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Business · Making operational decisions

Managing quality

Businesses manage quality in two ways: quality control checks finished products for faults, while quality assurance builds quality into every stage of production. High quality controls costs and gives a competitive advantage.

  • 5 key terms
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Last Lesson

Answer from memory before the answers appear.

  • What is buffer stock?

    The minimum stock kept for emergencies.

  • What is just-in-time?

    Ordering stock to arrive exactly when needed, holding little or none.

  • Name three factors in choosing a supplier.

    Any three of: quality, delivery, availability, cost, trust.

  • What is lead time?

    The time between ordering stock and it arriving.

Learning Objectives

  1. 1Explain what quality means.
  2. 2Explain quality control.
  3. 3Explain quality assurance.
  4. 4Explain the importance of quality in controlling costs and gaining competitive advantage.

What Is Quality?

A quality product meets or exceeds customers' expectations - and does so every time.

  • Fit for purpose

    It does what customers need it to do.

  • Consistent

    Every product is made to the same standard.

  • Not the same as luxury

    A cheap product can be high quality if it meets the expectations of customers who buy it.

  • Services too

    Quality applies to service - speed, friendliness and reliability.

Quality Control or Quality Assurance?

Quality control

  • Checking finished products for faults, usually at the end of production.
  • Done by specialist inspectors.
  • Faulty products are thrown away or reworked.
  • Finds problems after they have happened.
  • Can be wasteful: materials and time are lost on every faulty product.

Quality assurance

  • Checking quality at every stage of production.
  • Every worker is responsible for their own work.
  • Aims to prevent faults happening in the first place.
  • Less waste, as faults are caught early.
  • Needs training, and staff who care about quality.

The Importance of Quality

  • Controlling costs

    Fewer faulty products means less waste, fewer returns and less money spent fixing mistakes.

  • Competitive advantage

    A reputation for quality helps a business stand out from rivals and win customers.

  • Premium prices

    Customers will often pay more for a product they trust to be well made.

  • Customer loyalty

    Customers who get good quality every time come back and recommend the business.

The Cost of Poor Quality

When quality fails, the costs mount up quickly.

  • Waste

    Faulty products must be scrapped or reworked.

  • Returns and refunds

    Customers return faulty goods and demand their money back.

  • Product recalls

    Dangerous faults can force a business to recall every product sold - extremely expensive.

  • Reputation

    Bad reviews and news stories drive customers away for years.

Case study

The Galaxy Note 7 Recall

In August 2016 Samsung launched the Galaxy Note 7 smartphone. Within weeks, reports emerged of phones overheating and catching fire because of faulty batteries. Airlines banned the phone from flights. Samsung recalled millions of phones, and when replacement phones also caught fire, it stopped making the Note 7 altogether in October 2016. The failure cost Samsung billions of dollars and damaged its reputation - a clear example of how poor quality can cost far more than getting it right would have done.

2016 Galaxy Note 7 launched and recalled
Billions The cost of the failure, in US dollars

Build Quality In

A sandwich factory has had complaints about missing ingredients and wrong labels. Design a quality assurance system for it: list three checks at different stages of production, and explain how each would prevent the problem rather than just finding it.

1. One check when ingredients arrive.

2. One check during assembly.

3. One check at labelling.

4. How each prevents problems.

A good answer shows: Three checks at different stages (ingredients arriving, assembly, labelling) with each explained as preventing faults.

Can I...?

  1. 1Explain what quality means.
  2. 2Explain quality control.
  3. 3Explain quality assurance.
  4. 4Compare quality control and quality assurance.
  5. 5Explain how quality controls costs.
  6. 6Explain how quality gives a competitive advantage.
  7. 7Explain the costs of poor quality.

Summary & Exam Focus

  • Quality means meeting customers' expectations, every time.
  • Quality control checks finished products; quality assurance builds quality into every stage.
  • High quality controls costs and gives a competitive advantage.
  • Poor quality brings waste, returns, recalls and damaged reputation.

