11.2 Business Process Improvement - Other Process Improvement Tools Flashcards
The process improvement tool that compares company practices with those of best-in-class organizations is
A. Value chain analysis.
B. Enterprise performance management.
C. The balanced scorecard.
D. Benchmarking.
D. Benchmarking
According to the IMA, “benchmarking involves continuously evaluating the practices of best-in-class organizations and adapting company processes to incorporate the best of these practices.” It “analyzes and measures the key outputs of a business process or function against the best and also identifies underlying key actions and root causes that contribute to the performance difference.” Benchmarking is an ongoing process that entails quantitative and qualitative measurement of the difference between the company’s performance of an activity and the performance by the best in the world. The benchmark organization need not be a competitor.
The cost of statistical quality control in a product quality cost system is categorized as a(n)
A. External failure cost.
B. Appraisal cost.
C. Training cost.
D. Internal failure cost.
B. Appraisal cost.
The following are the four categories of quality costs: prevention, appraisal, internal failure, and external failure (lost opportunity). Appraisal costs include quality control programs, inspection, and testing. However, some authorities regard statistical quality and process control as preventive activities because they not only detect faulty work but also allow for adjustment of processes to avoid future defects.
For purposes of cost control, process reengineering is most similar to
A. Value-chain analysis.
B. Variance analysis.
C. Activity-based costing.
D. Kaizen budgeting.
A. Value-chain analysis.
Process reengineering and value chain analysis are similar due to their focus on inherent features in an organization’s business processes. Both rework an organization’s design to either improve customer service, reduce costs, or become more competitive.
Listed below are costs of quality that a manufacturing company has incurred throughout its operations. The company plans to prepare a report that classifies these costs into the following four categories: preventive costs, appraisal costs, internal failure costs, and external failure costs.
Design reviews $275,000
Finished goods returned due to failure 55,000
Freight on replacement finished goods 27,000
Labor inspection during manufacturing 75,000
Labor inspection of raw materials 32,000
Manufacturing product-testing labor 63,000
Manufacturing rework labor and overhead 150,000
Materials used in warranty repairs 68,000
Process engineering 180,000
Product-liability claims 145,000
Product-testing equipment 35,000
Repairs to equipment due to breakdowns 22,000
Scheduled equipment maintenance 90,000
Scrap material 125,000
Training of manufacturing workers 156,000
The dollar amount of the costs of quality classified as preventive costs for the manufacturing firm would be
A. $643,000
B. $701,000
C. $736,000
D. $768,000
B. $701,000
Prevention attempts to avoid defective output, e.g., by employee training, review of equipment design, preventive maintenance, and evaluation of suppliers. Accordingly, the preventive costs equal $701,000 ($275,000 design reviews + $180,000 process engineering + $90,000 scheduled maintenance + $156,000 training).
Which of the following quality costs are nonconformance costs?
A. Systems development costs
B. Costs of inspecting in-process items
C. Environmental costs
D. Costs of quality circles
C. Environmental costs
Nonconformance costs include internal and external failure costs. External failure costs include environmental costs, e.g., fines for violations of environmental laws and loss of customer goodwill.
