tolerance. There is an argument which suggests that there is waste if the definition of conformant quality is tighter than the market demands. Over performance costs money and it sets a customer expectation which may erode trust in the vendor brand if it ever slips. So over delivery actually leaves no buffer. There is no concept of buffering for conformant quality.

So as a management tool, we must be prepared to rigorously determine what represents conformant quality in the marketplace and what is an acceptable tolerance in that quality. These metrics give us the definition and position of the Y axis in our Wheeler matrix. The tolerance in conformant quality defines the definition of the columns. Shewhart used the term “specification limits” as opposed to “control limits” or “natural process limits” which determine the X axis and the definition of the rows on the Wheeler matrix.

Using this approach and starting at the consumer, we can work our way back through the value chain and determine what represents conformant quality and tolerance such that the consumer’s requirements are met appropriately.

What we achieve by doing this is a congruent alignment of departments (or suppliers) in the value chain. We also gain a tool for defining where change is needed and its impact when the consumer redefines their concept of conformant quality - or we (or a competitor) redefine it for them by using quality as a competitive weapon. When change happens we will see each process in the value chain move from Ideal State to the Threshold State (or some other state if special causes appear as a result of process changes) because the process cannot deliver with the “specification limits” of conformant quality. Each manager must then work to bring their process back to the Ideal state based on their new local definition of conformant quality and tolerance.