Exam focus

Explain one benefit to a business of using quality assurance rather than quality control. (3 marks) (3 marks)

The difference is when quality is checked: control finds faults at the end, assurance prevents them throughout. Link your answer to costs or reputation.

Key terms

The vocabulary this lesson expects you to use. Each one is linked from the first place it appears above.

Quality
Meeting or exceeding customers' expectations, consistently.
Quality control
Checking finished products for faults.
Quality assurance
Checking quality at every stage of production to prevent faults.
Product recall
When a business asks customers to return a product because it is faulty or dangerous.
Competitive advantage
Anything that makes a business more attractive to customers than its rivals.

Practice questions

Have a go at each one before you open its answer.

  1. Question 1 Define 1 mark

    Define the term 'quality control'.

    Show answerHide answer

    Model answer

    Checking finished products for faults, usually at the end of the production process.

    Mark scheme

    • Inspecting finished products / checking for faults at the end — 1 mark
  2. Question 2 Outline 2 marks

    Outline one cost to a business of poor quality.

    Show answerHide answer

    Model answer

    The business may have to recall products (1), which is very expensive and damages customers' trust in the brand (1).

    Mark scheme

    • A cost identified, e.g. waste / returns / recalls / reputation — 1 mark
    • Developed — 1 mark
  3. Question 3 Explain 3 marks

    Explain one benefit to a business of using quality assurance rather than quality control.

    Show answerHide answer

    Model answer

    It reduces waste (1). Faults are prevented or caught at each stage, rather than found only once the product is finished (1). This means fewer materials and less time are wasted on faulty products, lowering the business's costs (1).

    Mark scheme

    • A benefit identified, e.g. less waste / lower costs / staff responsibility / fewer faults reach customers — 1 mark
    • First linked point of explanation — 1 mark
    • Second linked point of explanation — 1 mark
  4. Question 4 Analyse 6 marks

    Source: SmartHome Ltd makes wireless doorbells. It uses quality control, with inspectors checking one in every 50 doorbells at the end of the production line. Last year 4% of doorbells were returned faulty, and its online reviews have fallen from 4.5 to 3.2 stars. Analyse the impact of poor quality on SmartHome Ltd.

    Show answerHide answer

    Model answer

    A 4% return rate means SmartHome is refunding or replacing many doorbells, which increases its costs, as each faulty doorbell is paid for twice - once to make and again to replace. Because inspectors only check one in every 50 doorbells, faulty products are reaching customers. The fall in online reviews from 4.5 to 3.2 stars will also affect sales. Customers read reviews before buying, so a low rating will push them towards competitors. This means SmartHome's sales and revenue are likely to fall at the same time as its costs rise, reducing its profit.

    Mark scheme

    • AO2 (Application, 3 marks): uses the context - 1 in 50 checks, 4% returns, 4.5 to 3.2 stars — Level 1-3
    • AO3a (Analysis, 3 marks): chains of reasoning about costs, reputation and sales — Level 1-3

Quick check

  1. Checking products for faults only at the end of production is:

    1. AQuality assurance
    2. BQuality control
    3. CJust-in-time
    4. DFlow production
    Show answerHide answer

    B: Quality control

    Quality control inspects finished products.

  2. Which is a key feature of quality assurance?

    1. AOnly inspectors check quality
    2. BQuality is checked once a year
    3. CFaulty products are always sold at a discount
    4. DEvery worker checks quality at every stage
    Show answerHide answer

    D: Every worker checks quality at every stage

    Quality assurance makes every worker responsible for quality at every stage.

  3. How can high quality help a business control its costs?

    1. ABy raising the price
    2. BBy removing the need for staff
    3. CBy reducing waste, returns and recalls
    4. DBy increasing the number of inspectors
    Show answerHide answer

    C: By reducing waste, returns and recalls

    Fewer faults means less waste, fewer returns and fewer expensive recalls.

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