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Chapter 2

Throughput accounting – background

Total Quality Management (TQM) Just-In-Time (JIT)

Just-In-Time (JIT)
TQM is the continuous improvement in JIT is a pull-based system of production,
quality, productivity and effectiveness pulling work through the system in
through a management approach response to customer demand. Goods
focusing on both the process and the are only produced when they are
product. needed, eliminating large stocks of
materials and finished goods.
Fundamental features include:
 Prevention of errors Key characteristics for successfully
operating such a system are:
 Importance of total quality in the
design of systems and products  High quality: possibly through
deploying TQM systems
 Real participation of all employees
 Speed: rapid throughput to meet
 Commitment of senior
management to the cause customers needs
 Reliability: computer-aided
 Recognition of the vital role of
manufacturing technology will
customers and suppliers
assist
 Recognition of the need for
continual improvement.  Flexibility: small batch sizes and
automated techniques are used
 Low costs: through all of the

above.

Standard product costs are associated with traditional manufacturing
systems producing large quantities of standard items. Key features of
companies operating in a JIT and TQM environment are:

 high level of automation

 high levels of overheads and low levels of direct labour costs

 customised products produced in small batches

 low stocks emphasis on high quality and continuous improvement

 Recognition of the vital role of customers and suppliers

 Recognition of the need for continual improvement.

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