The document discusses concepts related to total quality management (TQM) including continuous improvement, kaizen costing, value analysis, functional analysis, just-in-time manufacturing, and the costs of quality. Kaizen costing aims to reduce production costs through efficiency while value analysis identifies the value of product features to customers. Just-in-time manufacturing has little inventory by producing only what is requested. TQM aims for quality as a competitive advantage and considers appraisal, prevention, and failure costs. Business process reengineering makes radical changes to reduce costs and improve quality and value.

1. The value chain – TQM
The value chain – TQM
Continuous improvement
This is a change from the traditional perspective to achieve predetermined standards
and strive for continuous improvements. Target costing , Kaizen costing could be seen
as examples
Kaizen costing
Kaizen costing is concerned about reducing costs incurred in the production process
through increased efficiency and lower waste.
Because most of the products cost is determined in the designing stage the cost
reductions achievable in production stage (Kaizen) would be comparatively smaller
Value analysis
Value analysis is the process of identifying the actual value of features in their
products to the customers.
Functional analysis
Company would breakdown its product into the separate functionalists it provides,
then the analyze the amount customers are willing to pay for that function. If
providing the function costs more than that amount appropriate measures should be
taken to either reduce the cost or to eliminate the function entirely.
Value chain
Just in time concept
Just in time is a philosophy of having nearly zero inventory by purchasing only when
material is needed for production and producing only when the products are
requested by the customers. Hence JIT could be, just in time production or just in
time purchases

2. This is there for a pull system as opposed to the traditional push system
For a successful JIT implementation
- Versatile and multidisciplinary workforce
- Strong supplier relations to get the suppliers supplying regularly and to have
the 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 whole
production would stop, this could be seen as a problem of the JIT system, but since
this happens the whole company would then forces on getting the proper solution to
the problem
Total Quality Management
The main idea here is that, Quality is the main attribute for gaining competitive
advantage.
There are measurable costs concerning quality
External costs
- Loss of customer goodwill
- Manufacturing costs of failed goods

3. - Repair costs
- Liability claims
Internal costs
- Costs of scrap
- Reworking costs
- Manufacturing and process engineering required to correct the failures
Appraisal costs
These are costs associated with checking the products to confirm they are in
the required standard
Prevention costs
These are costs associated in making sure that defects don’t happen in the
first place
Criticism of TQM, the main issue of TQM is that it is not a well defined set of
instructions. It is rather a philosophy of culture within the organization. Many
companies have failed trying to use TQM as a quick fix to their problems.
Business process re-engineering
Business process re-engineering involves inspecting a business process and making
radical changes to that system in order gain reduced cost benefits improve quality
and value of products.
Gain sharing arrangements
When a company doesn’t have the capital requirement to venture on a business, it
may go for a gain sharing arrangement, where two or more companies contribute for
the business and the gain is shared amongst them.
Some problems firms may encounter when proceeding with a gain sharing
arrangement 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