The value chain


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The value chain

  1. 1. The value chain – TQMThe value chain – TQMContinuous improvementThis is a change from the traditional perspective to achieve predetermined standardsand strive for continuous improvements. Target costing , Kaizen costing could be seenas examplesKaizen costingKaizen costing is concerned about reducing costs incurred in the production processthrough increased efficiency and lower waste.Because most of the products cost is determined in the designing stage the costreductions achievable in production stage (Kaizen) would be comparatively smallerValue analysisValue analysis is the process of identifying the actual value of features in theirproducts to the customers.Functional analysisCompany would breakdown its product into the separate functionalists it provides,then the analyze the amount customers are willing to pay for that function. Ifproviding the function costs more than that amount appropriate measures should betaken to either reduce the cost or to eliminate the function entirely.Value chainJust in time conceptJust in time is a philosophy of having nearly zero inventory by purchasing only whenmaterial is needed for production and producing only when the products arerequested by the customers. Hence JIT could be, just in time production or just intime purchases
  2. 2. This is there for a pull system as opposed to the traditional push systemFor a successful JIT implementation- Versatile and multidisciplinary workforce- Strong supplier relations to get the suppliers supplying regularly and to havethe quality of the supplies be checked by the supplier.- Good communication between teams in the organization- Get it right the first time – zero defects approach- If some problem occurs in one part of the production line up the wholeproduction would stop, this could be seen as a problem of the JIT system, but sincethis happens the whole company would then forces on getting the proper solution tothe problemTotal Quality ManagementThe main idea here is that, Quality is the main attribute for gaining competitiveadvantage.There are measurable costs concerning qualityExternal costs- Loss of customer goodwill- Manufacturing costs of failed goods
  3. 3. - Repair costs- Liability claimsInternal costs- Costs of scrap- Reworking costs- Manufacturing and process engineering required to correct the failuresAppraisal costsThese are costs associated with checking the products to confirm they are inthe required standardPrevention costsThese are costs associated in making sure that defects don’t happen in thefirst placeCriticism of TQM, the main issue of TQM is that it is not a well defined set ofinstructions. It is rather a philosophy of culture within the organization. Manycompanies have failed trying to use TQM as a quick fix to their problems.Business process re-engineeringBusiness process re-engineering involves inspecting a business process and makingradical changes to that system in order gain reduced cost benefits improve qualityand value of products.Gain sharing arrangementsWhen a company doesn’t have the capital requirement to venture on a business, itmay go for a gain sharing arrangement, where two or more companies contribute forthe business and the gain is shared amongst them.Some problems firms may encounter when proceeding with a gain sharingarrangement are,- Agreeing the base line to measure gains- Agreeing on a way to proceed in the project- Sharing the gain- Measuring the gain reliably- Allowing other firms sensitive information