2. Total Quality Management Techniques Flashcards
What was the result of traditional approaches to promote efficiency?
High volume production runs, with low cost per unit, standardised products and high inventory levels
What are the 3 significant developments in the modern environment, leading away from the traditional efficiency/inventory approach?
- Globalisation
- Technology
- Fast changing consumer tastes
What are the 2 main results from modern environmental changes?
- Shorter product life cycles
2. Greater competitive pressures
What is total quality management?
An integrated and comprehensive system of planning and controlling all business functions so that products or services are produced which meet or exceed customer expectations
What 4 principles are key to TQM?
- Continuous improvement
- Right first time
- Employee involvement
- Customer focus
What is the cost of quality?
The difference between the actual cost of producing, selling and supporting products and the equivalent costs if there were no failures during production or usage
What are the 2 types of conformance costs?
Prevention and Appraisal
What are the 2 types of non-conformance costs?
Internal and external failure costs
What are prevention costs?
Costs incurred prior to or during production in order to prevent substandard or defective products or services from being produced
What are appraisal costs?
Costs incurred in order to ensure that outputs produced meet required quality standards
What are internal failure costs?
Costs arising from inadequate quality which are identified before transfer of ownership from supplier to purchaser
What are external failure costs?
Costs arising from inadequate quality discovered after the transfer of ownership from supplier to purchaser
What is the expected impact on quality costs of implementing a TQM approach?
Increasing appraisal and prevention costs in the short term and decreasing internal and external failure costs in the long term
What is the Just in Time system of inventory management?
A system whose objective is to produce or procure products or components as they are required by a customer for use, rather than for stock
Is a JIT system push or pull?
Pull - driven by demand
What is just in time production?
A production system which is driven by demand for finished products whereby each component on a production line is produced only when needed for the next stage
What is just in time purchasing?
A purchasing system in which material purchases are contracted so that receipt and usage of material coincide
What are the 5 key characteristics of JIT purchasing?
- Reduced number of suppliers
- Long term relationships with nearby suppliers
- Helping suppliers to increase quality
- Not hung up on single sourcing
- Stable and good communication throughout the firm
What are the 5 key characteristics of JIT production?
- Reduced set up and cycle times
- Flexible staff
- Efficient QC in production
- Customer order driven production
- Reduced inventory levels throughout
What is the theory of constraints?
A procedure based on identifying bottlenecks (constraints), exploiting their use, subordinating everything else, alleviating bottlenecks and re-evaluating the whole system
What is a constraint/bottleneck?
An activity, resource or policy that limits the ability to achieve an objective
What does measuring the throughput do?
Measures how fast revenue is being earned compared to how fast costs are being incurred
Why is throughput accounting sometimes referred to as super variable costing?
It considers materials to be the only truly variable cost
What is the equation for throughput contribution?
Sales revenue - materials
What is the equation for the throughput ratio?
Throughput contr per time period / Conversion cost per time period
How are products ranked for production using throughput accounting?
Rank the products by contribution per bottleneck hour
What are the 3 specific focuses of JIT, TOC and TQM?
- Efficiency
- Inventory management
- Cost reduction (in the long term)
What is continuous improvement?
The continuous search to reduce costs, eliminate waste, improve quality and performance of activities and increase customer satisfaction/value
What is Kaizen costing?
Setting a target cost for each function of a product/service, using this to create the target cost for a product and reviewing based on actual costs
What is business process re-engineering?
Seeking radical (rather than continuous) improvements, focusing on the best way to achieve an outcome that will add to customer value
What are the 5 steps to business process re-engineering?
- Develop the Vision and Objectives
- Identify the process
- Understand and measure the current process
- Identify aids to change
- Design and build a prototype
What are the 5 biggest issues with business process re-engineering?
- Dehumanises the workplace
- An excuse to downsize
- Exaggerated expectations
- Resistance to change and lack of management support
- Generic ‘best practise’ don’t always fit company needs
