Total Quality Management is a managerial term used in all operational areas of any industry stemming from pre-production stage to post-production stage of goods and services. In case of food industry the significance of TQM is beyond explanation. For SG plc, as a food manufacturer, TQM should focus on the people involved with the entire process of preparing and serving finished goods, the quality of raw materials collected from the suppliers, the production unit where the products are being manufactured, the storage and packaging of finished goods, etc.
JIT is an inventory management system that ensures exact supply of raw material in the production process. JIT drives the focus of the manufacturers on process rather than on product. TQM is oriented for customer satisfaction and thus it motivates the team members to solve customer problems and achieve continuous improvement; and JIT system is being implemented to ensure this. Both TQM and JIT ensures lower inventory cost for raw materials and other related parts, work in process, and finally finished goods. Thus, both jointly result in greater productivity for organizations and higher satisfaction for the customers.
Quality cost is the cost of not producing a standard quality product. It indicates the difference between the finally produced products and what the cost would be if no standardization or quality assurance is solicited. Quality costs can be divided into prevention costs, assessment costs, internal failure costs, and external failure costs.
The prevention costs include all the activities that are necessary to undertake in minimizing the poor or less quality in the finished products. The assessment costs are the costs of inspecting the quality of finished goods and checking whether they meet the standards. Internal failure costs are the costs to be incurred by the failure in production system that comes in view in the final product. External failure costs are the costs of complain handling, product return due to poor quality, warranty services, etc.
Table of Contents
Particulars
Page number
Total Quality Management
4
1.1 Total Quality Management for SG plc
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2. Adoption of TQM within JIT production environment
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3. Quality Costs
6
3.1 Prevention Costs
7
3.2 Assessment Costs
7
3.3 Cost of Internal Fault
8
3.4 External Failure Costs
8
References
9
Total Quality Management
Total Quality Management (TQM) is term that focuses primarily on the production process of any industry in order to serve the clients in the best way possible. Eventually, TQM extends its focus to each and every functional area. TQM also takes into account many pre-production activities like infrastructure maintenance, raw material collection, etc. The extent of TQM is lengthened to post-production state where the consumers/users get attached to the final product or service. The scope of TQM can not be confined to any specific industry or discipline, rather the implication of TQM is split in almost all the sector of business including textile industries, leather industries, fast-moving consumer goods industries, financial institutions, and the like.
To be effective, TQM requires a compact teamwork containing employees from every level of management. The team should be cross-functional having members from different functions and different departments. Even if necessary, the team may include end customers also. All the members of the team must strive hard to increase the level of customer satisfaction. They have to seek areas of improvement every single moment at every possible corner regardless of how significant the area is. A major focus of TQM is on lowering the total cost resulting in higher returns on investment. Even if the quality is ensured, firms can charge higher price than existing competition, build good reputation, bring out innovations, etc. However, implementing TQM is not an easy task. It is time and money consuming. Moreover, firms seeking TQM need to have high level of effort and patience.
There are eight elements on which a firm must concentrate while implementing TQM as follows:
The aforementioned elements can be converted into 4 groups based on the functions they serve. First group is titled as Foundation which is formed combining trust, integrity, and ethics. Foundation encourages everyone's involvement. All the members in the team should be fair and sincere to their respective duties. The group Building Bricks is formed comprising teamwork, leadership, and training. Based on the foundation built in the first group, bricks are used to move to the roof of recognition. A cross-functional team with highly productive members working under the supervision of a knowledgeable leader may serve the purpose best. Proper and active communication surrounds the entire TQM process and thus fall into the group Binding Mortar where information is shared and interpreted in the same way among the members. Successful formation of previous groups leads to Roof where individual suggestions and achievements are recognized as contribution to the team. Being recognized gives immense pleasure in team member's mind and will impact further productivity.
