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Deming\'s 4th Point.
4. End the practice of awarding business on the basis of price tags. Instead, minimize total cost. Move toward a single supplier for any one item, on a long-term relationship of loyalty and trust.
What Deming says is: Go for high quality material even though it is costly. As the material is costly you will handle it with care and can avoid waste. This may reduce overall price but definitely improve the quality of the product.
"How to map this with Software?"
As there is no supply of raw material, can we map "supplier" term and its meaning with any software term?
Re: Deming\'s 4th Point.
There is certainly a supplier in software. And certainly there are many extensions which we can apply to this concept.
On a typical software project somebody has to actively decide on several purchasing decisions:
- Operating hardware / operating system
- Development software / Component software
- Platform support program
In some sense these could be considered the "raw materials" of software development
Those have real costs attached to them, and have a direct impact on quality. Often people think that sticking with one supplier won't help them because they are unable to influence the decisions of the supplier, but this isn't always correct.
Many hardware vendors offer extra services if you're willing to pay for them, and they produce a long-term relationship with that vendor. Contrast Dell's 90 day guarantee on desktops to Sun's $500/minute downtime refund on their high-end systems.
In development software the suppliers have a constant fight to keep their customers -- this can be used to support the single supplier desire. Once you buy a package from a company they start offering discounts on new purchases and upgrades. Many vendors actively work on their products, and if their market is limited, they tailor their development to their primary customers.
Platform support is an interesting area to consider as a supplier, in this case they would be supplying information. There are many companies offering development support for other vendors products -- especially when that other vendor is very large / significant. The formal details of the support program don't always look good for repeat business, but the more you talk to them, the more they will give you additional contacts and access to more key individuals in the company.
Re: Deming\'s 4th Point.
Still confused !!!
Take a vey simple example from a Automotive Industry.
An Motorcycle manufacturer (ABC) is purchasing tyres from two companies (DEF & GHI). Both companies are back up for each other which is quite required.
Also Quality of the tyre can be maintained by forcing to follow certain manufacturing steps and by using good raw material .
Incase of software How this can be done?
Say A compay JKL has a software suit say a network monitoring system. This sysyem has many modules. One of the module is given a sub-contractor MNO. In this case JKL won't be going for other subcontractor. Main reason for this is very tight binding of systems and secrecy.
Here quality is completely dependent on the logic used for writing code. So eventhough a second sub-contractor is appointed preformance may vary a lot.
Oh god !!! I am even more confused.
Re: Deming\'s 4th Point.
<BLOCKQUOTE><font size="1" face="Verdana, Arial, Helvetica">quote:</font><HR>Originally posted by AmitK:
As there is no supply of raw material, can we map "supplier" term and its meaning with any software term?<HR></BLOCKQUOTE>
In one sense "supplier" could be third-party controls which, in this case, means go with only a minimal basis of third-party controls. The "raw material", in this case, is the third party controls or software. An automated test tool vendor can be a supplier, in this case of automated test tool solutions as well as, perhaps, training on automated testing concepts.
<BLOCKQUOTE><font size="1" face="Verdana, Arial, Helvetica">quote:</font><HR>What Deming says is: Go for high quality material even though it is costly. As the material is costly you will handle it with care and can avoid waste. This may reduce overall price but definitely improve the quality of the product.<HR></BLOCKQUOTE>
Well, this is not entirely what he was saying in this point. The idea was not that quality material is costly. Rather, it is that nonquality material is more costly even if the initial costs are very low. It is, in fact, the quality materials that will cost you less in the long run.
What Deming really said here is encapsulated well in his own words: "Price has no meaning without a measure of the quality being purchased." What this means, in practical terms, is that the lowest price for a competing product may, in the long run, turn out to be the most expensive. So imagine that you just purchased a very low-cost third-party tool to help with your development. The cost savings were incredibly from the other competing third-party tools. But let us now say that the cost of maintaining this third-party control was a nightmare. It was poorly documented, no support was offered, and they did not update the control on a regular basis. Now your low-cost solution ends up becoming a high-cost solution. The whole point is really to develop and buy products on the basis of cost of ownership and not just cost of acquisition.
So rather than relying on "price tags", as Deming asserts, "minimize total cost". Meaning - look at the big picture of what this will be costing you. If you do not know the quality of a product that you have purchased, then price alone cannot be used as an accurate measure - and many, many organizations do this. (Think of the automated test tools that many organizations buy that become shelfware, or the third-party components that become high-maintenence, or even think of the end consumers who are saddled with poor quality products.)
