TOPIC TWO : RIGHT QUALITY DECISIONS

• Quality in procurement
• Determination and control of quality
• Specification Review and Development
• Inspection on Receiving
• Variety Reduction
• Value Analysis/Value engineering
• Standardization and Simplification
 INTRODUCTION

Quality is a fundamental purchasing objective

 Before purchasing personnel can make

available whatever is required, they must
have an understanding of ‘quality’.

 The quality of materials used in production

has a direct relationship with the end –use of
the product
 Buyers must ensure that they know exactly
what they want, and that their suppliers
understand exactly what is required

 If inappropriate quality of material is used, it

would mean that the end –product is too poor for
a given application.

 Right quality is achieved through coordination

with other departments involved in quality
determinations and through good specifications
 Definition of Quality.
Crosby defines quality as conformity to
requirements not goodness.

He also stresses that the definition of

quality can never make any sense unless
it is based on what the customer wants
i.e. a product is a quality product only
when it conforms to the customer’s
requirements.
 Definition of Quality.
Juran defines quality as ‘fitness
for use’.
This definition implies quality of
design, quality of conformance,
availability and adequate field
service.
 Cont…

 Quality does not mean ‘ the best available’ or

‘most superior’ but “that which is suitable for
the purpose intended”.

 If a higher quality ( than what is required) is

purchased , is wasting money. A lower quality
means poor performance.
Eight dimensions of quality:
1. Performance: The product’s operating
characteristics.
2. Reliability: The probability of a product
surviving over a specified period of time
under stated conditions of use.
3. Serviceability: the speed, accessibility and
ease of repairing the item or having it
repaired.
4. Conformance: The degree to which
delivered products meet the pre
determined standards.
Eight dimensions of quality:

5. Durability: Measures the projected use available

from the product over its intended operating cycle
before it deteriorates.
6. Features: ‘The bells and whistles’ or secondary
characteristics which supplement the product’s
basic functioning.
7. Perceived quality: Closely identified with the
reputation of the producer. Like aesthetic, it is a
personal evaluation.
 Quality control
Quality control: Is concerned with defect
detection and correction. Inspection activities
can be classified as quality control processes,
along with other activities which involve
monitoring to ensure that defectives or
potential defectives are spotted.
Quality control can also be defined as a
process employed to ensure certain level of
quality or service.
It may include whatever actions a business
deems necessary to provide for the control
and verification of certain characteristics of a
 Quality assurance
Quality assurance: Differs from quality control and is
defined as all those planned and systematic activities
implemented within the quality system and
demonstrated as needed to provide adequate
confidence that an entity will fulfil requirements for
quality.
 Quality assurance can also be defined as a planned
and systematic production processes that provide
confidence in a product’s suitability for its intended
purpose.
It can also be defined as a set of activities intended to
ensure that products and services satisfy customer’s
requirements in a systematic and reliable fashion.
 Quality assurance
activities
Quality assurance includes all activities connected
with the attainment of quality such as:
1. Design, including proving and testing
2. Specification, which must be clear and
unambiguous
3. Assessment of supplier to ensure that they can
perform
4. Motivation of all concerned parties
5. Education and training of supplier’s staff
6. Inspection and testing
7. Feedback to ensure that all measures are effective
 INSPECTION AND CONTROL OF
QUALITY

 The buyer must ensure that when the goods are

delivered they must conform with the specifications.

 One way of achieving this is to inspect all incoming

goods before acceptance.

 A 100% inspection ensures that no sub- standard or

defective items are accepted but it is expensive.

 The common practice is a Sampling Inspection by

inspecting a sample from a batch/ consignment
 INSPECTION AND CONTROL OF
QUALITY

However, it is important to decide whether

the risk is less costly than a higher level of
inspection
HIGH HIGH
LOW REJECTION
INSPECTION INSPECTION
RATE
LEVEL COST

LOW LOW
HIGH REJECTION
INSPECTION INSPECTION
RATE
LEVEL COSTS
 REJECTION OF GOODS

Alternative courses of action when a

consignment is found to be rejectable
include the following:
 Refuse to accept the consignment
 Return the consignment for replacement
 Supplier to make 100% inspection to sort
defective from good ones
 Make 100% inspection using purchaser’s
inspection staff
THE ROLE OF A BUYER IN QUALITY

 Buyers should always take greatest care with

specifications

 If incorrect specifications is stated on a Purchase

Order, the supplier will supply what has been stated

 Though specifications originate from user ( other)

departments, purchasing must ensure that such
specs are clearly stated and understood.

 The purchasing staff can challenge and NOT change

specifications from various departments ( users)
 SPECIFYING QUALITY

Specification is a statement of which

provides a description or list of the
characteristics required in an item.
 TYPES OF SPECIFICATIONS

 There are two approaches to specifications,

Performance and Conformance specifications.

 Performance specification describes the

function which the product is intended to
serve.

 It informs potential suppliers of the

functionality that must be present in the
product.
 TYPES OF SPECIFICATIONS
 Conformance (design) specification describes
in detail what ( eg materials) to be used and
the method of manufacture etc.

