11. Contemporary MAS (Part 3) Flashcards
What is target costing?
The difference between the sales price needed to capture a predetermined market share and the desired profit per unit. Like life cycle costing, target costing has major role to play in developing and managing new products, although it can also be used to manage the costs of existing product, especially product upgrades.
What are the key features of target costing?
- It is price led
- Focuses on the customer and customer expectations
- Based on principles of life cycle management, placing primary emphasis on managing downstream and manufacturing costs
- Cross-functional—involving managers from across the value chain
What is Business Process Re-engineering (BPR)?
Becoming popular since the 1990s, BPR is the fundamental rethinking and radical redesign of business processes in order to achieve dramatic improvement in critical areas of performance such as cost, quality and delivery. BPR focuses on those processes that are essential in achieving the firm’s objectives and strategies (i.e. strategic processes that are value adding).
What are the four steps of BPR?
- Prepare a business process map (see Exhibit 15.3).
- Establish clear goals for the re-engineered process based on what the customers value.
- Reorganise work flow so that the goals can be achieved.
- Implement changes.
How does ABM and BPR work together?
Activity-based management (ABM) provides a good foundation for BPR however their focus are different. ABM is concerned with process improvement, an incremental continuous improvement process whilst BPR involves fundamental changes to the way processes are structured.
What are the 8 dimensions of quality?
- Performance—how consistent and well a product performs.
- Aesthetics—the appearance of the product as well as the appearance of the facilities, equipment, personnel, and communication materials associated with services.
- Serviceability—ease of maintaining and/or repairing a product.
- Features (quality of design)—characteristics of a product that serve the same function but have different design specifications, such as the type and quality of materials used in the product (for example, 14-karat gold jewelry and gold-plated jewelry).
- Reliability—the probability that the product or service will perform its intended function for a specified length of time.
- Durability—the length of time a product functions
- Quality of conformance—how a product meets its design specifications. Is the product manufactured as the design specifies?
- Fitness for use—suitability of the product for carrying out its advertised functions.
What is Total Quality Management (TQM)?
TQM is a management approach that focuses on meeting customer requirements by achieving continuous improvement in goods or services.
What are the 6 types of TQM?
Total Quality Management (TQM)
- Holistic – whole value chain
- Customer Driven
- Involves Empowerment
- Uses process perspective
- Supported by a Quality Management system
- Involves continuous improvement
Why do costs of quality exist?
Because poor quality may or does exist.
What are the four categories of costs of quality?
Prevention costs
Appraisal costs
Internal failure costs
External failure costs
What makes up prevention costs?
They are incurred to prevent poor quality. Examples of prevention costs include:
- quality engineering; quality training programs
- quality planning; quality reporting
- supplier evaluation and selection
- quality audits; quality circles
- field trials; design reviews.
What makes up appraisal costs?
They are incurred to determine whether products and services are conforming to requirements or customer needs. The main objective is to prevent nonconforming goods from being shipped to customers. Examples of appraisal costs include:
- inspecting and testing of raw materials; packaging inspection
- supervising appraisal activities
- process acceptance (sampling goods in process to see if the process is in control and producing non-defective goods)
- product acceptance (sampling finished goods to determine if the finished goods meet an acceptable quality level)
- measurement (inspection and test) equipment
What makes up internal failure costs?
They are incurred because products or services do not meet requirements and the defect is discovered before the external sale. Examples of internal failure costs include:
- scrap; rework
- downtime (due to defects); design changes
- re-inspection; retesting
If there are no defects, there are no internal failure costs.
What makes up external failure costs?
They are incurred because products fail to meet requirements after delivery to customers. Examples include:
- the cost of recalling defective products
- lost sales because of poor product performance
- returns and allowances because of poor quality
- warranty costs; repair costs
- product liability; complaint adjustment
- customer dissatisfaction; lost market share.
What are Observable quality costs?
They are those that are available from an organization’s accounting records
