P2 - 2. Total Quality Management

Question 1

What are the 3 major changes in the modern business environment?

Answer 1

1. Globalisation (transport, internet)
2. Technology
3. Fast changing consumer tastes

Question 2

What are the 2 major changes to businesses that we see in the modern environment?

Answer 2

1. Shorter product life cycles

2. Greater competitive pressures

Question 3

What is total quality management?

Answer 3

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

AND

A philosophy of business behaviour

Question 4

What is the cost of quality?

Answer 4

The difference between the actual cost of producing and selling products and the equivalent costs if there were no failures during production or usage

Question 5

What are the 4 types of quality costs?

Answer 5

1. Prevention
2. Appraisal
3. Internal failure
4. External failure

Question 6

What are 3 key exams of prevention quality costs?

Answer 6

1. High quality suppliers
2. Maintenance of equipment (+ QC eqp)
3. Training/recruitment for quality

Question 7

What are 3 key exams of appraisal quality costs?

Answer 7

1. Goods in testing
2. Final product taste testing
3. Machine callibrations/process testing

Question 8

What are 3 key exams of internal failure costs?

Answer 8

1. Re-inspection costs
2. Lost revenue from scrap
3. Re-working costs

Question 9

What are 3 key exams of external failure costs?

Answer 9

1. Liability claims
2. Lost goodwill
3. Complaints handling

Question 10

What is the cost of conformance?

Answer 10

Costs of achieving quality standards

Question 11

What is the cost of non-conformance?

Answer 11

Cost of failure to deliver the required standard of quality

Question 12

What is Just in Time manufacturing?

Answer 12

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

Question 13

Is JIT a push or pull system?

Answer 13

Pull

Question 14

What is just in time production?

Answer 14

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

Question 15

What is just in time purchasing?

Answer 15

A purchasing system in which material purchases are contracted so that receipt and usage of material coincide

Question 16

What are the 4 key elements of JIT purchasing?

Answer 16

1. Small number of suppliers
2. Long term supplier relationships
3. Helping suppliers to increase quality
4. Not to get hung up on single sourcing

Question 17

What are the 4 key elements of JIT production?

Answer 17

1. Reduced set up times
2. Flexible staff
3. Efficient QC in production
4. Customer order driven production

Question 18

What are the 2 accounting changes that come from using JIT manufacturing?

Answer 18

1. Zero inventory of raw materials, WIP and finished goods

2. Zero variances for price and usage

Question 19

What is the theory of constraints?

Answer 19

A procedure based on identifying bottlenecks, maximising their use and alleviating those bottlenecks

Question 20

What are the 5 steps for managing bottlenecks?

Answer 20

1. Identifying the binding constraint
2. Exploit the constraint
3. Subordinate everything else
4. Elevate the constraint
5. Return to step 1

Question 21

What is throughput?

Answer 21

How fast revenue is bearing earned compared to how fast costs are incurred

Question 22

In throughput accounting, what is the only truly variable cost?

Answer 22

Material cost

Question 23

What is the throughput accounting ratio?

Answer 23

TP Contr per time period / Conversion cost per time period

Question 24

When considering eliminating bottlenecks using throughput accounting, how do you rank?

Answer 24

By throughput contribution per time period

Question 25

Under total quality management, how do organisations improve efficiency? (3)

Answer 25

1. Identifying and managing bottlenecks
2. Only dealing with reliable suppliers (JIT) - reducing waste
3. Thorough training of staff

Question 26

Under total quality management, how do organisations regard inventory?

Answer 26

Inventory is non value adding, TOC and JIT reduce inventory (but need a little for assurance in reality)

Question 27

Under total quality management, how do organisations improve costs?

Answer 27

1. Fewer inventories = less storage

2. Cutting out unnecessary activities

Question 28

What is continuous improvement?

Answer 28

A continuous search to reduce costs, eliminate waste and improve the quality and performance of activities that increase customer value or satisfaction

Question 29

What is Kaizen costing?

Answer 29

A system of cost reduction via continuous improvement

Question 30

What are the 3 steps of Kaizen costing?

Answer 30

1. Functional analysis to set a target cost for each function
2. Compare actual product cost to target
3. Set cost reduction target for next period

Question 31

What is business process re-engineering?

Answer 31

Radical rather than continuous improvement

Question 32

What are the 4 drawbacks of business process re-engineering?

Answer 32

1. Exaggerated expectations
2. Resistance to change
3. Dehumanises the workplace
4. Lack of long term perspective