SHORT CASE OF HANDLES & HINGES LIMITED COMPANY
Handles & Hinges company is founded in 1984 (England) by two experienced hardware traders who names are Dave Philips and Chris Andrews. The company producing polished metal door handles, cupboard knobs, furniture fittings and hinges. The products have high quality and uniques design both traditional and modern ways. By 1996, company had grown their sales up to ?5 million. The Chief Executive Officer of Londons Dockland claims that company successful because once H&Hs products have been specified, they feel like they had no other choice but buying those.
1.1 Problems of the Company:
Because of the recession in the construction industry for almost 30 years, H&H expanded their direct sales to large UK hardware retail companies. This expansion means that 40% of H&Hs sales value. However, 15% of their gross profit.
In addition to hardware retail segment is more price-sensitive than some of construction industry, H&H has to produce good-quality hardwares.
This manufacture goods must be simple, standardized and they have to have low cost based on competitor companies.
H&H improved their gross profit in addition to using thinner and cheaper materials -same as competitors-. Moreover; Chris Andrews also reduce their processing cost by using modern batch methods. However, logistic problems occured bad effects on sales too. Making a successful fast delivery for small quantities is necessity but there is long production lead time problem in construction/contractors market. When a firm mislead or delay the delivery time, the reputation of the company affects faster than other sectors. Especially compared to B2C sectors.
Dented or scratched handles are one of the main problems for company sales as well. Production department of H&H says issues not based on the company it may be caused from delivery or usage of the consumer themselves. Unfortunately; the Quality Control Manager of the company can not be certain about that. because company only checking final products of the batches. The manager also claims that it is also not possible to say that products are sub-standard.
Sale catalogue of the company also another rub. In those catalogues, -obviously- special effects used to give a bright polished finish but H&H use mat finish. Misleading of the appearance of the product may affect negatively to reputation of the company against to consumers.
Finally, the last problem of the company is uneducated craftsmen. Chris Andrews finally detected the problem of dents or scratches originate from those and management team and him agreed on spending more money on investing the quality segment of production. H&H now spending ?15000 per annum for ensuring that the products are fit sub-standards before packaging.
QUESTIONS & ANSWERS
2.1. How does the company compete in its market place, and what is the role of quality in its competitive strategy?
2.1.1. The H&H company is manufacturing products for 2 different markets.
Construction Market: Firstly, they are producing high quality and aesthetic designs. The company has competed with cheaper products manufacturers in this type. Because of the producing high quality products, the costs are becoming higher. The company determines high price to gain profit in this situation and that makes them competitive with the less expensive producers company. But that position has some positive consequences. The designing architects and the constructors which desires to use quality and modern products are glad because of reaching the products whenever they order them. As a result the H&H Company is manufacturing the products high qualified in the right quantities in the right times.
Retail Market: Secondly,in 1990, because of the recession the H&H Company decided to reduce costs. So, they were beginning to batch producing. This situation caused to produce less quality products but they produced them faster. Now, they are compete with the less expensive producers with becoming like that. This market constitutes %40 of the companys sales value, but it constitutes %15 of the gain profit. They are producing faster so less quality and this makes some problems with the customers.
2.1.2. The role of Quality
The role of quality in H&H is figured out by understanding the meaning of the word quality. And it means creating different things for two markets and H&H are producing for different requirements to describe quality.
Conformance For Purpose: This means producing the products for their purpose and not adding different species. For example the handles are used for opening the tongue of the lock. They dont have any other duty.
Conformance For Specification: Determining the correct definition and information for the product.
Design Quality: In both markets, The design quality is important but in construction market, because of the innovation expect quality is more important than the retail market.
Customer Expectations: The expectation of customers is affected by the producers specifications. So, if the producer creates misleading and exaggerated specification, the customer affects wrong, and this causes the problem of trust between customer and producer.
Chris mentioned that The sales catalogue shows pictures of our products prepared for photography; special effects are used to give a bright polished finish but we actually use a matt finish. The examples used by sales are specially made by experienced craftsmen to eliminate any scratching or minor faults; of course we cannot repeat that standard with modern batch production methods..
Misdirection of the expectation of the customers harm the relationship between the customers and producer.
