Ch13 Quality control and process improvement

Question 1

Cost management

Answer 1

deals with EFFECTIVE and EFFICIENT use of resources to achieve organizational objectives.

Effective - achieving desired outcome
Efficient - achieving maximum productivity for minimum effort and/or with minimum waste

Question 2

Generic strategies
(customer value propostions)
- Michael Porter

Answer 2

Strategic target
Strategic advantage

Strategic advantage
- Cost leadership
* offer low costs than competitors

• Differentiation
• product/service is different from the competition in features, reputation, service, quality or other elements that customers value
• Focus (niche)
• product/service for a subset of customers
• to gain loyalty
• justify a premium price
• Best value
• a range of product/service at a lower price
• different from cost leadership, where only focusing on decreasing cost, which can involove decreasing quality
  *quality not sacrificed

Question 3

Target costing
a planning tool or strategic management tool
not an accounting tool

Answer 3

• Estimate price
• Estimate as-if cost
• Determine required investment and target cost
• Compare as-if cost to target cost

Target price - Target profit =Target cost > = as-if cost (take)
- target cost reflects the maximum allowable cost that will result in the required return

Question 4

Quality Management
- Quality control and Quality assurance
- planning for quality in alignment

Answer 4

Quality control
- process of comparing an output to an expectation
- most basic level of quality activities
- focusing on finding problems and defects AFTER facts
- Activities: inspecting / testing (manufacturing)
second review (service)

Quality assurance
- process for an organization to attempt to design quality into processes and procedures to avoid problems

Question 5

Cost of quality (COQ) - % of sales
- cost associated with failing to produce a defect-free product
- Joseph Juran QUALITY CONTROL HANDBOOK
- Pareto principle, or 80-20 principle (vital free / useful many)

Answer 5

Most expenseive place to discouver poor quality is after delivery to the customer.

• Prevention costs
• preventive activities before production: selecting suppliers for materials, training of employees
• Appraisal costs
• inspective activities for identifying defects: testing, validating, and inspecting
• Internal failure costs
• repair or replace defects (scrap, rework, downgrading costs - sold as a second)
• External failure costs
• customer complaint, warranty claims, product recalls
• intangible and opportunity costs: corporate image

Question 6

COQ theory

Answer 6

Focusing on quality assurance in terms of upfront spending to prevent problems will result in decrease in internal/external failure costs, and a decrease in overall COQ

Question 7

Quality management tools
- non-statistical
- statistical

Answer 7

Non-statistical tools
- fishbone diagram (cause-and-effect diagram) - Isikawa diagrams
- scatter diagrams : how two quality variables are interrelated

• check sheet

Statistical tools
- mean
- median
- mode
- standard deviation

Question 9

Random distribution
- every process is subject to random deviation
- when only random deviation exists, meaning there are no special causes of deviation present, the system is in control

Question 10

Three statistical tools for quality measurement

Answer 10

1. Control chart
2. Pareto analysis
3. Process capability analysis

Question 11

Six sigma
TQM approach/process

Driving down costs and improving profitability

Answer 11

to reduce variance continuously by defining, measuring, analyzing, controlling and placing accountability for improving operational process

Question 12

Process management tools

Answer 12

determine and analyze an organization’s business process to also improve performance

1. lean management- eliminate any element that does not add value to final product or service
2. ABM (activity based management)
   - Operational ANM: activity management, business process re-engineering, quality management and performance measurement
   * eliminate non vale added activity and process from the value chain
   * no impact on customer or service level

• StrateoABM
• to reduce overall costs and improve profitability
• focus on how to achieve org goals
• product design, product/customer mix, supply chain mgmt and CRM

Question 13

Business process approches
BPM

Answer 13

to optimize business process and improve efficiency and flexibility

BPR- business process re-engineering

Question 14

TQM - Total quality management

Answer 14

TQM is a process of controlling product quality from its raw materials stage up to the moment its finished products leave the organizations.

Features:
- quality is a continuous process
- quality encompasses not only products, but also people, processes, and services
- quality initiatives are designed to meet and exeed customer expectations

Question 15

Principles of TQM

Answer 15

1. Customer focus
   - focused on customer expectations and preferences (quality, price and dependability)
2. Executive leadhership
   - clear direction and internal culture that drives product quality foremost
3. People involvement
   - empower and involve employees in quality initiative. clear lines of responsibility and accountibility over TQM
4. Process approach
   - quality process should be defined, risks evaluated and controls implemented
5. System approach
   -structure and processes interdependent, correct measurement and evaluation of systems supporting quality
6. Continuous improvement
   - constant evolving
7. Factual approach in decision-making
   - decisions are made on analysis and facts
8. Supplier relationship
   - high-quality raw materials to make process smoother