60. Managing Quality

Question 1

Describe the activity-based management (ABM) model

Answer 1

• The ABM model is an integrated framework that management can use to establish and maintain a reporting structure to support the management objectives of the organization. It is not, however, a distinct management concept.
• ABM uses the ABC focus on activities and establishes a reporting structure with cost drivers and performance measures to help manage each activity.

Question 2

Describe how kaizen is related to total quality management (TQM).

Answer 2

• In total quality management (TQM), kaizen is typically described as making continuous improvement by small steps contrasted with more radical business process improvement concepts like business process reengineering.
• TQM using kaizen is based on ideal standards of performance.
• Rather than measuring the variance from the standard, kaizen performance measure is based on tracking progress toward the ideal standard.

Question 3

Describe the kaizen activity cycle Plan→Do→Check→Act approach (PDCA).

Answer 3

• Plan: A current or proposed process is assessed, and an improvement plan is established.
• Do: Changes are made, and data are gathered to determine if the changes are effective.
• Check: Evaluation of the data takes place, decisions regarding adjustments are made, and additional action and data gathering occur, if needed.
• Act: If the organization determines the process should be improved, the new process is rolled out, new performance standards are set, and the organization acts on the change

Question 4

With respect to measuring costs of quality, briefly describe prevention costs and appraisal costs and give a few examples of each type of cost.

Answer 4

• Prevention costs: Prevention costs are incurred to ensure that tasks are performed correctly the first time and that the product or service meets customer requirements. Some examples of prevention costs include process or product design, employee training, education of suppliers, and preventive maintenance.
• Appraisal costs: Appraisal costs represent what the organization spends on inspection, testing, and sampling of raw materials, work-in-process, and finished goods and services. Some examples include quality inspectors, and costs to adjust measuring and test equipment.

Question 5

With respect to measuring costs of quality, briefly describe internal failure costs and external failure costs. Provide examples of each.

Answer 5

Internal failure costs: Scrap and rework costs that are incurred to dispose of or fix defective products before they are shipped to the customer. These include costs of downtime or reduced yield due to production of defective parts or services.
•External failure costs: These are generally the highest costs of a low-quality product and include complaint processing costs, customer returns, warranty claims, product recalls, field service, and product liability. Future lost sales due to external failure can be very significant.