Page 5 - MCS August Day 1 Suggested Solutions

SUGGESTED SOLUTIONS

CHAPTER FOUR

1. TOTAL QUALITY MANAGEMENT AND COSTS OF QUALITY

TQM is the name given to programmes that can be adopted by an organisation that aims to
improve quality in all areas of the business. It has two basic principles:

Get it right first time

Under TQM the organisation strives for perfection, meaning that every product produced should
be of the appropriate quality and there should therefore be zero defects and wastage. This
comes from the theory that the costs of prevention (of stopping errors from occurring) are lower
than the costs of correction (dealing with errors once they have occurred). The principle doesn’t
just apply to the products themselves but to all aspects of the organisation.

Most businesses will struggle to achieve this state of perfection, certainly in the short‐term, due
to the challenging nature of achieving zero defects, wastage, idle time, etc., so the second
principle is:

Continuous improvement

An organisation may not yet be at a position of getting everything right first time but it should be
moving towards that state. By setting and striving to achieve targets that would lead to
improvement from the current position, the organisation can drive that change.

For instance, if there is currently a 5% wastage rate for the raw materials that go into camera
production then Montel should be aiming to reduce that number – not immediately to zero, but
by small increments of improvement. If appropriate targets for improvement are set across the
company then costs should reduce, wastage levels and defects should reduce and the business
should become more efficient.

Costs of quality

There are four costs of quality.

Prevention costs

These are costs spent by the company to ensure that quality is built in to its products and
operational activities. If prevention costs are spent wisely then the business should see a
reduction in wastage and defects and a move towards the state of perfection.

For Montel these types of costs would include ensuring that all staff are trained to an appropriate
level, particularly for the skilled manual work that goes into lens production. Well trained staff
should make fewer errors leading to a lower wastage rate of defective lenses.

Prevention costs would also include rigorous quality control checks before taking on new
suppliers to ensure that the materials bought in are of the appropriate quality and are unlikely to
lead to defects during production.

Appraisal costs
These are costs of ensuring that the built in quality is at the right level. Effectively they are costs
incurred to check that the prevention costs were well spent.

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