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Quality and time
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Quality and time
Dimensions of quality
- Design quality: The extent to which designed specifications address clients' expectation
- Customer-focused
- Designing to create waste
- Conformance quality: Evaluates the extent to which the actual characteristics of the product match design specifications
- Product-focused
- Design quality: The extent to which designed specifications address clients' expectation
Managing time to create value
- Time is a competitive factor
- Outsourcing can reduce development time
- Extend focus on reducing manufacturing cycle time and the internal focus of reducing order to delivery time to include 'need to satisfaction' time of customer
- Customer experience begins before an order is placed and ends after receipt of products
- Firm must ensure product info on website is up-to-date to assist customer purchasing decisions
- Minimal steps in online ordering to reduce time taken to order, improving customer satisfaction
- Early delivery can be negative so focus on on-time delivery
- Customer experience begins before an order is placed and ends after receipt of products
Introduction
- Two value propositions desired by customers
- Traditionally seen as in opposition to each other
- Increasingly recognised as mutually necessary and reinforcing
- Time requiring and improving quality
- Quality requiring and improving successful time management
- Haste makes waste
- Increasingly recognised as mutually necessary and reinforcing
Total Quality Management (TQM)
- Originated in Japan
- Permanent and integrated efforts across organisation to excel in all customer-relevant quality dimensions
- Employees must do everything right first time, everytime
- Focus is customer satisfaction
- Delivering both dimensions of quality
- Rust et al
- A certain level of lack of quality may product higher return
- Costs of some quality improvement initiatives may exceed expected benefits
- Quality is not free
- Optimal point where total cost of quality reaches the minimum
- Costs of some quality improvement initiatives may exceed expected benefits
- A certain level of lack of quality may product higher return
- Cost of quality report provides the necessary level of transparency of activity costs
- Shows % of sales to account for size, providing visibility as to whether they are incurring the desired type of cost
- Can compare to previous periods and other organisations
- Shows % of sales to account for size, providing visibility as to whether they are incurring the desired type of cost
- Categories of quality costs
- Conformance costs
- Incurred to ensure conformity with specifications
- Prevention costs
- Prevent production of products that don't conform
- e.g. quality planning, training
- If these increase, other costs should decrease with the savings more than offsetting the increase in prevention costs
- Cheapest, most beneficial results in minimising total quality costs
- Appraisal costs
- Incurred to ensure materials and products meet standards
- e.g. costs of inspecting
- Non-conformance costs
- Incurred when there is a failure to meet specifications
- Internal failure costs
- Associated with materials and products that fail to meet quality standards before being dispatched to customers
- e.g. repair, cost of scrap
- External failure costs
- Incurred when products fail to conform after being delivered
- Most expensive
- Reputation affected
- Opportunity costs from loss of sales / contribution
- e.g. cost of handling complaints, reputation, warranty
- Conformance costs
- Plan-do-check-act (PDCA) cycle
- Systematic, interactive approach to continuous improvement and problem-soling based on facts
- Plan: team examines facts to determine cause of problem and propose solution
- Do: Solution is tested
- Check: Results examined
- Act: + result = solution implemented, - result = return to plan
- Zero-defects policy
- Necessary if things are to be done right first time
- More effective if success of policy is measured using ppm
- Statistical quality control charts
- Monitor quality targets
- Graph of a series of successive observations of operations taken at regular intervals to test whether a batch of items is within the pre-set tolerance limits
- Control limits set 2sd from mean; investigate if over this
- Estimated population mean and sd using past observations of a process when it was working effectively
- Non-financial quality measures
- More appropriate than financial measures in measuring quality improvements
- Number of employees trained
- Number of late deliveries
- Number of defective products
Just-in-time (JIT)
- Integrates activities to obtain high-volume production while removing inventories, reducing waste
- Only producing required items at the required quantity and time
- Pull system: responds to demand so no longer stock up to prepare for demand
- Production commences when there is demand
- Elimination of non-value-added activities
- Manufacturing time shortened
- Only process time adds value
- Process time less than 10% of manufacturing time so lead time needs to equal process time
- Adopt JIT manufacturing
- Cellular approach
- Reorganise production process in a product flowline instead of batch production layout
- U-shaped flow line layout to enable operatives to access several machines
- Higher visibility behind ensures smooth running
- Can undertake routine preventative maintenance
- U-shaped flow line layout to enable operatives to access several machines
- Products grouped into families or similar products, manufactured in a well-define production cell to reduce moving time and manufacturing time
- Any worker can stop production line if fault occurs
- Employee empowerment
- Prevent production of defective products early
- Visibility signalling system kanban implements pull system
- Empty containers indicate need for production
- Adopt JIT manufacturing
- Process time less than 10% of manufacturing time so lead time needs to equal process time
- Batch size of one
- Reduces set-up times so there is no advantage of producing batches
- Firm can adapt to market demand and respond to customer requests
- JIT purchasing
- More frequent deliveries because they do not carry stocks of raw materials
- Eliminate cost of inspection
- Substantial reduction in raw material stocks to save factory space
- Increased labour productivity
- Place LT purchase orders to convince suppliers to guarantee quality, providing assurance
- Reduction in paperwork if LT purchase orders placed
- More frequent deliveries because they do not carry stocks of raw materials
- JIT manufacturing + purchasing + TQM (to emphasise quality and reduce waste) + respect for people = JIT philosophy
- Limitations (not an overnight process)
- Culture change: emphasis on continuous improvement and elimination of non-value-added activities
- Employee empowerment some employers aren't comfortable with
- Organisation relies on suppliers delivering as and when required; must be reliable
- Price variance may be redundant because LT orders may be in place, so prices are agreed before start of period
- Standard price = actual price
- Integrates activities to obtain high-volume production while removing inventories, reducing waste
Environmental cost management
- Increasingly important, with large costs for some industrial sectors
- Huge fines for non-compliance have increased
- Environmental costs traditionally hidden within OHs and not allocated to cost objects
- Lack of visibility and inaccurate
- 4 categories of environmental costs
- Prevention: preventing production of waste that could cause environmental damage
- Detection: incurred to ensure conformance to regulatory laws
- Internal failure: reduce waste before discharged
- External failure: activities performed after discharging waste
- Environmental cost report directs attention on these costs and identifies areas for potential cost-reduction
- Limitation: doesn't include costs caused by externalities e.g. caused by firm but borne by society
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- Accounting and finance Mind Map on Quality and time, created by Abbie Goffin on 12/05/2022.
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- Abbie Goffin
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