OPERATIONS MANAGEMENT PRESENTATION

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OPERATIONS MANAGEMENT PRESENTATION

• SUBJECT DEMINGS FOURTH POINT
• INSTRUCTOR DR. JOHN SEYDEL
• PRESENTED BY TEAM 9
• KOTONA BENSON
• JOEL BEDWELL
• SYED AHMED ALI QAZI

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Two or more suppliers for the same item will
multiply the evils that are necessarily inherent
and bad enough withany one supplier.

• Dr. Deming says.

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What does Point 4 say?

• End the practice of awarding business on price
  tag alone.
• It is customary for purchasing departments to
  purchase from the lowest-priced vendor.

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Major Drawbacks of this Practice

• Firstly, this practice almost invariably leads to
  a proliferation of suppliers.
• Also, it causes the buyer not to stick to one
  vendor and jump from vendor to vendor.
• Finally, it causes the buyer to rely on
  specifications.

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Proliferation of Suppliers

• This variation causes problems in production.
• Also, it causes impairment of quality.

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Jumping from Vendor to Vendor

• Creates inconsistency in the quality of raw
  materials acquired.
• It is very difficult to go through the
  development of an item, which demands so much
  talent and manpower, with two suppliers.

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Reliance on Specifications

• Raw material may meet specifications but still
  present problems in production.
• Also, it becomes a barrier to continuous
  improvement.

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Price Tag does not Determine Quality

• Price has no meaning without a measure of the
  quality being purchased.
• Also, a price tag is unambiguous and therefore
  appealing.

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How to Determine Quality?

• Purchasing agent must have education in
  statistical evidence, supplemented by experience.
• Also, purchasing agent must learn how raw
  materials are used, in order to acquire the right
  information from the supplier.

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Examining the Two Selected Companies

• Econo Lodge, which is a U.S.A based chain of
  hotels, is franchised by Choice Hotels, does not
  apply Demings point four.
• Comfort Inn, which is also a U.S.A based chain of
  hotels, applies Demings point four.

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Econo Lodge Our rates are low. Not our
standards.

• Awards business on price tag alone.
• Deals with three suppliers for the supply of
  furniture to be used in the hotel rooms.
• Customers often complain about the low quality of
  furniture in their rooms.
• Losing sales even though prices are cheap.

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Comfort Inn Its more than a room. Its comfort

• Does not award business on price tag alone.
• Deals with one supplier for the supply of
  furniture to be used in the hotel rooms.
• Customers report no such complaint regarding the
  quality of the furniture.
• Earning more sales and profit at high prices.

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Econo Lodges Sales for 1999
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Comfort Inns Sales for 1999
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Benefits of Applying Point Four

• Firstly, buyer will serve his company best by
  developing long-term relationship of trust and
  loyalty with the vendor.
• Also, all the departments working together to
  reduce costs and improve quality.
• Finally, accounting and other paperwork is
  simplified.

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A company that adopts the recommendations made
here will have wide influence. The suppliers that
serve one company also serve other companies, and
will deliver to all of them better and better
quality with better and better economy.

• Dr. Deming says.