Week 5- Quality and the cost of quality Flashcards
Is quality solely a tangiable measure eg. quality of the product produced
No quality can be measured intangible as well eg. the customer service you offer before and after the sale
who is the organisation that ensures that manufacturers have a well-defined quality control system in place?
The international standards organisation
what factors influence the quality of a product?
1) Grade: the promise made by the product to perform in the intended way
2) Design: how well the design meets the specificaations
3) Conformance: How eel it conforms to the design specifications
what should quality measures do?
- Indicate customers evaluations of product and service quality
- Estimate customers satisfaction with services received eg. through focus groups or surveys
- Provide warning signals about any deterioration in product or service quality. Should warm the company before the company loses market share and customers
what does variation in the number of defects in the product indicate?
Poor quality
what re lead indicators?
Tools that measure the variation in number of product defects
what are the three lead indicators?
Histograms
Run charts
Control charts
what do diagnostic tools show us?
help us to determine wy their is so much variance in the number of product defects
what are the four diagnostic tools that can be used to calculate quality problems?
Cause and effect diagrams
scatter diagrams
flowcharts
pareto charts
why is maintaining quality important?
Important for:
- Customer satisfaction
- Reputation
- Profit
- retaining customers
what are the two costs associated with maintaining quality?
1) costs of corrective measures taken because of a failure to control quality
2) costs of activities designed to control the quality
what are the type types of quality cost?
Observable and hidden
what are the different costs of controlling quality?
prevention costs: cost of preventing defects
Appraisal costs: costs of determining whether defect exist
what is the cost of internal failure?
Costs associated with defects in processes and products that are found PRIOR to delivery to customers
what is the cost of external failure?
Costs associated with defects in processes and products that are found AFTER delivery to customers
what is the traditional view on improving quality?
Return on quality
what is return on quality?
states that there is an optimal quality that id lower tahn the highest possible product quality. This is because it believes that customers prefer to pay a little less but still get good quality but not perfect quality. The view believes that this is where profit is maximised
what is the contemporary view on improving quality?
Total quality management
what is total quality management?
States that a company should strive to offer the highest product quality. this is because the view believes that improving quality constantly reduces cost and improves profitability
what is sustainable development?
the cost of maintaining that business activity does not limit the ability of future generations to meet their needs
what is environmental cost?
cost of cleaning up environmental issues eg. oilspill
what is environmental cost management?
identifiying and reducing environmental costs
what are the four types of environmental cost?
private environment costs: borne by a company or individual
social environmental costs: borne by the public
Visisble environmental costs: those that are known and clearly identified as tied to environmental issues
hidden social environmental costs: not clearly tied to environmental issues
how can visible and hidden environmental costs be further classified into three categories?
- montioring costs: cost of monitoring whether pollution is occuring in the production process
- Abatement costs: costs to reduce pollution
Remeditation costs
what are the factors that influence pricing decisions?
1) customer demand
2) political, legal and image issues
3) competitors
4) costs
what is the best approach to pricing decisions?
inbetween Optimal pricing decisions and suboptimal decisions
why is a mix of optimal and suboptimal pricing decisions the best?
optimal decisons are more sophisticated but more costly than suboptimal decisions
what is activity-based pricing?
Activity based costing applied to pricing strategy. Assigns the price to the activities involved in the production of the product. Optimises profit
does activity based pricing integrate price elasticity of demand?
yes
what is market skimming?
Charging a premium price on product that have a USP
what is market pentration?
Setting a low price to gain customers quickly
what is complementary pricing?
Setting the price high for products that complement other products eg. printer cartridges may be sold for a higher price because the company knows that a customer will return to byt them once buying a printer
what is market segmentation?
targeting differing segements of the market with different products and charging different prices.
