Hello everyone. This is our 4th lecture and today we want to talk about quality. Probably I want to define quality in a more formal sense and I want to try to connect quality with supply chain management. [BLANK_AUDIO] The first thing I want to do is, I want to define quality in a more formal sense. Please recall the definition of a value we talked about at the, probably, you know, very beginning of this course. We said that the value is functional with two variables and two factors. One is utility and the other one is cost. What is a utility? We also said that the customer feels satisfied and/or happy then the utility is word created. And, in that sense, I would just say that the quality is one very important factor, that determines utility. For instance, it's pretty reasonable, we believe, that when the customer, or when the consumer believes. The quality of the product where [UNKNOWN] is, is very high then she feels satisfied and or happy by consuming, by using the product or service. So I have to say that quality is, very closely related with utility, and therefore quality is at the numerator side of, the value function. Now, having said that the quality is one of the big factors, one of the big elements with dimensions that determine utility. I want to ask another question. Is, is quality one dimensional concept? In other words is quality a very simple concept or is qualities, [INAUDIBLE]. But you know, comprehensive in the sense that it [INAUDIBLE] over multiple factors and multiple elements or multiple dimensions. In order to answer the question, I want to give you a reference, reference. The book Managing Quality by David Garvin. And he actually suggested that the quality consists of at least eight dimensions. In other words, quality's not a single or one dimension or very simple concept. First of all, quality. As we talked about in our last slide I want to ask a question that's something like this. When a customer or when a consumer says that the quality of A, or product A is better than that that of product B, what does that mean? In other words when someone says that the quality of a product, a certain product is higher, or is better then the quality of You know, another product produced by a different company. What does that mean? So I want to talk about each one of these 8 dimensions of quality suggested by Garvin one by one. Garvin said that that at first, quality implies conformance, in other words there is a concept of conformance quality. Conformance, implying that meeting the specification given by the customer, okay? Given by the customer. In other words, let's say the customer wants to have a certain table that has a certain shape and certain length, and certain height and so on and so forth. Then the first thing, the first thing the company has to do is to make a thing that conforms to the exact specification given by the customer, right? So, maybe this conformance can be more external. In other words, maybe it, it, it, it depends on the shape, or it depends on how it looks, and you know, how it measures and so on and so forth. Okay. So we'll just say that conformance is the first dimension of quality. When people say that the product has high quality, that means that the product must conform to the exact specifications described by the customer or given by the customer. But conformance is just only one dimension of quality, one of those dimensions. And Garvin said the second dimension is performance, performance, in other words, functionality. When we buy a mobile phone, we expect that we can communicate with other people in other places. When we buy a car, we expect that we drive the car so that we can move people or some, you know, stuff from one place to another. So, that's the kind of functionality. What kind of task is I want to perform? I want to perform with that product, with that service. So, the product, in order to have quality, the product must perform certain functions as expected, as anticipated by the customer. And also, the third element is reliability. In other words, performing a certain task or performing a certain function is important. But, we expect that certain performance is reliable. In other words when I want to drive this morning, the car must function and when I, you know, if I want to drive my car during my lunchtime, it should- Function is where? And if I want to drive my car on the weekends, then the car is expected to function as well. So the functionality or the performance is important to, to mention, but. Also, the product or service must give me some, some belief that I can rely on that product or service, whenever I needed that kind of functionality. Whenever I need that performance, performed by the product or service. So that's the reliability. So, when customer, when the consumer thinks that the product of service has some certain inevitable reliability, then we believe that the quality of the product and quality of the service is very high. And there is durability, durability means that the product has a long life cycle. In other words, let's say I, I bought a car. It conforms to the specification I gave the company and it performs satisfactory. And also it has a some feature, reliable performance. I can rely on. The product, the car's performance. In order so I expect that I can drive this car for a long time. I mean that suppose the car satisfied this conformance, performance, and reliability but, you know- If I can drive this car for just a week, for only one week, what does that mean? It does not have any value. It doesn't have any quality. When I pay, you know? $20,000 or $30,000 to buy a car, I expect it to drive that car for at least 5 or 6, or even 10 years. Unless it is, you know, rented car. So, durability applies to how I can use that product. I expect a long product life, right? And, You know, oh, couple of years ago, I had a chance to talk with, some top managers at, luxury brand, you know, luxury products, and many people would probably think that the, the most important quality, dimension for those. Luxurious you know, products is something like design and so forth but when I ask the question you know, what is the most important quality dimension to you to one of those top managers at you know, luxury product company. He implies that durability, durability is our number one priority in terms of our product's quality. In other words, when you buy a very expensive, luxury bag, you expect you