CASE STUDY PRESENTATION
BY: PRAVAKAR PUTHAL. AKHILESH ANJAN. SYED MAJID. NOOR ALAM. UJJWAL SINGH.
Zero Defections Meaning?
Zero Defection was a quality control program originated by the
Denver Division of the Martin Marietta Corporation (now Lockheed Martin) on the Titan Missile program, which carried the Project Gemini astronauts into space in the middle to late 1960s. It was then incorporated into the Orlando Division, which built the mobile Pershing Missile System, deployed in Europe; the Sprint antiballistic missile, never deployed; and a number of air to ground missiles for the Vietnam War.
Everyone in the organization must understand that zero
defections is the goal.
Introduction
A new attitude toward preventing errors.
When manufacturers began to unravel the costs and implications of scrap
heaps, rework, and jammed machinery, they realized that quality was not just an invigorating slogan but the most profitable way to run a business.
They made zero defects their guiding light, and the quality movement
took off. Think of an objects user as attempting to do a task, getting there by imperfect approximations. Dont think of the user as making errors; think of the actions as approximations of what is desired. by D.A. Norman, 1988,
Doubleday
Principles of Zero Defects
I. Quality is conformance to requirements. When a particular product meets that requirement, it has achieved quality, provided that the requirement accurately describes what the enterprise and the customer actually need.
II. Defect prevention is preferable to quality inspection and correction Based on the observation that it is nearly always less troublesome, more certain and less expensive to prevent defects than to discover and correct them.
III. Zero Defects is the quality standard Based on the normative nature of requirements: if a requirement expresses what is genuinely needed, then any unit that does not meet requirements will not satisfy the need and is no good. If units that do not meet requirements actually do satisfy the need, then the requirement should be changed to reflect reality.
IV. Quality is measured in monetary terms the Price of Non conformance (PONC) The fourth principle is key to the methodology. Phil Crosby believes that every defect represents a cost, which is often hidden. These costs include inspection time, rework, wasted material and labour, lost revenue and the cost of customer dissatisfaction. When properly identified and accounted for, the magnitude of these costs can be made apparent, which has three advantages.
What to achieve by zero defection.
Retaining all the profitable customers by: Knowing the companys defection rate, What happens to profits as the rate moves up or down, Why defections occur. The managers should make sure that the entire organization
understands the importance of keeping customers, by trying incentives, planning, and budgeting to defection targets. Trying to retain all the profitable customers is elementary.
The zero defection culture.
As the defection rates are measurable, so are they
manageable too. Managers must establish meaningful targets and monitor progress. It requires supporters at all organization levels.
Management must develop that support by training the
work force and using defections as the primary performance measure.
Every one in the organization must understand that zero
defection is a goal.
Contd..
Having every one in the company work towards keeping
customers and basing rewards on how well they do, creates a positive atmosphere In the company.
Encouraging employees to solve customer problems and
eliminating the source of complaints allows them to be nice and customers treat them better in return.
Defections Management
Service companies probably cannot find and eliminate all the
defects, but they can and must reduce them.
Defection analysis can help companies to decide which service
quality investment will be profitable.
Watch
the door: Managing zero defections requires mechanisms to find customers who have ended up their relationship with the company or are about to end it. The key is to identify customer behaviors that both drive your economics and drive customer loyalty.
Contd..
What are defectors telling you? The reason to find
customers leaving you is to win them back. Customers who leave can provide a view of the business that is unavailable to the indoors and whatever caused one individual to defect may cause others to follow.
Feedback from these customers can be more concrete and
specific. Defection analysis involves certain questions about why a customer has defected?
The cost of losing a Customer.
If companies knew how much it really costs to loose a customer, they
would be able to make accurate evaluations of investments designed to retain customers.
Customers generate increasingly more profits each year they stay
with a company.
The longer a company keeps a customer, the more money it stands to
make.
It is obvious that acquiring a new customer entails certain one time
costs for advertising, promotion and the like. But if the customers stay, the economics greatly improve.
Contd
As purchases rise, operating costs decline.
To calculate a customers real worth, a company must take
all the projected profit streams into account.
When a company lowers its defection rate, the average
customer relationship lasts longer and profits climb steeply.
You have two options:
Demand vigilance: Exhort workers to be
more careful!
Mistake-proof: Eliminate the chance of making
the mistake
Service companies
Produce scrap* heap customers who will not come back.
That scrap heap too has a cost.
They will strive for zero defectionskeeping every
customer the company can profitably serveand they will mobilize the organization to achieve it.
Making profit.
Customers relationship with the company lengthens, profits
rise. Companies can boost profits by almost 100% by retaining just 5% more of their customers. While defection rates are an accurate leading indicator of profit swings, they do more than passively indicate where profits are headed. By soliciting feedback from defecting customers, companies can ferret out the weaknesses that really matter and strengthen them before profits start to dwindle.
Companys Point Of View Of PROFIT
Few examples
Charles Cawley, president of MBNA America, a
Delaware-based credit card company, knows well how customer defections can focus a companys attention on exactly the things customers value.
Frustrated by letters from unhappy customers, he assembled all 300 MBNA employees and announced his determination that the company satisfy and keep each and every customer.
Phil Bressler, the co-owner of five Dominos Pizza
stores in Montgomery County, Maryland, calculated that regular customers were worth more than $5,000 over the life of a ten year franchise contract.
He made sure that every order taker, delivery person, and store manager knew that number. For him, telling workers that customers were valuable was not nearly as potent as stating the dollar amount: Its so much more than they think that it really hits home.
Mastercares message to employees includes a candid admission that previous, well-intentioned incentives had inadvertently caused employees to run the business the wrong way; now it is asking them to change.
It builds credibility among employees by sharing its strategic goals and customer outreach plans. In the two target markets where this approach has been used, results are good. Employees have responded enthusiastically, and 25% more customers say they intend to return.
Criticisms
Criticism of "Zero Defects" frequently centres around
allegations of extreme cost in meeting the standard. Proponents say its an entirely reachable ideal and that claims of extreme cost result from misapplication of the principles.
Another criticism was that Zero Defects was a motivational
program aimed at encouraging employees to do better. Crosby denied ever having said any such thing under any circumstances. He stated repeatedly that defects occur because of management actions and attitudes.