Total Quality Management for SG plc
SG plc is a food manufacturer. Thus it has to find out the operational areas where TQM can be implemented. In a nutshell, it can be said that SG plc should focus on its people, quality of raw material, production process, production plant, ambience, storage, packaging, etc.
People are the core of any business. They remain involved with the entire process of production, quality assurance, serving clients, handling complaints, etc. Thus, it is a must to train the people involved in the process about the proper resource utilization and quality controlling. SG plc should recruit experienced people and give them proper training about their processes and deals. They should be informed about how the resources can be utilized properly and the overall productivity can be ensured.
As SG plc manufactures semi-processed food products and delivers it to fast food shops, it has to maintain good quality of raw-materials and with those they should prepare their products. Thus, the product quality can be maintained.
The way SG plc produces their product should be kept smooth. No blockade, no spoilage, no hindrance should be there. They should check the machineries, stoves, and other accessories every now and then in order to ensure free flow of production units.
The employees should wear hand-gloves, masks, caps, aprons, etc. while preparing foods so that hygiene can be ensured. They must maintain all code of food quality according to the requirement of the clients.
Even after production, SG plc should be careful about storing the finished goods. They must store the products in a clean and at a temperature that does not spoil the product. If the time of delivery is long, they should store it at a proper place that ensures the taste, fragrance, and hygiene of the product.
SG plc should focus on the packaging of the semi-processed finished food products while delivering to fast food shops. The packaging should be as with the requirement of the clients. SG plc should not use any packing material that hampers the food quality.
Above are some of the examples that SG plc can undertake in order to implement Total Quality management (TQM).
2. Adoption of TQM within JIT production environment
The production environment has changed significantly than before. Today manufacturers are more conscious about maintaining good quality for their products. But the availability of raw materials, spare parts, and other accessories is getting scarce day by day. In this circumstance, managing inventory is full of threats of spoilage, breakage, high cost of storage, poor maintenance, and the like. The situation is even worse in case of food industry. Here the raw materials should be used at the earliest possible time in order to get best output from it. While relating TQM with Just-in-Time (JIT), it is necessary to have a clear understanding of JIT in mind.
Just-in-Time (JIT) is a technique for managing inventory in the production of any goods. In this technique, the manufacturers place order and receive raw-materials and other accessories to the limit they need. This process goes on frequently as with the production. In case of food industry, the way of placing and receiving orders is carried on daily in a regular basis in order to maintain best quality of supplies and ensure smooth production. The task of both manufacturers and suppliers is spontaneous. Negligence in either side may hamper the entire system.
JIT ensures accurate amount of supply of accurate raw material at accurate time at accurate place resulting in improved productivity and operating efficiency. JIT drives the focus of the manufacturers on process rather than on product. Different types of costs remain attached at different stage of production. JIT provides work-in-process (WIP) inventory thus eliminating costs of extra input. Thus, it is a must to build good relationship with the suppliers.
TQM is oriented for customer satisfaction and thus it motivates the team members to solve problems and achieve continuous improvement; and to ensure this, implementation of JIT occurs. Both TQM and JIT ensures lower inventory cost for raw materials and other related parts, work in process, and finally finished goods. Thus, both jointly result in greater productivity for organizations and higher satisfaction for the customers. The business organizations combine these two to serve their customers/clients in the best way possible. Statistical evidences say that adoption of JIT along with TQM reduces the cost of production significantly.
Now-a-days, the production is being counted in minutes, usually known as cycle time, instead of hours/days and required standard of quality is set very high. Any distortion from the benchmark can easily be tracked. Here TQM ensures quality standard and JIT meets production time requirement. Thus, TQM and JIT are interrelated to each other.
