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The modern business environment is remarkably different from the business environment
of a decade or so ago. One change has been the switch in emphasis away from quantity
towards quality. Consumers and customers have become more sophisticated and
discerning in their requirements.
Many organisations are therefore turning to quality to help them to survive the competitive
modern business environment. By developing new products quickly and supplying them
on time at a consistently high level of quality such organisations are likely to become the
success stories of the new millennium.
TQM
Total quality management (TQM) is the process of applying a zero defect philosophy to the
management of all resources and relationships within an organisation as a means of
developing and sustaining a culture of continuous improvement which focuses on meeting
customer expectations.
One of the basic principles of TQM is that the cost of preventing mistakes is less than
the cost of correcting them once they occur. The aim should therefore be to get things
right first time.
A second basic principle of TQM is dissatisfaction with the status quo. The belief that
it is always possible to improve and so the aim should be to get it more right next
time.
Performance measures for TQM must embrace every activity of the organisation. They
should not be confined to the production process. Measures should also cover the work of
sales, distribution and administration departments, the efforts of external suppliers and the
reaction of external customers.
In many cases, the measures used will be non-financial ones. They may be divided into
three types:
Move away from relying on inspecting to a predetermined level of quality and move
towards preventing the cause of the defect in the first place.
There must be a move away from acceptable quality levels. Any level of defects is
unacceptable.
All departments should try obsessively to get things right first time.
The cost of poor quality should be emphasised. Good quality generates savings.
The quality of output depends on the quality of input materials, and so quality control should
include procedures for acceptance and inspection of goods inwards and measurement of
rejects.
Each supplier can be given a rating for the quality of the goods they tend to supply, and
preference with purchase orders can be given to well-rated suppliers. This method is
referred to as vendor rating.
Under a quality assurance scheme, the supplier guarantees the quality of goods
supplied. Usually agreed inspection procedures and quality control standards are worked out
by customer and supplier, and checks are made to ensure that they are being adhered to. This
places the onus on the supplier to carry out the necessary quality checks, or face
cancellation of the contract.
Inspection of output
This will take place at key stages in the production process, and provides a continual check
that the production process is under control. The aim of inspection is to satisfy
management that the production process is meeting required quality standards.
When new technology or new practices are introduced, training in the new way of working
is vital if quality is to be maintained or improved. A quality orientation requires well trained
and motivated staff.
Empowerment
o
Allowing workers to have the freedom to decide how to do the necessary work.
Making those workers personally responsible for achieving production targets and
for quality control.
Quality circles
o
3. COSTS OF QUALITY
Prevention costs
These represent the cost of any action taken to investigate, prevent or reduce defects
and failures.
Example:
o
Quality engineering
Appraisal costs
Example:
o
Acceptance testing
Performance testing
These are costs arising within the organisation of failure to achieve the quality specified.
They are discovered before the product is delivered and include down time and scrap
costs.
Example:
o
Failure analysis
Re-inspection costs
These are costs arising outside the manufacturing organisation of failure to achieve
specified quality (after transfer of ownership to the customer).
Example:
o
Example 3.1
A manufacturers inspection procedures indicate that one faulty item out of every 1,000 good
items produced is sent to a customer. The management regards this as acceptable, as a
replacement will be supplied free of charge.
Unit sales are 10,000,000 per year, and each unit costs $20 to manufacture and makes a
profit of $5. It is probable that every customer who buys a faulty product will return it, and will
thenceforth buy a similar product from another company. The average customer buys two
units a year. Marketing costs per new customer are $10 per year.
Required:
What is your best estimate of the net cost of this policy for a year?
Notes:
Estimated number of faulty items
10,000,000 unit
1,000 unit
10,000 unit
$
200,000
200,000
400,000
50,000
450,000
(250,000)
200,000
It reduces wastage and mistakes, and therefore leads to contracts being completed on
time without unnecessary remedial work. In addition, due to built-in fault-logging procedures, it
is unlikely that problems will be duplicated in the future.
The Royal Bank of Scotland explained why they choose to gain BS EN ISO 9000
registration:
The benefits are manifold and can be applied to all sectors of business. The primary
benefits enable the business to sustain a competitive edge and include:
Processes are defined and managed consistently. This in turn leads to a more efficient
and effective organisation through effective planning and control;
Our quality management system is designed for continuous self and team based
improvement. This can be achieved with our corrective action system and the process
of internal quality audits.