Quality

Question 1

definition, context, classification of costs

Answer 1

Quality is critical to the survival and success of many businesses.

As quality increases price can also increase

you must define quality for the product in the context of the question
1. free from errors
2. fit for purpose
3. meets customer needs

classification of Quality costs - conformance and non conformance costs
1. conformance costs -
- prevention (Training, design) and
- appraisal (quality control, testing) . costs of preventing failure and maintaining standards.
2. Non conformance costs -
- internal failure (discovered before delivery to customer e.g. rework,
waste) and
- external failure ( discovered by customer e.g. replacement, refund,
reputational damage to goodwill) - These are cost consequence of
failure.

Question 2

Systemised - Total quality management
getting it right first time.
proactive approach
requires leadership

Answer 2

A Japanese philosophy of establishing a system to prevent errors from occurring and getting things right first time.
It is a continual process involving management and staff to deliver quality to customer and demand quality of internal processes and supply chain.
The general focus is to invest in conformance costs in the hope of reducing non conformance costs.
It requires leadership and quality driven processes and training
This is a proactive approach

TQM stresses
1. Processes -checks and balances
2. Training of staff - cultural change
3. Leadership - Top down change
4. continuous improvement - long run policy
5. The supply chain -

Question 3

Systemised - Five S model

Answer 3

A Japanese idea stressing tidiness in the workplace, tidy mind tidy office, quality work.

Structurise - Sort - Remove unnecessary material by sorting
systemise - organise the work place. A place for everything and
everything has a place
sanitise - clean it and keep it clean
standardise - create a standard process for everything
self discipline - sustain through self discipline

Exam - Nelson, Jody and Nigel

Question 4

Problem solving - Six sigma - DMAIC, conditions for successful six sigma

Answer 4

A problem solving approach to quality

Reactive rather than proactive, Once the problem emerges follow a set process to resolve it.

Define the problem
what is the problem and can it be defined
Think of relationship between cost, quality and time

Measure the problem
How serious is the problem? as this will determine the speed of response and resources allocated.
Seriousness can be in terms of cost or reputational damage to the entity.

Analyse the problem
Understand the problem and identify the root cause, identification of the root cause is key to getting the correct solution.

Implement the best solution
There are various ways to fix the problems, referring back to quality, cost or time.

Control the changes
This refers to process change
change is often resisted and often difficult to manage
Training will be needed as will monitoring of results

General conditions for a successful six sigma quality programme
1. Ensure an increased focus on quality in the organisation i.e. change leaders
2. Make decisions based on facts and data not guesswork
3. Embed any new change with a process that everyone understands
4. Training will be needed
5. collaboration is likely and preferable between business units and departments
6. Leadership is crucial for buying of each business unit.
7. Using trained experts in quality and professionalise the process e.g. master black belt, black belt and green belts

Question 5

Bottom up - Kaizen - Definition and principles

Answer 5

Kaizen means improvement by continual small steps, Regular and gradual change.
The change should be bottom up and staff driven and operational focus not strategic
Standards will need to change gradually
main focus is on cost reduction rather than quality but can be both - waste is low hanging fruit

specific principles are
1. Management establish a target or baseline cost with the expectation that costs will reduce and quality will improve gradually.
2. Operationally driven improvements - not strategic and suggested by staff
3. Improvements are suggested by staff who are seen as part of the solution not source of problems. staff empowerment is common and important as is team working
4. waste driven out of the business
5. will rarely improve an strategic change only small continuous improvements

Question 6

waste removal - lean production

Answer 6

Lean production is how to avoid wate in production, . Focus is on removing waste in a business

waste can occur in a number of way and LP seeks to tackle all of these

1. Over or excess production - excess production may not be capable of sale and hence is wasted.
   A closer alignment of production to demand prediction is needed here or even demand led production.
2. Waiting - This refers to delays that occur whilst staff wait for Info or resources or other people. e.g. stock outs, delayed reports. waiting is waste
   Supply chain reliability, promote communication and reporting will eliminate waiting
3. Excess motion - moving excessively in warehouse of raw materials or WIP is wasteful and time consuming. warehouse and manufacturing space needs to be well organised to keep motion low.
4. Transportation - sourcing supplies from afar is costly and potentially wasteful. local supplies are preferred and a distributed manufacturing base. consider economy and efficiency of scale.
5. Over processing - excessive functionality of a product often unused by a product. Remove all non value added processes that customers do not use.

