Customer-Oriented Quality Management in the Automotive Industry

The production sites are also mainly located in Sweden (Saab website- company overview, 2004). The main production facilities for the Saab 9-3 and 9-5 as well as the product development are situated in Trollhättan. The sales & marketing and financial departments and a transmission plant are to be found in Gothenburg. The logistical hub for the world-wide distribution of parts is located in Nyköping. Close to Nyköping, in Södertälje, they develop and produce the Saab four-cylinder petrol engines. In addition, they manufacture the Saab 9-3 convertible in cooperation with the Magna Steyr plant in Graz, Austria, which also assembles the Mercedes-Benz E- and G-class, the Jeep Grand Cherokee, the Chrysler Voyager and the BMW X3 (Magna-Steyr-website, 2004). In 2003, Saab produced a total of 130,034 units (Saab Information Korta Fakta, 2004). This represents an increase of 5,142 (4%) units in comparison to 2002. However, the number of sold cars rose by 9% as they sold 131,641 cars in 2003 and 120,800 units in the year before. The total production has expanded by 102 % over the last 20 years. In 1980, Saab produced 65,754 units moving up to 87,356 cars in 1990 and breaking the 100,000-border with a total production of 133,013 units in 2000. In 2003, 66,919 (51%) of the sold cars were Saab 9-3 Sport Sedans, 14,889 (11%) were Saab 9-3 Convertibles while the sales of the Saab 9-5 account for 36% (46,739 units). Saab sells their cars to more then 60 countries world wide. The most important sales markets are the USA, Sweden and Great Britain. These markets account for two thirds of the total units sold. Last year, 47,839 cars found their new owners in the US, while 26,318 cars were sold in Sweden and 14,584 units in Great Britain. As the US represents Saab’s biggest sales market, it is important for Saab to understand the needs and wants of the American customers and to get insight in their quality perception. This is one of the reasons why the results of the J.D. Power survey were used to compare them to the data of the internal survey in chapter six. [...]

(Hardie, 1994) This quote illustrates the connection between quality and customer satisfaction very well. The illustrations have shown, that in today’s competitive environment, it is crucial for a company to bridge the gap between internal quality and external customer’s needs and satisfaction. Bandyopadhyay & Sprague (2003) stresses the linkage as they state that the main goal of the TQM approach is customer satisfaction. Also Lillrank (1999, p.318) links quality management to customer satisfaction as he defines it as “finding out what the customer wants”. If a company offers faultless products with the best quality possible, they would not be successful if the product’s features do not meet the needs and wants of the potential customers. Here it becomes obvious that one can not only look at quality from just the technical point of a low level of defects but has to take the consumers into account. Köster (1994) supports this point of view as he argues that customers do not purchase goods or services unless the products meet their needs and wishes. Correspondingly, the closer a product matches the needs and wishes of the customer, the more will be sold. Therefore it is important to decrease the number of unsatisfied customers and focus on the customers as the driving force behind improvement strategies (Behara et al, 1995). The company’s success depends on whether they manage to offer the ‘best’ in the eyes of the customers or not (Köster, 1994). The perception of the ‘best’ refers to the overall quality of the product. This includes its fulfillment of promised and expected characteristics as well as the user friendliness, the usefulness or safety as well as the price. [...]

As quality management focuses on the elimination of waste and avoidable costs, it is of crucial importance to analysis the costs of quality in the context of creating a sustainable competitive advantage through quality management. A competitive advantage implies that the company implements their assets in the most efficient way and has thus lower production costs than their competitors. According to Gryna (2000), some regard ‘quality costs’ as the costs to attain quality, while others equate it with the costs of poor quality. Thus the costs of quality can be defined by expenditures that incur to prevent a deficit in quality as well as costs occurring when the quality fails to meet the customer requirements (Horngren et al, 1996, in: Krishnan et al (2000)). ‘Quality is for free- it is the lack of quality that costs.’ (Philip B. Crosby, 1988) This quote might sound ambiguous at the first sight, but with this statement Crosby wanted to create attention to the fact that poor quality or ‘everything that is not done right at the first time’ causes even higher expenditures for the company than the expenditures for setting up and running a quality management. Consequently, it should be the target to reduce the total costs of quality in line with achieving a higher level of quality. The model for the optimal quality costs, illustrated in figure 2.4, gives an overview of the composition of the costs of quality and its interaction. The total quality cost is demonstrated as the sum of failure costs and the costs of appraisal and prevention. The graph illustrates that the higher the level of quality, the lower the costs of total quality. As the cost for prevention increases, the total amount of faults and errors is reduced and thus the failure costs. This model shows that the level of quality translates directly into either costs or benefits for a firm. [...]