CIMA E1 Syllabus E1. Operations management - Total Quality Management - Notes ^{15 / 21}

Total Quality Management (TQM)

TQM is a management philosophy that focusses on continual improvement in quality, productivity and effectiveness in internal operations and relationships with suppliers.

The ultimate goal os TQM is to eliminate the costs of poor quality.

Features of TQM:

• Prevention of errors before they occur - costs of prevention (getting things right first time) are less than the costs of correction.

• Continual improvement - therefore companies should focus on getting things right first time (zero defect) and then getting them better next time.

• Real participation by all

• Commitment of senior management

4 types of Quality costs

1. Prevention Costs

   are the costs incurred in preventing the production of quality products

   They include the costs of:
   - preventive maintenance
   - quality planning and training
   - the extra costs of acquiring higher quality raw materials
   - quality circles

2. Appraisal Costs

   are the costs incurred to ensure that materials and products meet quality standards. 

   They include the costs of:
   - inspecting purchased parts
   - work in process and finished goods
   - quality audits
   - field tests

3. Internal Failure Costs

   are the costs associated with materials and products that fail to meet quality standards. 

   They include costs incurred before the product is dispatched to the customer, such as:
   - the costs of scrap, repair, downtime
   -  work stoppages caused by defects.

4. External Failure Costs

   are the costs incurred when products or services fail to meet requirements or satisfy customer needs after they have been delivered. 

   They include the costs of:
   - handling customer complaints
   - warranty replacement
   - repairs of returned products
   - the costs arising from a damaged company reputation

   Costs within this category can have a dramatic impact on future sales.

Costs of compliance (conformance)

• These are Prevention and appraisal costs.

  Their aim is to eliminate the costs of failure.

Costs of non-compliance (non-conformance)

• These are Internal and external failure costs 

  Costs of non-compliance are the result of production imperfections and can only be reduced by increasing compliance expenditure.

Empowerment is the aspect of TQM that provides for the participation by selected employees in quality improvement and is concerned with giving decision making powers to employees.