can use that bag for a long time. And so in many different environments. Not just in you know, a city life. You want to use that product in the rural areas or you want to, you want to the, you know, product while you're hiking and you're biking and, [UNKNOWN], you know? So, durability is also, obviously, very important, element. Important dimension for quality. There is, another quality dimension, which is called the features. Think about, let's say, a mobile phone, okay? I buy a mobile phone and what is the primary performance I expect from this mobile phone? The primary performance I expect from a mobile phone is, I can talk with, I can communicate with my friends, my families, and my, you know, students, there so and so forth. And, nowadays, probably, normal by phone has just only one, you know? Such performance only. Such functionality. Almost every mobile phone have some other features like Camera function or music player function. And diary function and, you know, nowadays you use smartphone and it has many different types of applications and so on and so forth. So there are not just the primary functions, there are- Many supplementary functions the customer expected to perform from that product. So when the product or service has many interesting, many good features, they would believe that the quality of the product is perceived as high. There is another dimension which is called Serviceability. Again consider you know i bought a car and it confirms to the exact specification i had in my mind. It performs very well, it is reliable, it is durable. It has many features, right? Very nice interior, and it has all these you know, some advanced, features, like internet, or you can use, you know, you can enjoy music. Or you can feel very, you know, very comfortable inside your car, and so on and so forth. But there is a, another very important, in other words, it has a long life cycle, and during the life cycle, sometimes my car breaks down, or sometimes I hit by another car, or I hit. You know, another car myself. So you have, you, you will see that the your car needs maintenance and your car needs some repair. And some other solve issues, right? Throughout their lifetime. Of your car. And, how convenient it is to receive such a service during the [UNKNOWN] of life cycle, is another very important factor that determines, the quality or the perception of a quality by the customer and the consumer. So serviceability, the higher, or the larger the serviceability, the higher the quality. And that's the perception of the customers. And that is ethics as well. Says let's, let's think about these MP3 player market. MP3 player market. APple was not the first company that actually invented the MP3 player with that, you know introduced MP3 players you know for the first time to the market. There was a, you know, a Korean company and the company actually was the first to develop and introduce an mp3 player in the market, and really beginning of this whole lifecycle of mp3 players. The company [UNKNOWN] which is a coding company. The company enjoyed the early big, global [UNKNOWN] the entity pre-market. But, when Apple introduces iPad, it actually, you know,. Obtained most of the, big chunk of the market share enjoyed by that, you know, original company [UNKNOWN]. And many people tried to, analyze why, how, how come that happen. And one important factor people found out was at rate they design things. And some aesthetics, in other words how we feels, how it looks, whether I can touch it and sometimes What is the, what is the design of the product? What is the design of the service? So that's called aesthetics, aesthetics is a legitimate dimension, 1 of those dimensions. That, you know, determined the quality. And obviously, we would say that aesthetics, pretty much subjective, right? People have different ideas about what is beautiful and what looks good, and so on and so forth. Of course, there is sometimes some common. Elements or common parts there but still we would just say that the aesthetics is a subjective dimension. And finally there is, so called, perceived quality, which is related to brand or brand image, or social status, and so on and so forth. You know that you know, think of this luxury brand, you know. There are many good luxury brands in the global market, and sometimes we think that there are some unknown small companies make similar products. And when we just look at conformers, performers, reliability, durability, the products produced by the small local company is as good as that produced by this big name, big brand luxury company, luxury brand name. But even if the, the two products, one produced by this local small company, the other one produced by this big global brand name. You know, luxury, luxury brand. And if even if these two products have similar confirmance, er performance, reliability, and durability. But still. People are willing to buy this luxury brand, and maybe by paying twice with bitcoins or even ten times. [SOUND] When that happens can we comprehend what's wrong here. I mean that the, does the product have the same conformance, same performance, the same delivery, same durability. And, how come people are willing to pay 4 times more, even 10 times with this, this, you know? Luxury brand. Is it unfair? Some people might say it's unfair. Alright and though it's not an issue of fairness, it is an issue of quality and perceived quality is also an estimated dimension. It's very important dimension. Brand value, because, let's say, when. When the customer has that luxury brand product, if she or he feels very happy, she feels that, or that he feels that, her or his social status is kind of, Vision because of that luxury brand. Is it an element of quality? Obviously. Obviously. Is it that quality is utility and utility when the customer feels happy, when the fer, the customer feels satisfied. There is quality. Nobody can deny perceived quality, and you should not force every product, the product with the same conformers and performers, reliability and durability, to be paid exactly the same. That probably is not practical at all. You know it's, you know, anyway I just say that to perceived equality, some people might lay some questions, but I think that there is no question, there is no question about legitimacy of including this perceived equality. Perceived quality as part of this you know, [INAUDIBLE] manager concept of quality. [BLANK_AUDIO]
