Organizational Innovations:

TOTAL QUALITY MANAGEMENT and

JUST-IN-TIME PRODUCTION
SYSTEM
Arbonida, Merry Joy
Dela Cerna, Reggie
Dominguez, Sheila Marie
Munoz, Pia Blanca Chapter 6
 Total Quality
Management
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 What is Quality?

The ultimate tests of a quality product

or service is whether the product or
service meets or exceeds customer’s
expectation.

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 Core Principles of
TQM
 Focus on satisfying the customer
 Strive for continuous improvement
 Involve fully the entire workforce
 Support and involve top management actively
 Use clear and measurable objective recognize
quality achievements in a timely manner
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 Providing training on TQM continuously
 Implementation
Guidelines
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 Year One:  Create quality council and
Preparation and staff
Planning  Conduct executive-quality
training programs
 Conduct quality audits
 Prepare gap analysis
 Develop strategy on quality
improvement

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 Year Two:  Conduct employee
Training and communication and
Implementation training program
 Establish quality items
 Create a measurement
system and set goals

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 Year Three:  Revise compensation /
Assessment, appraisal / recognition
Review, and system
Revise  Launch external initiative
with suppliers
 Review and revise

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 Types of
Conformance
▪ Goalpost Conformance (Zero defects Conformance)
▫ This conformance to a quality specification expressed
as a specified range around target.
▫ Specified range allowed for variation
▪ Absolute Quality Conformance (Robust Quality
Approach)
▫ All products or services meet the target value exactly
with no variation.
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  Costs incurred to avoid poor-quality goods or
services or educe the number of defects in
products or services
 These include:
Cost of Quality • Systems development
• Quality engineering
• Quality training
• Quality circles
• Statistical process control activities
Prevention Cost • Supervision of prevention activities
• Quality data gathering, analysis and
reporting
• Quality improvement projects
• Technical support provide to supplier
• Audits of the effectiveness of the quality
system
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  Incurred to identify products before the
products are shipped to customers.
 These includes:
 Test and inspection of incoming
Cost of Quality materials
 Test and inspection of in-process
goods
 Finished product testing and inspection
 Supplies used in testing and inspection
Appraisal Cost  Supervision of testing and inspection
activities
 Depreciation of test equipment
 Maintenance of test equipment
 Plant utilities in the inspection area
 Field testing and appraisal at customer
site
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  Cost result from identification of defects
during the appraisal process.
 Examples are:
Cost of Quality • Net cost scrap
• Net cost spoilage
• Rework labor and overhead
• Re inspection of reworked products
• Retesting of reworked products
Internal Failure • Downtime caused by quality
problems
Cost • Disposal of defective products
• Analysis of the cause of defects in
production
• Re-entering data because of keying
errors
• Debugging of software errors
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  Incurred when poor-quality goods or
services are detected after delivery to
customers.
Cost of Quality  They include:
• Cost of field servicing and handling
complaints
• Warranty repairs and replacements
• Repairs and replacements beyond
External Failure the warranty period
Cost • Product recalls
• Liability arising from defective
products
• Lost sales arising from a reputation
for poor quality
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 Uses of Quality Cost
Information

▫ It provides a basis for establishing budgets for quality cost

as management looks for ways to reduce the total cost
involved
▫ Helps managers see the financial significance of quality
▫ Helps mangers identify the relative importance of the quality
problems faced by the firm
▫ See whether their quality costs are poorly distributed and
when needed, it helps them distribute the cost better
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 ♠ Some important quality costs are
Limitations typically omitted from the quality
cost report
of Quality ♠ Simply measuring and reporting
quality costs does not solve quality
programs
Cost ♠ A log may exist between when
quality improvement programs are
Information put into effect and when the results
are seen

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 Reporting Quality
Costs

The purpose of reporting quality costs is to

make management aware of the magnitude of
quality costs and to provide a baseline against
which the impact of quality improvement
activities could be measured.

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 Nonfinancial Measure of
Quality and Customer
Satisfaction

▪ To evaluate how well their actual

performance satisfies customer needs and
wants, companies supplement financial
measure with nonfinancial measures of
quality of design and conformances quality.

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 Nonfinancial
Measures

▪ Indicate the future needs and preferences

of customers, as well as specific areas that
need improvement.
▪ Indicators of future long-run performance.
▪ Maintained and presented by Management
Accountants.
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 Nonfinancial Measures
of Customer Satisfaction

 On-time delivery rate

 Delivery delays
 Percentage of products that fail soon or often
 Number of customer complaints
 Number of defective units
 Market research information on customer
preferences and customer satisfaction
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 Nonfinancial Measures
of Internal Performance

▪ Number of defects for each product line

▪ Employee turnover
▪ Process yield

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 Time as a Competitive
Tool

▪ Many companies consider “time” as a

driver of strategy.

▪ Two common operational measure of time;

▫ Customer-response time

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▫ On-time performance
 Customer-Response
Time

▪ Duration from the time a customer places

an order for a product or service to the time
the product or service is delivered to the
customer.

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 Manufacturing Lead
Time

▪ The duration between the time an order is

received by manufacturing to the time it
becomes a finished good.

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 Delivery Time

▪ How long it takes to deliver a completed

order to the customer.

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 On-Time Performance

▪ Product or service is actually delivered by

the time it was scheduled to be delivered.
▪ Increase customer satisfaction

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 Aims: Meet customer demands in a
timely way with high quality
products at the lowest possible
total costs

JUST-IN-TIME
Production
System

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 Key Features

▪ Maintaining a limited number of suppliers

▪ Improving plant layout
▪ Reducing Setup Time
▪ Improving Production Scheduling
▪ Targeting Zero Defects
▪ Maintaining Flexible Workforce
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 TRADITIONAL VS JIT

▪ Just in case Manufacturing

- stocking up large amounts of inventory
to cater the forecasted wants of customers

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 Financial Benefits of JIT

▪ Greater transparency of production process

▪ Heightened emphasis on eliminating the
specific causes of rework, scrap, and waste
▪ Lower manufacturing lead times

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 THANK YOU

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