Page 2 - CIMA MCS Workbook November 2018 - Day 2 Suggested Solutions

CIMA NOVEMBER 2018 – MANAGEMENT CASE STUDY

This means that implementing TQM should reduce the levels of failures and wastage. Reducing
the level of failures, from supplier late delivery to quality failures in the finished goods, will not
only reduce costs of correcting the failures but would lead to the ability to implement just‐in‐time
and make the associated inventory savings.

The improvements in efficiency would come at a cost. There is a saying that you have to spend
money to save money. In this case there are two types of spend, prevention and appraisal costs,
together known as conformance costs, which end up reducing the amount spent on non‐
conformance costs from failures.

Prevention costs are those spent to ensure that quality is built into the processes. it would
include such spend as vetting potential suppliers to ensure that they can deliver the right quality
materials with appropriately short lead times and of undertaking preventative maintenance to
ensure that machine breakdowns do not occur.

Appraisal costs are those spent to test whether the failure prevention measures are effective.
They would include the costs of testing the machines before a production run and inspecting
supplier deliveries.

Non‐conformance costs that should be saved include internal failure costs and external failure
costs. An internal failure cost are those failures spotted before the customer takes possession of
the goods, such as fizzy drinks not having the correct amount of fizz, spotted before the goods
leave the factory. External failure costs are those that have impacted the customer, such as
where the same error in carbonisation levels is not spotted before the product leaves the factory
and is noticed instead by customers, leading to complaints and lost sales.

Grapple does currently have wastage levels in production, so the adoption of a TQM approach
should be able to address this.

Horseshoe layout

A horseshoe layout for manufacturing is where a process is designed to flow as efficiently as
possible, without long transitions between different stages in the process. Goods flow directly
from one stage to the next without having to be transported across the factory, wasting time and
potentially leading to damage or losses.

As a result, this layout fits in very well with the just‐in‐time and TQM concepts where efficiency is
key

Finance Manager

92 KAPLAN PUBLISHING