6 .Excess inventory - Excess stock may not be saleable or might be damaged. Stock management is needed and demand led production as well.

7. Defective units - Internal failures are wasteful and a TQM programme may be needed here.

Question 7

Lean MIS

Answer 7

Based on similar ideas of eliminating waste but the focus is on information system and reports generated.

General ideas are
1. Avoid duplication
2. Provide only relevant data
3. make it easily accessible to avoid wasting time
4. Avoid waste by only producing reports and info that is needed.

Question 8

waste removal - Just in time
Question corrusk - How APM is marked

Answer 8

Just in time
Traditionally companies considered having a certain level of stock or raw material, WIP and finished goods. This may be costly with possibility of waste, damage and obsolescence. the requirement to hold stock may be symptoms of inefficiencies in the company.

Just in time focuses on demand pull production, greater customer satisfaction, savings from greater efficiency and savings from lower sock levels

1. Demand lead philosophy
2. Only produce goods as needed, no stock until customer orders
3. limited stocks if any
4. High degree of coordination is needed internally with suppliers and customer.
5. MIS has to good to handle co-ordination
6. Flexible and high quality suppliers
   7.close relationship with both suppliers and customers built in teamwork not cheapness
7. may lead to fewer suppliers, SLA’s should stress time delivery and good quality
8. Should lead to flexibility in product offering - colour, style, fabric
9. Increased risk of production stoppages if supply chain is disrupted.

KPIS
% of late delivery from suppliers and to customers
product range data
Low rejection rates - good quality

Question 9

Target costing - drivers of price, process of target costing, how to close cost gap

Answer 9

The opposite of traditional cost plus pricing

Drivers of price include
1. Cost
2. Competition
3. Customers

Steps to target costing - Places the competition at the centre of a pricing decision

1. Set a price based on market conditions
2. Deduct desired margin
3. Derive the target cost
4. calculate current budget or standard cost
5. Identify the cost gap

The existence of cost gap is problem for cost reduction not quality or value proposition.

The cost gap means the business cannot make the product cheaply enough to be able to sell competitively and make the required margin for the shareholders

Approaches to closing cost gap
* Sales price cannot be increased as this goes against entire
approach
* Margin cannot be reduced as this is tantamount to giving up and accepting the business is powerless to be able to do something more constructive about the problem.

1.value engineering reduction of non value added features - Design out any NVA, this step is the most effective way of reducing cost, be careful not to remove features customers value and do not reduce quality
2. Material - New suppliers, better discounts
3. Labour - improve efficiency and automation rather than using cheaper staff
4. Overhead - Be specific e.g. rent, supervisory cost, utilities. - Relocate to a different factory, new electricity suppliers
Overhead will rarely damage value proposition but takes time to be realised so it isn’t a quick fix

Question 10

Exam Slide

Answer 10

1. Define quality in context of question
2. Generally quality should free from error and fit for purpose
3. The costs of quality should and can be measured, conformance v non - conformance
4. Approaches vary so choose approach most suitable
5. TQM is to systemise everything and get it right first time.
6. Five s model is to tidy up and keep things tidy - sort, systemise, sanitise, standardise and self - discipline
7. Solve problems using DMAIC approach
8. Kaizen encourages staff to improve things - improve quality or cost, regular gradual change bottom up
9. Lean production removes waste from production process
10. Lean MIS removes waste from the reporting environment

Target Costing
1. 3c’s in pricing - Cost, customer, competition are all valid factors
2. cost has different measures - must include variable cost but some fixed cost might be included in the long run or if incremental
3. Standard costs are often used since know in advance
4. Actual cost based pricing possible but can be abused.
5. competition cant be ignored
6. Customers have the final say
7. Target costing process - Price, margin, target cost, budget cost, cost gap
8. do not increase price or reducing margin in closing cost gap
9. Make suggestions to design out non value added costs
10. Make specific suggestions on how to reduce direct and indirect costs without damaging value proposition