3. Quality Costs
The term "Quality Cost" is frequently used in current business world and this term is misunderstood more frequently. Many experts say that Quality Cost can is the totality of all the costs incurred in production process in order to achieve quality standard; whereas, Quality Cost is the cost of not producing a standard quality product. It indicates the difference between the finally produced products and what the cost would be if no standardization or quality assurance is solicited. Thus quality cost can be defined as the totality of:
Investing in the elimination of things unrelated to requirements
Appraising the inclusion of things related to requirement
Failing to meet the ultimate requirements
The common scenario is that quality costs more. But if the productivity can be boosted, per unit cost can be minimized proportionately. The cost of quality can be divided into four areas: Prevention Costs, Appraisal/Assessment Costs, Internal Failures, and External Faults.
3.1 Prevention Costs:
During the production, it is very common to have poor quality in the output. The prevention costs include all the activities that are necessary to undertake in the minimization of the poor or less quality in the finished products. It is an endeavor of manufacturing organizations to avoid defective products not only during the production but also at the end of entire production process.
In case of SG plc, prevention costs include:
Cost of analyzing new products or design: These costs are incurred while checking the reliability of newly generated idea, assessing the improvement in design, and other related activities required to launch a new product. If SG plc wishes to design or launch new product they must check whether this innovation will be accepted to the fast food stores.
Quality planning: These costs include the activities undertaken collectively to disclose the procedures required to ensure the quality, actions to maintain the quality, and the like. If SG plc is willing to implement TQM, it must share its principles to all the team members.
Suppliers' quality assessment: This cost includes the cost of selecting the supplier. SG plc should collect raw material from those suppliers who can help them ensure TQM as well as JIT procedures.
Personnel qualification: This is mainly the cost of training the employees to enable themselves with the process that will generate best output for SG plc.
Quality-based information system: If SG plc wishes to inform all its stockholders and stakeholders about the process and performance, it must have to build an information system that may regularly communicate information with the team members.
3.2 Assessment Costs:
Soon after the production, there should be measures for quality control. These controlling measures will check whether the finished goods meet the requirement of the clients or the quality standards. The costs incurred while measuring and evaluating the products and comparing them with quality standards are known as Assessment Costs. This cost also includes inspection costs, laboratory analysis costs, technical analysis costs, etc.
In case of SG plc, assessment costs include
Inspection of raw-materials: SG plc should test or examine the raw materials they are purchasing from the suppliers before using those materials in the production. SG plc can set standard compared to which the materials will be sent to the production plant.
Testing of finished product: SG plc should check the quality of semi-processed finished products and compare with what is expected from the clients.
Inspection infrastructure: In order to inspect the quality of raw materials entering into the production plant and test the quality of the finished product, SG plc must have to set up an interface having all sorts of equipment of testing standards.
Personnel Checking: SG plc has to closely monitor whether the employees are doing their task properly or not. They can provide the employees with a code of production process and observe whether the code is being properly maintained. If there is any discrepancy, SG plc should take proper action against it.
3.3 Cost of Internal Faults:
In many cases, it may occur that due to any short-comings, the delivery of the product may miss the deadline for any internal failure. Such costs usually incur as a result of failure in production system. After the production, these failures come to view from the finally produced goods that are to be delivered to the consumers.
For SG plc, cost of internal faults can be
The cost of scraps found in the finished products that has to be recycled or rejected.
If there is any failure in production system, SG plc may need to restart the entire procedure.
If the failure continues, SG plc may need to recheck the inspection tools and personnel.
3.4 External Failure Costs:
Though the product is manufactured properly, consumers may not get right product due to some external threats. Such instances may result in product return or the consumers expect warranty services. Even the consumers may ask for compensation if the end product causes harm to them. These costs are called external failure costs.
SG plc may need to incur external failure costs like -
If the semi-processed products hamper the quality of the fast food stores, SG plc may need to handle such complaints.
In some cases, fast food stores may return the product if it does not meet the standard.
The fast foods stores may switch to another manufacturer as a result of downgraded reputation of SG plc arise from poor quality products.
Above are the costs of quality that SG plc may need to incur while operating in the market. SG plc must ensure proper raw material, proper production process, proper delivery, and proper handling of customer complaints in order to get rid of all such obstacles.
