P2 - 2. Total Quality Management Flashcards
What are the 3 major changes in the modern business environment?
- Globalisation (transport, internet)
- Technology
- Fast changing consumer tastes
What are the 2 major changes to businesses that we see in the modern environment?
- 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
AND
A philosophy of business behaviour
What is the cost of quality?
The difference between the actual cost of producing and selling products and the equivalent costs if there were no failures during production or usage
What are the 4 types of quality costs?
- Prevention
- Appraisal
- Internal failure
- External failure
What are 3 key exams of prevention quality costs?
- High quality suppliers
- Maintenance of equipment (+ QC eqp)
- Training/recruitment for quality
What are 3 key exams of appraisal quality costs?
- Goods in testing
- Final product taste testing
- Machine callibrations/process testing
What are 3 key exams of internal failure costs?
- Re-inspection costs
- Lost revenue from scrap
- Re-working costs
What are 3 key exams of external failure costs?
- Liability claims
- Lost goodwill
- Complaints handling
What is the cost of conformance?
Costs of achieving quality standards
What is the cost of non-conformance?
Cost of failure to deliver the required standard of quality
What is Just in Time manufacturing?
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 JIT a push or pull system?
Pull
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 4 key elements of JIT purchasing?
- Small number of suppliers
- Long term supplier relationships
- Helping suppliers to increase quality
- Not to get hung up on single sourcing
What are the 4 key elements of JIT production?
- Reduced set up times
- Flexible staff
- Efficient QC in production
- Customer order driven production
What are the 2 accounting changes that come from using JIT manufacturing?
- Zero inventory of raw materials, WIP and finished goods
2. Zero variances for price and usage
What is the theory of constraints?
A procedure based on identifying bottlenecks, maximising their use and alleviating those bottlenecks
What are the 5 steps for managing bottlenecks?
- Identifying the binding constraint
- Exploit the constraint
- Subordinate everything else
- Elevate the constraint
- Return to step 1
What is throughput?
How fast revenue is bearing earned compared to how fast costs are incurred
In throughput accounting, what is the only truly variable cost?
Material cost
What is the throughput accounting ratio?
TP Contr per time period / Conversion cost per time period
When considering eliminating bottlenecks using throughput accounting, how do you rank?
By throughput contribution per time period
Under total quality management, how do organisations improve efficiency? (3)
- Identifying and managing bottlenecks
- Only dealing with reliable suppliers (JIT) - reducing waste
- Thorough training of staff
Under total quality management, how do organisations regard inventory?
Inventory is non value adding, TOC and JIT reduce inventory (but need a little for assurance in reality)
Under total quality management, how do organisations improve costs?
- Fewer inventories = less storage
2. Cutting out unnecessary activities
What is continuous improvement?
A continuous search to reduce costs, eliminate waste and improve the quality and performance of activities that increase customer value or satisfaction
What is Kaizen costing?
A system of cost reduction via continuous improvement
What are the 3 steps of Kaizen costing?
- Functional analysis to set a target cost for each function
- Compare actual product cost to target
- Set cost reduction target for next period
What is business process re-engineering?
Radical rather than continuous improvement
What are the 4 drawbacks of business process re-engineering?
- Exaggerated expectations
- Resistance to change
- Dehumanises the workplace
- Lack of long term perspective
