Cheap does not supplant Quality

I drove for 1/2 hour to Wal-Mart to buy a set of windshield wiper-blades only to find that the type I needed was out of stock. Is it a unique experience?

Have you also been bothered by the fan of your Dell laptop blowing hot air on your (right) hand-wrist as you were handling your mouse?

Beyond the fact that both types of customer dissatisfaction come from icons of our economy, is there anything else these companies share? Of course, they are both representatives, each in its own industry, of the transformational nature of technology and ensued operational efficiencies.

Wal-Mart, by operating a just-in-time supply chain, and Dell, by manufacturing-to-order, have managed to be the most efficient organizations in their given industries. The common knowledge goes on to say that the customer gets the benefits (read savings) when dealing with anyone of these two. Yet, driving twice to the same store to get wiper blades more than doubles my cost, and taking all the heat from a poorly placed fan is all I remember when the lower price I paid for the laptop is forgotten.

So, when you have a long supply chain, long in weeks and miles, or when you change suppliers of your parts every now and then, "to keep them honest," it becomes easy to overlook 'subtleties' in your service/product like the ones above.

To the extent these are not isolated occurrences, what can drive such organizations back to consider quality of service/product?

Could there be anything like a customer revolution or are we in a race to the bottom?

Juran saw the problem with quality (too) many decades back... Somehow, had he had mostly Japanese and European students?

Addendum: The minimalist approach throughout!
Ikea makes an interesting case study: Not the greatest service on the floor, several items out of stock unless shopping on the first floor or the warehouse, one's shopping experience is more like a crawl than a flow. Yet, Ikea manages somehow to offer simple lines / functional furniture, an entry level to Scandinavian design (as far as price and quality,) that is still popular with shoppers for the lack of alternatives. In the end, the model behind Ikea's success is keep it minimalist (assembly, features, price, logistics, etc.) The only exception from minimalism seems to be its global scale.

To understand the difficulty through which change comes about, at a macro-level, it's worth recalling how Thomas Kuhn used to say that mere disconfirmation or challenge never dislodges a dominant paradigm; only a better alternative does.


Dragos Novac said...

Your argument reminds me of Porter's classic "What is strategy" article from 1996, with a very good graph argumenting that a company has to make a tradeoff between competing on costs or competing on quality or features. Actually I believe that there's always a tradeoff one has to make among product, service and process (see some brief scenarios here) - the beauty of it starts from the excellence frontier on where Porter argues that the real strategy should be conceived. Both Dell and Wall MArt are mastering the process side and try to leverage the scale their business involves by widening their scope as well. Why is that -- competitive pressures from the industry - and in time, by neglecting the customer side they were not able to create a competitive advantage.

I think that the company best exemplifying a low cost provider play (as a competitive advantage)is Southwest Airlines.

fCh said...

Dragos, thank you for your comments and the points you make!

For the time being, it is hard to see a scenario in which Wal Mart could be displaced.

With Dell we have a different story from which I'd like to point out just a couple of data points: a) Dell abandoned the Chinese (consumer?) market, and b) Lenovo is climbing up through its recent acquisition.

Dell still has plenty of options before giving up, but at a certain point those options ought to probably include spending more on R&D/quality.