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Enhancing Quality Management: Strategic Insights and Cost Implications

The ISO 9000 framework provides internationally accepted guidelines for effective quality management. Understanding and managing the cost of quality, which can account for 20-25% of sales, is crucial for profitability and market share. Total Quality Management (TQM) focuses on continuous improvement, customer satisfaction, and employee involvement. A structured approach over three years involves executive training, quality audits, and gap analyses. Quality management systems aim to meet customer expectations while minimizing costs through prevention and appraisal, ultimately driving strategic success and cultural shift towards quality.

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Enhancing Quality Management: Strategic Insights and Cost Implications

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  1. ISO 9000 • International Organization for Standardization • Internationally accepted guidelines for quality management and standards • Cost of quality = 20 - 25 percent of sales

  2. Quality and Strategic Cost Management • Quality and profitability are related • Premium on quality leads to larger market share • Premium on quality leads to higher ROI

  3. Elements of TQM • Continuous improvement • Customer focus • Employee involvement • See page 202

  4. IMA’s TQM Process • Year One • Quality council and staff • Executive quality training • Quality audits • Gap analysis • Strategic quality improvement plans • Year Two • Employee quality training • Quality teams • Establish measurement system and goals • Year Three • Revise compensation system • Launch external initiatives (value chain) • Review and revise

  5. Other Quality Thoughts • Poor quality is disastrous for service industries • Increased quality = increased productivity • Management accountants increase the focus…see page 226.

  6. Ansari: MMQC • Quality costs: costs incurred to ensure products/services meet customers’ expectations • Features • Performance

  7. MMQC • Strategic Implications of Quality Cost System • Supports quality as a strategic adv. • Provides the total cost of quality to a product • Assists in avoiding non-productive time

  8. MMQC • Types of quality costs • Prevention • Appraisal • Internal failure • External failure

  9. MMQC • Quality Management System • Understand customer requirements • Establish quality goals • Set work processes (P) • Perform work & monitor output (A & I) • Deliver product & monitor cust. satisf.(E) • Perform root cause analysis

  10. MMQC • Quality Cost and Customer Satisfaction • Total firm spending • Spending by category • Amount of financial benefits • Focus on customer quality concerns • Elimination of root causes

  11. MMQC • Value Index • Develop customer perf. rankings • Estimate quality costs for each element • Compute the value index • Cust. Perf. % / Cost % • Root cause analysis and “fish bones”

  12. MMQC • Attribute Implications • Technical • Improved decision relevance • Process understanding • Behavioral • Focus on Customer Requirements • Improved quality attitudes • Better mgt. Visibility…but watch out for “padding” • Cultural • Quality as a way of life • Quality as an ethical value

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