Now, this also translates to development of products if you think about it. Do you see how? Consider that many organizational practices reward project development for on-time delivery and within budget. Now consider that many of them consider that the only reward. What this does is measure one distinction of the product but does not take into account its inherent quality. Just being "on time" or "within budget" is not a reflection of quality. So here the emphasis is more on cost ("We are on time so we do not go over budget") rather than on the quality that is actually present in the product. Let us say that you come in with a product that is on-time and within budget but is a nightmare for your customers to use. In that case you must, generally, spend twice as much to handle the problems after the fact than you would have if you came in a little over the time and maybe a little over budget, but with better quality going out the door.
So the real point of this initial statement is that there must be a tradeoff between budget (in terms of time and money) and quality. The problem with this of course is that, when Deming was making his rounds, dates-for-release and costs were very easy to measure, whereas quality was not. As such, organizations focused on what they could measure and that is why an emphasis on deadlines and cost-savings at the exclusion of quality came into being.
As far as the second part of the point, about moving to single suppliers, consider the benefits of this. You have decreased costs of information capture from the supplier as well as maintenance headaches. You eliminate a lot of potential redundancy and complexity. Also consider strict operational advantages. Two suppliers can both produce excellent products (such as third-party controls), but there will be differences between the two. A change in process or product from one vendor to another can cause integration problems as well as just general systemic issues. Also remember that variation even with just one supplier of something you need is inevitable and leads to problems. Thus, variation in more than one supplier of something you need just multiplies the problem. Add that to the potential integration problems and you see why one supplier can be a good route. And you can also tie this into Point 3 in that if you can count on quality products from a supplier, then less time and money is spent on your own testing (inspection, auditing, etc.) of those products. (Remember Point 3 was as a reduction in mass inspection/testing costs.)
That being said, there are, of course, advantages to multiple vendors or suppliers. If you do have multiple sources of products, that can mitigate problems when one supplier cannot meet schedules because of quality problems or other issues. So, in this case, using multiple suppliers is a safety net. However, with the specialization present in multiple suppliers these days (something that was not the case in manufacturing), this is really less of an issue. There is also, however, the element of price. If you do have multiple suppliers, then you can apply pressure to those various vendors to reduce their unit cost because, after all, you do have somewhere else to go. Again, the specialization has hurt this somewhat but certainly not as much.
Now, having said all of this, I want to return to one conceptual idea but if you are already bored to tears, I recommend stopping here. The conceptual idea I want to return to is one that is implicit in Deming's Point 3 and that I hinted at above. That conceputal idea is this: Quality can be measured quantitatively in financial terms and in terms of customer satisfaction. This applies to any kind of product. That is how we determine if the cost savings (the "price tag" that Deming talks about) is, in fact, viable. In the case of the financial measure (which is always impact on bottom-line in terms of customer satisfaction), you compare the cost of the development (or of the acquisition) of a product and implementation of said prodcut to the estimated costs of "change requests" and "defect fixes" that are requested in the first six months of operating against the requirements in the original scope of the project in which the product will be used. The ratio of the estimated modification hours to the actual development hours demonstrates the quality of development to meet the customer expectations. (Now: mind you that this is also talking about acquisition of a product from a supplier. So you could be the customer with the expectations in this scenario.) If the change requests are anywhere from zero to ten percent of the original development (or acquisition) costs, then the development/acquisition quality is quite high. If, however, the percetnage is thirty percent or greater, then the development/acquisition quality is quite low.
So, in other words, if you acquire some third-party automated testing tool and you find that in your first six months, it does not recognize half of your controls and cannot execute unattended with your application and the support for the tool is minimal at best, then you will have a much higher cost ratio, even if the tool was the cheapest solution.
Does some of this make sense? Rather than respond to your second post about the motorcycle manufacturer and the software suite provider, I would rather see if some of this answered your questions and then we go from there.
Re: Deming\'s 4th Point.
Very good explanation. Having worked with the government for years, who has the ultimate buy from the low-bidder mentality, and then getting the opportunity to see what it actually costs them, I have first hand experience in this very point. They buy a network monitoring tool from the low bidder but had to hire 4 people to configure it to be able to use it and then had to pay huge amounts of money in maintenance and then, get this, had to install over 300 patches in the first year. The cost of ownership was considerably higher than the cost of acquisition.
The most exciting phrase to hear in science, the one that heralds the most discoveries, is not "Eureka!", but "That's funny..."
The most exciting phrase to hear in science, the one that heralds the most discoveries, is not Eureka!, but That's funny...