M/A - Quality Control and Process Improvement (Overview & In-depth) Flashcards
What is the difference between effectiveness and efficiency?
Effectiveness - achieving the desired outcomes
Efficiency - focuses on achieving maximum productivity for minimum effort and or with minimum waste
*Cutting cost is not an effective cost management strategy unless the root cause namely the activity in which cost is eliminated
What is value-added and non-value-added activities and cost management
Value-added activities - from the customer perspective, add value to the good or service (increase in quality)
Non-value added activities - customer perspective, do not add value to the goods or services
Cost management - Deals with the effective and efficient use of resources to achieve organization objective
Provide the 3 types of strategic advantages and 2 types of integration
- Differentiation
- Unique product product or service, industry-wide, reputation, quality - Cost leadership
-Low cost - Focus
- Niche - Particular segment, gain loyalty at premium price
- The customer value proposition - a concise statement of the reason, why a customer should buy a product and how the customer needs to satisfy
Integration of cost and differentiation
Best Value - Offer customers a range of products similar to those of competitors, but at a lower price
Blue Ocean - Integration of cost leadership & differentiation
Explain what target costing is and estimate price
- A strategy in which the target price is set by the market.
- Organization subtracts target profit to calculate easier to reduce product cost during the planning stage
- Easier to reduce product cost during the planning stage
Estimated price - Estimates as if cost, Determines required investment and target cost - compared to target cost
Estimate price - Estimate as-if cost - Determine required investment and target cost - Compared as-if cost to target cost
What is the difference between Quality, Quality control and Quality Assurance
Quality - is a measure of the superiority of a product or service, its ability to meet customer expectation
Quality control - Process of comparing an output to an expectation. Control is the most basic level of quality activities
Ex, the Audit firm has a second partner review review the audit files
Quality Assurance - Attempt to design quality into processes and production to avoid problems (Quality issue to be discovered)
Quality Management - Encompasses both quality control and quality assurance, planning level in alignment with organization, mission, vision, value
What is the cost of quality and the four components
Cost of quality - Cost of failing to produce a defect-free product.
Most expensive place to discover poor quality is when it is delivered to the customer
Four components
1. Preventing cost - the cost of activities designed to prevent defects. Ex. Working with suppliers to include quality
2. Appraising cost - the cost of inspection used to identify the defect. Testing incoming from raw material
3. Internal failure cost - cost needed to repair or replace the defective product during production
4. External failure cost - repair & replacement of product after delivery to the customer. Customer complaint
Explain what quality measurement tools are and examples and nonstatistical tools and statistical tools are
Quality measurement tool
- Are used to quantify how an entity is doing at achieving quality
Non-statistical tool
Cause and effect diagram - shows how two quality variables are inter-related using graph
“Fish-bone” diagram
Check sheet - List of procedures developed by front-line operators in coordination with other department
Scatter diagram- Graphically shows how quality variables are interrelated.
-If data points form a tight band that reflects expected relationship problems with vehicles causing erratic consumption
Statistical tools
Control chart - graphical representation of the result of a process over time to ensure the process is operating within defined tolerance
Pareto analysis - Statistical analysis tool to identify the barriers to quality and to prioritize them concerning process improvement
The rule is that 80% of problems result in 20% of work being performed. If fixed the 20%, productivity increases 80%
Process capability - Analysis that measures how well a process performs against a specific set of limitation
What is Six Sigma
Six Sigma - Recognized tool quality management approach/process that focuses on trying to manufacture and provide high-quality products and service
- Process to try and reduce variation continuously by defining, measuring, and analyzing
- Uses statistical quality control/ measurement methods
What are some examples of process improvement tools
- Lean management - focuses on the elimination of any element of a business process that does not add value to the final product/ service. Maintain value while reducing work organization perform
- Activity-based management - Management tool based on activity-based costing
Two main types - Operational ABM - focus on efficiency in operation
Strategic ABM - focuses on the activity to be performed and reduces overall cost
Explain what business process approach is used for process improvement
- It is used to optimize business production by improving efficiency & flexibility
- Completely rethinking and redesigning the organization’s business processes
- Business re-engineering - a fundamental benefit that organizations have derived from implementing enterprise-wide information systems such as SAP and Oracle
Explain how total quality management is used and give two examples of companies that used this
- Is the process of controlling product quality from its raw material stage up to the moment its finished goods leave the organization
Ex, Apple, Toyota
What are the advantages and disadvantages of strategic advantage for cost leadership, differentiation, and focus
- Cost leadership
Advan: Large market and potential for profit based on volume of sales
Disadvan: Constant competition and pressure to keep lowering prices make this difficult to compete in the market
Ex, Walmart - Differentiation
Advan: Significant profits are possible, prices are set higher and benefit what the customer wants, customer pays more
Disadvan: Competition is high, reliance on innovation and customer loyalty
Ex. Apple - Focus/ niche
Advan: Profit can be large as high prices can be charged
Disadvan: Target a small market and difficult to gain other customer segments
Ex, Boutique pet store, hair loss treatment - Best value
- Offering customers a range of products that those of competitors but lower price
- Quality is not sacrifice Ex. Toyota
What is the formula for target costing
Target price - Target profit = target cost
Target price - Relates to customer
Target profit - requires investment in product/ product design
As-if cost - relates to the product and process design
Ex. Estimate price of market is set $40
- Estimate the cost of developing the product $32
- Determine the required investment level of the product (ROI). Target profit. 10 million investment, $10 profit per unit
-Compare the product as-if cost to the target cost
Need target cost of 30, as-if cost is $32. Expected cost is too high
Team determines it can reduce as-if cost by $5 per unit by using plastic rather than metal
-Target cost = 38 selling price - 10 profit = $28
As-if cost = 32 as-if cost - $5 reduction using plastic = $27
What are the three different types of Lean management
- Focus on eliminating business processes that do not add value
- Just in Time
- Is a plan to deliver product and service as customer demand them - Activity analysis
- Involves a sequence of activities that add value to product/ service
Activities - Processing - activity that add value, meaning that it enhances the customer perception
- Moving - Any activity that involves the physical movement of resources
- Storing - any waiting and holding on to work in process that does not result in value to the customer
- Inspecting - verification that quality of goods or services is to standard
- Zero-defect approach
- Employs a system that forbids mistakes to be passed on to the next stage of the production service process - Inspecting - verification that the quality of the good or service
- Internal failure - the cost associated with defects when they are identified
- External failure - cost associated with defects when they are identified by the customer
What are the 8 charactertics of total quality management
- Is the process of controlling product quality from its raw material stage up to the moment its finished product leaves the organization
- Customer focus
- Executive leadership
- People involvement
- Process approach
- System approach
- Continuous improvement
- Factual approach in decision making
- Supplier relationship