 The main difference is that with performance

specifications the supplier is told of what the
product must do, whereas in conformance
specifications, quality is present in a product
if the product conforms to the list of
requirements laid down at the specification
stage.
 Methods of specifying

 Some methods of specifying requirements include;-

 Brand or Trade name ( least encouraged)

 Dimensions

 Physical / Chemical properties

 Market grades

 Samples etc
 READING ASSIGNMNET 3

 Identify the problems that may arise from

1: Over- specifying
2: Under -specifying
 Quality and stores

Almost every kind of item has different

storage requirement.
Care must be taken to ensure that the
appropriate storage conditions are provided.
Some items are attractive and vulnerable to
loss through theft whiles others need to be
kept cool, warm or away from direct
sunlight.
So, stock must be categorized into groups
with similar storage needs and must be
given code number for easy identification.
 Codification
Codification is the process of assigning
letters, numbers or both which is used to
identify items in a warehouse or stockyard,
e.g. A/BG/D, O1.41.22, T649 AHH.
Codification is the system adopted for
accurate identification of materials by
allotting a numerical number for each item
procured and stored.
o Numeric
o Alphabetical
o Alphanumeric
 Advantages of Codification
 Avoids repeated use of long descriptive titles
 Avoid unambiguous in naming
 Efficient Purchasing
 Accurately identifies all items
 Prevents duplication of same items
 Simplifies mechanical recording
 Simplifies pricing, costing and stock accounts
 May be used as a storehouse location system
 Ensures accuracy in correspondence, records
and postings of receipts.
 Codification Methods
1. Coding by nature of the item
2. Coding by end use
3. Coding by stores location systems
4. Coding by source of supply
5. Coding by reference to customer
6. Coding by Colour
7. Technical spares code
Approach Of Control Stock
Range

Standardization and variety

reduction
Identification and elimination of
slow moving, obsolete,
redundant etc items
Use of stockless buying
techniques and
Cost – Benefit analysis (VA/VE)
 Standardization
Standardization is a process of
reducing the number of varieties
of inventories in stock that serve
the same purpose. (Variety
reduction )
Standardization is the process of
establishing basic specifications for a
set of commonly used characteristics of
size, shape and performance for
products.
 Control Of Slow Moving Items,
Obsolete & Redundant
You may eliminate or disposal
slow moving, redundant and
obsolete items by;
 Circulating to other potential
users
 Advertising, inviting offers
 Sell by auction
 Sell to a merchant or dealer
 Sell to employees
Control Of Slow Moving Items,
Obsolete & Redundant
 Give to charitable
organizations
 Recycle
 Dismantle for spares
 Dump
 Stockless Buying Techniques

These are techniques which basically

transfer inventory responsibilities to
vendors. These techniques are;
 Blanket orders purchasing/ framework

 Consignment inventory/vendor
managed inventory (VMI)/ Vendor
shelf inventory program
 Buy as needed (Just In Time)
 VALUE ANALYSIS AND
ENGINEERING

Value is a function of 'Desired Performance'

and 'Cost'.
Expressed as Desired Performance (P)
+Overall Costs (C)
Desired performance is expressed by the
term worth which is defined as the lowest
cost to achieve the Use (work) function and
Aesthetic (sell) function.
Question
Is selling price = value?
 CONT….

Value can be considered in three ways; cost value, use

value and esteem value.

 Cost value refers to the cost of producing the item

 Use value is that value of the function performed ie,

that which enables an item to fulfill its stated function

 Esteem value refers to those features that increase the

desirability of an item. Eg, the difference between a
gold –plated pen costing 10,000 and a ball pen costing
100 ( 9,900) is esteem value.
 VALUE ANALYSIS

Value Analysis is a methodical approach to the

elimination of unnecessary costs without impairing
performance, reliability, safety or marketability.

It involves looking in detail at each aspect of a

product and asking why that aspect exists at, why it
exists in the form it does, whether any other form
would be preferable or cheaper

It is a process aimed at both improving the

functional performance and reducing
manufacturing costs
 VA & VE

Very often the two terms Value Analysis and

Value Engineering are used synonymously.
Value Analysis is a technique that allows to
increase the value of a product or a service
systematically, eliminating all the functions
that do not add any value or benefit to the
product
Value Engineering is where the value of all
components used in construction of a product
from design to final delivery stage are
completely analyzed and pursued.
 Examples of VA

Integrate-Air conditioner and heater

integrated into one unit.
Substitute-ln-house wiring has been changed
from copper to aluminum or coke bottles
changed from Glass to Plastic
 BENEFITS OF VA/VE

Cost reduction /elimination techniques.

Balances costs and performance
Prevents overdesign of product (Customer
Function Deployment)
Increases profits and reduces costs.
Increases customer satisfaction
A good dancer must know when to leave the
stage
REVIEW QUESTIONS ON TOPIC TWO

QUESTION ONE

(a) What is meant by term ‘performance

specification?
How does it differ from design
( conformance) specification?
(b) Discuss the advantages and disadvantages
of performance specifications compared
with design specifications
REVIEW QUESTIONS ON TOPIC TWO

QUESTION TWO

Explain how value analysis and value

engineering can contribute to the profitability
and efficiency of an organization.

Outline the procedure for undertaking a value

analysis exercise including the contribution
which the purchasing function can make.