To sum up, the quality factors affect the success in competition badly. Poorly managed, misunderstood quality specifications cause problems in satisfying the customers expectations in all of the markets. H&H management have realised that poor quality is the underlying cause of their problems, but they have not figured out how to manage quality, so have tried to apply Statistical Quality Control.
2.2. Do you think that the companys use of statistical quality control is sensible?
First of all, In this case the SPC tool has not been sensibly implemented because there is an obvious misunderstanding how to apply it to the situation. The company makes the process control in the beginning of the all process. And the improper raw materials send back to the suppliers to change or pay back for them. And also they check the end of the process before packaging and they scrapp faulty products. But this situation increases costs and becomes a charge on.
What they had to do?
The quality department had to check all process one by one and uncover the process which one is producing more damage products. And also the quality department needs to find solution to reduce mistake rates.
At the other point, well-understood specification is needed at any control point. H&H does not take into account the current requirements for changing final products and should provide a specification that explains what “fail” or “transition” for each product / market. This may include surface finish, scratches or grooves, the type of varnishes, the feeling of movement, etc. Features and also product variables should include: material thickness, product weight, certain critical dimensions and mounting location holes and machining variables such as plating time and heat treatment parameters.
The above describes the physical errors of the SPC method used in H & H. However, good quality is not entirely associated with physical factors: labor force, their participation and attitudes towards any improvement package play a major role in their success. The process is just as powerful as the weakest connections!
Therefore, employees’ attitudes and objectives should be changed as well as quality measurement and control tools. H & H is not included in quality discs, it is not visible to control labor measurements; and bonus points still qualify for exit times at standard hours. These workers would not be guided by a company for a quality product: they were removed from the equation and had little understanding and participation in the need for improvement. finally, this bonus does not progress towards producing a higher quality product.
Table 1. Manufacturing processes chart of H&H
2.3. Apply the gap model of quality diagnostics to the company.
H&H firms has couple of problem about understanding of quality standards. Customer expectations, requirements and perceptions has strong bonds with those standards and firm hast to improve their manufacturing abilities for that. The firm working in different markets which has different needs, even same product may require different receipt for that scala of customers.
H&H needs to understand what quality means for customers because quality is quality if it pleases the customers. If distance of quality standards dangerously large between customers and the company, H&H will continue to lose their gross profit in long term.
2.3.1 The GAP Model:
GAP 1: The customers specification The product specification
GAP 2: The managements product concept The product specification
GAP 3: The product specification The actual product quality
GAP 4: The actual product quality Image of the product (and customers expectations)
GAP 1: This is the GAP between the what customer wants and what the company produce. Distance in two objective relatively smaller than other gaps because company strongly understood what market requirements are. Quality of the product is main problem for this.
GAP 2: Differences is higher than GAP 1. Management of H&H knows construction industry asks for best quality with low price even though UK retailers offers standardized products for the true price. Management of H&H may see this difference but product specification is lacking because of the batch method.
GAP 3: This is not a large gap in between because the specification will satisfy the customer needs since the product will leave the production line as it is imagined regardless of the cost involved. The cost consists of the rework and scrap costs, the delivery failure, the increased delivery costs and the representatives time spent smoothing out problems.
GAP 4: This is the largest gap. H&H shows its customers catalogues which does not represent the situation with the real product, so an exaggerated hype is on for the customer. When they meet the actual product, it will end with a rejection. H&H does not have a problem with conforming the specifications, but have a problem with setting those specifications.
Table 1. Polar Representation of H&Hs Markets
Table 2. The basis of specifications for the two markets
Product /Service feature Construction market Retail market
Functionality Smooth action, robust feel, heavy duty. Good safety margin (over designed?). Just sufficient to do the job. Designed down to the minimum cost.
Appearance Up market, innovative prestige, unique, blemish-free. Industry standard, domestic. Finish good on most visible surfaces.
Reliability Critical, at least during the first 10 years. To industry norms.
Durability Long life, heavy duty, serviceable (e.g. if vandalised). Medium life, domestic use. Not serviceable.
Recovery Ease of repair, spares availability, quick response to problems. N/A.
Contact Critical technical relationship with architect/specifiers. Commercial relationship with buyers.
QUALITY, 5th edition, Donna C.S. Summers; Pearson Education, Prentice Hall, 2010.
et al. (1998) Chapter 17, Table 17.3