Recently, Wal-Mart has launched a quality improvement initiative that aims to ensure the “quality and freshness of the fruits and vegetables that it offers its customers” (Wal-Mart). To ensure customer satisfaction, the corporation is offering a 100% money back guarantee on produce that is not up to these standards. The company aims to achieve this goal by shipping the produce from the farms to their shelves more quickly by buying directly and reorganizing the structure of their distribution and trucking centers, completing weekly checks in all of its stores to ensure that the produce is fresh, and launching “Fresh Produce Schools” and training programs to their employees.
Total quality costs are generally incurred by “investing in the prevention of nonconformance to requirements, appraising a product or service for conformance to requirements, and failing to meet requirements (ASQ). Prevention costs include new product review, quality planning, supplier capability surveys, process capability evaluations, and quality improvement in team meetings and team training. Appraisal costs include incoming and source inspection/test of purchased material, in-process and final inspection/test, product, audits, calibration of measuring and test equipment, and supplies and materials. Failure costs include the work that occurs before the delivery of the product to the customer (internal failure costs) and costs occurring after the delivery of the product to the customer (external failure costs).
Although it seems like the company is making this decision in order to provide better customer service to their employees, this is not the case. Reducing the percentage of food that is spoiled in their stores will lead to a higher degree of sellable items, which would therefore increase their profits and allow them to control cost. Ultimately, these activities could be classified as prevention costs, which would enhance total quality management. The weekly checks and training programs for their employees function as quality circles, assuming these people meet on a regular basis to find ways to maintain the produce quality.
There are several failure costs that are associated with the ways that the Wal-Mart produce sections are currently operated. Examples of internal failure costs include the costs of inspecting the produce before they are shipped to the stores or distribution center and how and where these fruits and vegetables are actually delivered from. External failure costs include customer complaints and after the implementation of the quality improvement, there will be a need for “product recalls” which in this case is a money-back guarantee.
Appraisal costs are also important to consider in this example because they are an essential component of quality control costs. Since Wal-Mart aims to increase customer satisfaction, they will unavoidably incur appraisal costs in order to pay for floor inspectors to monitor the produce sections in all of its stores. Although this may be costly for the company, it shows that Wal-Mart as a whole is concerned about its reputation and will take necessary steps to rectify issues.
Overall, this business plan will end up saving Wal-Mart more money than it puts in to establishing this practice and improve its reputation. Therefore, Wal-Mart made the correct decision when it chose to launch this quality improvement initiative.
ASQ. “Cost of Quality (COQ)”. ASQ, 1999. Web. 4 June 2013. <http://asq.org/learn-about- quality/cost-of-quality/overview/overview.html>
Wal-Mart. “Walmart Launches Fresh Produce Guarantee in U.S. Stores”. Wal-Mart News, 3 June 2013. Web. 4 June 2013. <http://news.walmart.com/news- archive/2013/06/03/walmart-launches-fresh-produce-guarantee-in-us-stores>